1. “Value” as a Measure of Rightful Position – General Principles • Overarching principle of all compensatory damage awards is to restore injured party to their rightful position • But how do we implement “rightful position?” • Value = the method by which courts measure injury/loss to plaintiffs • 3 most common ways to measure value: • Market value • Replacement costs • Income/capitalization of earning

2. Measuring Value in Tort Cases – Background on Sept. 11th Litigation • Port Authority (“PA”) entered K to lease Twin Towers and related buildings to Silverstein/Companies (“WTCP”). • PA conveyed 99 year leaseholds on towers to WTCP • WTCP gave as consideration a flat payment at closing and a 99 year stream of future rental payments (present value of which is roughly $2.8 billion) in consideration • After 9/11, WTCP sued the Aviation D’s claiming WTCP property wouldn’t have been destroyed but for their negligence. Lawsuit seeks at least $12.3 billion damages. • Liability is NOT yet established. Decision comes after D’s motion on whether P’s damages are limited to market value of destroyed property IF liability is established. • Major questions: • Can P recover replacement costs or is P limited to market value? • Can P recover loss of use damages?

3. In Re Sept. 11th- Market Value v. Replacement Costs • In a well-functioning market, market value and replacement costs are generally equivalent. But sometimes replacement costs are significantly higher than the market value of a damaged or destroyed item. • When does this occur? • How does the In re Sept. 11thcourt rule on whether to award market value or replacement costs when they are not equivalent? • Why would the court have such a rule?

4. In re September 11th– exception to awarding lesser market value • Special Purpose Property (aka “specialty property”) • Property for which there is no discernable market value – i.e., property which isn’t readily traded in a market • P’s can get replacement costs • Why aren’t the WTCP properties special purpose property? • Were the Twin Towers not iconic symbols of NYC? Doesn’t that make them unique in some sense? • What if the Washington Monument had been hit? Wouldn’t such an iconic property be a specialty property? • How are the Towers different from the Washington Monument?

5. In re September 11th– Loss of Use Damages • P asked for $3.9 billion in lost rents from tenants due to loss of buildings. (These are loss of use damages ). • According to the court, why isn’t P entitled to them? • Is the court right that P’s will be in rightful position without them? • Would it be different if P sought only the 10 years of rents that it took to rebuild the WTCP properties?

6. Trinity Church v. John Hancock • Assume the church had been totally destroyed, what measure of damages would have been appropriate – market value or replacement costs? • Why?

7. Could Trinity Church build any replacement it wanted? Example: 8 times larger than the original & entirely out of Portuguese limestone

8. BUT Trinity Church wasn’t totally destroyed: • After the damage, Trinity Church was simply closer to “takedown” (i.e., the end of its useful life) than before. • Has P really been damaged if it is using the church and isn’t planning to repair the damage until the church is fully at “takedown”?

9. The Concept of “Present Value” • Trinity Church rejected argument that P’s damages should be reduced to their present value – What is that? • Present Value = the amount of money which if invested today would produce a future stream of payments sufficient to compensate plaintiff for future pecuniary loss resulting from a present injury. • Example: • A is injured by B. A will need an operation that will cost $20,000 in 10 years as a result of the injury. • A will not recover $20,000 from B. She will recover the present value of $20,000. • In order to figure out what that value is, we will use a present value table, which uses interest rates and time invested to come up with appropriate multipliers.

10. Present Value, con’td • A needs $20,000 in 10 years • Assume A will invest any money she is awarded now at 5% interest for the next 10 years. • Using the present value table (p. 1010)– use the columns to find the appropriate multiplier (.61391325) • Thus, A would be awarded $12,278.27 which she could invest now to get $20,000 in 10 years. • $20,000 X .61391325 = $12,278.27 These calculations require a lot of assumptions: 1) appropriate interest rates 2) cost of the operation in the future (which requires assumptions about inflation) 3) timing of the operation (when it will be needed) Should the court have reduced Trinity Church’s award of damages to its present value?