July 2021 Questions and Sample Answers
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MPT-1
Winston v. Franklin T-Shirts Inc.
FILE
Memorandum to Examinee
Winston v. Franklin T-Shirts Inc., Agreed Statement of Facts
LIBRARY
United States Copyright Act – 17 U.S.C. § 101 et seq.
Brant v. Holt, U.S. District Court for the District of Franklin (1998)
Allen v. Rossi, U.S. District Court for the District of Franklin (2015)
Klavan v. Finch Broadcasting Co., U.S. District Court for the District of Franklin (2017)
FILE
Chambers of the Hon. Joann Gordon
United States District Court for the District of Franklin
120 N. Henry Street
Centralia, Franklin 33705
MEMORANDUM
TO: Examinee
FROM: Hon. Joann Gordon
DATE: July 27, 2021
RE: Winston v. Franklin T-Shirts Inc., Case No. 21-CV-0530
As you know from the conference in my chambers that you attended as my law clerk, the defendant in this copyright infringement case will make a motion for summary judgment, arguing that its use of the plaintiff’s photograph was fair use under the federal copyright statute, 17 U.S.C. § 107. The parties agree that, in the absence of a finding of fair use, the defendant infringed the plaintiff’s copyright. While I must await and consider the arguments of the litigants before I rule, I would like your preliminary analysis of the issue.
I am attaching relevant materials. The statute includes illustrative introductory language and calls for the application of four factors in determining whether a particular use qualifies as fair use.
Please prepare a memorandum to me analyzing the possible fair use claim. Do so by applying the statute, including an analysis of each of the statute’s four factors. Note that the factors are not applied mechanically; the court has considerable discretion to consider the weight to give each factor in reaching its conclusion. Although you do not yet have the benefit of reviewing the litigants’ arguments, be sure to discuss the arguments that the plaintiff and the defendant will likely make for each factor. After that analysis, state your conclusions for each of the four factors and for the overall claim of fair use.
Do not include a separate statement of facts, but be sure to refer to the relevant facts in the record in analyzing the fair use claim.
Winston v. Franklin T-Shirts Inc.
AGREED STATEMENT OF FACTS (record citations omitted)
1. Since 1979, the “Franklin Fun Fair” has been an annual “street fair” type of event in Riverside, Franklin. Riverside is a small town with a population of 15,000.
2. The fair’s organizers state that the fair is intended to “poke fun at the powers that be and let everybody have a good time.”
3. On occasion, various individuals and groups have used the event to make political statements.
4. In 1985, Jim Barrows, a student at Franklin State University, joined in a political demonstration at the event and was arrested for and convicted of disorderly conduct.
5. Plaintiff Naomi Winston is a professional photographer and was the only professional photographer on the scene that day.
6. Winston took a picture of the police leading a sneering Barrows away from the demonstration in handcuffs (the “Photograph”).
7. Winston’s Photograph of Barrows was the only pictorial record of the arrest.
8. The photographer, Winston, registered the copyright in the Photograph with the United States Copyright Office and is the owner of the copyright in the Photograph. (Barrows has no copyright interest in the Photograph whatsoever, as he is not the “author” of the Photograph.)
9. As copyright owner of the Photograph, Winston granted a single-use license to the Riverside Record, a local newspaper, allowing it to publish the Photograph accompanying a story about the political demonstration.
10. Winston received a fee of $500 for the Record’s use of the Photograph.
11. In 1992, Winston licensed the Photograph and 72 other pictures she had created to the publisher of a coffee-table book of her photographs, entitled Franklin in the 1980s—A Pictorial History (the “Book”), which retailed for $40. She received a one-time license fee of $10,000, plus a 7% royalty for each copy sold.
12. After selling 3,500 copies, the Book went out of print in 1995. Winston’s royalties amounted to $9,800. Winston has not received any revenues from uses of the Photograph since 1995.
13. There have been no other uses of the Photograph to date; Winston has received no other income from any use of the Photograph.
14. In 2020, Barrows, now a prominent businessman, unsuccessfully ran for mayor of Riverside. After he lost the election, Barrows completely withdrew from public life, retired from his businesses, and moved to the neighboring state of Olympia.
15. During Barrows’s mayoral campaign, at a news conference he gave, a reporter for the Record raised the topic of Barrows’s 1985 arrest, compared it to his current “law and order” stance, and asked if he had any comment.
16. Barrows said, “I was young and foolish and impetuous back then, and my arrest was justified. Now, I’m older and wiser, and I recognize the virtues of law and order.”
17. Defendant Franklin T-Shirts Inc. is a purely commercial company that manufactures and sells T-shirts. Its owner is active in Riverside politics and was a strong supporter of Barrows’s opponent in the mayoral election.
18. During the mayoral campaign in 2020, Franklin T-Shirts Inc. took a copy of the Photograph from the Book and reproduced it in its entirety on a T-shirt. The words “Arrested & Convicted” were stamped in red over the Photograph, and the caption BARROWS IS A HYPOCRITE!” was printed below the Photograph. Reports of Barrows’s arrest and conviction, and publicity surrounding them (including the widespread appearance of the T-shirts), were seen by analysts as significantly contributing to his defeat.
19. Because Franklin T-Shirts Inc.’s owner opposed Barrows’s election, he sold the T-shirt at cost, for $4.00, and sold around 2,000 units.
20. Purchasers of the T-shirts were overwhelmingly supporters of Barrows’s opponent in the mayoral election.
LIBRARY
UNITED STATES COPYRIGHT ACT – 17 U.S.C. § 101 et seq.
[Excerpted provisions]
§ 106 Exclusive rights in copyrighted works
Subject to sections 107 through 122 [specifying limitations on rights], the owner of copyright under this
title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
. . .
§ 107 Limitations on exclusive rights: Fair use
Notwithstanding the provisions of section[]106 . . ., the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use[,] the factors to be considered shall include—
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole;
and
(4) the effect of the use upon the potential market for or value of the copyrighted work.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.
Brant v. Holt
United States District Court for the District of Franklin (1998)
Plaintiff Barbara Brant is a songwriter and the copyright owner of the song “Onward and Upward” (the “Song”). The Song achieved considerable popularity last year, and reached number four on the Billboard charts, a standard measure of music popularity based on sales. The Song is an upbeat, inspirational composition, with lyrics that espouse hope and triumph over adversity. Defendant Ken Holt is a candidate for governor of the state of Franklin seeking his party’s nomination in the upcoming primary election later this year.
In the course of his campaign, Holt has repeatedly had the Song publicly performed at campaign rallies and had it reproduced and publicly performed as background in television and radio commercials, all without Brant’s authorization. Brant has objected to Holt’s use of the Song in his campaign. She sent Holt a “cease and desist” letter, demanding that Holt immediately stop using the Song in any fashion. When Holt ignored the demand, Brant brought an action for copyright infringement and filed this motion for a preliminary injunction to bar any such use.
Holt has claimed that the use of the Song is “fair use” under 17 U.S.C. § 107. For the reasons stated below, we conclude that it is not fair use; the relevant undisputed facts are set forth as appropriate in our analysis.
Overview
[Analysis of standard for granting a preliminary injunction omitted; the court concluded that the standard was met.]
Fair use is an affirmative defense to a claim of copyright infringement. In cases finding fair use, the use in question (absent any other valid defense) would constitute infringement. But the copyright statute excuses acts that would otherwise be infringements if they fall within the limits of the fair use provision of the Copyright Act, 17 U.S.C. § 107. Hence, we must analyze the facts based on the criteria set forth in that statute.
The introductory language of § 107 sets forth some general, illustrative, and no exhaustive bases for a claim of fair use. Holt correctly notes that his use of the Song was “comment,” one of those bases. However, this is not dispositive. The statute requires a fact-specific analysis under four factors to determine if the unauthorized use is excused.
Factor 1: Purpose and Character of Use
The first factor requires an analysis of the purpose and character of the use, including whether it is “of a commercial nature or . . . for nonprofit educational purposes.” Here, the use is for neither—it is for a political purpose. In that regard, Holt claims that he is using the uplifting message of the Song to parallel his political agenda. He argues that political discourse is and should be encouraged in our society, and that his use of this particular song does so. We agree that political discourse is vital to the essence of our democracy, and uses for that purpose should, absent other factors, weigh heavily in favor of fair use. But that is not the end of our inquiry here, for there are many songs that convey that uplifting message. There was no need to use this particular song to do so. Further, Holt is not using the Song to make any specific comment on his political agenda— it is more of a generalized feeling that all candidates espouse. This factor cuts slightly in favor of the copyright owner and against fair use.
Factor 2: Nature of the Copyrighted Work
This factor usually does not significantly figure in most fair use analyses. Most cases see its application as favoring the use of published as opposed to unpublished works, and scientific or factual works as opposed to those that are creative and expressive. We do not think this factor has much weight here and is neutral in this case.
Factor 3: Amount and Substantiality of Use
The statute requires us to analyze both the quantitative (“amount”) and qualitative (“substantiality”) use of the work. Here, the analysis is simple—the entire work was used, repeatedly, and without modification. While there are circumstances where use of the entire work can nevertheless amount to fair use (e.g., when the entire work is necessary for a commentary or a news report), this is not one of them. This factor cuts against fair use in this case.
Factor 4: Effect on Potential Market or Value
The fourth factor, which some cases (but by no means all) have said is of great importance, is the effect of the use on the market for, or value of, the copyrighted work. One of the purposes of copyright is to protect the economic interests of the copyright owner. Brant has stated in deposition that she fears Holt’s use of the Song will make the Song permanently identified with him and his political views and erode its popularity with members of the public who do not agree with Holt’s political viewpoint. In addition, Brant has stated in deposition that she has publicly opposed the political agenda that Holt espouses and that his use of the Song will undermine her reputation with her fans. Further, Brant notes that she has not licensed the Song for use in advertising of any sort. We note that the statute speaks not merely of actual harm, but also of harm to the “potential market for or value of the copyrighted work” (emphasis added). We find Brant’s testimony compelling in this regard. This factor cuts strongly against a claim of fair use.
Conclusion
For the reasons stated, we hold that Holt’s use of the Song is not fair use, and we grant the preliminary injunction.
Allen v. Rossi
United States District Court for the District of Franklin (2015) In this copyright infringement case, defendant Stephanie Rossi has moved for summary judgment, claiming that her use of part of plaintiff Martin Allen’s photograph in a collage was fair use. We agree.
Facts
The facts are not in dispute. Allen is a noted wildlife photographer. He took the work in question (the “Photo”) in 2005; it depicts a scene at a watering hole in Africa. Clustered around the watering hole are various animals—a giraffe, a water buffalo, a rhinoceros, and several others. The Photo was published in 2005 in a book of photographs by many different photographers; Allen received a one-time payment of $100 for this use of the Photo. He has not made any other sales of the Photo in the 10 years since he took it.
Rossi is a graphic artist whose work is known for espousing social causes. One of those causes is the protection of endangered species. Last year, she created a photographic collage in which she took photographs of many endangered species and placed them in juxtaposition. She took a copy of the Photo, clipped from the book in which it had been published, cut out the picture of the rhinoceros, and then included it in the collage with excerpts of 13 other photographs from various sources, all depicting endangered species of animals. She made the collage into museum quality poster-sized prints, which she is selling for $450 each, the proceeds to benefit nonprofit organizations devoted to protecting endangered species.
Analysis
The Copyright Act requires that, to determine if a particular use is a fair use, we analyze
four factors.
Factor 1: Purpose and Character of Use
Rossi has testified that her purpose in using the excerpt from the Photo was to draw attention to the plight of endangered species. She hoped, in her juxtaposition of pictures of all the animals in the collage, to educate the public on the beauty of the various animals and the danger they face. She said that she could only do this by showing all the animals together, so as to depict in an overwhelming way the many species at risk. By taking only a part of the Photo and using it to make a comment on a social issue, Rossi has transformed the original aspect of the Photo. The courts, up to and including the Supreme Court, have made such transformative use one touchstone of fair use analysis.
Although such transformative use is not absolutely necessary for a finding of fair use, the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine’s guarantee of breathing space within the confines of copyright, and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.
Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994) (citations omitted). Although Rossi is selling copies of the collage—a commercial use—we note that the proceeds are going for noncommercial educational purposes, a use endorsed by the statute.
We believe, as the Supreme Court has instructed and as many other courts have found, that the transformative nature of the use is crucial in this case. There may be cases where the reproduction of the entire work is transformative, by making a new work different in character and meaning from the original. But, as a general matter, simply reproducing the copyrighted work, even in another medium, is not the “transformation” that would justify a finding of fair use. See Rodgers v. Koons, 960 F.2d 301 (2d Cir. 1992) (reproduction of photograph into three-dimensional sculpture was not fair use). That type of use simply treads on the copyright owner’s right to make derivative works, 17 U.S.C. § 106(2). On the other hand, using an element of a copyrighted work in combination with other creative expression, for a different purpose than the copyright owner’s and to make a different social commentary, changes—transforms—the use and argues for fair use. See Blanch v. Koons, 467 F.3d 244 (2d Cir. 2006) (use of a portion of a copyrighted photograph in a collage, which in total made a comment on the materiality of commercialism, constituted fair use). That is what happened here, and we see this factor as favoring fair use.
Factor 2: Nature of the Copyrighted Work
Although photographs are intrinsically creative works (weighing against fair use), the
Photo here is arguably more informative than artistic. Further, it has been published, weighing in
favor of fair use. And that its artistic merit is limited is reflected by the fact that it has been utilized
only once in the 10 years since it was taken. On balance, this factor slightly favors fair use.
Factor 3: Amount and Substantiality of Use
Rossi has used only a small portion of the Photo (“amount”). Further, she has not taken the
heart of the Photo, as the depiction of the rhinoceros was but one of many animals in the Photo
(“substantiality”). This factor cuts in favor of fair use.
Factor 4: Effect on Value
We see no substantial effect of Rossi’s use on the actual or potential value of the copyrighted work. Allen has sold the rights to the Photo but once, for a mere $100, and has not made any further sale in 10 years. In addition, no one seeing the collage would, we believe, have the slightest notion that the picture of the rhinoceros came from Allen’s picture. The use would in no way affect any possible market for the Photo in the future. This factor, too, cuts in favor of fair use.
Conclusion
Based on our analysis, we find that Rossi’s use of the Photo was fair use. Summary judgment granted.
Klavan v. Finch Broadcasting Co.
United States District Court for the District of Franklin (2017)
Plaintiff Amanda Klavan is a professional videographer. She has brought this action against Finch Broadcasting Co. (Finch) alleging that Finch’s broadcast of a portion of a video she made was unauthorized and hence copyright infringement. Finch has moved for summary judgment, claiming that the broadcast was “fair use.”
Facts
The facts are not in dispute. Klavan had just finished making a video for the host of a private party in Franklin City, and was walking home with her camera, when an altercation involving two men occurred in front of her. One of the men was Murray Freed, the Speaker of the Franklin City Council. The dispute became nasty, with profane name-calling on both sides, and Freed took a piece of wood that was lying on the sidewalk and repeatedly struck the other man with it. Klavan captured the whole event on her video camera and owns the copyright in the video. There were no other bystanders, and her video, running 14 minutes, was the only visual record of what transpired. She sent a copy to Finch’s local television station, noting that she owned the copyright in the video and offering to license the broadcast of the video for $5,000. Without responding to her offer, Finch took an eight-second excerpt of the video, showing Freed’s assault with the piece of wood, and aired the excerpt in its nightly news broadcast reporting on the incident. Klavan then brought this action for copyright infringement.
Analysis
Finch’s use of the video excerpt, absent any valid defense, would constitute infringement. Finch’s only defense is that the use falls within the fair use provision of the Copyright Act, 17 U.S.C. § 107. Hence, we must analyze the facts based on the criteria set forth in that statute. At the outset, we note that one of the uses, which the statute explicitly states may be fair use, is “news reporting.” That is the case here. But our analysis cannot end there; rather, we must look at the four factors that the statute requires of every fair use analysis.
Factor 1: Purpose and Character of the Use
Finch’s purpose in using the excerpt of the video was to report the news to its viewers.
While the use was commercial—Finch operates the television station for profit—that does not mean that the use cannot be considered fair. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994). Here, the news story at issue was one of significant importance to the populace of Franklin City—it showed something about the Speaker of the City Council that reflected on his character and temperament. Application of the first factor weighs in favor of fair use.
Factor 2: Nature of the Copyrighted Work
Although this factor usually does not figure in most fair use analyses, we believe it is of great importance here. We recognize that one of the frequent applications of this factor turns on whether or not the work has been published. Klavan’s video was unpublished, which weighs against fair use, for the creator and copyright owner should have the right to first divulge the work to the public in the manner she desires. But we note that the last sentence of § 107 states, “The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.” Thus, while we must take into account the unpublished nature of the video, that does not end our inquiry.
We believe this factor militates in favor of fair use for two reasons: First, it is a visual record of a significant newsworthy event, and so is more vivid and revealing than a mere description would be. Second, and more significantly, it is the only visual record of the significant newsworthy event. Thus, Finch cannot turn to any other source for a comparable visual report. In this regard, we find Time, Inc. v. Bernard Geis Assocs., 293 F. Supp. 130 (S.D.N.Y. 1968), instructive. That case involved a book’s use of line drawings made from single frames of the only motion picture capturing the moment of the assassination of President John F. Kennedy, for the purpose of illustrating the author’s theory concerning the assassination. Thus, the case involved the use of the only visual record of an event of transcendent national importance. The court deemed it fair use. Although that case was brought before the current Copyright Act was enacted, at a time when the fair use doctrine was uncodified and entirely judge-made, we find it persuasive.
