Source: https://ru.b-ok.org/book/5004216/169623
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Matched Legal Cases: ['§3', '§6', '§18', '§101', '§9', '§668']

Examples & Explanations for Remedies | Richard L Hasen | download
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A new discussion of the draft Restatement of the Law Torts (Third): Liability for Economic Harm's treatment of the economic harm rule A new discussion of special emotional distress rules for cases involving high risk of causing such distress, such as mishandling human remains and injuring pets A new discussion of emotional distress damages for breach of contract A new section discussing of the basis for temporary restraining orders, including the appealability of such orders (which has become a contested issue in challenges to Trump administration executive orders) A new section discussing the controversy over the use of nationwide injunctions in highly charged political cases, a trend that has emerged to challenge policies of both the Obama and Trump administrations A new discussion of restitutionary claims for constructive trusts involving disproportionate gains, such as lottery winnings, under both the common law and Restatement (Third) of Restitution A new section on opportunistic breach of contract in Restitution, including the Supreme Court's recent endorsement of the section in a 2015 case A new section on the relationship between laches and statutes of limitations and new Supreme Court authority on the question
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eISBN 978-1-4548-9256-4
Names: Hasen, Richard L., author.
Title: Remedies / Richard L. Hasen, Chancellor’s Professor of Law and Political Science, University of California, Irvine School of Law.
Description: Fourth edition. | New York : Wolters Kluwer Law & Business, [2017] | Series: Examples & explanations | Includes
Identifiers: LCCN 2017025391 | eISBN 9781454892564
Subjects: LCSH: Remedies (Law)—United States—Outlines, syllabi, etc. | LCGFT: Study guides.
Classification: LCC KF9010.H37 2017 | DDC 347.73/77—dc23
LC record available at https://lccn.loc.gov/2017025391
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To Deborah, Shana, and Jared
With love, for a bright future
Chapter 1 Read This Chapter First: Why Remedies? What Remedies?
PART I. COMPENSATORY DAMAGES
Chapter 2 Introduction to Damages: Show Me the Money
Chapter 3 Tort Damages
Chapter 4 Contract Damages
Chapter 5 The Unusual: Expectancy Damages in Tort and Reliance Damages in Contract
Chapter 6 Ensuring the Rightful Position: A Look at Certainty, Mitigation, Offsetting Benefits, and the Collateral Source Rule
PART II. EQUITABLE REMEDIES
Chapter 7 Injunctions and Other Equitable Remedies: Stop Me Before I Harm (Again)!
Chapter 8 Advanced Topics in Injunctions
Chapter 9 Preliminary Injunctions
and Other Preliminary Relief
Chapter 10 Enforcing the Injunction:
PART III. RESTITUTION
Chapter 11 No Gain, No Pain: Restitution and the Unjust Enrichment Principle
Chapter 12 Unjust Enrichment: Measuring Ill-Gotten Gains and Apportioning Profits
Chapter 13 Advanced Topics in Restitution: Constructive Trusts, Equitable Liens, and Other Restitutionary Remedies
Chapter 14 Rescission and Reformation
PART IV. OTHER IMPORTANT REMEDIES CONCEPTS
Chapter 15 Dishing It Out: Punitive Damages and Their Constitutional Limits
Chapter 16 Declaratory Judgments and Related Remedies
Chapter 17 Help! I Need Somebody: Ancillary Remedies
Chapter 18 Remedial Defenses
Chapter 19 Putting It All Together: Taking a Remedies Exam
Table of Books and Articles Cited
Table of Statutes, Restatement Sections,
and Uniform Commercial Code (UCC) Provisions
1.1 Why Should a Law Student Care About Remedies?
1.2 Why Should a Lawyer Care About Remedies?
1.3 Remedies as the Lawyer’s Toolbox
1.4 The Categories of Remedies
2.1 Compensatory Damages as Substitutionary Relief
2.2 Compensatory Damages and the Rightful Position Standard
2.3 Valuing Compensatory Damages
2.3.1 Damages in a Well-Functioning Market
2.3.2 Damages Without a Well-Functioning Market
2.4 Nominal Damages
2.5 Time and the Value of Money
2.5.1 Prejudgment and Postjudgment Interest
2.5.2 Present Value
3.1 Introduction to Tort Damages
3.2 Pain and Suffering, Emotional Distress, and Other “Noneconomic” Damages
3.3 Special Rules for Wrongful Death, Survivor, and Loss of Consortium Actions
3.3.1 Wrongful Death
3.3.2 Survival of Personal Injury Actions
3.3.3 Loss of Consortium Claims
3.4 Presumed Damages (Defamation)
3.5 Other Limits on Tort Damages: Proximate Cause and the Economic Harm Rule
4.1 Introduction to Contract Damages: Expectancy Versus Reliance
4.2 The Theory of Efficient Breach
4.3 Consequential Damages
4.4 Liquidated Damages and Other Contractual Limitations on Remedies
4.5 Contract Damage Issues Under Article 2 of the Uniform Commercial Code
4.5.1 Buyers’ Remedies
4.5.2 Sellers’ Remedies, Including the “Lost Volume Seller”
4.5.3 U.C.C. Article 2 Limitations on Remedies
5.1 Review of the Usual Tort and Contract Damage Measures
5.2 Expectancy Damages in Tort? The Special Case of Fraud
5.3 Reliance Damages in Contract?
Chapter 6 Ensuring the Rightful Position: A Look at Certainty, Mitigation, Offsetting Benefits, and the
