PART ONE OF TWO PARTS: THE REMEDIES EXIST IN EQUITY.
Many non-lawyers, and others, have recently accepted and promoted a view that nothing can be done to recover the Bailout Bonuses which AIG openly paid to its Financial Products Division. (Those are the very people who made AIG too failed to be big, without Federal Taxpayer Funds.) The view that nothing can be done to get this money back is simply not true. Remedies exist to get the Bailout Bonuses back.
As explored in this first of two posts, exoneration is an equitable remedy which clearly appears to be instantly available. In the second of two posts here which will explore potentially available equitable remedies, we will take a look at quasi contracts and other contracts implied in law and in fact.
The remedy of exoneration, like a contract constructed in law, is a forgotten means of relief in equity. Unlike quasi contract, however, exoneration has remained essentially forgotten.
Exoneration is based on the principle of indemnification. This means that out of fairness, the one that caused a loss should pay for the loss and not some comparatively innocent party. Exoneration requires at least three parties. It is a right of action to compel a debtor to pay its creditor, where the party seeking exoneration (for example, the Federal Taxpayer) is subjected to liability to the creditor (the Bailout Bonus Baby) on the debtor's account (on the Bailed out Bank’s or AIG’s account).
Out of this tripartite or three-party relation, the doctrine of exoneration arises in order to protect the plaintiff from a loss connected with the withdrawal of its capital from other uses in order to make payment. For example, it ought to be available to protect the Federal Taxpayers from a loss connected with the withdrawal of their Bailout capital from other uses in order to pay the bonuses.
Most significant, however, is that in exoneration all three sides have to sue or be sued. This would be distasteful to the Bonus Babies, no doubt. From accumulating press reports, it is pretty clear that they fear lawsuits almost as much as some members or advisers of the current Federal Government fear lawsuits. Both the debtor (the Bailed out party) and the creditor (the one who receives the Bailout Bonus) would have to be joined in the exoneration action.
Therein lies the key to negotiation. The parties receiving the Bailout Bonuses will be very likely to want to consider ways of avoiding being sued – including negotiating a return of all or part of the Bailout Bonuses in return for not being sued to give the money back.
In sum, even though the bonuses have been paid and the other outrageous payments have been made after their then-employers took Federal Taxpayer Funds, exoneration offers an equitable way to get that money back. It is simply not true that nothing can be done. To the contrary, something can be done.
Based on § 7:18 of Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith, Second Edition Published by Shepard's/McGraw-Hill and 2008 Supplement Published by Thomson West. Here is the Table of Contents of all 356 Sections and 11 Appendices at this time (Third Edition in progress): Download Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith, Table of Contents.March 2009.
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