Factor 3: Amount and Substantiality of the Portion Used
In absolute terms, the amount of the video used by Finch—eight seconds of a 14-minute work—was minimal. The question of the substantiality of the portion used, however, is closer. It might be argued that the most significant portion of the video—the part showing Freed wielding the piece of wood—was used. But there were other portions of the video of similar significance— for example, the argument leading up to the altercation, the profanity-laced back-and-forth, and so on. At best, we see this factor as neutral as far as fair use goes.
Factor 4: Effect of the Use on the Potential Market for and Value of the Work
It could be argued that, should fair use be found, Klavan may lose a potential market for the eight seconds of the video that Finch used. We do not agree. There are many uses of that portion of the video that differ from Finch’s use and that could be licensed. Further, there is an untouched market for the entire video, and for other portions of it. We note that Finch argues that its use actually enhances the value of the video, by bringing it to the public’s attention and, arguably, creating a market for it. We do not agree with or credit this argument in reaching our conclusion. Rather, it is for the copyright owner, not the user, to determine what may enhance the work’s value. Nonetheless, for the reasons given above, we find this factor tilts in favor of fair use.
Conclusion
For the reasons given, we find Finch’s use to be fair use. Motion for summary judgment granted.
Sample Answer
MEMORANDUM
TO: Hon. Joann Gordon
FROM: Examinee
DATE: July 27, 2021
RE: Winston v. Franklin T-Shirts Inc., Case No. 21-CV-0530
Standard
A summary judgment motion requires the moving party to show that there is no genuine dispute of material fact. Once the moving party has made that showing, the burden then shifts to the nonmoving party to show that there is a dispute of material fact, and that the case should proceed.
Introduction
Fair use is an affirmative defense to a plaintiff's claim of copyright infringement. The United States Copyright Act, 17 U.S.C. section 106 describes the owner of a copyright as having exclusive rights to do and to authorize various uses of the copyrighted work. Among these uses is the right to reproduce the copyrighted work in copies, as well as to distribute copies of the work to the public by sale or other transfer of ownership (subsections 1 and 3). Further, the United States Copyright Act, 17 U.S.C. section 107 indicates that the use of the work for "criticism, comment, news reporting, teaching, scholarship or research" is not infringement and is fair use. The statute also outlines four factors to assess whether a use made of work in any particular case is a fair use. These four factors are (1) the purpose and character of the use (commercial or nonprofit), (2) the nature of the work, (3) the amount and substantiality of the portion used compared to the whole work and (4) the effect of the use upon the potential market or value of the work. The statute also indicates that the fact that a work is unpublished shall not itself bar a finding of fair use. Finally, these four factors are not dispositive, rather should be utilized at the court's discretion and balanced according to the facts at hand.
Statement of Facts
Incorporated Throughout
Main Argument/Body
1. Franklin T-Shirts' use of the photograph was for a specific comment and transformed from its original medium, cutting in favor of fair use. This factor looks to the purpose and nature of the use of the copyrighted work. To begin, it's important to assess whether the work is being used in a commercial or nonprofit educational purpose (according to section 107 of the statute). When the use is coupled with a political factor, courts have found that the use if neither commercial nor nonprofit, rather for a political purpose. Brant v. Holt (United States District Court for the District of Franklin, 1998). In Brant, a candidate for governor (Holt) repeatedly had Brant's song publicly performed at rallies and used in the background on television and radio commercials. Here, the court found that the use was neither commercial nor nonprofit, but for a political purpose. The court also went on to indicate that political discourse is "a vital essence of our democracy" and this purpose should weight heavily in favor of fair use, however, the inquiry does not end at the mere finding of political use since Brant's song was used for a generalized feeling and not a specific comment in relation to the political agenda.
Further, courts have found that the transformative nature of a work is an element for consideration. In Allen v. Rossi (United States District Court for District of Franklin, 2015), the court indicated that "simply reproducing the copyright work, even in another medium is not transformation that would justify a finding of fair use", see also Rodgers v. Koons, 960 F. 2d 301 (2d Cir. 1992). However, when using an element of a copyrighted work combined with other creative expression for a different purpose than the owner's initial intention and to make a different social commentary, there could be an argument for fair use. See Blanch v. Koons, 467 F. 3d 244 (2d Cir. 2006). In Allen, the court found for the user in regards to this element as she took a piece of the work and incorporated it into another larger transformative piece while using her own touch and creativity. In this matter, there is no dispute that Franklin T-Shirts utilized Winston's exact Photograph, unaltered or unchanged, on it's T-Shirts. As in Brant, it could be found that the use was for a political purpose, rather than a commercial or nonprofit one. However, of importance is the specificity of the Photograph and the intentional political message that was relayed via the T-shirts. In Brant, any other generalized political song could have been used. Here, the Photograph was utilized as a specific comment and specific point of view and expression, not simply in a generalized purpose.
Moreover, Franklin T-Shirts did not simply print the Photograph and hang it up around town. Much like the user in Allen, Franklin T-Shirts transformed the Photograph by using other creative means. As indicated in the factual record, the words "Arrested & Convicted" were stamped in red all over the Photograph, and the words "BARROWS IS A HYPOCRITE!" were also added below the Photograph. Not only did Franklin T-Shirts creatively come up with these additions, but there was also a change of medium between the actual photograph to the T-Shirts. Therefore, while Franklin T-Shirts used the Photograph in a commercial manner, it was for a specific political comment and transformed from its original medium and purpose. Therefore, it is likely that this factor will weigh in favor of Franklin T-Shirts.
2. Winston has not received any revenues from the uses of the Photograph since 1995, which slightly favors fair use.
This second factor relates to the nature of the copyrighted work. While it is one of the factors, courts do not typically find that it is significant in most fair uses analyses. When used, it is seen as an application favoring the use of published works as opposed to unpublished works as well as scientific/factual works as opposed to creative and expressive ones. Pursuant to the analysis in Brant, this factor does not have much weight in the case at hand. However, the court in Allen touched on this factor, indicating that the initial work's use was only once within a 10 year span, which slightly favors fair use.
While this factor weighs less in this analysis, the court's application in Allen would weigh towards Franklin T-Shirts' fair use as the last time Winston utilized the Photograph was in 1995.
3. Franklin T-Shirts utilized the entirety of the Photograph, which can be significant in not finding fair use, however, Franklin T-Shirts use was necessary to accomplish a specific purpose.
The third factors requires the analysis of the quantitative and qualitative use of the work, meaning the amount and ubstantiality of the work when used by the noncopyright holder. In Brant, the court found that the use of the entire work can "nevertheless amount to fair use" as the circumstances did require the use of the entire song. When used as a commentary or news report, however, the entire use could potentially be found to be fair.
Much like Brant, Franklin T-Shirts used the entire work. However, the reasoning in Brant was that the circumstances at hand did not require the use of the entire work. On the other hand, when the use is for a commentary, it is more likely for fair use to be found. Contrary to Brant, the facts at hand indicate that the main use of the Photograph on the T-Shirts was to make a political statement and specific comment. While Franklin T-Shirts used the entire work, it was used on their TShirts in another medium and for a different purpose than the initial newspaper publishing. In this case, it was almost necessary to use the entire photo to fulfill the new intended purpose. That said, even though the entire work was used, it is likely that this factor comes out in Franklin T-Shirt's favor.
4. It is unlikely that Franklin T-Shirts' use of the Photograph negatively impacted the Photograph's potential market as Winston's last revenue producing use of the Photograph was in 1995.
The fourth and final factor looks to the use's effect on the potential market or value. At times, this factor is said to hold great importance and weight throughout the overall analysis, as one of the main purposes of copyright is to protect the economic interests of the copyright owner. In Brant, the court assessed how Brant had not licensed the song for any other advertising, as well as the fact that Brant did not agree with Holt's political viewpoint and was concerned about the use of the song undermining her reputation with her fans. Taking those facts into consideration, the court stated that this factor cuts strongly against a claim of fair use as it not only affects the current market, but also the potential market of the work. Conversely, the court in Allen found this factor to cut in favor of fair use since the copyrighted work had only sold the rights in the photo once for a mere $100. Additionally, the author had not made any sales within a 10 year period.
Thus, the current market as well as the possible market for the work did not appear to be impacted.
As indicated by the facts at hand, Winston initially granted the Riverside Record a single-use license and received a single $500 fee. In 1992, Winston licensed the same photograph (along with 72 other ones of her created) to a book publisher. The book as a whole retailed for $40 and she received an additional one-time license fee of $10,000 plus a 7% royalty for each copy sold. When the book went out of print in 1995, Winston's royalties had amounted to $9,800, and she has not received any revenues from the Photograph's use since 1995. Unlike the song in Brant and much like the case in Allen, the Photograph in question has been out of the market and not utilized in a revenue generating manner since 1995. That said, it is fairly difficult to find that Franklin T-Shirts' use would impact the potential market as the facts do not indicate that there has been a market since 1995.
Conclusion
As previously indicated, it is within the court's discretion to consider the weight given to each factor. Of significance in this matter is factor one (the purpose and character of the work) and factor four (the impact of the potential market). The case law coupled with the undisputed facts point to Franklin T-Shirts use as a specific political commentary that has transformed the original Photograph for a different creative use. Additionally, it does not seem that Franklin T-Shirts' use is likely to usurp or even affect the market, as there has been no traction on that since 1995. That said, it appears that Franklin T-Shirts' use was fair and the factors weigh in favor of granting summary judgment in their favor.
Sample Answer
MEMORANDUM
TO: Hon. Joann Gordon
FROM: Examinee
DATE: July 28, 2021
RE: Winston v. Franklin T-Shirts Inc., Case No. 21-CV-0530
The issue in this matter concerns whether Franklin T-Shirts' (hereinafter "Franklin") use of Naomi Winston's (hereinafter "Winston") copyrighted photo of Jim Barrows' (hereinafter "Barrows") arrest on their T-Shirt constitutes fair use, and would therefore be allowed under Section 107 of the US Copyright Act Section 106 of the US Copyright Act gives the owner of a copyright the exclusive rights to do and authorize numerous specific actions with the copyrighted material. Here there is no dispute of fact that in the absence of fair use under Section 107, the Defendant infringed on the Plaintiff's copyright.
Section 107 allows for the fair use of copyrighted materials, and sets a four factor test to determine whether the use made of a copyrighted work in any particular case is fair use. Below follows an analysis of the four factors under 107 along with relevant case law as they apply to this matter concerning same.
Factor 1 - Purpose and Character of the Use
When beginning an analysis of the purpose and character of a work, Sec 107 states that a determination must be made concerning whether the use of a work is commercial in nature or for non-profit educational purposes.
Here the shirt in question is not being used for a non-profit, educational use. It is also unlikely that the shirts were being used for any commercial use - they were sold at cost and therefore did not result in any profits. It's possible to argue that the sale of the shirts at cost could be used to drum up interest in Franklin's general T-shirt business, but this is likely too attenuated to make the T-Shirts "commercial." However, even if the shirts use was considered commercial, a finding of same, does not mean a product still cannot be fair use (Cambell as cited in Kovach).
The main purpose of the shirts is political. Per Brant, political discourse is vital to the essence of democracy, and uses for that purpose should weigh heavily in favor of fair use. Here the photo used of Barrow's was specific to the political message put forward by the T-Shirts - namely that his current "law and order” stance is hypocritical given his past arrest. No other picture would have quite the same effect as a picture of Barrow's arrest when it comes to the above political statement.
It could also be argued that the use of the photograph on the T-shirt constituted "transformative use." Per Cambell, (as cited in Allen) the goal of copyright, to promote science and the arts is generally furthered by the creation of transformative works. Per Allen, just reproducing a copyrighted work, even in another medium, is not the transformative use that would justify a finding of fair use. However, using an element of a copyrighted work in combination with with other creative expression for a different purpose than the copyright owner's and to make a different social commentary changes - transforms the use and argues for fair use. (Blanch as cited in Allen).
Here Franklin took the entirety of the photo for the T-Shirt and added text with a political message. It could be argued that by taking the entirety of the photo (not just part) and reproducing it in another medium prevented the fair use of the photo. However, by adding the political speech to the photo, Franklin combined the photo with political expression to make a different commentary from the original photo.
Given the totally different political purpose of the shirt vs the photo this factor would likely weigh in favor of the shirt being a transformative use, even if the entirety and not part of the photo was used.
As the shirts involve political discourse directly related to the photograph in question, and likely transformed the use of the photographs, Factor 1 weighs in balance for Franklin.
Factor 2 - Nature of the Copyrighted Work
Most often the analysis surrounding the nature of copyrighted work turns on whether the material was published. (Kovach). Here the work was published, which weighs towards the finding of fair use.
Past the above analysis, generally the nature of the copyrighted work is of limited purpose when it comes to an analysis of the factors surrounding fair use (See Brant, Allen and Kovach). However, this factor can militate in favor of fair use under a number of circumstances. Specifically, per Kovach, the nature of copyrighted work favors fair use when it involves a 1. a visual record of a newsworthy event, and most importantly, 2. when the material is the only visual record of a significant newsworthy event.
Here the photo of Barrows taken by Winston is the only visual record of the significant newsworthy event involving a political candidates prior arrest. As such Factor 2 leans towards a finding of fair use.
Factor 3 - Amount and Substantiality of Use
Factor 3 requires the Court to analyze both the quantitative and qualitative use of the work. Here the analysis is straightforward, Franklin used the entirety of Winston's photo, without modification, but instead adding political speech.
However, per Brant circumstances still exist where the use of an entire work can amount to fair use. Specifically, fair use can still be found when the entire work is necessary for a commentary. Here the entire photo of the arrest was likely needed to produce the desired political commentary on the Franklin T-Shirts, as the sole focus of the photo was Barrows arrest, and the sole focus of the T-Shirts was to highlight the discrepancy of said arrest with his current political stance.
Accordingly, Factor 3 also weighs towards a finding of fair use.
Factor 4 - Effect on Potential Market or Value
Factor 4 in the fair use analysis is often said to be of great importance, as one of the purposes of copyright is to protect the economic interests of the copyright holder. (Brant).
Here Winston received compensation from her photo of Barrows on numerous occasions. Specifically, she received $500 in 1985 when the photo was published by the newspaper Riverside Record. Winston also received $10,000 for the use of her photographs in a Book in 1992, and also a 7% royalty for sales of the said book, which went out of print in 1995, and amounted to revenues of $9,800 which were completely paid out by 1995.
Based on the information above, it is unlikely that Winston has strong continuing likelihood of receiving income from the sale of her photo. Indeed the photo has not brought in any income for her in over 25 years. While Winston might argue that her association with the photograph and attachment of the photograph to Franklin's political message T-Shirts may hurt her future profits from her photography, it is unlikely that her association as a photographer of a photo, now displayed on political T-shirts would lead to other's associating her with the political message on same, and thus hurt her sales. As such Factor 4 likely weighs towards a finding of fair use.
Conclusion
While there are valid points on both sides of the ledger concerning whether Franklin's use of Winston's photographs constitutes fair use, it is likely that the balance of the factors under Section 107 lean towards a finding of same.
MPT-2
In re Canyon Gate Property Owners Association
FILE
Memorandum to Examinee
Interoffice memorandum re: opinion letters to clients
File memorandum re: meeting with Jane Mendoza
ACC denial letter re: home improvement requests
Excerpts from Canyon Gate Property Owners Association Covenants, Conditions, and Restrictions
File memorandum re: Association Covenants, Conditions, and Restrictions defined LIBRARY
Excerpts from Franklin Property Code, Chapter 400
Foster v. Royal Oaks Property Owners Association, Franklin Court of Appeal (2017)
Powell v. Westside Homeowners Association Inc., Franklin Court of Appeal (2019)
FILE
FAWCETT & BRIX LLP
Attorneys at Law
425 Lexington Ave., Suite 100
Hayden, Franklin 33054
MEMORANDUM
TO: Examinee
FROM: Deborah Fawcett
DATE: July 27, 2021
RE: Canyon Gate Property Owners Association
________________________________________________________________________________
Our client, Canyon Gate Property Owners Association, needs legal advice regarding a home improvement application. As you know, a property owners association is an organization in a subdivision or condominium building that makes and enforces rules for the properties and their residents. The Canyon Gate Association’s rules are set forth in its Covenants, Conditions, and Restrictions (deed restrictions). The deed restrictions are enforced by the Association’s architectural control committee (ACC).
Charles and Eleanor Stewart live in Canyon Gate. Last month they submitted an application to make certain improvements to their property. The Association’s ACC denied the Stewarts’ application on the ground that the requested improvements (a structure and a fence) would violate the Association’s deed restrictions. The Stewarts will be attending the next Association board of directors meeting to appeal the ACC’s denial of their application.
The board has asked our opinion whether the ACC properly denied the Stewarts’ application so that the board can then take appropriate action. Please draft an opinion letter to the board analyzing and evaluating
(1) whether the board should uphold the ACC’s denial of the Stewarts’ application for a structure and a fence; and
(2) if the board affirms the ACC’s denial and the Stewarts sue the Association, what outcome is likely and what potential remedies are available.
Be sure to follow the firm’s guidelines for drafting opinion letters when preparing the letter. Do not include a separate statement of facts, but be sure to incorporate the relevant facts, analyze the applicable legal authorities, and explain how the facts and law affect your analysis.
FAWCETT & BRIX LLP
Attorneys at Law
INTEROFFICE MEMORANDUM
TO: All attorneys
DATE: January 6, 2020
RE: Opinion letters to clients
The firm follows these guidelines in preparing opinion letters to clients:
For each question presented:
1. State the question.
2. Provide a concise one-sentence answer.
3. Identify and analyze all issues raised by the question, including the strengths and weaknesses of the client’s position where applicable. Be sure to discuss the relevant facts and law that support your conclusions.