6.1 The Certainty Requirement
6.2 The Mitigation Requirement
6.2.1 Avoidable Losses: Rules and Economic Rationale
6.2.2 Mitigation Under Article 2 of the U.C.C.
6.2.3 What Are “Reasonable” Steps in Mitigation?
6.3 Offsetting Benefits
6.4 The Collateral Source Rule
7.1 Introduction: Injunctions as Specific Relief
7.2 Requirements for Injunctions, the Origins of Equitable Relief, and a Note on Replevin
7.3 The Propensity Requirement and the Scope of Injunctions
7.3.1 Propensity, Ripeness, and Mootness
7.3.2 The Proper Scope of Injunctive Relief
7.4 The Irreparable Injury Requirement
7.5 Does eBay Set a New Standard for Granting Injunctions in Federal Court?
7.6 Other Policy Reasons for Courts to Deny Injunctions
8.1 Structural Injunctions (or Institutional Reform Litigation)
8.1.1 Structural Injunctions, the Rightful Position, and the Roving Commission to Do Good
8.1.2 Consent Decrees
8.1.3 How Congress May Limit Remedies: The Prison Litigation Reform Act Example
8.2 Modifying Existing Injunctions
8.3 Injunctions and Third Parties
8.4 Nationwide Injunctions: Political Warfare in Federal Courts
Chapter 9 Preliminary Injunctions and Other Preliminary Relief
9.1 Introduction to Preliminary Relief
9.2 Preliminary Injunctions (and Stays)
9.3 Injunction Bonds (or “Security”), with a Note on Ne Exeat
9.4 Temporary Restraining Orders
9.4.1 Why Seek a Temporary Restraining Order?
9.4.2 Important Procedural Differences Between a Preliminary Injunction and a Temporary Restraining Order
Chapter 10 Enforcing the Injunction: The Power of Contempt
10.1 Introduction to the Contempt Power
10.2 Civil Coercive Contempt
10.3 Criminal Contempt
10.4 Civil Compensatory Contempt
10.5 The Collateral Bar Rule (More on Criminal Contempt)
10.6 Contempt and Third Parties
11.1 Introduction to Restitution
11.2 The Meaning of “Unjust Enrichment”: When Is Restitution Available?
11.2.2 Benefits Conferred by Mistake
11.2.3 Benefits Conferred by Transferor with Defective Consent or Authority
11.2.4 Benefits Conferred Intentionally in Emergency, and by Officious Intermeddlers
11.2.5 Benefits Conferred in Contractual Settings, Including the Case of “Opportunistic Breach”
11.2.6 Benefits Obtained Through Tortious or Otherwise Wrongful Conduct
11.3 Why Allow for the Recovery of Defendant’s Gains in Cases of Unjust Enrichment?
11.4 More on Losing Contracts: Should the Contract Price Be the Cap?
12.1 Measuring Ill-Gotten Gains
12.2 Apportioning Profits
Chapter 13 Advanced Topics in Restitution: Constructive Trusts, Equitable Liens, and Other
13.1 Constructive Trusts
13.1.1 Constructive Trusts: The Basics
13.1.2 Advanced Tracing Problems
13.2 Equitable Liens
13.3 Other Restitutionary Remedies
13.3.1 Replevin and Ejectment
13.3.2 Subrogation, Contribution, and Indemnity
14.1 Introduction: Are Rescission and Reformation Restitutionary Remedies?
14.2 The Remedy of Rescission
14.3 The Reformation Remedy
14.4 The Choice Between Rescission and Reformation
15.1 Introduction to Punitive Damages
15.2 Punitive Damages and Contract
15.3 Constitutional Limits on the Amount of Punitive Damages
16.1 Introduction: Why Declaratory Judgments?
16.2 Ripeness Requirements for Declaratory Judgments
16.3 Declaratory Judgments and Federalism
16.4 Other Declaratory Remedies
17.1 Collecting Money Judgments
17.2 Prejudgment Freeze Orders, Attachments, and Receiverships
17.3 Attorney’s Fees and Litigation Expenses
18.1 Plaintiff’s Bad Conduct: Unconscionability, Unclean Hands, and In Pari Delicto
18.1.1 Unconscionability
18.1.2 Unclean Hands
18.1.3 In Pari Delicto
18.2 Estoppel and Waiver
18.3 Laches and Statutes of Limitation
18.3.1 Laches
18.3.2 Statutes of Limitation
18.3.3 Relationship of Laches to Statutes of Limitations
19.1 How to Prepare for a Remedies Exam
19.2 Sample Remedies Essay Examination Questions and Answer Keys
Table of Statutes, Restatement Sections, and Uniform Commercial Code (UCC) Provisions
This book owes an intellectual debt to two exemplary scholars and teachers. In 1997, Laurie Levenson, then
Loyola Law School’s associate dean, agreed to let me come as a visitor to teach Remedies, a course I had never
taught before. I was anxious to get back to Los Angeles, and I was willing to come even if it meant teaching a
course I did not especially want to teach. Now, having taught the course numerous times, it has become one
of my favorites. I get to pull together interesting tidbits from all parts of the first-year curriculum, and it
allows me to move back and forth between theory and practice with seasoned law students.
The other scholar to whom I owe a debt is Doug Laycock, whose Remedies casebook is a tremendous
teaching tool and a wonderful resource. That casebook (and its teacher’s manual) was my bible in 1997, and it
has guided me in understanding Remedies both in and out of the classroom. Doug also has been consistently
responsive to e-mail questions I have peppered him with over the years. Anyone familiar with Laycock’s book
will see the influence his view of Remedies has had on mine. I also owe a debt to my Remedies students,
beginning with my 1997 guinea pigs. I was assigned the 8:10-10:10 p.m. slot twice a week for the course. I
expected a group of tired, graduating students with little interest in the course. To my pleasant surprise, the
students were intellectually engaged, serious, and blessed with an understanding of the real world that only
evening students have. For my Remedies students through the years, the course is really a nice capstone,
bridging the law school and real worlds. I have learned a great deal from my students.
This book is much stronger because of the excellent assistance I have received across the four editions of the
book. Thanks to my terrific research assistants: Jim Buatti, Denny Chan, Danielle De Smeth, Rachel
Ettinger, Justin Martin, Tony Sain, Vince Shang, Christina Wang, and Joel Yanovich. Thanks for the
excellent library assistance of Lisa Schultz and the Loyola Law School library staff and Christina Tsou and the
University of California, Irvine Library staff. Sara Galloway, Carla Heidlberg, Betty Kinuthia, Stacy Tran and
Valda Hahn of the Loyola and UC Irvine faculty support staffs provided wonderful administrative support.
Dean Victor Gold of Loyola Law School and Dean Erwin Chemerinsky of UC Irvine Law School
generously supported this research, and so much else. Lynn Churchill, Sue McClung, Barbara Roth from the
publisher’s side have provided constant encouragement and sage advice.
A slew of anonymous reviewers provided important suggestions and corrections to the manuscript. All
remaining errors are mine alone.
None of my work would be possible without the love and encouragement of my wife, Lori Klein, who
supports me in all that I do. This book is dedicated to our three most successful joint ventures: Deborah,
Shana, and Jared.
I continue to receive insightful questions and comments from book users. If you have questions or
suggestions, or see an error (no one is perfect!), please send an email to rhasen@law.uci.edu, and I will use
those comments to improve the next edition.
I am grateful to the American Law Institute for granting permission to quote from two of its publications:
For Restatement material: Copyright © 2017 by The American Law Institute. Reprinted with permission.
