Restitution for Wrongs: The Measure of Recovery

Abstract

I. Introduction When one person misappropriates a protected interest of another, the matter is prima facie within the law of wrongs or within the law of property. This indeed is the way in which most legal systems have dealt with the topic for hundreds of years. However, seventeenth-century English law developed an alternative route to protect the owner's interest. This route enabled the plaintiff to claim the defendant's gain rather than his own loss. The historical reasons for this development were mainly procedural. The rules of pleading in the common-law action of assumpsit-the ancestor of the modern law of restitution-were comparatively liberal.1 In addition, the tort action was extinguished by the death of the tortfeasor or his victim (actin personalis moritur cum persona). But the claim in restitution remained available and thus offered a way to circumvent the tort rule.2 For the purpose of modern law, these advantages are hardly relevant.3 But the action for recovery of profits derived from the wrong has other aspects that distinguish it from the action for damages for the wrong. These are of considerable significance. One issue relates to the extent of the overlap of the causes of action. Does the cause of action in restitution depend on the existence of a cause of action in tort (or breach of contract), or is the restitutionary claim independent so that it might be available even in the absence of a cause of action in another branch of the law?4 The other issue relates to the measure of recovery. It is concerned with the analysis of the factors that lead to the discrepancy between the plaintiffs loss and the defendant's gain. I have examined elsewhere the question of the independence of the restitutionary claim and its theoretical basis.5 The present Article addresses the other topic, which relates to the measure of recovery. II. Normal (Objective) and Actual (Subjective) Measurements of Recovery The wrongful invasion of another's protected interest often yields the wrongdoer substantial gains. The event can be examined from two perspectives. One perspective, that of the law of torts, emphasizes the loss suffered by the plaintiff (the victim). The other perspective, that of the law of restitution, concentrates upon the defendant's (the wrongdoer's) gain. In instances of wrongful appropriation of another's interest, these viewpoints ordinarily represent two sides of the same coin. If the wrongdoer misappropriated $100 which belonged to the victim, the gain of one prima facie equals the loss of the other.6 But whether this seeming equality indeed reflects the legal position depends on rules relating to assessing damages, on the one hand, and those relating to measuring the enrichment on the other. Broadly speaking, the assessment of damages for the loss suffered by the victim can be either (abstract) or (concrete).7 In a similar vein, the benefits that the wrongdoer obtains may be measured objectively (abstractly) or subjectively (concretely). The measure is based on either the market cost of remedying the loss or the market price of purchasing a substitute. This measure disregards factors that are peculiar to the victim (the elements) that may either increase or decrease the loss suffered by him. Similarly, the measure of the benefit ensuing to the wrongdoer is based on its market price and disregards factors that may increase or decrease the gain derived by the defendant. In this Article, I use the term normal8 damages (or gain) to describe an assessment that in other legal systems is termed objective or abstract. I use the term actual damages (or actual gains) to describe an assessment that in other legal systems is termed subjective or concrete. As already indicated, in cases of appropriation of another's interest, the plaintiffs normal loss is equal to the defendant's normal gain. Where the defendant steals $100 from the plaintiff, the gain of the one equals the loss of the other. …