Because this is an opinion letter, analyze each theory or issue and all elements or factors of each issue.
An opinion letter should be written in a way that clearly addresses the legal issues but also allows the client, who is not a lawyer, to follow your reasoning and the logic of your conclusions.
FAWCETT & BRIX LLP
Attorneys at Law
FILE MEMORANDUM
FROM: Deborah Fawcett
DATE: July 26, 2021
RE: Canyon Gate Property Owners Association; meeting with Jane Mendoza
______________________________________________________________________________
Today I met with Jane Mendoza, the chair of the Canyon Gate Property Owners Association Board of Directors. The Association needs legal advice regarding a home improvement application submitted by homeowners Charles and Eleanor Stewart. This memorandum summarizes the interview.
• Canyon Gate is a small residential subdivision in northwest Hayden consisting of 45 single-family homes on lots that range in size from one to five acres.
• The Association has appointed an Architectural Control Committee (ACC) to oversee approvals and enforcement of the Association’s Covenants, Conditions, and Restrictions (deed restrictions).
• The Stewarts have lived in Canyon Gate for approximately seven years. They own a 3,000- square-foot home located on a two-acre lot.
• On June 11, 2021, the Stewarts submitted an application to the ACC, along with plans and specifications, seeking approval for two home improvements: (1) construction of a new
Structure to be located adjacent to their existing home and (2) installation of an eight-foot-tall Fence to be erected behind the Structure.
• The Structure would be located approximately 12 feet to the right of the existing home and set back 50 feet from the street.
• The Structure would be connected to the existing home by a roof-covered walkway without walls (a “breezeway”). The breezeway’s roof would extend from the edge of the Structure’s roof to the existing roof on the Stewart house.
• The Stewarts’ application states that Mrs. Stewart’s 72-year-old mother, Estelle, intends to move into the Structure so that she can live with them.
• The application states that the purpose of the Fence is to create an enclosed backyard for the Structure to prevent Estelle’s dog from roaming the entire two-acre Stewart property and possibly getting lost or injured.
• According to the plans submitted by the Stewarts, the Structure will be 600 square feet (30 feet wide by 20 feet deep) and will contain a large living/sleeping area and a bathroom.
• The Structure would be the first of its type in Canyon Gate; there are no other lots in the subdivision that contain a guesthouse or other similar separately walled living area in addition to the originally constructed residence.
• In the past, the ACC has approved the construction of sheds and barns that comply with the requirements for outbuildings set forth in the deed restrictions.
• The ACC has never formally approved the installation of fences that are over six feet tall or that otherwise do not meet the requirements in the deed restrictions.
• A few homes in the community have some type of fencing that is noncompliant with the deed restrictions with regard to fence height, color, and/or material. Ms. Mendoza is not sure how many homes have nonconforming fences, but she did say that the nonconforming fences exist because of lax enforcement of the fencing requirements. For example, one former ACC member built a nonconforming fence on his lot without approval while serving on the ACC.
• On July 16, 2021, the ACC denied the Stewarts’ requests to build the Structure and install the Fence.
• Following the denial, Ms. Mendoza received a call from Mrs. Stewart. Mrs. Stewart insisted that the ACC misapplied the deed restrictions with regard to the Structure and that a variance should have been granted for the Fence.
• The Stewarts have now requested a hearing before the Association’s Board of Directors at its meeting on August 10, 2021.
• Ms. Mendoza and her fellow board members are concerned that if the board upholds the ACC’s denial of the Stewarts’ application, the Stewarts may challenge the decision in court.
Canyon Gate
Property Owners Association
www.cgatepoa.com
July 16, 2021
Charles and Eleanor Stewart
1401 Tanglewood Circle
Hayden, Franklin 33058
HOME IMPROVEMENT REQUESTS
Dear Mr. and Mrs. Stewart:
Thank you for submitting the Home Improvement Requests described below to the Canyon Gate Property Owners Association. After careful consideration, review of the plans and specifications submitted, and an on-site meeting with you to inspect the proposed location of the improvements, the Architectural Control Committee (ACC) has made the decisions noted below.
Request #1: Outbuilding
Decision: Disapproved
Reason: Per Section 5C of the Canyon Gate Covenants, Conditions, and
Restrictions, the square footage of the proposed exterior building
exceeds the maximum allowable limit per acreage.
Request #2:
Decision:
Reason:
Eight-foot-high fence
Disapproved
Please email the ACC if you have any questions. If you wish to appeal either denial, you may request a hearing before the Association Board of Directors.
Sincerely,
Canyon Gate Architectural Control Committee
Per Section 7A of the Canyon Gate Covenants, Conditions, and
Restrictions, fences taller than six feet are not permitted.
Excerpts from Canyon Gate Property Owners Association
Declaration of Covenants, Conditions, and Restrictions
(Adopted April 12, 1985)
SECTION 1. INTRODUCTION
The Canyon Gate subdivision is intended to embody superior standards of single-family housing. For the purpose of creating and carrying out a uniform plan for the improvements to lots within the subdivision, the following restrictions upon the use of said property are hereby established and shall be made a part of each and every contract and deed executed.
SECTION 2. ARCHITECTURAL CONTROL
A. Approval Required: No building, fence, wall, or other structure shall be constructed or maintained . . . until the construction plans and specifications for same shall have been submitted to and approved in writing by an Architectural Control Committee (ACC) composed of three or more representatives appointed by the Board.
B. Enforcement/Damages: These restrictions are for the benefit of each and every property owner in the subdivision, and may be enforced by the Association . . . , which shall be allowed to recover from a violating party all costs, attorney fees, and out-of-pocket expenses incurred in enforcement of any covenants herein whether by judicial means or settlement.
SECTION 3. GENERAL REQUIREMENTS FOR RESIDENCES
A. Minimum Square Footage: The living area (air-conditioned space) of a residence shall be a minimum of 2,800 square feet, excluding porches and garages, and shall be set back at least 30 feet from the front street right-of-way.
B. Residential Use Only: All lots shall be known and described as lots for residential purposes only. Said lots shall not be used for business purposes of any kind nor for any commercial, manufacturing, or apartment house purposes. Only one family residence may be erected, altered, placed, or permitted to remain on any lot.
***
SECTION 5. CRITERIA FOR BUILDINGS OTHER THAN RESIDENCES
Minimum standard for outbuildings: . . .
C. Size Restrictions: The maximum allowable square footage of all outbuildings shall not exceed 100 square feet per acre of a homeowner’s lot.
***
SECTION 7. FENCE CRITERIA
A. Height Limits: Fences are limited to a maximum height of six feet. No fence having a height greater than six feet shall be constructed or permitted to remain in the subdivision.
***
SECTION 10. VARIANCES
Variances to the design standards and development criteria shall be granted only for a compelling reason and only if the general purposes and intent of the covenants and design standards are substantially maintained.
FAWCETT & BRIX LLP
Attorneys at Law
FILE MEMORANDUM
FROM:
DATE:
Deborah Fawcett
July 26, 2021
RE: Association Covenants, Conditions, and Restrictions defined ______________________________________________________________________________
I have researched the common meaning of certain terms and concepts contained in the Association’s Covenants, Conditions, and Restrictions. Below are my findings:
Residential Building
• a building which is used for residential purposes or in which people reside, dwell, or make their homes, as distinguished from one which is used for commercial or business purposes. The phrase “residential purposes” does not mean only the occupying of a premises for the purpose of making it one’s “usual” place of abode; a building is a residence if it is “a” place of abode.
20 Am. Jur. 2d Covenants § 179 (2018).
Outbuilding
• [a] detached building (such as a shed or garage) within the grounds of a main building.
Black’s Law Dictionary (11th ed. 2019).
• a structure . . . not connected with the primary residence on a parcel of property . . . [including] a shed, garage, [or] barn . . . .
www.definitions.uslegal.com/o/outbuilding/
Excerpts from Franklin Property Code, Chapter 400
§ 401 Definitions
. . .
(d) “Restrictive covenant” means any condition or restriction that runs with the land and limits permissible use of the land.
* * *
§ 403 Construction of Restrictive Covenants
(a) A restrictive covenant shall be reasonably construed to give effect to its purposes and intent.
(b) A restrictive covenant may not be construed to prevent or restrict the use of property as a family home.
(c) This section applies to all restrictive covenants regardless of the date on which they were created.
§ 404 Enforcement of Restrictive Covenants
(a) A property owners’ association may initiate, defend, or intervene in litigation or an administrative proceeding affecting the enforcement of a restrictive covenant or the protection, preservation, or operation of property subject to a restrictive covenant.
(b) A court may assess civil damages for the violation of a restrictive covenant in an amount not to exceed $200 for each day of he violation.
Foster v. Royal Oaks Property Owners Association
Franklin Court of Appeal (2017)
The Royal Oaks Property Owners Association (Association) sued Mark and Kathryn Foster to enforce the deed restrictions for the Royal Oaks subdivision after the Fosters erected a fence that violated certain restrictive covenants contained in the deed restrictions. The trial court entered judgment for the Association. We affirm.
Background
The Royal Oaks subdivision, in the city of Hayden, Franklin, is subject to deed restrictions that include specific setback requirements governing the placement of structures on each lot and other restrictive covenants. The Royal Oaks Architectural Control Committee (ACC), a three-member committee appointed by the Association and made up of homeowners in the subdivision, governs approvals of improvements to lots within the subdivision and enforces the subdivision’s deed restrictions.
In June of 2015, the Fosters bought a lot at the corner of Eagle Drive and Tremont Road in the subdivision and received ACC approval of plans to build a house. The approved plans included a wrought-iron fence enclosing the backyard along Eagle Drive to be located 25 feet from Eagle Drive (the “Eagle Setback”). Nine months after the plan approval, an ACC member drove by the Foster lot and saw a wrought-iron fence being constructed 10 feet from Eagle Drive and thus significantly outside the 25-foot Eagle Setback. On learning of the fence relocation, the ACC sent a letter to the Fosters advising them to stop construction of the fence because it was too close to the street, in a location that had not been approved by the ACC. The Fosters ignored the letter and completed construction of the fence. They thereafter requested a variance to allow the noncompliant fence.
Discussions ensued between the Association and the Fosters, but no agreement was reached. When the Fosters failed to remove or relocate the fence, the Association sued seeking injunctive relief to enforce the restrictive covenants contained in the deed restrictions, a declaratory judgment affirming the Association’s authority to enforce the restrictive covenants, and damages pursuant to § 404 of the Franklin Property Code. The Fosters filed a counterclaim, seeking a declaratory judgment that their fence did not violate the restrictive covenants or, alternatively, that the ACC had been arbitrary, capricious, and/or discriminatory in not granting the Fosters a “variance.” Following a bench trial, the court entered judgment in favor of the Association, granting the Association’s requested injunctive and declaratory relief, and awarding $20,000 in damages pursuant to Franklin Property Code § 404, plus attorney’s fees and costs.
The Fosters raise three issues on appeal: (1) the trial court misinterpreted the Royal Oaks subdivision restrictive covenants, (2) the trial court erred in upholding the ACC’s denial of the requested variance, and (3) the trial court erred in assessing damages under § 404 without evidence of actual injury or harm.
On appeal, we review these Association actions de novo, applying two separate analyses. First, we must determine whether the Association correctly interpreted the restrictive covenant. Then, we must determine whether the Association properly applied the restrictive covenant. Interpretation of the Restrictive Covenant The Fosters contend that the trial court erroneously interpreted the restrictive covenant regarding the minimum distances at which fences must be placed from Eagle Drive (i.e., the 25- foot Eagle Setback). Article III, Section 9 of Royal Oaks subdivision’s deed restrictions prohibits any fence from being erected “nearer to the street than 25 feet” [emphasis added]. Section 14 provides that “to the extent not otherwise limited by these deed restrictions, no building or other structure shall be located nearer to a side lot line than five feet” [emphasis added].
The Fosters argue that although Section 9 requires fences to be located at least 25 feet from the street, Section 14 should govern here because the front of their house faces Tremont Road and Restrictive covenants are a type of deed restriction. They are widely used in many neighborhoods to protect homeowners against construction that could interfere with their use and enjoyment of their property and/or impair property values. Restrictive covenants are a “contract between a subdivision’s property owners as a whole and individual lot owners and are thus subject to the general rules of contract construction.” Coleman LLC v. Ruddock (Fr. Sup. Ct. 1999). In construing a restrictive covenant, a court must ascertain the drafter’s intent from the instrument’s language, giving a restrictive covenant’s words and phrases their commonly accepted meaning. Id. At common law, covenants restricting the free use of land were not favored. However, in 1990, the Franklin legislature amended the property Code to provide that all restrictive covenants contained in instruments governing certain residential developments must be reasonably construed to give effect to their purposes and intent. See Fr. Prop. Code § 403. The Franklin Supreme Court has held that § 403’s reasonable-construction rule concerning restrictive covenants supersedes the common law rule of strict construction. See Humphreys v. Oliver (Fr. Sup. Ct. 2007). thus the side of their house (and side lot line) faces Eagle Drive. Because the lot extends to the edge of Eagle Drive, and the fence is 10 feet from the edge of Eagle Drive, they assert that the fence does not violate the deed restrictions because it is more than 5 feet from their side lot line (as required by Section 14).
This interpretation lacks merit. The five-foot setback in Section 14 specifically applies to a setback from the “side lot line” only “to the extent not otherwise limited by these deed restrictions.” Section 9 deals exclusively with a fence’s distance “from the street.” Thus, the “side lot line” setback established by Section 14 does not apply because Section 9 requires a greater setback (25 feet) between fences and bordering streets. Accordingly, the trial court did not misinterpret the Royal Oaks deed estrictions.
Application of the Restrictive Covenant
The trial court found that the ACC acted properly in denying the Fosters’ request for a variance for the Eagle Drive fence. On appeal, the Fosters assert that the ACC’s refusal to grant the variance was arbitrary, capricious, and/or discriminatory.
An association’s application of a properly interpreted restrictive covenant in a particular situation is presumed to be proper “unless the court determines that the association acted in an arbitrary, capricious, or discriminatory manner.” Cannon v. Bivens (Fr. Sup. Ct. 1998). The Fosters thus had the burden at trial to prove by a preponderance of the evidence that the Association’s denial of the requested variance was arbitrary, capricious, or discriminatory.
In Mims v. Highland Ranch Homeowners Ass’n Inc. (Fr. Ct. App. 2011), the court upheld a summary judgment finding that the defendant association had acted in an arbitrary, capricious, or discriminatory manner in denying a request to build a carport. In Mims, although the deed restrictions did not specifically prohibit carports, an ACC member told the homeowner that the carport plans would be denied “no matter what,” and the ACC did not review the carport plans or even contact the homeowner to discuss the dimensions of the proposed carport.
Here, in contrast, the Fosters deviated from the approved plans for their home and the ACC attempted to work out other fencing options with them. Although the deed restrictions allow the ACC to modify deed restrictions under “compelling” circumstances, the Fosters failed to provide any justification, let alone a compelling one, for relaxing the 25-foot Eagle Setback. The evidence at trial supports the trial court’s finding that the ACC acted properly in denying the requested variance.
Damages under Franklin Property Code Section 404
Finally, the Fosters assert that the trial court erred in assessing $20,000 in damages under Franklin Property Code § 404(b) because the damages were “unsupported by the evidence, manifestly unjust, and erroneous as a matter of law.” They contend that a trial court may not assess damages unless there is record evidence that a violation of a restrictive covenant resulted in actual harm or injury.
The amount of damages that may be assessed under § 404 is not related to the showing of any type of injury or harm or the extent of such injury or harm; rather, it is related to the number of days that the violation takes place, without any reference to the existence, nature, or extent of any type of injury or harm. Nothing in § 404 indicates that the “damages” that the trial court may “assess” under subsection (b) are intended to be compensation for any actual harm or injury from the violation of a restrictive covenant. The trial court did not abuse its discretion in assessing damages of $20,000 under § 404(b).
Affirmed.
Powell v. Westside Homeowners Association Inc.
Franklin Court of Appeal (2019)
Richard Powell appeals the trial court’s grant of a permanent injunction in favor of Westside Homeowners Association Inc. (HOA) requiring Powell to remove a vehicle parked on his front lawn in violation of certain restrictive covenants contained in the neighborhood association’s deed restrictions. We affirm.
BACKGROUND
The HOA is a neighborhood association in the Westside neighborhood of Bradford, Franklin, and is governed by a board of directors. Property in the neighborhood is subject to certain deed restrictions recorded in January 1974 and enforced by the HOA Architectural Control Committee (ACC).
Powell owns a home on Claremont Drive in the neighborhood. In August 2016, Powell. began parking a Chrysler Pacifica minivan on his front lawn, next to the driveway and under an oak tree. In September 2016, the ACC notified Powell that parking a vehicle in his front yard violated the HOA restrictive covenants and that the vehicle needed to be removed within 10 days. The letter also stated that if Powell disagreed, he could contact the ACC and explain his position. Powell did not respond or move the minivan. The ACC sent a second letter in October 2016 notifying Powell that the HOA was prepared to file suit against him for the ongoing violation and advising that he could request a hearing before the board within 30 days. Powell never responded. On February 6, 2017, the HOA sued Powell, seeking a permanent injunction requiring removal of the minivan. After a bench trial, the trial court granted the permanent injunction and assessed attorney’s fees and costs against Powell.