For UCC material: Copyright © by the American Law Institute and the National Conference of
Commissioners on Uniform State Laws. Reproduced with the permission of the Permanent Editorial Board
for the Uniform Commercial Code. All rights reserved.
No matter how your professor starts this course, you should begin with Chapter 1. It sets forth some basic
terminology and ideas that are used throughout the book, including the important “rightful position”
standard. After Chapter 1, you can begin at the beginning of Part I (on damages), Part II (on injunctions and
other equitable remedies), Part III (on restitution), or Part IV (presenting the remedies topics of punitive
damages, declaratory judgments, ancillary (or helping) remedies, and remedial defenses). Within each Part
(except for Part IV), I expect that you will begin with the first chapter in each part, which defines basic
concepts and sets the stage for what comes next.
You should save the last chapter, Chapter 19, for the end of the course. It will help you with issue spotting
and choosing remedies skills that you cannot test until you master the material in the first eighteen chapters.
For the most part, this book follows standard Bluebook citation format. However, I usually avoid putting in
pin cites in an effort not to clutter up the text, and I don’t always note when I’ve deleted internal citations or
footnotes. Before quoting any material in this book, be sure to check the original source. There are two
sources that I cite so often that I just use a short form. I cite DAN B. DOBBS, LAW OF REMEDIES: DAMAGES,
EQUITY, RESTITUTION (1993) simply as DOBBS §. I cite DOUGLAS LAYCOCK, MODERN AMERICAN
REMEDIES: CASES AND MATERIALS (4th ed. 2010) simply as LAYCOCK.
Students may have many reasons to take a course in Remedies. In places such as California, for example,
Remedies is heavily tested on the bar exam, and many students feel obligated to take a “bar course.” Even in
states that do not test Remedies independently on the bar, it is a good bar preparation course because much
material from the first year of law school—particularly from Constitutional Law, Contracts, Property, and
Torts—gets covered, albeit from a different angle. Other students may take Remedies because they like the
instructor teaching it, or because it fits into their schedule. I have run into very few students (though there are
some) who take Remedies out of an intrinsic interest in the subject.
Fortunately, however, many students complete a course in Remedies with their (admittedly low)
expectations exceeded—there are some intellectually interesting issues related to Remedies, many of which are
covered in this book. Consider these examples:
• Jane steals Bill’s idea for an invention and makes millions of dollars selling it. Should a court award Bill a
sum of money equal to his loss (perhaps the amount of money he would have charged Jane to use his
intellectual property), or to Jane’s gain (some or all of her profits from the invention)? In some cases,
there can be huge differences between these two figures.
• Gary makes repeated defamatory statements about Roxanne, injuring Roxanne’s business reputation. May
a court order Gary to shut up about Roxanne, or does such an order run afoul of the First Amendment?
• Phillip fraudulently induces Hector to enter into a contract. Can Hector have the court rewrite the
contract more to his liking, or must the contract be cancelled, with Hector entitled to nothing more than
a return of his consideration?
• Tomorrow Acme Wrecking Company is going to bulldoze what the Main Street Preservation Society
believes is a building of historical importance protected by state law. How should a court decide, in the
face of much ignorance on the merits of the Society’s case because there is no time to get up to speed
fully, whether to issue an order temporarily preventing the demolition?
• From 1850 to 1950, the State of Pacifica discriminated against African-Americans in educational and
housing opportunities. Since 1950, there has been no official state discrimination, but African-American
residents of Pacifica still lag behind in education, and much of the state’s housing market remains
unintegrated. What remedies, if any, can—or should—a judge order against Pacifica today to assist
Pacifica’s current African-American residents, many of whom were born after the period of official state
• Sarah and Larry rob a bank together, agreeing to split the loot equally. Sarah doesn’t give Larry his half.
Should courts allow Larry’s suit against Sarah to go forward, or should the suit be barred because of
Larry’s bad conduct?
If the intellectual feast in store to answer these questions does not convince you that Remedies is a course
well worth your attention, there is an even more compelling reason for a student to take a course in Remedies:
your future clients want you to do so.
Ask a practicing lawyer what clients care about the most, and the answer typically is “the bottom line.” The
client’s attitude is often: Don’t talk to me about abstractions—problems of proximate cause, supplemental
jurisdiction, or the Statute of Frauds. Tell me what I have to lose or gain in this case. How likely is it that I’ll
prevail? If I prevail, how much will I get? Or if I lose, how much will it cost me?
In that sense, clients care about remedies mostly because remedies translate abstract legal rules into concrete
consequences. Suppose that even if Bill has a good case for prevailing on the merits against Jane for her
misappropriation of Bill’s invention, it may not be worth bringing suit if Bill could only get money equal to
his loss. On the other hand, if Bill has a chance of capturing Jane’s “ill-gotten gains” (through the law of
restitution), it may make economic sense for Bill to sue. Indeed, if Jane has a good chance of losing her profits
to Bill, she might be more likely to settle her case than if all that is at stake is paying Bill’s losses. A good
lawyer must think not only about substantive law—the legal basis for Bill’s claim that Jane has wronged him—
but also about the range of available remedies. Similarly, just as it is not always obvious what substantive law
addresses a particular legal dispute, there is often much up in the air about available remedies. Part of a
lawyer’s job, whether as a litigator or as a transactional lawyer, is to figure out the range of applicable remedies
Abbott and Costello are entering into a contract for the sale of widgets. You represent Abbott, the seller.
What remedies issues might you wish to address in the contract?
Good transactional lawyers will consider many remedies issues that could arise should something go sour
between the parties to the contract. Here are a few remedies issues for Abbott’s lawyer to consider:
• Should the contract contain a provision allowing the winning party to obtain attorney’s fees in the event
of a dispute under the contract? Would it be permissible to draft a provision allowing only Abbott to get
attorney’s fees in the event that such a dispute arises and Abbott wins?
• Should the contract specify the amount of damages in the event of a breach? If so, how can the clause be
written so that it is an enforceable “liquidated damages provision” rather than an unenforceable
contractual penalty?
• Should the contract exclude certain remedies, such as consequential damages?
• Which state’s law should apply to contractual disputes? (Chapter 4 explains that for some contracts
governed by the Uniform Commercial Code, the choice of state’s law may not matter because the law is
the same for all states.) Might there be some state whose remedies law is more advantageous to Abbott?
