benefit of the bargain

On April 10, 1902, Louisa M. Gerry leased the Hotel Bristol at the northwest corner of Forty-second Street and Fifth Avenue in New York City to Walter J. Salmon for a twenty-year term beginning May 1, 1902, and ending April 30, 1922. The lease required Salmon to convert the building into shops and offices at a cost of two hundred thousand dollars. All alterations became accretions to the land. While negotiating the lease with Gerry, Salmon entered into a joint venture agreement with Morton H. Meinhard. Meinhard agreed to pay half the funds needed to reconstruct, alter, manage, and operate the property. Salmon received sole power to manage, lease, underlet, and operate the building. Net profits were to be divided forty percent to Meinhard for the first five years and fifty percent thereafter. Losses were to be shared equally. The venture operated the reconstructed property at a loss in its early years and later at a profit. It generated substantial returns for both parties until the lease approached its end. In late 1921, Elbridge T. Gerry, who had acquired the reversion and owned adjoining lots on Fifth Avenue and Forty-second Street, approached Salmon alone after failing to interest other parties in a larger development plan. On January 25, 1922, Gerry executed a new lease to Midpoint Realty Company, a corporation owned and controlled by Salmon. The new lease covered the entire tract for twenty years with successive renewal options extending up to eighty years. It required demolition of existing buildings after seven years and construction of a new three-million-dollar building. Annual rents ranged from three hundred fifty thousand to four hundred seventy-five thousand dollars. Salmon personally guaranteed performance until the new building was completed and paid for. Salmon did not inform Meinhard of the negotiations or the new lease until February 1922. Upon learning of it, Meinhard demanded that the lease be held in trust for the venture and offered to share the guaranty obligations. Salmon refused, prompting this suit. A referee awarded Meinhard a twenty-five percent interest in the lease. On cross-appeals the Appellate Division modified the judgment to enlarge the interest to one-half of the entire lease. The defendants appealed. Separately, in 1917 Meinhard had assigned his entire interest in the joint venture agreement to his wife. She reassigned it to him before suit was commenced. Salmon continued to deal with Meinhard on the basis that the enterprise remained subsisting.

The Nollans own a beachfront lot in Ventura County, California. A concrete seawall approximately eight feet high separates the beach portion of their property from the rest of the lot. The historic mean high tide line determines the lot's oceanside boundary. The Nollans originally leased their property with an option to buy, and the building on the lot was a small bungalow totaling 504 square feet. The Nollans' option to purchase was conditioned on their promise to demolish the bungalow and replace it. On February 25, 1982, they submitted a permit application to the California Coastal Commission proposing to demolish the existing structure and replace it with a three-bedroom house. The Commission informed them that the permit would be granted subject to the condition that they allow the public an easement to pass across a portion of their property bounded by the mean high tide line and their seawall. On June 3, 1982, the Nollans filed a petition for writ of administrative mandamus in the Ventura County Superior Court to invalidate the access condition. The court remanded the case to the Commission for a full evidentiary hearing. After the hearing, the Commission reaffirmed the condition. The Superior Court ruled in favor of the Nollans on statutory grounds and directed that the permit condition be struck. While the Commission's appeal to the California Court of Appeal was pending, the Nollans tore down the bungalow, built the new house, and bought the property. The Court of Appeal reversed the Superior Court. The Nollans appealed to this Court, raising only the constitutional question.

Around 2:30 a.m. on June 20, 2007, neighbors reported a fire that had erupted at the home of the Tinchers in Downingtown, Pennsylvania. Investigators concluded that a lightning strike near the Tinchers’ home caused a small puncture in the corrugated stainless steel tubing transporting natural gas to a fireplace. The CSST was part of the TracPipe System manufactured and sold by Omega Flex. The resulting fire burned for over an hour and caused significant damage to the home and belongings. Following the fire, the Tinchers reported the incident to their insurer, United Services Automobile Association. USAA compensated the Tinchers for their loss up to the limit of their policy and received an assignment of liability claims. The Tinchers suffered an additional out-of-pocket loss because a portion of their claimed loss exceeded the limits of the USAA policy. In January 2008, the Tinchers filed a complaint against Omega Flex in the Chester County Court of Common Pleas. They asserted claims premised upon theories of strict liability, negligence, and breach of warranty, with the strict liability claim based on Section 402A of the Second Restatement. The case proceeded to a jury trial in October 2010 before Judge Ronald C. Nagle. The Tinchers offered expert testimony that the CSST walls were only one-hundredth of an inch thick and therefore inherently defective because lightning-generated currents were highly likely to perforate them. Omega Flex presented its own experts who testified that the TracPipe System met all applicable industry standards. They also stated that the lightning strike lacked sufficient energy to cause the puncture and that an attempted bonding clamp found disconnected after the fire may have prevented the incident if properly installed. After the close of evidence, the trial court denied Omega Flex’s motions for nonsuit and directed verdict. On October 20, 2010, the jury returned a verdict in favor of the Tinchers on the strict liability claim. The jury awarded compensatory damages totaling $958,895.85 plus delay damages. The jury found for Omega Flex on the negligence claim. Omega Flex filed post-trial motions that the trial court denied, leading to entry of judgment. The Superior Court affirmed the judgment in September 2012. The Supreme Court granted Omega Flex’s petition for allowance of appeal limited to the question of whether to replace the strict liability analysis of the Second Restatement with that of the Third Restatement.

Jose Padilla, a native of Honduras, has been a lawful permanent resident of the United States for more than forty years and served in the U.S. Armed Forces during the Vietnam War. He faced criminal charges in Kentucky after being arrested for transporting a large amount of marijuana in his tractor-trailer. Before entering a guilty plea to the drug distribution charges, Padilla's counsel did not advise him that the conviction would trigger deportation proceedings. Counsel instead told him that he did not have to worry about his immigration status because he had lived in the country so long. Padilla relied on that advice when he pleaded guilty and later alleged that he would have insisted on going to trial if he had received accurate information. In postconviction proceedings Padilla claimed that his attorney's erroneous advice about deportation constituted ineffective assistance. The Supreme Court of Kentucky denied relief without holding an evidentiary hearing, treating deportation as a collateral consequence outside the protection of the Sixth Amendment. The United States Supreme Court granted certiorari to review whether federal law imposed on counsel an obligation to advise Padilla that his guilty plea would result in removal from the country.