DISCUSSION
Powell challenges the trial court’s findings that Powell violated the restrictive covenants by parking his minivan on his front lawn. In the alternative, Powell argues that even if his actions did violate the restrictive covenants, the HOA waived its right to enforce the restrictions because the HOA allowed other homeowners to park their cars in their front yards.
We review de novo a trial court’s conclusions of law. Mistover LLC v. Schmidt (Fr. Sup. Ct. 1987). Restrictive covenants are subject to the general rules of contract construction and are to be reasonably construed to give effect to their purposes and intent. Fr. Prop. Code § 403(a). The restrictive covenant at issue provides, in relevant part, that “No vehicles . . . shall be parked or stored between the curb and building line of any lot, other than on a paved driveway.” Although restrictive covenants cannot restrict or prevent the use of property as a family home, id. § 403(b), the restrictive covenant here does not affect Powell’s ability to use his property as his home. Rather, it simply requires him not to park his minivan in his front yard. Although this restriction was recorded in 1974, before Franklin Property Code § 403 was enacted, § 403 applies retroactively to create a presumption that the restriction is reasonable. See id. § 403(c).
Powell admits to parking his minivan on his front lawn, which is between the curb and the building line of his lot. In doing so, Powell violated the deed restriction. We reject Powell’s contention that the HOA waived its right to enforce the deed restriction. To demonstrate a waiver of restrictive covenants, a party must prove that “the violations then existing were so extensive and material as to reasonably lead to the conclusion that the restrictions had been waived.” Larimer Falls Comm. Assoc. v. Salazar (Fr. Ct. App. 2005). The number, nature, and severity of the existing violations are factors to consider in determining waiver. Id. Franklin courts have repeatedly found that the evidence was insufficient to support a finding of waiver when 1% to 10% of properties violated the restrictive covenants at issue. For example, no waiver has been found where 4 of 62 lots had nonconforming fences, 2 of 33 lots contained unapproved access roads, 10 of 180 houses violated setback requirements, and 15 of 150 homeowners stored prohibited recreational vehicles on their property. See id. and cases cited therein.
At trial, the chair of the ACC testified that in the five years preceding the lawsuit, she had not seen any other vehicles parked on the front lawns of other properties in the neighborhood. Powell did not produce any evidence to support his allegation that other homeowners parked their cars in violation of the restrictive covenant.
The trial court properly issued the permanent injunction. Affirmed.
Sample Answer
To: Canyon Gate Property Owners Association
From: Examinee, Associate of Fawcett & Brix LLP
Date: July 27, 2021
Re: Canyon Gate Property Owners Association - The Stewarts' Request
Dear Jane Mendoza,
Thank you for contacting our firm regarding your legal matter. After reviewing your case file and relevant legal authorities, our firm can offer you the following guidance on the two questions you have presented.
1) Whether the board should uphold the ACC's denial of the Stewart’s application for a structure and a fence?
A. Answer / Conclusion: The Board should likely not uphold the denial of the Stewart's application for a structure, but should uphold the denial of the application for an eight foot fence.
The rule on point here regarding restrictive covenants and their enforceability is that a restrictive covenant essentially is a contract between a subdivision's property owners as a whole and individual lot owners and are thus subject to the general rules of contract construction. (Coleman LLC v. Ruddock, 1999). What this means is when a court is construing a restrictive covenant, the court must determine the writer's intent from the restriction's language, using commonly accepted meanings for words and phrases (Foster v. Royal Oaks, 2017). The old rule under the Common Law, or judge made precedent-based law, was restrictions on the free use of land were not favored and would be struck down.
However, in 1990, the Franklin legislature amended the Property Code to provide that restrictive covenants contained in written documents or instruments in some residential developments must be reasonably construed to give effect to their purposes or intent (Foster v. Royal Oaks). The Franklin Supreme Court has held that the reasonable construction interpretation of Section 403 which sets forth the rules regarding restrictive covenants control. What this amounts to is that the court will try to reasonably interpret the purposes or intent of the covenant, rather than look for ways to find a covenant is invalid. Under Franklin Property Code Section 403(b), an association is prohibited from restricting or preventing the use of property as a family home. The Court in Powell noted there is a presumption that restrictions in deed are reasonable.
The rules of the Canyon Gate Property Owners Association adopted on April 12, 1985 state in relevant part: No building, fence, or wall can be constructed until the plans and specifications for same have been submitted to and approved in writing by an Architectural Control Committee composed of three or more representative (Section 2A). So as a preliminary matter, this type of provision will be presumptively found to be reasonable based on the rule of construction set forth by the Court of Franklin. The old rule would have restricted free use of property, however the new Franklin Property Code allows for these restrictions.
B. As to the Structure:
Per the Canyon Gate Property Owner's Association Declaration of April 1985, for an additional residence to be built the residence needs to be a minimum of 2,800 square feet (Section 3A). Further, these structures must be set back at least 30 feet from the front-street right of way. There is a provision that only one family residence may be erected. However, under Section 403(b), a covenant cannot be interpreted as being used to prevent or restrict the use of a property as a family home. Here, the submitted plans by the Stewarts include a residential structure proposal of 600 square feet, this violates the 2,800 square foot language. However, the Stewarts can argue that through the use of a breezeway the new structure is actually part of the existing structure, and satisfies the square footage requirement. Utilizing the rule of construction from the courts of Franklin, it is possible the Stewarts could succeed on this argument, as the Stewarts are trying to make what is essentially a property addition for another family member. Section 403(b) forbids the restrictive covenant in question from being used to prevent the use of the property as a family home. The Stewart's could make a strong argument that the inclusion of their grandmother makes the property's use a family home. However, the Association can argue the use of the property already is a family home and the additional living structure being denied does not prevent the property from being used as a family home. Further, the proposed additional structure satisfies the requirement of a 30 foot setback, as it is planned to be 50 feet. Though the Association has not allowed similar structures prior, the use of the property as a family home is likely sufficient to satisfy the restrictive covenant's language.
C. As to the Fence:
Section 2A mandates a homeowner must seek approval for construction of a fence. Section 7A states that fences are limited to a maximum height of six feet, with no fences being allowed to be more than six feet. Here, the submitted application by the Stewart's is for an eight foot fence. Either through strictly construing or reasonably interpreting the language of the restrictive covenant, it is clear that the Stewart's request for an eight food fence is violative of the language of the covenant. Based on the proposed fence and language of the covenant, the Stewart's application for the fence was properly denied.
In response to a denial, the Stewart's may argue that the Canyon Gate Association waived their right to enforcement. However, Franklin Courts have found that not enforcing the deed restriction does not amount to an association waiving their right to enforce the provision. (Powell). A waiver can only be shown when “the violations then existing were so extensive and material as to reasonably lead to the conclusion that the restrictions had been waived". This is a fairly high bar for a plaintiff to show because the plaintiff needs to show first, the violations were widespread and extensive. Second, the plaintiff needs to show the violations were actually material, that the reasonably conclusion for the court is the association essentially stopped enforcing the restrictions. (Powell citing Larimer Falls Comm. Assoc. v. Salazar). 1% - 10% of properties violating a restriction at issue is insufficient. A plaintiff would need to show that enough other residents are violating the restrictive covenant in order for a waiver to be found.
Here, the Association concedes that there are fencing requirements in violation of the restrictive covenant. However, the amount of home with fences in violation is unlikely to be sufficient to rise to the level of waiver. First, the Stewarts would need to show the violations are widespread. Here, the facts state the violations are only by a "few homes", though there is variation regarding the height, color, or materials. However, based on the facts it is also clear there is lax enforcement. However, this is likely not sufficient for the Stewart's to get past the first step. If the Stewart's were successful in showing widespread non-conformity, they would need to also show the materials were material. Based on the facts, it appears only some houses violate the height requirement for the fencing. Also being violated are color and material requirements. Due to the lack of widespread non-conformity and only few violations of height requirements, the Stewart's would likely not be able to properly argue the Association has waived their right to enforcement of the fence height restrictions under Section 7A of the Canyon Gate Declarations.
2) If the board affirms the ACC's denial and the Stewarts sue the Association, what outcome is likely and what potential remedies are available?
Answer: The likely outcome is that a court will overturn the denial of the request for an additional living structure, but will not overturn the denial of the fence.
A. There is a presumption of validity as to an Association's decision to deny a variance so long as they properly interpreted the restrictive covenant. When a court looks at a housing association's decision, under the case of Foster v. Royal Oaks, there is a presumption that when an association properly interprets a restrictive covenant, the association's actions were proper. The only time a court will challenge an association's application of a restrictive covenant is when the court finds the association acted in a manner that was "arbitrary, capricious, or discriminatory" (Cannon v. Bivens, 1998). The burden is on the plaintiff party to show by a preponderance of evidence that the association's denial of the variance was arbitrary, capricious, or discriminatory. What this essentially means is that in order for a plaintiff to succeed in challenging an association's denial of a variance, the plaintiff must show that it is more likely than not the defendant association’s actions were done in a manner that was arbitrary, capricious, or discriminatory. A court will find activity by a defendant association to be arbitrary, capricious, or discriminatory when for example a deed restriction or restrictive covenant does not expressly prohibit an activity, yet the association makes a categorical bar on the activity. An example is from the case of Mims v. Highland Ranch Homeowners Ass'n in which there was no deed restriction regarding carports, however the association told the owner that their prospective carport plans would be denied "no matter what". In Mims, the association did not even review the carport plans or even contact the homeowner to discuss the dimensions. If the Association can show that the homeowner deviated from the approved plans, and the Association tried to work out other fencing options with them, the Association's actions will likely be protected and not easily overturned. If the Homeowner's association can show they made legitimate good-faith efforts to try to resolve the matter with the homeowner directly before initiating litigation, they will likely be found to have acted properly. If a homeowner chooses not to respond to those requests or ignores them, the scale will tip against the homeowner and in favor of the association (Powell v. Westside).
Here, the Stewart's could potentially prevail on the claim for having the structure, but not for the fence. This is because the structure itself likely satisfies the language of the statute, and Franklin Property Code which prohibits covenants from being interpreted to stop a property from being used as a family home. The Stewart’s would argue their application was arbitrarily or capriciously denied because they satisfied the square footage requirement for a living structure due to the addition of a breezeway, so for all intents and purposes the new structure should be considered to be part of the old living structure. Further, the Stewart's are complying with the setback line requirements, another factor which weighs in their favor. If the courts prefer to allow for familial homes to exist, the Stewarts would have a strong argument.
On the fence issue, the language is more clear , as is the violation of the restrictive covenant by the Stewart's proposed plans. The fence clearly violates the plain and commonly used language of Section 7A. Though there are non-conforming uses, the Stewart's would likely fail in making a sufficient claim to have their application for the fence to be denied because it is plainly violative.
B. Potential Penalties and Remedies Available
Per Franklin Property Code, Section 404(b), a court may assess civil damages for the violation of a restrictive covenant in an amount of no more than $200 for each day of violation. These damages are not subject to a showing that a party suffered an injury. Rather it is related to the number of days the violation takes place. (Foster v. Royal Oaks). There is nothing in Section 404 which indicates that the damages a trial court may impose are intended to be compensation for an injury. Rather, the penalty imposed is for a violation. Penalties as high as $20,000 inclusive of attorney's fees and costs have been upheld against homeowner's for violating restrictive covenants.
Here, per the Canyon Gate Property Owner's Association Section 2B, available remedies include charging the violative party all costs, attorney fees and out of pocket expenses incurred in enforcement of any covenants. Given that penalties as high as $20,000 have been upheld, the Association would likely maintain the right to impose a financial penalty or sue for judicial intervention such as a permanent injunction against the Stewart's. However, the remedies available to the Association would likely amount to either a fine per day if the Stewart's constructed a prohibited fence. The Association could attempt to get a permanent injunction for the construction of the fence. If the court does not find the Stewart's proposed housing addition is violative, the Association would not be able to seek an injunction nor impose a daily monetary penalty for the construction and existence of the structure. If the court does find the proposed structure to be violative, the Association could impose daily monetary damages / penalties so long as the structure remains, or the Association could seek an injunction prohibiting the construction of the addition if it has not been constructed already.
Conclusion:
If the Association attempts to limit the construction of the residence, it is likely the Stewarts will succeed in a subsequent lawsuit. If the Association limits the construction of the fence and upholds the ACC, it is unlikely the Stewart's will prevail in subseuqneunt .litiga
- Sincerely,
/s/ Examinee
Associate of Fawcett & Brix LLP
July 27, 2021
Sample Answer
To: Canyon Gate Property Owners Association
From: Examinee
Date: July 27, 2021
Re: Stewart Matter -- Opinion Letter
Dear Canyon gate Property Owners Association
The purpose of this letter is to inform you of the firm's opinion regarding the legal issues in volved in the dispute between the Association and Mr. and Mrs. Stewart. Whether the board should uphold the ACC's denial of the Stewarts’ application for a structure and a fence.
At issue is whether the board would be justified in upholding the ACC's denial of the Stewarts' application for a new structure on their property. The board should uphold the ACC's denial of the Stewarts' applications because the Stewarts will not be able to meet their burden of showing that the Association acted in an arbitrary, capricious, or discriminatory manner, and a claim of waiver is unlikely to succeed. A restrictive covenant is a "condition or restriction that runs with the land and limits permissible use of the land." Franklin Property Code, Section 401(d). Such restrictive covenants are to be "reasonably construed to give effect to its purposes and intent." Id. Section 403(a). A restrictive covenant "may not be construed to prevent or restrict the use of property as a family home." Id. Section 403(b). Essentially, a restrictive covenant is a contract between the individual property owner and the remaining property owners in the subdivision. Coleman LLC v. Ruddock (Fr. Sup. Ct. 1999).
"An association's application of a properly interpreted restrictive covenant in a particular situation is presumed to be proper." Foster v. Royal Oaks Property Owners Association (Fr. Ct. App. 2017). However, that presumption will not apply if the court determines that the association acted in an arbitrary, capricious, or discriminatory manner. Cannon v. Bivens (Fr. Sup. Ct. 1998). The plaintiff must prove at trial that more likely than not, the denial was arbitrary, capricious, or discriminatory. Foster (Fr. Ct. App. 2017).
Here, the Stewarts would have the burden of showing that the denial of their request was arbitrary, capricious, or iscriminatory. In Mims v. Highland Ranch Homeowners Ass'n Inc., the court ruled in favor of the plaintiff (against the association) where a request to build a carport was denied. Mims v. Highland Ranch Homeowners Ass'n Inc. (Fr. Ct. App. 2011). The ACC in that case old the plaintiff homeowner that his plans would be denied "no matter what," refused to review his plans or even discuss them with the homeowner. This case is very different. Here, the association, according to the "HOME IMPROVEMENT REQUESTS" document sent to Mr. and Mrs. Stewart, engaged in “careful consideration," reviewed the plans and specifications, and conducted an on-site meeting to inspect the proposed improvements. Further, the Association gave written disapproval of the plans with specific reasons why the plans were denied and invited the Stewarts to email the ACC if they had questions. Further, the Stewarts were notified of their ability to appeal their denial. This shows that the Association did not act in an arbitrary, discriminatory, or capricious manner. The Association would argue that it engaged in diligent work to ensure that the Stewarts were treated fairly. Thus, the claim that the denial was arbitrary, capricious, or discriminatory would seem unlikely to succeed.
Furthermore, the Association pointed to specific sections of the Canyon Gate Property Owners Association Declaration of Covenants, Conditions and Restrictions in making this denial. Those provisions, as discussed above, must be considered through ordinary contract construction principles. In other words, the words must be given their fair meaning and considered in light of the purposes of the provisions. Here, according tot he Declaration, the purpose is "creating and carrying out a uniform plan for the improvements to lots within the subdivision...."
According to the specific provisions at issue, no structures, including buildings or fences, can be constructed "until the plans and specifications for same shall have been submitted to and approved in writing by the Architectural Control Committee (ACC)...." The Declaration goes on to state in Section 3 that "[o]nly one family residence may be erected, altered, placed, or permitted to remain on any lot.” Furthermore, Section 5 indicates that "the maximum allowable square footage of all outbuildings shall not exceed 100 square feet per acre of a homeowner's lot.” Lastly, under Section 7, fences are expressly limited to a maximum height of six feet.
In this case, the Stewarts submitted an application to the ACC for (1) construction of a new structure and (2) installation of an eight-foot-tall fence. The purpose of these structures is to accommodate Mrs. Stewarts' 72 year old mother, Estelle, who intendeds to move into the structure so that she can live with them. The fence is to ensure Estelle's dog does not run away. Notably, the building will not be connected to the home, except by a "breezeway," a roofed structure with no walls.
The ACC has never formally approved the installation of fences over six feet tall. Also notable is that no other lot in the subdivision has a guesthouse or other similar separately walled living area in addition to the primary residence. These two requests from the Stewarts have, thus, never been aproved before, further demonstrating that the denial is not arbitrary, capricious or discriminatory.