Some have compared remedies to the “lawyer’s toolbox.” Just as a carpenter carries around a number of tools
and decides on the right tool to use for a particular project, a good lawyer does the same (whereas a bad
lawyer, like a bad carpenter, can commit malpractice by failing to use the right tool for the job). If the legal
rules allow for the recovery of either Bill’s losses or Jane’s gains, and Jane’s gains are substantially larger than
Bill’s losses, Bill’s lawyer must be in a position to go for the more lucrative recovery, and that requires knowing
when restitution might be the better tool than damages. Jane’s lawyer, too, must keep an eye not only on the
choices of remedies that Bill’s lawyer might pull out of the toolbox, but also on Jane’s own possible remedial
defenses. For example, if Bill waited a long time to sue, Jane’s lawyer should consider if the action could be
barred by the defense of “laches,” a doctrine which bars some suits because of unreasonable delay.
The toolbox analogy doesn’t exactly hit the nail on the head (sorry—you can expect bad puns like this
throughout the book), because it suggests that the choice of remedies is rather mechanical: everyone knows,
for example, that one uses a hammer and not a screwdriver to put a nail through a piece of wood. There is a
lot more creativity, however, involved in choosing an appropriate remedy than in choosing whether to use a
hammer or screwdriver. Good lawyers can come up with creative arguments for or against the use of particular
remedies in particular cases, just as good lawyers may make creative arguments for creative application of the
underlying substantive law. But there are some constraints on creativity.
One particular constraint involves plaintiff’s choice of remedies. Bill at some point will be forced to choose
between recovering his losses or Jane’s gains. We usually don’t let him get both—and courts sometimes are
reluctant to allow plaintiffs to change their minds after electing to seek a particular remedy. In addition,
certain remedies might violate a constitutional right, such as the right to a jury trial, or the remedy might be
precluded by statute or be limited for reasons of public policy (think of Larry’s suit to get his share of the bank
robbery loot from Sarah). One of the most important rules in choosing a remedy, as we will see, says that
court orders (often an injunction) are commonly unavailable when a damages remedy would be “adequate” in
redressing plaintiff’s concerns.
Even within classes of remedies, however, there is room for lawyerly creativity. If Bill is only entitled to his
losses, how do we measure his losses? If he is entitled to Jane’s gains, how do we measure Jane’s gains? As we
shall see, sometimes damages are awarded for losses we expect a plaintiff to incur in the future, which creates
its own complications.
Mary causes a serious automobile accident, permanently disabling Fred, a 50-year-old white male. Fred will
need round-the-clock nursing assistance. This year, his nursing care cost $100,000 per year. How much
should a court award for nursing care that Fred could need 10 years from now?
There may be considerable uncertainty over how much medical care Fred will need in 10 years—or whether
Fred even will be alive then. But even if we overcome these problems about Fred’s condition, the jury will
have to consider issues related to the costs of goods and services in the future (a topic explored in Chapter
2.5.2). In cases where enough money is at stake, lawyers will need to bring in experts, including economists, to
make predictions about the future economy. These experts will have their depositions taken and, in cases that
go to trial, they will be subject to examination and cross-examination on their economic assumptions driving
the “bottom line.” That means that good lawyers will have to understand rudimentary economic principles
applicable to these kinds of problems. I know that many of you chose law school because you hate the sight of
blood—thereby precluding medical school—and because you hate math—thereby precluding business school.
Unfortunately, however, for the innumerate, good lawyers need to understand some mathematical content
beyond that which is necessary to bill clients in six-minute increments. Also, I hope the amount of blood you
see in your job is minimal.
So suppose that the jury believes that Fred will need exactly the same medical care in 10 years that he needs
today, and today it costs $100,000 to provide this care. Economists will have to make assumptions about
medical technology and the costs of medical goods and services to predict how much the care will cost in 10
years. Economists will have to make further predictions about how much money we would need to give Fred
today to invest so that it will yield the right amount of money for Fred to pay his bills 10 years from now. This
is the issue of present value, discussed in Chapter 2.5.2.
Remedies teachers usually divide the major remedial tools into three categories:
• Damages—an amount of money awarded to a wronged party from the party who committed the wrong
to compensate for that wrong.
• Injunction—a court order to a defendant to do or not to do something in relation to the plaintiff.
Sometimes this category is referred to as “Equity,” because injunctions were the most important of a class
of remedies once issued by courts of equity (as opposed to courts of law). That distinction sounds
historical and perhaps unimportant, but that history has real-world consequences, even today.
• Restitution—money awarded to a wronged party from the party that committed the wrong, measured by
the gain to the party that committed the wrong, and not by the loss to the wronged party.
These tools do not form the complete universe of remedies, but they serve as useful organizing principles
for much of the material in the course, and they are covered in the first three parts of this book. The final part
of this book covers other important remedies, including punitive damages, declaratory judgments, and
ancillary (helping) remedies (including attorney’s fees). It also considers remedial defenses.
Thinking about the “Why” in Remedies.
In some Remedies courses, it is all trees and no forest. The course
moves from remedial tool to remedial tool, much like the carpenter who teaches the trade tool by tool. “This
is a screwdriver. You use the screwdriver by turning it clockwise in the following situations . . .” Other
Remedies courses are more theoretical, looking for connections among remedies and differences in form and
function. These courses also focus more on the “why” of remedies: what purpose do particular remedies serve,
and how can one with a particular theoretical orientation (say, to maximize economic efficiency) choose the
right remedies?
I have written this book to help students whose instructors focus only on trees, only on the forest, or on a
mixture of forest and trees. All students need to understand how remedial tools work. For some students,
those remedies are all they will need to understand. Other students will need to understand the more
theoretical questions, which are explored in the appropriate chapters. While students who have “tree”
professors might be tempted to skip the more theoretical part of the reading, I hope that these students keep
reading—not only because this material is interesting, but also because developing a deeper understanding of
remedies will help these students think creatively as lawyers.
The most important concept in the Remedies course is the “rightful position” standard, a term coined by
Professor Douglas Laycock. It serves as a benchmark for judging various remedies. The rightful position
standard says to choose the remedy that puts the plaintiff back (or keeps the plaintiff) in the position that she would
have been in but for the defendant’s wrong. Embedded within this definition are assumptions about the ability of
courts to identify plaintiff’s position before and after the wrong, as well as about remedies that restore plaintiff
to (or keep plaintiff in) the rightful position. But there are also broad philosophical issues behind the rightful
position standard. What social purpose is served by the rightful position standard? Under what circumstances
would it be better (from whatever normative point of view) to give plaintiff more or less than the rightful
position? Some remedies, at least in theory, try to tailor themselves to the rightful position standard while
One argument in favor of the rightful position standard comes from the law and economics school, where
at least some scholars, such as Judge Richard Posner of the Seventh Circuit, have argued for legal rules—like
the rightful position standard—which seek to maximize overall social wealth (and not worry about
distribution of that wealth—who wins and who loses under different legal rules). This efficiency standard is
sometimes referred to as “Kaldor-Hicks efficiency,” after two economists who had discussed the concept.