Waiver
The application of a restrictive covenant, such as the ones at issue here, may be waived. Powell v. Westside Homeowners Association Inc. (Fr. Ct. App. 2019). To demonstrate the waiver of a restrictive covenant a party must prove that “the violations then existing were so extensive and material as to reasonably lead to the conclusion that the restrictions had been waived." Larimer Falls Comm. Assoc. v. Salazar (Fr. Ct App. 2005). "The number, nature, and severity of the existing violations are factors to consider in determining waiver." Powell (Fr. Ct. App. 2019). Where between 1-10% of properties violate a restrictive covenant, Franklin courts have repeatedly found there to be no waiver. For instance in Powell, the homeowner parked his minivan on his front yard in violation of restrictive covenants. He claimed that the association waived the covenant prohibiting him from doing so, but could point to no evidence "to support his allegation that other homeowners parked their cars in violation of the restrictive covenant." Id. This case is somewhat different. Jane Mendoza, the chair of the Canyon Gate Property Owners Association Board of Directors, has stated that "a few" homes have some type of fence that is noncompliant with the deed restrictions. Ms. Mendoza was not sure how many home have nonconforming fences, but indicated that the cause of non-conformance is through lax enforcement. In fact, even a former ACC member built a non-conforming fence without approval. The burden would be on the Stewarts to show that more than 10% of the homes in Canyon Gate have nonconforming fences. If they do, we could argue that only fences that do not conform with regard to the height restriction should be considered, thus bringing down the number. However, the Stewarts may point to the fact that an ACC member himself built a non-conforming fence as persuasive evidence of waiver of that restrictive covenant. However, this would not be a demonstration that the violations were "so extensive and material" as to conclude waiver has resulted, as the case law requires. Importantly, the subdivision has 45 lots, so the Association may wish to ensure that fewer than 10% of those lots have non-conforming fences. But unless the Stewarts can prove waiver, this would not harm the Association’s position.
If the board affirms the ACC's denial and the Stewarts sue the Association, what outcome is likely and what potential remedies are available. At issue is whether the Stewarts would be able to carry their burden of rebutting the presumption that the the associations properly applied the restrictive covenant, or their burden to show that the conditions were waived. There is insufficient data to determine if a waiver has been made as to the fence, but the Stewarts will be unable to carry their burden to rebut the presumption that the covenants were properly applied. The wavier argument can only realistically apply to the fence, but as discussed above, there is insufficient data to make a determination on that issue. However, the association, if they properly interpreted the restrictive covenant, is presumed to have properly applied it unless the Stewarts show that the association acted arbitrarily, capriciously, or in a discriminatory manner. Foster (Fr. Ct. App. 2017). Thus, the first issue in a law suit would be whether the Association properly interpreted the provisions.
The Association treated the structure that the Stewarts wanted to build as an "outbuilding," as shown from their reason for denial. An outbuilding is defined by Blacks Law Dictionary as "[a] detached building (such as a shed or garage) within the grounds of a main building." Blacks Law Dictionary (11th ed. 2019). US Legal defines an outbuilding as "a structure . . . not connected with the primary residence on a parcel of property . . . [including] a shed, garage, [or] barn . . . ." These definitions are in juxtaposition with a "residential building" According to legal sources, a "Residential Building" is "a building which is used for residential purposes or in which people reside, dwell, or make their homes, ad distinguished from one which is used for commercial or business purposes." 10 Am. Jur. 2D Covenants Section 179 (2018). The definition goes on to say that "a building is a residence if it is 'a' place of abode." Id.
Thus, the reasonableness of the interpretation will come down to whether or not the court believes it was reasonable for the Association to treat the structural addition as an "outbuilding" as opposed to as a "residential building.” The Association can argue that it was reasonable, particularly because these are simply competing definitions. The fact that one definition supports the conclusion reached by the Association demonstrates that it was reasonable. The Stewarts may argue that the interpretation was not reasonable, since the latter source clearly identifies "Residential" buildings as any place of abode, and Estelle's building would certainly be a place of abode. But, given the competing definitions, it would be difficult for a court to conclude that the interpretation by the Association was unreasonable. Thus, the likely result of any litigation is that the Association will prevail.
Potential Remedies
At issue is what potential remedies are available for each side, should they prevail in litigation. If the Association is to prevail, the court "may assess civil damages for the violation of a restrictive covenant in an amount not to exceed $200 for each day of the violation." Franklin Property Code, Section 404(b). Likewise the Declaration of Covenants, Conditions, and Restrictions entitled to association to recover "from a violating party all costs, attorneys fees, and out-of-pocket expenses incurred in enforcement of any covenants herein whether by judicial means or settlement.
MEE Question 1
A mother was shopping with her six-year-old son at Big Box store. The son was visually impaired, so his mother, concerned about crowding and jostling by other patrons, restrained him by placing her hand on his shoulder and instructed him to remain in her grasp. Despite his mother’s efforts, the son broke free of her grasp and ran toward a nearby candy display. Because he was running and visually impaired, the son did not notice some cheesecake on the floor in the store’s self-serve dining area; the cheesecake was flattened and dirty. The son slipped on the cheesecake and fell to the floor, suffering physical injury. Another customer unsuccessfully attempted to help the son to stand, worsening the son’s injury by negligently twisting his arm. Big Box had in place a policy instructing employees to take steps to promptly clean known hazards on the floor, but it did not assign an employee to monitor floor conditions. Big Box employees do not know when any employee had most recently inspected the floor or when the floor had last been cleaned. The self-serve dining area includes displays that contain takeout food, including cheesecake. These displays had last been stocked several days before the son slipped on the cheesecake. On the day the son slipped and fell, a store employee had walked by the self-serve dining area before the son slipped but had not noticed the cheesecake on the floor. The mother has filed a negligence claim on her son’s behalf against Big Box and the customer who attempted to help the son. Both Big Box and the customer claim that the son was negligent.
1. Under the applicable standard of care, are the facts sufficient for a jury to find that the son acted negligently? Explain.
2. Under the applicable standard of care, are the facts sufficient for a jury to find that Big Box acted negligently? Explain.
3. Can the customer be held liable for enhancing the son’s injury? Explain.
4. Assuming that only Big Box and the customer were negligent and can be held liable, can the son recover the full amount of damages from Big Box only? Explain.
Do not address the effect of any “Good Samaritan” statute.
Sample Answer
1. The issue is whether the facts are sufficient for a jury to find that the son acted negligently.
The issue is whether the son or mother owed a duty of care to the big box store and if so, did they breach that duty. The son and mother likely did not breach the duty of care. A parent is responsible for their children and they must employ the actions of a reasonable parent. A child is held to the standard of care of a child of the same age and likelness. Standards of care do not take into account mental defects or dissabilties but do take into account physical disabilities. An child that is partaking in adult activity may be held to the standard of a reasonable adult. Adult activities are Big Box would also need to prove that the boy running was the but for cause and the proximate cause of his injuries.
Here the mother acted within her standard of care because she kept her son close to the extent that she could and knew that he was visually impaired and did not want any other patrons crowding her. The mother took reasonable care to ensure that she had control of her child. Here, though the son was visually impaired, it is possible and likely that six year old similar to him with or without vision impairment may run off to a candy display. The mother can argue that the candy case was an attractive nuisance and that a child can not forsee or respect the dangers as to the attractive nuisance. The mother can argue that it is forseeable to Big Box that a similar child within age 6 with visual impairment or no visual impairment may run towards the candy case once they see it. The woman can argue that she had her hand on her child and was attempting to restrain him and have him within her grasp. Under this theory, it is unlikely that the jury can find that the son was negligent in running towards the candy display that was nearby. The son was not acting in the manner of an adult therefore it is not likely that a jury would hold him to the adult standard of care. The boy running was not the but for cause of the injury because a non-running person could have fallen on the cheesecake that was on the floor and dirty. The Proximate cause element is also not met as to the boys negligence because it is forseeable to big box that a child may run towards a candy case in their store. The jury may also use the attractive nuisance theory in determining if Big Box was negligent.
2. The issue is whether the facts are sufficient for a jury to find that Big Box acted negligently.
In order to determine if negligence occurred, a plaintiff must prove that there was a duty, that breach of the duty occurred, and that the breach was the actual and proximate cause of the injury, and they must prove damages. A duty exists when there is a sufficient relationship between the two parties. The applicable standard of care is determined by what type of relationship the parties had. Generally, there is a standard duty of care where business's have a duty to keep their liscenees free from known or forseeable danger on their premises. A business has a duty to keep its invittee's safe from dangers it is aware of. If there is forseeability of unknown dangers occuring, the business owners have a duty to keep their liscensee's safe from that foreseeable unknown danger. There is no duty owed to unknown tresspassers. If the duty has been breached, the plaintiff must also show that the injury was the actual and proximate cause of the breach of the existing duty. Actual cause is defined as but for causation, where the action or inaction by the person or business that owed the duty was the direct cause, and but for that inaction or action the injury would not have occured. Proximate cause is often called “legal" cause. Proximate cause is defined under two theories. The first majority theory is the Cardozo theory, which looks to the zone of danger, and finds that proximate cause is found when the injury occured in the zone of danger that the breach of the duty occured in. The zone of danger limits recovery for negligence theories based on if the Plaintiff was in the forseeable zone of danger of the negligent act. The second minority theory is that under proximate cause, the negligent party is responsible for all damages that occur out of there actions, or lack of actions, regardless of their forseeability. Lastly, a plaintiff must prove damages in order to recover under a negligence theory. Negligence does allow for punitive damages but does not permit recovery for soley economic damages. Under the theory of res ipsa loquitor, a plaintiff may recover for negligence without specific evidence of negligence if they can prove that this type of injury and event is not something that occurs without negligence. The plaintiff must prove that the premises was in the exclusive control of the party they are accusing of negligence and that an injury of this kind does not occur absent negligence.
The Big Box had a duty to its invitee's to keep its premises reasonably safe. The duty of care applicable to Big Box is that of an invitee/liscensee relationship, because it had consumers coming onto its premises for consumer purposes. The duty of care was breached when the Big Box store did not have someone checking for hazards that could reasonably occur on their premises. Therefore, the Big Box store breached its duty when it did not have any protocol in place to check that the premises was reasonably safe. There is no duty to tresspassers to warn of obvious dangers, here the son was not a tresspasser but was an invitee on the premises. Though the son was visually impaired, the store still had a duty to make sure the premises was reasonably safe to its patrons. The store breached that duty when it did not have an employee checking the premises for debris on the floor. Regardless of the son's visual impairment, any individual could have slipped on the floor because the facts note that the son had slipped on cheesecake and the cheesecake was flattened and dirty. The actual cause requirement is met because but for the spilled, old cheesecake on the floor, the son would not have fallen. Proximate cause under the majority Cardozo theory is also met, because it was forseeable that Big Box would have food spills because they were in the business of selling food. It was also foreseeable that the Big Box store would have food fall on the floor dring re stock days or in the self serve area. Big Box had employed "self serve" food purchases, and therefore, it was forseeable that a patron could spill food and cause someones injury. Big Box could have easily had an employee every hour check the area of the self serve food station in order to make sure the floor was free of debris and food. Further, it was forseeable to Big Box that if food had been left on the floor it could cause injury. The facts show that the cheesecake was flattened and dirty, therefore the Big Box store could have not seen the cheesecake on the floor for several days. It was reasonably forseeable that a food spill could cause a patron to slip and therefore, the proximate cause requirement is met under the majority theory. If the court employed the minority theory, the minority theory would also be met, because it provides that any injury does not have to be forseeable in order for the negligent party to be responsible. Here Big box would be responsible under the minority theory because the floor and self serve food station was within their Big Box store and the boy had slipped and fallen on that when it was in their exclusive control. Therefore, under both theories of proximate cause this element is met. The Plaintiff must also prove damages. The plaintiff may recover for any medical expenses that may have arose because of the fall in the big box store including hospital bills and physical therapy for broken bones.
The Plaintiff can also argue that this accident is not the type that occurs without negligence. This is the theory of res ipsa loquitor. The plaintiff would need to prove that this is not something that occurs without negligence. Here the plaintiff can argue that the store had not supplied any evidence of employees having a record of when the floor had been inspected or when the floor had last been cleaned. The plaintiff must also show that the injury is not something that occurs absent negligence. The plaintiff can likely argue that slipping and falling on cheesecake that is dirty and flattened does not occur without negligence on the Big Box stores part. The plaintiff can also likely show that the Big Box floors were in its exclusive control at the time of the injury. Therefore, the jury can likely find that the Big Box store was negligent under a standard negligence theory or under Res Ipsa loquitor.
3. The issue is whether the customer can be held liable for enhancing the sons injury.
In order to prove negligence against the customer the Plaintiff must prove that the customer breached a duty and that the customer's act was an actual and proximate cause of the injury. There is no affirmative duty to rescue. However, once an individual takes on the act of resuing they must complete the rescue or attempt to compelte the rescue in good fatih and with reasoable actions. They may be liable if they abandon the rescue. An intervening cause occurs when an act disrupts the tort in action and breaks the causal chain. A superseding cause is one that occurs simultaneously with the tort that is in action. The Plaintiff also has to prove damages.
Here, the customer did not have an affirmative duty to rescue the son. There is no affirmative duty to rescue. The customer attempted to help the boy up and grabbed his arm. The customer did not have a duty to act in the affirmative. The customer did have a duty to employ reasonable effort in aiding the boy. The plaintiff would have to prove that the customer did not reasonably attempt to help the boy. Under the facts it appears that the customer attempted to help the boy up or to catch his fall. The customer unsuccessfully attempted to help the son stand after he had fallen. The plaintiff also must prove that the injury worsening was the actual and proximate cause of the customers aid. The but for cause would likely be established because the boy had already fallen, and the customer was trying to help him up. Therefore, the customer was not an intervening cause of the fall. Proximate cause may be established under the zone of danger test, which is the majority test. The plaintiff would need to establish that it was forseeable that the customer could cause greater injury if she helped pick up the boy from his fall. It is likely that it was forseeable she could cause greater injury, we would need more information on the manner that she attempted to help the boy up in. The plaintiff would need to prove that the damages were directly caused by the customers help. If the plaintiff can prove that the injury would not have been as severe but for the customer’s atempt to aid the boy, then the Plaintiff can likely find that the customer was negligent.
A jury may find that the customer is liable for enhancing the sons injury if they find that she did not act reasonably in attempting to help him up and that her act directly caused the injuries to be worse. Therefore it is likely that the customer can be found negligent.
4. The issue is whether the the son can recover the full amount of damages from Big Box only assuming that Big Box and the customer were negligent.
Most jurisidictions use a theory of joint in several liability, where joint tortfeasors can be jointly and severally liable for the entire harm of the action or in action. Some jursidictions apply contributory negligence, which looks to the amout each party was negligent and permits the plaintiff to recover that percentage from each party. Under Comparative fault jursidictions, the plaintiffs amount of negligence is subtracted from the damages and the plaintiff may then recover the remaining amount from the parties. In pure comparative negligence jursidicitons an plaintiff who is more than 50% at fault for the harm may not recover from any defendant.
Under the theory of joint and several liabiliy if both the BIg Box store and Customer are found negligent, the son can recover the full amount of damages from Big Box. The son would be able to recover the full amoun from Big Box. Big Box would then be able to go to the customer and ask for reimbursement of the customers share of negligence.
Sample Answer
(1) The son did not act negligently.
The standard of care necessary for children are those of similar age, intelligence, and experience, with a presumption that children under the age of four are not capable of being negligent. Individuals with physical impairments are also compared to reasonable people of similar physical limitations. Thus, the question is whether the son acted less reasonably than another six-year old child with a visual impairment of similar intelligence and experience.
Here, the son was with his mother until he broke free and ran toward a nearby candy display. This action was one that is reasonably to be expected by a child in a big box store that sees candy. Not only would a child be unlikely to look around and inspect the floor for possible tripping hazards, a reasonable child with a similar visual impairment further would likely be unable to appreciate or notice this. The courts specifically condition the standard of care for children because of their inability, due to their age, to appreciate the risks and harms associated with certain things. Here, the son only ran away from his mother when he saw the candy display, which would distract and excite a reasonable child of his age. Thus, he likely was not negligent.
Further, while his actions were partially the cause of his injury, because he was running, it is not the but for factual cause of his injury, and thus he is not liable. Because he is not the factual cause, proximate causation, and injury and damages need not be considered.
(2) Big Box acted negligently as there was a duty to the invitees, which can be demonstrated by res ipsa loquitur.
Duty
In order to act negligently, there must be a duty, a breach, causation and injury. All have a duty to those that would be foreseeably within the zone of danger of their activity, under the majority approach, or under the minority approach all individuals who are harmed by the defendant's behavior. Stores that open themselves to the public owe a duty of care to those individuals that enter the premises with the intent to exchange business or purchase items, and are called invitees. Invitees are owed a duty of care to not only warn of known defects, but also to inspect for defects and repair or warn invitees of both latent and hidden defects. Thus, the Big Box store owed a duty of care both to the mother, son, and customer to maintain safe premises and to inspect for hidden and latent defects. So Big Box had a duty to maintain safe floors, and to inspect the safe floors, in order to make sure that there are not unsafe passages in the food dining area.
Breach
Individuals can demonstrate breach by claiming that the perpetrator acted in an unreasonable way by deviating from custom, or that the risk of harm was outweighed by the cost of alleviating the harm. Where individuals are unable to demonstrate a breach through direct evidence, they can establish breach through a rebuttable presumption called res ipsa loquitur, it speaks for itself. This allows a plaintiff who estabslihed that an injury occurred, that does not usually occur but for negligence, that was entirely within the control of the defendant. This is particularly helpful when plaintiffs do not have the evidence, or where it is unclear who was the source of the instrument that caused injury.
Here, the plaintiff does not know exactly who spilled the cheesecake that was left on the floor, however, the fact that the defendant did not clean it up is sufficient to demonstrate a breach. Because the son, his mother, and the customer were invitees, Big Box was responsible for monitoring the premises to make sure there were no defects. Thus not only was Big Box responsible for making sure the food area was cleaned up, but they were also responsible for inspecting it. This requires that they inspect it in fact, rather than having a policy that does not include follow through. Thus, Big Box was negligent in that they did not enforce or supervise the policy to make sure that employees take steps to "promptly clean known hazards on the floor." Further, this policy must require that they inspect for hazards, not just clean known ones. Big Box will claim that they were not negligent because the cheesecake was not known, and even if they are not negligent on that, they will be found negligent by virtue of the negligent supervision and entrustment.
Causation
In addition to there being a duty and breach, there must be causation (factual and proximate) and damages. Factual causation is but for causation which requires that "but for" the defendant's action, the plaintiff would not have been harmed. Here factual cause is met because if it were not for the Big Box's negligence in failing to inspect and warn about the cheesecake or clean it up, son would not have fallen when he ran to the candy display. Further son is a foreseeable plaintiff and it is foreseeable that he would fall when he was walking, or running, in the food area when there is an unsafe condition. Lastly, the rescuer hurting him is foreseeable as rescue is always foreseeable.
Injury/Damages
Son was clearly damaged as he had fallen because of the floor condition. Even though the customer exacerbated his injuries, that's insufficient to claim that his injuries are not due to the Big Box's negligence.
(3) Customer is liable for enhancing the injuries as he voluntarily assumed a duty to rescue.
Duty and Breach
There is not duty to rescue. This only is applied if one starts to rescue someone, or is the cause of the danger to which the person needs a rescue. However, once someone has begun to rescue someone, then they have a duty to exercise reasonable care in doing the rescue.
Here the customer did not have a duty to help son, however once customer rendered aid, then the customer was required to exercise reasonable care in doing so. Thus because the customer "negligently twisted his arm" he has breached the duty of care.
Causation
Here, factual causation is likely met because but for the customer attempting to render aid, son would not have had his injury worsened by the negligent twisting of his arm. Even though Big Box was the original but for cause, the enhanced injury was solely due to the negligence of customer. While damages may not be clear between the original injury and the enhancement, it's sufficient for the but for causation. Proximate causation requires that the harm that resulted was foreseeable, and is known as legal causation. If the events that caused the injury were not foreseeable, then there is no liability. Here, the twisting of the son's arm as the customer attempted to pull him up was a foreseeable exaggeration of his injury, and thus proximate causation would apply.
Injury/Damages
Lastly there must be injury or damages. Generally, it must be a physical injury. Here, the son can demonstrate that the injury he incurred because of Big Box’s negligence was exacerbated and enhanced by customer. He is not required to demonstrate that customer was the only perpetrator, but rather that Customer’s actions created an injury, and an enhanced injury applies as an injury.
(4) Son can recover from Big Box alone due to joint and several liability. When individuals are harmed by multiple defendants, jurisdictions have varying applications of liability between the defendants. Some jurisdictions apply pure several liability which means that each defendant is only liable and thus must furnish the amount of damages apportioned to their conduct. Other jurisdictions apply joint and several liability, which means that a plaintiff can seek all of the judgment against either defendant or can seek the partial amounts from each. The default jurisdiction for the UBE applies joint and several liability. Thus if both Big Box and customer were negligent, then the son can seek the entire judgment from Big Box under a joint and several liability theme. Big Box may be able to seek contribution from customer for their negligence, but that is not relevant for purposes of the son's recover for the entire amount from Big Box.
MEE Question 2
Carlos, Diana, and Ethan own all the shares of Winery Inc., which is incorporated in State A. They are equal shareholders of the corporation and the only members of its board of directors. They share responsibilities in the corporation’s vineyard and winery. They have no shareholders’ agreement.
Recently, Carlos and Diana decided that it would be a good idea to change the corporation’s business model. In addition to producing wines from the corporation’s own small vineyard using sustainable, organic farming methods, they believe that the business should expand to buy grapes from local vineyards that produce grapes using such methods. They believe this new focus will allow them to attract new customers interested in organic wines. They also see this change and expansion to their business as a way to promote environmentally sustainable organic grape cultivation in their region.
To make this shift in the corporation’s business, Carlos and Diana have decided that the corporation should become a “benefit corporation.” A benefit corporation, authorized by many states, is a type of for-profit corporation that defines in its articles of incorporation a social or environmental purpose. Benefit-corporation law insulates directors from liability for making business decisions that serve this defined social or environmental purpose, even when their decisions may negatively impact shareholder profits.
State A has adopted the Model Business Corporation Act, which does not explicitly provide for benefit corporations. State A courts have held that domestic corporations must seek to maximize shareholder profits.
State B, which is adjacent to State A, also has adopted the Model Business Corporation Act but has modified its corporate statute to provide for the formation of benefit corporations. To form a benefit corporation, the articles of incorporation must indicate that the corporation has opted to be a benefit corporation and must state a social or environmental purpose for the corporation.
The State B statute insulates directors from liability for claims that they did not seek to maximize shareholder profits if their decisions are consistent with the corporation’s stated social or environmental purpose. Carlos and Diana have decided that they can best carry out the new business plan by creating a benefit corporation in State B to operate in State A with the stated social and environmental purpose of “promoting sustainable and organic vineyard, winery, and production practices.” They will incorporate the new benefit corporation as Organic Wines Corp. and be its only initial shareholders. Once this corporation is created, they will cause Winery Inc. to merge into it with all the Winery Inc. shares converted into shares of Organic Wines Corp.
Ethan is opposed to the plan, but Carlos and Diana support it.
1. Can Ethan block the merger of Winery Inc. into Organic Wines Corp. by voting against it? Explain.
2. If Winery Inc. merges into Organic Wines Corp., does Ethan have a right to demand that he receive payment in cash (instead of receiving shares in Organic Wines Corp.) equal to the fair value of his shares in Winery Inc.? Explain.
3. Assume that Ethan becomes a shareholder of Organic Wines Corp. Could Ethan successfully sue the Organic Wines Corp. directors in State A for promoting sustainable and organic practices at the expense of maximizing shareholder profits? Explain. Do not discuss whether that suit would have to be direct or derivative.
Sample Answer
1. Can Ethan Block the Merger by Voting Against It
The issue is whether an owner of 1/3 of a corporation's shares may prevent a fundamental corporate change. They cannot.
If there is no shareholder's agreement, the default rules apply to fundamental corporate changes. A fundamental corporate change requires that the directors make a majority decision to carry out the change. The decision must be submitted to the shareholders. The shareholders must conduct a meeting with notice of the purpose, and must vote for the change by a majority of the shares entitled to vote. A merger is a fundamental change which must comply with the Model Business Corporation Act rules described above.
Here, Ethan owns only 1/3 of Winery Inc's shares. He is a director as well. However, Diana and Carlos own 1/3 each, and are also directors. They have the voting power to effect the merger as long as they follow the proper procedure described above.
Thus, Ethan cannot block the merger of Winery, Inc. into Organic Wines Corp. by voting against it.
2. If The Merger Occurs Does Ethan Have a Right to Demand Payment in Cash for the Fair Value of his Shares?
The issue is whether Ethan is entitled to appraisal rights. He would be. In a corporation with less than 2000 shareholders, and is not publicly traded, a shareholder who dissents to a merger will be entitled to appraisal rights. This allows the shareholder to step away from the business with the fair market value of their shares in cash, rather than go on with a business which they object to. The shareholder must first give the corporation notice of his dissent, then either abstain from voting or vote against the merger. Then the shareholder must deposit their shares with the corporation and must make a demand for payment from the corporation. If the corporation disputes the estimate as to the fair market value of the shares, then they may sue and have a court determine the value of the shares. Here, Winery Inc is a closed corporation with less than 200 shareholders. Ethan is entitled to appraisal rights because it meets the above description. He must notify the corporation prior to the vote, and then deposit his stocks and make his demand. Whether Winery Inc. agrees with his estimate or a court decides, Ethan will be entitled to the fair market value of his shares.
Thus, if the merger occurs, Ethan has a right to demand that he receive payment in cash equal to his shares in Winery Inc.
3. If Ethan Becomes a Shareholder of Organic Wines Corp, could Ethan successfully Sue the Corporation in State A for Promoting Sustainable and Organic Practices at the Expense of Maximizing Shareholder's Profits? The issue is whether Organic Wines Corp may be sued for violating the law of a State in which it is not incorporated.
Generally, a corporation and its directors have a duty to maximize profits for the shareholders. This party of their fiduciary duty of loyalty; to act in good faith and exercise their discretion in the manner a reasonably prudent person would, in like circumstances, in the belief they are acting in the best interests of the corporation. However, a Benefit Corporation is different, and this type of corporation may take into account other factors, such as the environment or greater society. They must make annual filings describing how they are fulfilling this mission. A corporation’s internal management is bound by the laws of the state in which it is incorporated. Although it might do business in another state, it is obligated to abide by the corporate management law of the state in which it is incorporated. It may be sued in another state, but a management question will be resolved by looking to the law in the state of incorporation. This is otherwise known as the internal-affairs rule. If the corporation's business statement in their articles allows for the policy judgment to be exercised, then the directors will not be liable to the shareholders. Any action beyond a corporation's business purpose in their articles is an ultra vires act which may be enjoined.
Here, Winery Inc. in a state A corporation. This state follows the general rule and does not provide for a benefit corporation. However, Organic Wine Corp will be incorporated in State B. State B allows for incorporation of Benefit corporations. Assuming Ethan becomes a shareholder, he can sue in a state A as if it has jurisdiction over the corporation, but the court will apply the internal affairs rule and state B law will insulate the directors from liability for failing to maximize profits for the shareholders. They would only be liable for ultra vires acts (acts not provided in their articles of incorporation). But the policy judgments of promoting sustainable and organic methods are going to be in the articles of incorporation. They will not be ultra vires and non-enjoinable.
Thus, assuming Ethan becomes a shareholder of Organic Wines Corp, he would not be able to successfully sue the directors in State A for promoting sustainable and organic practices at the expense of shareholder's profits.
Sample Answer
1. Ethan's Blocking of the Merger
Ethan cannot block the merger. At issue is procedure necessary to undertake a fundamental corporate change.
A merger is a fundamental corporate change. To undertake a corporate change, a corporation must first obtain approval by a board resolution. This can be accomplished by obtaining a quorum of the directors for a special meeting, after approrpriate notice and having a majority of those directors present vote in favor of the resolution. A quorum for board of directors is a majority of the directors unless otherwise indicated by the articles of incorporation. After a board resolution, there must be shareholder approval. For a quorume there must be a majority of the outstanding shares entitled to vote. Ordinarily, a majority of the quorum is required to take shareholder action. However, for a fundamentla change, a majority of the shareholders entitled to vote must approve of the action. Here, Carlos and Diana make up a majority of the board of directors because they are two of the three directors. Accordingly, they can properly call a meeting and attend themselves. Even if Ethan were to appear and dissent, his vote would be insufficient to overcome Carlos and Diana's 2/3 majority. After approval, the board would then call a special meeting of the shareholders. And again, because Carlos and Diana own 2/3 of the outstanding shares entitled to vote, Ethan is powerless to prevent them from approving the merger.
2. Ethan's Right to Appraisal
Ethan can demand a cash payment. At issue are a shareholder's right to appraisal. Generally, when a corporation undertakes most types of fundamental changes, including a merger, a dissenting shareholder is entitled to a right of appraisal unless the corporation's shares are publicly traded. Thus, if the shareholder dissents, he must (1) provide notice of his intent to dissent and to seek right of appraisal (2) vote against the fudnamental change and (3) make a demand of his appraisal rights and tender the shares to the corporation. The corporation is then required to pay the shareholder fair market value for the shares. If the corporation disagrees as to the fair value demanded by the shareholder it can undertake judicial proceedings to have a court determine the fair value.
Here, Winery Inc. is seeking to merge with another company and, thus, this is a fundamental change. Ethan can, therefore, make a demand on the corporation to afford him his appraisal rights and seek to have the corporation buy out his shares.
3. Ethan's Ability to Sue
Ethan could not sue Organic Wines Corp. At issue is which state's law applies to the potential suit.
Under the internal affairs doctrine, the law of the state of incorporation applies to internal issues of the corporation. Internal affairs include things such as the fiduciary duties owed to shareholders, distributions of dividends, etc. as opposed to external affairs such as contracts with third parties.
Here, Organic Wines Corp. would be incorporated in State B as opposed to State A in which Winery Inc. was located. Thus, any claim brought by Ethan for a breach of the duty of care or the breach of the duty of loyalty would be governed by the law of State B. State B provides that a properly formed Benefit Corporation, which indicates its election and states a social or environmental purpose results in the directors being insulated from liability caused by the directors' failure to maximize shareholder profits and, instead taking actions that are consistent with the corporation's stated social or environmental purposes. Thus, assuming that Carlos and Diana properly form a Benefit Corporation in State B, and take actions that are in accordance with their social and environmental purposes outlined in the articles of incorporation, they will be insulated from liability for failing to take actions that maximize profits because the law of State B will govern the claim.
MEE Question 3
Fifteen years ago, a woman moved to State A for a temporary job. Shortly after moving to State A, the woman met and briefly dated a man who lived in State A.
Eight months after her relationship with the man ended, the woman, still living in State A, gave birth to a daughter. She then moved to State B with her daughter. The woman was certain that the man was the daughter’s father because he was the only person she had had sexual intercourse with while she was living in State A, but she did not contact him to tell him of her pregnancy or the daughter’s birth. The woman had no other children. She and the daughter lived together as a two-person household exclusively in State B. The woman told her family and her daughter that the daughter’s father had been killed in a car accident.
Two months ago, the daughter, age 14, overheard a conversation between the woman and her oldest friend. The friend said, “Your daughter’s father is now an important scientist. His most recent research is in today’s newspaper. Don’t you think your daughter should meet him?” The daughter, shocked, found the newspaper and emailed the scientist whose research was described in the paper. In the email, she identified her mother, recounted the conversation she had overheard, and suggested DNA testing. The man agreed to cooperate, and the test confirmed that he was the daughter’s biological father. The daughter told the man that she wanted to live with him at his home in State A. The man, wanting to get to know his daughter better, agreed and sent her a bus ticket, which she used without her mother’s permission.
Three weeks after the daughter’s arrival in State A, the man sued in a State A court to establish his paternity, to gain sole custody of the daughter, and to obtain child support from the woman. The man had the woman served personally in State B.
Under State A’s long-arm statute, the State may exercise personal jurisdiction over a nonresident for purposes of determining paternity, child custody, and child support if “the individual engaged in sexual intercourse in this State and the child may have been conceived by that act of intercourse.” State A’s paternity statute permits the “mother or alleged father to establish paternity at any time during the mother’s pregnancy or within 21 years after the child’s birth.” The woman moved to dismiss the man’s suit, arguing that State A’s exercise of personal jurisdiction over her would violate her rights under the due process clause of the Fourteenth Amendment. The trial court denied her motion, and the woman made a special appearance, preserving her right to appeal on the jurisdictional issue. At a hearing on the merits, the woman argued, based on a series of United States Supreme Court opinions, that a putative father may not establish his paternity years after his child’s birth unless he registered with a putative father registry or actively participated in his child’s care. She also argued that the court lacked authority to issue either a child custody or a child support order.
1. Did the State A court’s exercise of personal jurisdiction over the woman violate her rights under the due process clause of the Fourteenth Amendment? Explain.
2. Assuming that the State A court properly exercised personal jurisdiction over the woman, and that the man’s paternity is undisputed, does the court have subject-matter jurisdiction to
(a) award the man sole custody of the daughter? Explain.
(b) require the woman to pay the man child support? Explain.
Sample Answer
1. The court's exercise of jurisdiction did not violate the due process clause of the constitution because her conduct satisfied the minimum contacts requirement of the constitution, and the method of service was reasonably calculated under the circumstances to provide her with notice and an opportunity to be heard. Under the constitution courts can exercise personal jurisdiction over a person if they have had minimum contacts with that jurisdiction. In the past the supreme court has held that sexual intercourse within a state is sufficient to establish personal jurisdiction over the defendant.
The next constitutional requirement for personal jurisdiction is that the method of service be reasonably calculated under the circumstances to put the defendant on notice. Here, personal service in state B clearly put her on notice of the action. Therefore personal jurisdiction here does not violate due process.
2.
The next issue is whether the court has subject matter jurisdiction over (a) the custody determination, and (b) any child support obligations.
For the first subject the court does not have subject matter jurisdiction over custody because state A is not the home state of the daughter and both parents do not consent to jurisdiction. The rule here is that the proper forum for a custody determination is the state where the child and at least one parent has resided for the last six months. Mere presence in the forum is not enough to confer subject matter jurisdiction. If no state is the child's home state a court can exercise jurisdiction if it was the home state within the last six months and there are significant connections to the child and at least one parent. That is the case here because state B had been the child's home state within the last six months and it has significant connections to both the mother and child. Therefore it would be improper for state A to exercise jurisdiction over the child custody issue. The next issue is whether the state court of A has subject matter jurisdiction over the child support aspect of the case. Here, the court can exercise jurisdiction because there have been no previous child support findings, and the state has a sufficient interest in the outcome. The rule is that foreign states cannot modify the child support obligations created in another state, but when there have been no such findings any state with sufficient interest can exercise jurisdiction. Here, there have been no previous findings and both the father and daughter live there. It is likely however that because this is attached to a custody dispute that state A does not have jurisdiction over, both cases should be brought in state B.
Sample Answer
Mother's Personal Jurisdiction Claim
At issue is whether mother is subject to personal jurisdiction in state A for the paternity suit issued by the man.
For a state to exercise personal jurisdiction over a certain individual, it must be authorized by statute and also be consistent with the Due Process Clause of the Fourteenth Amendment. The Constitutional analysis requires that the defendant have sufficient minimum contacts with the forum state. The defendant must purposely avail themself to the forum state, and it must be reasonably foreseeable that they are hailed to court there. The defendant's contacts must be related to the claim unless the defendant is at home in the forum state. A defendant is at-home in the state where they are domiciled. Lastly, it must be fair that the defendant be hailed to court in the forum state. Courts must consider the state and plaintiff’s interests and weight this interest against the burden on the defendant.