Further, the theory of “efficient breach” (discussed in Chapter 4.2) provides that courts award damages for
breach of contract that are measured by what the non-breaching party would have stood to achieve had the
contract not been breached, placing the non-breaching party in the position she would have been in but for
the contract breach. These damages therefore are tied to the rightful position. Posner likes this remedy not
because it helps plaintiffs (remember, economists don’t care about distribution), or because it is morally right,
but because he believes it best promotes economic efficiency.
Other jurisprudential theories also have much to say in favor of the rightful position standard. Philosophers
going back to Aristotle have advocated forcing defendant to restore what had been taken from plaintiff as a
matter of justice. Indeed, Aristotle’s restoration principle ties justice to the rightful position standard.
The law often deviates from this rightful position standard, however. Suppose Alice steals $100 from Bob’s
wallet, runs to the casino, gambles, and walks away from the table with $1,000. If a court awards Bob a sum of
money equal to Alice’s gains rather than his losses, it has chosen a (restitutionary) award not tied to the
rightful position. Consider Figure 1.1, measuring Bob’s financial situation.
We might think of Bob at Point B, the status quo ante, or 0, before he ever meets Alice. When Alice steals
his money, we can think of him as moving to Point A, −$100, his position after the wrong. A damages
remedy tied to the rightful position standard says that giving Bob $100 will move him back to the status quo
ante (Point B) and restore him to the rightful position. (Of course, this is an oversimplification because it
ignores Bob’s costs of finding an attorney, the lost value of money over time, and other factors that we will
consider in due course. But for now let us say that $100 perfectly moves Bob back to 0.)
If we give Bob a choice, however, between damages and a restitutionary remedy that gives him Alice’s gain
of $1,000, we can see why Bob would choose restitution. That remedy moves him from −$100, Point A, to
Point C, or $900. (Why does it not move Bob to $1,000? Although Bob would receive $1,000 from Jane, he is
already out $100 from the initial theft, so he now has in his wallet only $900 more than he had in the past.)
Sometimes the law allows for the recovery of gains, and when it does so, it deviates from the rightful
position. In our case, the rightful position is Point B, but restitution leaves Bob at Point C, better than his
position before the wrong. Why might the law decide to give Bob what appears to be a windfall? Should it
have something to do with the wrongfulness of Alice’s conduct? To test your thinking about this question,
consider whether we should still give Bob the choice of damages or restitution if Alice took the $100 honestly
believing it was her money.
These are issues we will take up in later chapters. The point now is that the rightful position standard serves
as a useful benchmark in evaluating the choice of remedies. We can use it when considering how to use
remedies to reach (or at least approximate) the rightful position standard, and also when it is appropriate to
allow litigants to deviate from the rightful position.
With this introduction, you are ready to move forward. How you should proceed depends upon how your
instructor has organized the course. You can begin at the beginning of Part I (on damages), Part II (on
injunctions and other equitable remedies), Part III (on restitution), or Part IV (presenting the remedies topics
of punitive damages, declaratory judgments, ancillary (or helping) remedies, and remedial defenses). Within
each part (except for Part IV), I expect that you will begin with the opening chapter, which defines basic
You should save the last chapter, Chapter 19, for the end of the course. It is provided to help you with issue
spotting and skills in choosing remedies that you cannot test until you master the material in the first 18
Frank punches Javier in the nose, breaking Javier’s nose and causing him to miss work for a week. What is
Javier’s rightful position, and how would a court go about putting Javier back in the rightful position?
Even this simple example of a punch in the nose shows the gap between the theory of the rightful position
and its implementation. In theory, we want to move Javier from Point A in Figure 1.1, his position after the
punch in the nose, back to B, the status quo ante. But how do we do so? Certainly, Javier will have some
losses that will be easy to quantify. For example, we can look at his doctor’s bills to know how much Javier has
paid out of his pocket for medical care, and we can look at a recent pay stub to see how much money Javier
would have earned had he not needed to miss work for a week of recuperation. But other costs will be harder
to measure, the most important of which are his pain and suffering. We do not know exactly how to quantify
in dollars this kind of emotional distress damage, and it may be that there is no amount of money that Javier
would have willingly exchanged for the punch in the nose. So the law sometimes engages in a fiction that
money can in fact put the plaintiff back to the position he would have been in but for the wrong.
Same facts as in Example 3. A jury awards Javier damages for his hospital bills and lost work, and an
additional $5,000 in punitive damages (damages which are intended to punish and deter Frank and people
like Frank). Do the punitive damages restore Javier to the rightful position?
If compensatory damages were perfect at putting plaintiff in the rightful position, punitive damages would put
plaintiff in a better position than would apply had there been no wrong. In terms of Figure 1.1, the
compensatory damages would move Javier from A (below 0) to B (0, or the status quo ante). The punitive
damages would then move Javier beyond C, to +$5,000, or $5,000 better than where Javier would have been
had Frank never punched him. This potential “windfall” to plaintiff troubles some opponents of large punitive
The analysis in the last paragraph assumed that compensatory damages were perfect at compensating Javier.
But the explanation to Example 3 tells us that the compensatory damages might undercompensate Javier by
underestimating his emotional distress damages. Javier also might be undercompensated because Javier will
likely incur some attorney’s fees (because this is a torts case, Javier will likely give up a percentage of his
recovery from Frank to his lawyer under a contingency fee arrangement). Punitive damages, therefore, might
be justified as making it more likely that plaintiff in fact is put back in the rightful position. There are other
justifications for punitive damages as well, as we shall see in Chapter 15.
One of the most common remedies given by courts to a complaining plaintiff is an award of compensatory
damages. We refer to the award of damages as substitutionary relief because money substitutes for the thing
that has been lost or damaged.
Why would a plaintiff want substitutionary relief? Sometimes, substitutionary relief is all that is available
because it is not physically possible to restore to the plaintiff that which defendant has lost or destroyed.
When Alex burns down Barbara’s house while carelessly playing with matches, there is no way for Barbara to
get her house back. The same principle applies when Carly breaks Dan’s arm while rollerblading. Money
substitutes for that which plaintiff would really want: the house as it stood before the fire or the unbroken
Sometimes, it is possible to give plaintiff back the very thing that was taken, or prevent threatened harm to
the plaintiff from occurring. We call such a remedy specific relief. When specific relief is available, a plaintiff
may not want damages. For example, if Erica steals Franny’s bike, Franny may want to bring an action to have
the bike returned, at least if the bike is undamaged. Such an action may be in the form of replevin, discussed
in Chapters 7 and 13. As we shall see, we don’t give Erica the option of keeping the bike and paying Franny
damages if Franny wants her bike back. In addition to the bike, Franny may want damages to compensate for
any losses she suffered by being deprived of the use of the bike between the time of Erica’s theft and the time
The fact that damages are substitutionary raises a whole host of measurement problems. When Erica
returns the bike undamaged, we don’t have to worry about how to value it. That is an advantage for the courts
in granting specific relief. But even in cases of specific relief, some amount of substitutionary relief will also be
necessary. In Franny’s case, a court may have to come up with a measure for the value of the loss of use of the
bike during the period it was in Erica’s possession. How is the court to do so?
Valuation problems pervade awards of compensatory damages. When Alex burns the house down, valuation
problems immediately emerge: How much would it cost Barbara to rebuild the house? What about money to
replace the lost contents of the house? Suppose Barbara has an old but reliable refrigerator in her kitchen.
Does she get the market value of that fridge (very low) or the cost of a new replacement (much higher)?
Suppose the fire destroyed some sentimental one-of-a-kind photographs. How should those be valued?
The measurement problems are even more profound when it comes to personal injury. Consider Dan’s
broken arm. Some of the costs associated with the break will be easy to measure; think, for example, of the bill
from the emergency room. But what about damages for the loss of use of the arm for a specified period? And
what of emotional distress/pain and suffering? Should such damages be compensable, and if so, how should
they be measured?
Even more easily measured costs such as hospital bills can create valuation problems. Suppose Dan is
reimbursed by his health insurer for the hospital bill. Can he recover again from Carly? Or suppose Dan
doesn’t get a damage award from Carly until two years after the accident. Is he entitled to interest on his
We will consider these questions in this chapter or in later chapters, but the point now is that
substitutionary relief creates valuation problems for the courts, problems that don’t exist with specific relief.
Gary owns a 1966 Thunderbird convertible in excellent condition. He received the car as a gift from his
mother, who was the car’s original owner. The original purchase price of the car in 1966 was $3,000. Its
current market value as a collectible is $30,000, and Gary recently turned down an offer to sell his car for
$50,000 to a collector. Heidi, who works for Acme Construction Company, accidentally flattens Gary’s car
with a steamroller that she was driving down Gary’s street as part of a paving project. Gary is devastated by
the loss of his car, and he sues Heidi and Acme for negligence. Will Gary ask for specific or substitutionary
relief? If Gary asks for substitutionary relief, how do you think his loss should be measured in monetary terms?
The first question is a no-brainer: Gary will want substitutionary relief because specific relief (such as the
return of the car in its original condition) is not available. Returning a flattened car to him is of no use; he will
want a sum of money to compensate him for his loss. The money substitutes for the car and therefore damages
are a kind of substitutionary relief. The harder question is: how to value the loss? Before you continue with the
rest of the chapter (and the other chapters on damages) to see how the law answers this question, ask yourself
the normative question of what should be the proper measure. Is the original purchase price relevant? The fact
that Gary received the car as a gift? The current market price? What about the emotional loss he may feel
from the loss of a car he loved that came from his mother? Whatever answers you give to these questions, ask
yourself another question: if Gary receives the sum that you think is the right one, does that sum truly
“substitute” for the destroyed car? And reconsider your answer after you have completed the material in this
We have discussed how compensatory damages are substitutionary, but we have thus far ignored the
“compensatory” label. The label is significant in that it gives a possible baseline for a court to determine the
amount of damages. Such damages should compensate: “make satisfactory payment or reparation to;
recompense or reimburse.” AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE 376 (4th ed.
2000). Under this definition, and according to most courts, compensatory damages are oriented toward
plaintiffs’ losses (unlike restitution, which, as we shall see, is oriented toward defendants’ gains), and they
require a payment that is “satisfactory” to repair the loss suffered by the plaintiff. In this way, they are different
from (at least the conventional understanding of) other kinds of damages we will discuss later: nominal
damages, which serve a declaratory function, and punitive damages, which serve punishment and deterrence
The idea that damages should serve a compensatory function traces far back in history. Aristotle, for
example, wrote of the need for “corrective justice” in his NICOMACHEAN ETHICS, Book V. As Professor
Weinrib explains,
Corrective justice . . . features the maintenance and restoration of the notional equality with which the parties enter the transaction. This
equality consists in persons’ having what lawfully belongs to them. Injustice occurs when, relative to this baseline, one party realizes a gain
and the other a corresponding loss. The law corrects this injustice when it re-establishes the initial equality by depriving one party of the
gain and restoring it to the other party. Aristotle likens the parties’ initial positions to two equal lines. The injustice upsets that equality by
adding to one line a segment detached from the other. The correction removes that segment from the lengthened line and returns it to the
shortened one. The result is a restoration of the original equality of the two lines.1
In this way, the corrective justice understanding of damages lines up with the rightful position standard,
discussed in Chapter 1: ideally, awarding a plaintiff compensatory damages puts the plaintiff back in the
position she would have been in but for the defendant’s wrong.
To see how compensatory damages can serve to restore the plaintiff to the rightful position, consider again
Alex’s burning down Barbara’s house. Let’s make two unrealistic assumptions: first, we can perfectly compute
the value of the loss to Barbara (we will set it at $100,000); and second, Alex, after burning down the house,
instantaneously makes a payment of compensatory damages to Barbara (thereby eliminating questions about
the relationship of time and money discussed in section 2.5.1 below).
The money line in Figure 2.1 measures Barbara’s position before and after Alex’s wrong. Before the wrong,
Barbara was at Point B, or at zero in relation to Alex. After the wrong, Barbara is at −$100,000. If Alex pays
Barbara $100,000 instantaneously, she can use it to “buy” her way back to B, the status quo ante. In that way,
compensatory damages return the plaintiff to the rightful position. (Mathematically, the court awards Barbara
(B − A), or (0 − (−100,000)), or $100,000 [remember, convert the two minus signs into a plus].)