Here, State A likely properly asserted personal jurisdiction over the woman. First, State A's long-arm statute allows for such jurisdiction, as the statute allows personal jurisdiction for those who engage in intercourse in the state, and the paternity statute permits the mother or father of alleged paternity to initiate within 21 years of child's birth. Therefore, the constitutional analysis is necessary. It is worth noting that woman is not at-home in state A. Woman is a domicilliary of state B as she moved to state B shortly after having daughter and appears to have lived in state B since. Woman has likely purposely availed herself to State A’s jurisdiction because she had a relationship with the man while she was working for state A. She also gave birth to daughter in State A before she moved to State B. It was likely foreseeable that the woman would be subject to suit in state A for paternity reasons as the woman had no other children and knew that the man was likely to be the father of her daughter as he was the only person she had intercourse with while in state A. These contacts with State A are directly related to the man's claims of paternity. The daughter is purportedly his daughter and he is asserting paternity based on her contacts with State A. It does not appear that there is a huge burden on the woman as well if she were to have to try the case in state A. When daughter went to visit the man, he sent her a bus ticket, so it can likely be assumed that it is easy to commute from State B to state A if you can take a bus from one to another.
Mother's Subject Matter Jurisdiction Claims
At issue is whether the court in state A can rule on the child custody and child support claims of the father. The man is asserting the following in his suit in state A: the man is seeking to establish paternity, to gain sole custody of daughter, and to obtain child support from the woman.
Child Custody
As a general rule, the court that has jurisdiction to enter custody decrees is the child's home state. When the child's home state enters a custody decree, then that court has continuing exclusive jurisdiction over custody matters. The child's home state is the state where the child has spent at least 6 consecutive months living with a parent prior to the enactment of the custody dispute. Such state remains the child's home state even if the child no longer lives in the state if one of the parents still lives in the state. Such jurisdiction can be imposed on another court only under extreme circumstances or if none of the parties live in the home state anymore. Here, the court in state A likely does not have jurisdiction over the custody dispute because State A is not the daughter's home state. Here, Woman and daughter have lived as a two-person household exclusively in State B for the daughter's entire life, which would be 14 years. When daughter learned of her father's existence, she wanted to be able to meeting him, and therefore emailed him and stated that she wanted to live with him. Daughter took off from State A without the permission of the woman and began to live in State A. The suit however was only filed three weeks after Daughter's arrival in State A. State A therefore is not the home state of Daughter, because she has lived in state B for the last 14 years and has not lived in state A with the man for the last 6 months. The woman still lives in State A, so State A will still be deemed to be the child's home state.
Therefore, because State B is the child's home state, the court should declare that it does not have subject matter jurisdiction over the custody claim from the man.
Child Support
At issue here is whether the court has jurisdiction to order the woman to pay child support to the man.
Parents generally have a duty to provide support for their children. As a general rule, the first court to exercise a decree for child support will have continuing exclusive jurisdiction over these disputes. For a court to have jurisdiction over a child support action, it must have personal jurisdiction over both of the parties. State A has personal jurisdiction over the man here because he is the plaintiff and is therefore consenting to jurisdiction in the state. As established above, State A also has personal jurisdiction over the woman because of the relatedness of her contacts to State A. State A likely therefore could potentially have jurisdiction to enter the child support decree here.
It is worth noting however that the court likely would not order the woman to pay child support, as she will still be awarded custody of her daughter. While parents have a duty of support their children, the man will not be issued custody of daughter because she has been living with her mother for the last 14 years, the woman has been her caregiver, she does not have a substantial relationship with the man yet, and while her preference is relevant, the court would still award custody to her caregiver, which is the woman because she has lived with the woman her entire life. However, in terms of subject matter jurisdiction, State A would likely have such jurisdiction.
MEE Question 4
A police officer patrolling in his squad car after dark saw a woman lying on the sidewalk near an intersection. A teenage girl standing near her yelled, “Help! That guy just knocked this woman down and took her purse!” The girl pointed toward a man carrying a white purse and sprinting away from the scene.
The officer jumped out of his squad car and shouted, “Stop! Police!” He ran after the man down an alley and between houses. The man leapt a series of backyard fences and ran onto a back porch. The officer, following behind, jumped over a low fence, heard the man fumbling with keys, and saw him unlock the back door of a house. The man rushed inside and slammed the door. The officer tried to open the door, but it was locked. From inside the house, the man yelled, “Get off my porch!” The officer kicked the door open. The man was standing just inside the door, out of breath, and a white purse was on the floor near his feet.
The officer handcuffed the man, grabbed the purse, and walked the man back to the intersection where the woman was sitting on a nearby bench. The teenage girl was gone.
The woman immediately said, “That’s my purse.” Then she asked the officer, “Is that the guy who took it? I never saw anything. Someone pushed me hard from behind, knocked me down, grabbed my purse, and took off. I was dazed and just lay there until some girl helped me up.” The officer told the man that he was under arrest and placed him in the backseat of the squad car. Another officer arrived, and a few minutes later the teenage girl returned. The girl began speaking with the second officer, saying, “I was right there. It happened really fast. One second I was waiting for my bus and reading text messages. The next second I heard a woman scream and saw some big guy running past me with a purse.”
The girl then noticed the man handcuffed in the backseat of the squad car. She shouted, “Oh my gosh! Hey, I think that’s the guy! It was dark, and it happened fast, but, wow. He’s right there in the car. I’m pretty sure that’s the guy.”
The state charged the man with one count of robbery under a state statute that defines the crime as it was defined under the common law.
Relying only on his rights under the United States Constitution, the man has moved the trial court to suppress evidence of the purse and the officer’s testimony about where the officer recovered it. The man argues specifically that the officer’s entry into his home without a warrant violated his constitutional rights. The man has also moved the court to prohibit any witness from discussing the girl’s on-the-scene identification of him and to prohibit her from identifying him in court during trial. He argues specifically that allowing evidence of the teenage girl’s identification would violate his constitutional rights.
1. Did the officer’s warrantless seizure of the man and warrantless seizure of the purse in the man’s home violate the man’s Fourth Amendment rights? Explain.
2. Would the trial court violate the man’s constitutional due process rights by admitting testimony that reveals the girl’s on-the-scene identification of the man or by allowing her to identify him in court? Explain.
Do not discuss any confrontation clause issues.
Sample Answer
1. Issue is whether the warrantless arrest violated the man's Constitutional Rights Under the 4th amendment as incorporated by the due process clause of the 14th amendment, private citizens have a reasonable expectation of privacy from the state in their own homes. The state cannot seize a citizen or their property without a warrant issued by a neutral magistrate or an exception to the rule. A seizure constitutes a stopping of freedom, movement of person and or taking of property. Officers need probable cause to arrest someone without a warrant.There are two relevant exceptions here. 1) Being told about a felony while in commission or immediately thereafter and 2) exigent circumstances, which is hot pursuit. Here, the man's rights were not violated as to both the seizure of the man and the pursue. The girl let the officer know of the felony that just happen, which was Robbery. The officer knew this because him or her could see the woman lying on the ground and the man sprinting away. This gave rise to probable cause to chase the man. Since there was hot pursuit running through backyard fence etc. There was no expectation of privacy when the man locked himself in the house after there was hot pursuit from the probable cause that arose from the woman telling the officer. Thus, the officer was justified in kicking open the door due to the exigent circumstances. The arrest was valid based on the probable cause of the notification about the felony from the teenage girl. The seizure of the pursue was valid because first it was told to the officer by the girl that the "purse was taken!”. In additional it is a valid search incident to lawful arrest. An officer can search a persons wingspan in public and seize items in plain view in their home. Here, the purse was near the man's feet, which would be close enough to wingspan. Furthermore, it was in plain-view, the officer did not need to go through the man’s cabinets to find the purse, it was simply in plain view during the valid arrest. Therefore, the arrest and seizure of purse did not violate the man's 4th amendment rights
2. Identification
A pre-indictment identification is valid so long as it is not suggestive. A suggestive identification is one where the police do not have an adequate sampling of the possible suspects and leads the person identify to draw a conclusion based on the limited sample size to identify. Since the sixth amendment right to counsel has not attached pre- indictment, defense attorneys are not needed at an identification. However, even if an identification is suggestive, it can still be admissible if the witness that made the suggestive identification is available to testify about it and re certify the identification in court under oath. This would give the defendant an opportunity to cross-exam the witness based on their credibility. Here, the girls identification at the scene is suggestive but would be valid in court. At the scene the girl's identification is suggestive because the only person there is the defendant who is in handcuffs in the backseat of the police cruiser. Plus the girl says "I think that is him". She is not sure if that is him but she is sure. The defendant can argue this is a suggestive identification because the girl could have identified whoever the officers hand cuffed and put in the car that looked remotely familiar to the defendant she thought looked like. That being said, if the witness girl takes the stand under oath, she can validly make the identification. She would be subject to cross-examination and could testify about her identification and the jury would be able to see if she is credible or not.
Therefore, the identification is valid if the girl can testify as a witness.
Sample Answer
Whether the officer's warrantless seizure of the man and warrantless seizure of the purse in the man's home violate the man's Fourth Amendment rights.
Arrest
A seizure, the form of an arrest, is permitted without a warrant when a police officer has witnessed a misdemeanor crime or has been informed about a felony crime being committed.
Robbery at common law is defined as the forceful trespassory taking and carrying away of another person's property with the intent to permanently deprive them of that property. A felony at common law.
In this scenario, the cop was patrolling his squad car. He saw a woman lying on the sidewalk and a teenage girl standing near her yelling "Help! that guy just knocked this woman down and took her purse!" The girl pointed toward a man carrying a white purse and sprinting away from the scene.
The officer identified himself as an officer of the law when he shouted “Stop! Police!". The office continued to run after the man, down an alley and between houses. The man also leapt a series of backyard fences and onto a back porch. The officer, followed behind jumped over a low fence, heard the man fumbling with keys and saw him unlock the back door of a house. The man rushed inside and slammed the door. The officer tried to open the door, but it was locked. The man yelled "get off my porch" and the officer kicked the door open. The man was standing just inside the door, out of breath. The officer cuffed the man, grabbed the purse and returned to the intersection where the woman was sitting on a nearby bench.
The officer was patrolling, so he was in an area where he would normally be -- in the public space, on a city street and was undertaking activity in the standard course of his job.
He happened upon a scene where a witness stated that she had seen a man take a woman's pursue and the cop ran after him. Based on the facts it doesn't appear that the officer lost site of the man for any period of time, kept up with him throughout the chase -- both through visual site and through sounds (keys rattling). As the officer broke into the house and found both the white purse he saw the man carrying and the man was out of breath, the officer was acting correctly when he made the arrest.
It may be argued that the cop didn't actually see the robbery happen because the woman was already down on the ground and there was a girl that had pointed him in the right direction. However, the girl at the scene said that the woman had gotten her purse taken away from her by the man. Based on either viewing the felony himself or being told about a potential misdemeanor, he would meet the threshold of having of making a warrantless arrest.
Based on the foregoing, the cop's seizure of the man was not warrantless.
Purse
Evidence obtained as a result of hot pursuit does not violate Fourth Amendment rights.
In this scenario, the cop was patrolling his squad car. He saw a woman lying on the sidewalk and a teenage girl standing near her yelling "Help! that guy just knocked this woman down and took her purse!" The girl pointed toward a man carrying a white purse and sprinting away from the scene.
The officer identified himself as an officer of the law when he shouted “Stop! Police!". The office continued to run after the man, down an alley and between houses. The man also leapt a series of backyard fences and onto a back porch. The officer, followed behind jumped over a low fence, heard the man fumbling with keys and saw him unlock the back door of a house. The man rushed inside and slammed the door. The officer tried to open the door, but it was locked. The man yelled "get off my porch" and the officer kicked the door open. The man was standing just inside the door, out of breath.
The officer was patrolling, so he was in an area where he would normally be -- in the public space, on a city street and was undertaking activity in the standard course of his job.
He happened upon a scene where a witness stated that she had seen a man take a woman's pursue and the cop ran after him. Based on the facts it doesn't appear that the officer lost site of the man for any period of time, kept up with him throughout the chase -- both through visual site and through sounds (keys rattling). The man rushed in and slammed the door. The officer tried to open the door, but it was locked. When the officer broke down the door to gain entrance to the house, he found both the white purse he saw the man carrying and also observed the man was out of breath.
The purse was in plain site, the officer did not have to go beyond the threshold of the door of the house to identify the white purse he had seen the man carrying away.
Further, when the officer returned to the scene the woman identified the stolen purse as being hers. She further described the manner in which the purse was taken -- someone pushed her from behind, knocked her down, grabbed her purse and took off. All of these actions meeting the threshold of robbery - the forceful trespassory taking and carrying away of another person's property with the intention to permanently deprive them of that property -- a felony at common law. Based on the foregoing, the seizure of the purse did not violate the man's Fourth Amendment rights.
Whether the trial court would violate the man's constitutional due process rights by admitting testimony that reveals the girl's on-the-scene identification of the man or by allowing her to identify him in court.
On the scene identification
Evidence is considered admissible if it is both material and relevant. It is relevant if the evidence makes a fact more or less certain/ascertainable. The evidence in question is relevant.
The next question is whether it is admissible. Generally, out of court statements that are offered for there truth are considered hearsay and cannot be admitted unless it is a hearsay exception.
A hearsay exception can established when there is an excited utterance -- an excited utterance is a statement or gesture -- that is made when the person is still under the influence of an exciting/emotional occurrence.
Another hearsay exception can be established if the statement is is made to police in the course of trying to address the ongoing, presently occurring incident and resolving issues relative to public safety.
In this scenario, it can be argued that the girl was under the influence - or currently experiencing an exciting/emotional event. She had just seen a woman being robbed. She had yelled "Help! That guy just knocked this woman down and took her purse!"
Further, it can argued that she made this identification during the course of an active police investigation as she had flagged the officer down and pointed to the man who was running down the street - assisting the police in identifying the assailant and ultimately helping with public safety.
The defense may argue that the girl because she because she was waiting for the bus and reading text messages and the next thing she knew she heard a woman scream and saw some big running past her with a purse she did not have sufficient time to obtain personal knowledge of the witness.
The defense may also argue that because she left the scene and returned to the scene and then identified the the person in the back of the car, that might not constitute permissible on-the-scene identification because the man was in custody and there was no longer a police emergency.
Despite the defense's objections, based on the foregoing, the on-the-scene identification of the man is not a violation of the man's constitutional due process rights.
Identification in court
A witness must have personal knowledge of the issue in order to testify. Further, a witness that possesses personal knowledge and is subject cross-examination can make an in-court identification.
Based on the fact that the girl identified the man running down the street on the day of the robbery, she had personal knowledge of individual and she is present in court to make the identification.
While it can be argued that she was influenced by seeing the man in the cop car, that was not an attempt by the officer to have the girl identify the man.
As a result of the forgoing, the witness can identify the man in court.
MEE Question 5
Eight years ago, a testator validly executed a will. The will, in pertinent part, provided:
1. I give my house to my friend Doris.
2. I give my residuary estate, in equal shares, to my friend Alice, if she survives me, and to my friend Bill, if he survives me.
3. If any beneficiary under either of the foregoing two provisions of this will predeceases me and my will does not expressly provide otherwise, the heirs of the deceased beneficiary shall take the beneficiary’s bequest.
Three years ago, Bill and Doris died.
Doris died testate, bequeathing her entire estate to a charity. If Doris had died intestate, all of her
probate assets would have passed to her nephew, her sole heir.
Bill died intestate, and his entire probate estate passed to his daughter, his sole heir. Last week, the testator died a domiciliary of State A, leaving a probate estate consisting of her house and a bank account with a balance of $250,000. The testator died with no debts. State A’s anti-lapse statute provides in its entirety:
Unless the decedent’s will provides otherwise, if a bequest is made to a beneficiary who predeceases the decedent leaving issue surviving the decedent, the deceased beneficiary’s share passes to the issue of the deceased beneficiary.
The testator is survived by Doris’s nephew, Bill’s daughter, and Alice. The only relative of the testator who survived the testator is her sister. The charity to which Doris bequeathed her estate still exists.
1. Does the state anti-lapse statute or Clause 3 of the testator’s will determine who takes the share of a beneficiary who predeceased the testator? Explain.
2. Assuming that Clause 3 of the testator’s will applies, who is entitled to the testator’s house? Explain.
3. Does the residuary bequest to Bill lapse because of the express survivorship requirement in Clause 2 of the testator’s will? Explain.
4. Who is entitled to Bill’s one-half share if the bequest to Bill lapses? Explain.
5. Who is entitled to Bill’s one-half share if the bequest to Bill does not lapse? Explain.
Sample Answer
1. Clause 3 determines who takes the share of a beneficiary who predeceases the testator.
The state anti-lapse statute states that it applies only if the decedent's will does not provide otherwise. The decedent's will did make a provision regarding a beneficiary who predeceases the testator. Section 3 of the will states that if the will does not provide otherwise, then the heirs of a deceased beneficiary shall take the beneficiary's bequest. Section 2 of the will expressly states that the heirs of a deceased beneficiary under that provision will not take, because it conditions the gifts to Alice and Bill on their surviving the testator. So, the state anti-lapse statute does not apply to that provision and if either Alice or Bill die before testator, their issue will not take their gifts.