The money line also nicely illustrates how valuation problems can threaten the rightful position. Imagine
that Barbara really suffers $100,000 in losses (putting her at Point A), but the court underestimates her
damages at $80,000. In that case, as Figure 2.2 shows, Barbara is not returned to the rightful position.
Instead, she is brought to place B−, which is at −$20,000. The damages award does not put her in the place
she was at before the wrong. She will need another $20,000 to restore her house to its previous state.
Valuation problems don’t necessarily work against plaintiffs. So again imagine that Barbara really suffers
$100,000 in losses (putting her at Point A), but this time the court overestimates her damages at $150,000. In
that case, as Figure 2.3 shows, Barbara is brought to a position better than the rightful position. She will be at
position B+, which is at +$50,000. (Do you see why? The first $100,000 of damages moves Barbara from A
back to B, and then the next $50,000 moves her into positive territory on the money line to $50,000.) In this
scenario, Barbara is actually better off than she was before Alex burned her house down. Even after paying to
get her house back into the same shape it was in before the loss, she has an extra $50,000 in her bank account.
Figures 2.2 and 2.3 show that courts will need to value accurately the position that plaintiffs would be in
but for the wrong, in order for compensatory damages to satisfy the rightful position standard.
In the typical torts case, such as Barbara v. Alex, the rightful position means accurately measuring the
plaintiff’s losses, which will necessarily be somewhere in the region less than B, or 0. In typical contracts cases,
however, the rightful position means accurately considering the gains that plaintiff failed to realize because of a
defendant’s breach of contract. So imagine that Irina was going to buy a valuable painting from Juan at a cost
of $25,000. The market price of the painting is $35,000. They had a valid binding contract and Irina paid in
advance. Juan decided not to sell to Irina after he realized he could make more money selling to someone else.
He sells the painting to another buyer for $35,000.
Consider in Figure 2.4 how we might represent the rightful position:
Before Irina entered into any contract with Juan, she was at position B, the status quo ante (or zero). When
Irina paid Juan in advance and received nothing, she landed at position A, −$25,000. At first blush, it might
appear that giving Irina $25,000 would put her back in the rightful position by restoring her to the status quo
ante position. But remember that the rightful position is the position that the plaintiff would have been in but
for the defendant’s wrong. In this case, had Juan not breached the contract, Irina would have spent $25,000 for
an item that she could then turn around and sell for $35,000, yielding a profit of $10,000 (putting aside the
costs of entering into the two transactions and other complexities that we will discuss later) and placing her in
position C, +$10,000. To place her into the position she would have been in without Juan’s breach (think of a
list of her assets with a net balance increase of $10,000), Juan is going to have to pay her $35,000: the first
$25,000 takes her back to 0, and the next $10,000 puts her above the status quo ante, the position she would
have been in but for the breach (a court would compute these damages as C − A, or 10,000 − (−25,000), or
$35,000).
Later chapters will consider how and why tort and contract damages typically differ in this way, with tort
damages usually geared toward restoring the status quo and contract damages usually geared toward giving the
plaintiff the benefit of the bargain. Chapter 5 considers some exceptions to this rule, especially for fraud cases
in tort. For now, keep your eye on the general point: if we value gains and losses correctly, compensatory
damages can put the plaintiff into the rightful position.
One final point on the rightful position standard and compensatory damages: while corrective justice
adherents such as Aristotle focus on the rightful position as a means of compensating plaintiffs, some adherents
of the economic analysis of law focus as well on how compensatory damages affect the incentives of defendants.2
Consider, for example, the incentives facing Juan, who is wondering whether he should breach the painting
contract with Irina. Suppose Juan has another willing buyer who will pay $35,000 for the painting. Would
Juan—assuming he cares only about the immediate bottom line and not about any moral obligation to keep a
contract or about his long-term reputation—decide to breach? He likely would not decide to do so if he is
going to have to pay that $35,000 over to Irina as compensatory damages (though he would if the measure of
damages was the undercompensatory $25,000 measure).3 Think also of Carly, who was not careful and
collided into Dan in a rollerblading accident, breaking Dan’s arm. The possibility that Carly will have to pay
damages if she rollerblades carelessly and injures someone will motivate Carly to take the right amount of
care. In this way, damages serve to influence the behavior of defendants. (In the economic model, the
possibility of recovering damages also influences the behavior of plaintiffs. Think of the extra precautions Dan
might choose to take if he knew that Carly or others could injure him and not have to pay anything.)
Accurate valuation is important for the economic view of compensatory damages as well. Recall the
example (illustrated in Figure 2.2) wherein Barbara really suffers $100,000 in losses (putting her at Point A),
but the court underestimates her damages at $80,000. For purposes of the economic analysis, if courts
consistently underestimate losses or, equivalently, if too many plaintiffs who should win their lawsuits end up
losing their lawsuits, then damages might not create sufficient incentives for defendants not to wrong
plaintiffs. Indeed, for this reason, some economists say that the possibility of a plaintiff’s recovery of additional
punitive damages might be necessary to provide the “efficient” amount of deterrence.
To sum up to this point: compensatory damages aim to put the plaintiff in the rightful position, the
position the plaintiff would have been in but for the wrong. There are both philosophical reasons and
economic arguments in favor of utilizing compensatory damages to bring plaintiff to the rightful position, and
both views depend on courts being able to accurately value plaintiff’s losses. It is to this valuation process that
we turn next.
One day after Laurent bought a new chocolate Labrador retriever puppy from a breeder for $1,000, Kira stole
it. The market price for similar puppies is $2,000. Kira sold the puppy to Mary, who has left the country with
it. Laurent sues Kira. Would compensatory damages put Laurent in the rightful position? If so, how much
should the compensatory damages be?
Laurent might have become emotionally attached to his new puppy (though he’s only had it for one day), and
it may be hard to value any emotional loss. However, dogs are not one-of-a-kind items, and presumably
Laurent could use compensatory damages to buy a replacement dog. There should be some amount of money
that puts him in the position where he was before the wrong, possibly setting aside the emotional distress. As
for the amount of damages, absent evidence that Laurent could buy another dog for half the market price, it is
going to take $2,000—and not merely $1,000—to put him into the position he was in before the wrong:
owning a new puppy.