2. Doris's nephew is entitled to the testator's house.
Section 3 of the will provides that if no other provisions of the will expressly provides otherwise, then a gift to a beneficiary who predeceases the testator will go to the beneficiary's heir.
Section 1, which disposes of the testator's house, does not expressly provide what will happen to the house in the event that Doris predeceases the testator. Thus, Section 3 applies and if Doris predeceases Testator, her heir will take the house. Doris did predecease Testator, because she died three years ago and Testator died only last week. Doris's heir is her nephew, so he is entitled to take the house under Section 3.
3. The residuary bequest to Bill lapses.
As stated above, Section 3 applies to this provision of the will rather than the state anti-lapse statute. Under Section 3, a gift will lapse if the portion of the will devising that gift expressly provides that the heirs of a deceased beneficiary don’t take the gift.
Here, Section 2 expressly states that the heirs of a deceased beneficiary don't take, because the gift is conditioned on surviving the Testator. If the beneficiary doesn’t survive the testator, then he is not entitled to the gift and neither is his heir. This provision is also valid under the state anti-lapse statute, because the statute expressly permits a testator to "provide otherwise," that is, to ignore the provisions of the statute.
4. If the gift to Bill lapses, either Alice or the testator's sister are entitled to his halfshare. The different types of gifts contained in a will can be: (i) a specific gift; (ii) a demonstrative gift; (iii) a general gift; and (iv) a residuary gift.
A residuary gift is a provision in a will that directs the distribution of the assets remaining in the probate estate after the specific, general, and demonstrative gifts have been disposed of. The testator's estate consists of her house and a bank account with a balance of $250,000. The house is a specific gift, and it will be satisfied. The only other gift was a residuary gift. It was to be divided in equal shares among Alice and Bill, but only if each survived the testator. Since Bill did not survive the testator, his gift lapsed. Alice is the only remaining residuary beneficiary, so she is entitled to her half-share as well as Bill's.
Under the common law, there was a rule prohibiting the residuary of a residuary. Under this rule, the gift to Bill would fail because it was a residuary gift, and thus cannot be passed to a different residuary beneficiary. Instead, this portion of the estate would pass through the intestacy laws. The Testator's only surviving heir is her sister, so her sister would be entitled to Bill's half-share.
5.
If a court interprets the survivorship language of Section 2 as not prohibiting a deceased beneficiary's heirs from taking under the will, then Bill's daughter would. be entitled to his half-share under the language of Section 3. Section 3 provides that if a beneficiary predeceases the Testator, his heirs will take his bequest. Bill predeceased Testator and left his daughter as his heir. Even if the state anti-lapse statute applies, the result would be the same. The state anti-lapse statute directs that a bequest to a beneficiary who predeceases the testator goes to the beneficiary's heirs. Here, Bill's issue and heir are the same person: his daughter, because he only has one issue and she is his only heir.
Sample Answer
Does State Anti-Lapse or Clause 3 Determine who takes the share of a beneficiary who predeceased the testator?
At issue is when a state statute and the express terms of the will contradict, which controls. Generally, a will is valid if it is executed in accordance with the laws of the state. Here, the record indicates that Testator died a domiciliary of State A. Thus, her law will be probated in accordance with State A law so long as it is valid in State A.
Here, Clause 3 of the Will provides that if any beneficiary predeceases testator, the heirs of the deceased beneficiary shall take the beneficiary's bequest. State A’s anti-lapse statute provides that, unless the decedent's will provides otherwise, if a bequest is made to a pre-deceasing beneficiary leaving issue surviving the decedent, the deceased beneficiary share passes to the issue of the deceased beneficiary.
Where a contradiction occurs that is violation of public policy, then the court will be hesitant to apply the will. However, a clause discussing pre-deceased beneficiaries does not rise to that level. Thus, Clause 3 will control. Because State A's anti-lapse statute provides for a situation where the decedent’s will provides otherwise, Clause 3 will control.
Who is Entitled to Testator's House?
Testator's will provides that Doris shall take Testator's house. However, Doris predeceased Testator. At issue is who would take the house under Clause 3 of Testator's will. Clause 3 provides that the heirs of the deceased beneficiary shall take the beneficiary's bequest. The record provides that Doris died testate, bequeathing her entire estate to a charity. Her sole heir is her nephew.
Where the terms of a will are ambiguous, the modern trend is to interpret the will to get as close as possible to the testator's intent. Here, Testator intended for Doris to have her house, and if Doris did not survive her, for her heirs to have her house. However, Doris bequeathed her property to charity, while leaving her sole heir with nothing. Thus, based on Testator's intent, the probate court would likely find that it was Testator's intent for Nephew to take the house. Further, the will expressly provides for Doris's heirs to take the beneficiary's bequest.
Charity could make an argument that the express terms of the will apply, and because they are provided for in Doris's will, then they should take. However, this argument will likely be without much merit and Doris' nephew will take. Does the Residuary Bequest to Bill Lapse due to Clause 2?
At issue is whether the express language of the will controls. The residuary clause to Bill will lapse. The express terms of Clause 2 states that the residuary estate is to go, in equal shares, to Alice and Bill, if they survive Testator. However, Bill predeceased Testator. Thus, because Bill did not survive Testator, his bequest lapses. Even if an anti-lapse statute were to apply, it would not override the express terms of the will. Where survival is expressly made a condition precedent to take a bequest, the pre-deceased beneficiary's heirs have no claim on the bequest. Thus, the bequest will lapse
Who is Entitled to Bill's one-half share if the bequest to Bill Lapses The issue is who is entitled to a lapsed residuary bequest. Generally, where a bequest lapses, it falls into the residuary estate in equal proportion to the other devisees of the residuary estate.
However, where the express terms call for the survival of a class member, and that class member predeceases the testator, the courts are split. Some courts hold that the residuary gift would fail, and that part of the gift would pass through intestacy. Modern courts have held that the residue would fall, in equal shares, to the other remaining residuary devisees. Thus, if Bill's one-half gift fails, it will either pass through intestacy to Testator's heirs, or to Alice.
Where the no residue of the residue rule applies, then the shares will either pass through intestacy, or, if an applicable anti-lapse statute is on point, to the beneficiary's heirs. However, generally, most state's anti-lapse statutes will only provide for the beneficiary's issue to take if the beneficiary was either a descendant of decedent's grandparents, or in some jurisdictions, more broadly, a relative. Here, Bill is neither, he is just a friend. Thus, in most states, his bequests would pass through Testator's intestate succession. Here, the will expressly provides however that the deceased beneficiary's share shall pass through to their heirs.
Who is Entitled to Bill's one-half share if the Gift does not lapse?
If the gift does not lapse, then the Gift will pass to Bill's issue. Generally, a gift to a pre-deceased beneficiary lapses, and falls into intestacy. However, if the court applies an anti-lapse statute, then the residuary estate will pass to the pre-deceased beneficiary's taker. If the court were to find his gift did not lapse, then it will pass through his estate. The record indicates that he died intestate, and his entire probate estate passed to his daughter, who was his sole heir. Thus, if Bill's share of the residue did not lapse, it will pass to his daughter Clause 3.
MEE Question 6
A 55-year-old woman had been employed for 30 years as a paralegal at a law firm in State A.
One year ago, a 28-year-old male attorney became the firm’s paralegal manager. The attorney began criticizing the woman’s work and berating her on nearly a daily basis. He made derogatory comments about her and her work to the other paralegals and attorneys in the firm. He nicknamed her “grandma” and told people that “it’s time for a new generation to take its place here.”
Three months after he took over as paralegal manager, the attorney fired the woman. To replace her, he hired a 22-year-old paralegal. He explained the firing to his coworkers by stating that the woman had stolen valuable supplies from the firm and was neither honest nor trustworthy. After exhausting all prerequisite administrative remedies, the woman filed an action in the US District Court for the District of State A. Her lawsuit was against the attorney who had fired her. The woman’s complaint states two causes of action. First, the complaint asserts that the attorney fired her because of her age, in violation of the federal Age Discrimination in Employment Act of 1967 (ADEA) (under which the attorney is considered an “employer”). Second, the complaint alleges that the attorney made defamatory comments about the woman to other employees of the law firm, thereby committing a tort under State A law. In particular, the woman’s complaint alleges that the attorney made comments to others “to the effect that [the woman] was dishonest and a thief,” and that “such comments were false and defamatory.” The woman’s allegations include the approximate dates of the comments and the identity of persons to whom they were made, but the complaint does not recite the exact allegedly defamatory language used by the attorney.
The attorney and the woman are both citizens and domiciliaries of State A, where the law firm’s offices are located and where all the events in this matter took place. State A pleading rules require a plaintiff ’s defamation claim to “allege the time and place where the allegedly false statement was made, the persons to whom it was made, and the particular words constituting defamation.” State A courts apply these rules strictly and dismiss complaints seeking damages for defamation if the specific words that are alleged to be defamatory are not stated in the complaint.
The attorney concedes that the court has federal-question jurisdiction over the woman’s ADEA claim but has moved to dismiss her defamation claim. The motion to dismiss argues (i) that the federal court lacks jurisdiction over the defamation claim because it is based entirely on state law, and (ii) that the woman did not allege the “particular words constituting defamation” as required by State A.
1. Should the federal court grant the attorney’s motion to dismiss the woman’s defamation claim on the ground that the federal court lacks jurisdiction over that claim because it is based entirely on state law? Explain.
2. Should the federal court grant the attorney’s motion to dismiss the woman’s defamation claim on the ground that the woman did not allege the “particular words constituting defamation” as required by State A? Explain.
Sample Answer
1. Lack of Jurisdiction over Defamation Claim. The federal court should not grant the attorney's motion to dismiss the woman's defamation claim on the ground that the federal court lacks jurisdiction over that claim because it is based entirely on state law. The issue is whether the federal court has supplemental jurisdiction over a purely state based claim that arises from the same set of operative facts. Subject matter jurisdiction is the federal court's ability to hear the type of case plaintiff is instituting against the defendant. There are two forms of subject matter jurisdiction: (i) diversity cases; and (ii) federal question. Diversity cases are when no two parties on the opposite sides of the action are citizens of the same state, and the plaintiff makes a good faith complaint for damages exceeding $75,000. Federal question jurisdiction is when the cause of action arises from a federal law, statute, treaty, or the Constitution.
Here, it is established, and the attorney concedes, that the age discrimination claim comes arises from the federal ADEA. Diversity jurisdiction does not apply to the state defamation claim because the woman and the attorney are both citizens of state A.
However, where the federal court does not have either federal question or diversity subject matter jurisdiction over a claim, the court may invoke its supplemental jurisdiction to hear a claim it normally would no be able to hear. Supplemental jurisdiction permits the federal court to hear a claim/action that it would not normally have subject matter jurisdiction over had the claim been asserted in federal court on its own. The claim need not satisfy the requirements of federal question or diversity jurisdiction. Rather, the claim must arise from the same common nucleus of operative facts that gave rise to the claim(s) that the federal court has original (federal question or diversity) jurisdiction over.
Here, as mentioned above, it is established that the court has federal jurisdiction over the age discrimination claim via federal question jurisdiction. The state law defamation claim arises from the same common nucleus of operative facts that give rise to the age discrimination claim. The woman was a paralegal at the firm where the attorney fired her from and replaced her with a 22-year-old after berating her daily, nicknaming her grandma, and telling people "its time for a new generation to take its place here." Furthermore, after she was fired and replaced, the attorney told coworkers the woman had stolen valuable supplies from the firm and was neither honest nor trustworthy. This nucleus of facts gave rise to both the federal question-age discrimination claim, as well as the state defamation claim. Thus, even though the defamation claim is based entirely state law and would not be within the court's purview if brought alone, the US District Court for the District of State A can hear this claim under its supplemental jurisdiction. In conclusion, the federal court should deny the attorney's motion to dismiss the defamation claim based on its supplemental jurisdiction over the state defamation claim.
2. Failure to state a claim. The court should not grant the attorney's motion to dismiss the woman's defamation claim on the ground that the woman did not allege the "particular words constituting defamation" as required by State A. The issue is whether the woman pleaded a sufficient claim under the federal pleadings standard. As discussed above, the court has jurisdiction over the pleading because of its supplemental jurisdiction over the defamation claim because it arises from the same nucleus of operative facts that gave rise to the federal question-age discrimination claim. This requires the federal court to employ a single procedural standard across the case, i.e. the court will not apply federal procedural rules to the discrimination claim but state procedural rules to the defamation claim. Rather, the court will use the federal procedural rules across the case despite the fact this is a state defamation claim because it arises from the federal question claim.
Under the federal rules of civil procedure, a plaintiff is required in the complaint to sufficiently state claims that relief plausibly could be granted based on the face of the complaint. This is a lower standard to meet than the strict State A claim. Based on the good faith allegations of the complaint, the court must be able to determine whether relief could plausibly be awarded. Success must not be probable, rather plausible. The later parts of adjudication like discovery and trial will fill out the claims and indicate whether success is likely or futile.
Here, woman makes a good faith allegation in her complaint that the attorney made comments to others "to the effect that the woman was dishonest and a thief" and that "such comments were false and defamatory." Furthermore, she included approximate dates of the comments and the identities of the people who heard the comments. The woman should not be required to pin point the exact words used to defame her or the specific dates and times. This is the function of discovery, not the pleading stage. Rather, the woman has made a sufficient complaint that gives the court a foundation to plausibly envision awarding relief to the plaintiff. Her complaint and claim should fail for lack of concrete details. As stated, the court is not determining the probability, but the plausibility of the claim based on the face of the complaint and the plaintiff's good faith allegations under the federal rules. In conclusion, the federal court should not grant the attorney's motion to dismiss the defamation claim based on the woman's failure to allege particularities as required under State A law because the applicable procedural standard to apply is federal law, not state law.
Sample Answer
1. Whether the federal court lacks jurisdiction over the defamation claim because it is based entirely on state law:
Federal courts have subject matter jurisdiction over actions that arise from questions of federal law and in diversity actions between citizens of different states. Diversity jurisdiction exists if there is diversity of citizenship between the parties and the amount in controversy exceeds $75,000. Diversity of citizenship is achieved where no one defendant and no one plaintiffs are domiciled in the same state.
Here, diversity jurisdiction does not exist with regard to the state law defamation claim because the woman and the lawyer are citizens of the same state. However, that alone is not fatal to the woman's case in this instance because the court can use supplemental jurisdiction to hear the claim.
Supplemental jurisdiction (in federal question actions) exist if the plaintiff has properly alleged a federal claim against the defendant and has related state law claims that they would also like to raise in the same lawsuit. This is called federalpendent supplemental jurisdiction, where the state law claim quite literally hangs from the valid federal law claim to establish SMJ despite lack of diversity existing. Additionally, if a case qualifies for supplemental jurisdiction, the court isn't forced to use it as supplemental jurisdiction is discretionary on behalf of the court. In order for a federal court to chose to use supplemental jurisdiction, the state law claim must arise from the same nucleus of operative fact. The state cause of action must arise from the same transaction or or occurrence, or series of transaction or occurrences, as does the valid federal law claim. If the cases do arise from the same nucleus of operative fact, the federal court can hear the state law claim. With that said, because the alleged defamatory statements the lawyer made to the woman were during the course of her employment and had to do with her age, and because the woman's federal law claim involves wrongful termination based on age, the two can be said to arise from the same nucleus of operative fact - i.e., the conduct of the lawyer prior to the woman's termination. Accordingly, the federal court should deny the attorney's motion because the court can exercise supplemental jurisdiction to hear the state law claim.
2. Whether the court should grant the attorneys motion to dismiss the woman's defamation claim on the ground that the woman didn't allege the "particular words constituting defamation:"
A lawsuit is commenced by filing a complaint with the court to be served on the defendant that sets forth the specific grounds for recovery alleged by the defendant. A complaint is the mechanism by which the plaintiff uses to put the court and the defendant on notice of their claim for relief and the facts which support their claim. The groundbreaking cases of Twombly and Iqbal changed the way federal courts handle the pleading stage of civil litigation.
After those Supreme Court cases, the standard which federal courts use to evaluate pleadings is that of plausibility. A plaintiff's complaint is sufficient to put the court and defendant on notice of the claim if the plaintiff alleges the violations that the defendant committed along with a short factual statement that shows that the defendant is plausibly responsible for the plaintiff's alleged harms. The plaintiff cannot only allege enough facts to suggest that their claim is possible, nor do they have to prove that the allegations are likely. They only have to state a cause of action and list facts which show that recovery is plausible. Only certain cases require the plaintiff to allege highly particularized facts in their complaint, usually involving fraud cases.
To determine whether the woman's complaint was sufficiently descriptive to be valid under the federal rules, it is important to consider that the case is being brought in federal court. Under the Erie doctrine, federal courts are to follow federal procedure when taking a case, irrespective of whether the cause of action involves a state law claim (this isn't the case for a state's substantive laws). Procedural laws are understood as being laws which regulate conduct inside a court room, but some procedural rules can be understood as being substantive for Erie purposes if the rule prevents a person from pursuing a cause of action. However, when it comes to the pleadings stage of litigation, federal rules control the particularity of a plaintiff's complaint in order for a cause of action to exist. Here, because the state A pleading rules do not regulate the conduct of the parties outside of a court action, federal rule controls as per the Erie Doctrine. And since federal rules control, the woman need not allege her cause of action with the same particularity that is required under state A's rule. She must allege facts sufficient to find her cause of action plausible, which she most likely can based on the statements that the lawyer made.
Accordingly, the federal court should also deny the attorney's motion to dismiss the woman's defamation claim on the ground that she didn't allege the particular words constituting defamation.