Nina enters into a binding contract with Olivia for the sale of a rare coin. Nina agreed to pay $1,000 for the
coin. The market price for this type of coin in the same condition is $700. Olivia breaches the contract
because she has misplaced the coin. Nina has paid nothing in advance. Would compensatory damages put
Nina in the rightful position? Is so, how much should the compensatory damages be?
This looks like a lucky break for Nina. Had Olivia held up her end of the contract, Nina would have
purchased an item worth $700 for $1,000. On an imaginary ledger of Nina’s net worth, we would say after the
purchase her net worth would have declined by $300. Thus, because this is a losing contract, compensatory
damages are not going to be helpful in putting Nina in the rightful position. As we will see in Chapter 11.4,
in the case of losing contracts, plaintiffs sometimes seek the remedy of restitution rather than compensatory
damages because there are no damages. If Nina still wants the coin, she should be able to purchase it from
another seller for the market price of $700.
Let’s return to Barbara and her home (burned down by Alex) to begin our exploration of valuation for
purposes of compensatory damages. Consider first the structure of the home itself, rather than its contents.
How should the home be valued? Initially, we must choose between an objective measure of damages (such as
market value) and a subjective measure of damages (such as the value that Barbara would place on her home).
For example, suppose that a competent builder would charge $50,000 to rebuild a home for Barbara of the
same general size and quality as the one that burned down. This market value is an objective measure; though
the parties can disagree about how much competent builders charge to build such a home, the court can
resolve this dispute through the taking of evidence from experts in the construction market in Barbara’s area,
and using data about the type of home Barbara had before the fire. Alternatively, we might ask how much
Barbara personally valued her home. Suppose that this was her childhood home, and that it had great
sentimental value to her. Indeed, imagine that Barbara had recently turned down an offer for the purchase of
her home and land for $400,000—many times the fair market value of the land and home—because she loved
it so much. In other words, a person’s subjective valuation does not necessarily line up with objective market
Generally speaking, when there is a well-functioning market (meaning that there are many buyers and sellers),
courts use an objective market measure for calculating a plaintiff’s compensatory damages. “Determinations based on
value are pervasive in damage measures. Familiar damage measures include the value of the property taken or
destroyed, the difference between the value of property before damage and the value after damage, and the
difference between the contract price and the market value of property promised but not delivered.” LAYCOCK
p. 22. In Barbara’s case, the portion of damages for the loss of her home is going to be measured by the
objective market cost to replace the damaged home, and not by Barbara’s subjective value.
Objective market measures of value will be undercompensatory when plaintiffs subjectively value items
more than the market does.
Imagine that Barbara would not have moved from her house unless someone paid her $500,000 (plus more
money for the land, but we’ll ignore that complication). Figure 2.5 shows how the use of objective market
value will undercompensate her in this instance. If Barbara is truly at position A (−$500,000) after the fire, it
will take a $500,000 damages award to move her back to B, the status quo ante. But the law, using market
valuation, treats her loss as being at A−, giving her compensation of only $50,000. In fact, the $50,000 award
moves Barbara from position A to position A*, at −$450,000. It is grossly undercompensatory.
If that’s the case, it seems unfair to Barbara to use objective market valuation. But courts have gravitated to
it in part because objective measures are much easier to administer. When a market is functioning well, it is
easy to get figures for repair or replacement costs. Subjective measures exist only inside the head of the
plaintiff and thus are harder to identify accurately. There is also the risk that plaintiffs will exaggerate
subjective values after a loss. Thus, even if Barbara hated her house and valued it at less than the $50,000 cost
of rebuilding, if the law allowed her to receive compensatory damages based on subjective valuation, she may
be tempted (but for fear of committing perjury) to state her subjective value as $500,000.
One way that the law can allow subjective valuation in through the back door is to allow emotional distress
damages as an element of damages in appropriate cases. Thus, a court in Barbara’s negligence case against
Alex might allow her to recover the $50,000 cost to repair the home plus some additional amount of damages
to compensate for emotional distress. We return in Chapter 3.2 to a consideration of when emotional distress
damages may be available as an element of damages.
Even with market-based valuation, issues of subjectivity can surface in cases involving damage to property
that do not diminish the overall market value of the property. Consider these examples:
• Percy cuts down a tree on Quentin’s land to use the lumber. The tree provided Quentin with shade near
his home. The cost to replace the tree is $1,000, but the market value of the land without the tree is
unchanged. (See DOBBS at §3.3(6), p. 310.)
• Ralph cuts down a tree from a forest of trees on Samir’s land to use the lumber. Samir did not even notice
that the tree was gone until Ralph told him about it. The cost to replace the tree is $1,000, but the
market value of the land without the tree is unchanged.
• Tomas signs a contract with Ursula, a building contractor, to construct a building. The contract provides
that Ursula will install plumbing using Alpha brand copper pipe. Ursula inadvertently uses Beta brand
copper pipe instead, which is of identical quality to Alpha pipe. The error is discovered as the house is
completed. The cost to replace the pipes in the building is $20,000, but the value of the home with Beta
brand rather than Alpha brand remains unchanged. See Jacob & Youngs, Inc. v. Kent, 129 N.E. 889, 891
(N.Y. 1921).
In each of these examples, the costs to repair or replace are high, but the overall impact on market value of
the loss is low. Plaintiffs have at times successfully argued for the repair or replace measure when they can
show subjective value in the item that was lost or damaged, or at least when they can show they intended to
actually make the repair or replacement. See, e.g., McKinney v. Christiana Cmty. Builders, 280 Cal. Rptr. 242,
246 (1991) (unpublished opn.); DOBBS, supra. For example, Quentin may really want his shade tree replaced,
and arguably the court should allow him to recover damages to do so. But one suspects that someone like
Tomas might sue, claiming repair costs, and never make the repair, hoping to gain a windfall from the minor
error of a contractor or the inadvertent tort of a defendant.
In cases where plaintiff cannot show any subjective reason to prefer the replacement cost, as in Samir’s case
against Ralph, it is tempting to say that there should be no damages. But an economist might bristle at the
suggestion, because it would create no deterrence for Ralph, who would pay no damages for the theft. Samir
might then be forced to take expensive measures to prevent theft from people such as Ralph.
In response to these concerns, some courts will allow the more generous cost of repair measure when a
defendant engages in a willful breach of contract. See, e.g., Groves v. John Wunder Co., 286 N.W. 235, 236
(Minn. 1939). The same principle should apply to intentional torts as well, such as those committed by Percy
and Ralph (but not the inadvertent breach by Ursula). The law also offers Quentin and Samir an alternative
remedy, restitution (see Part III), which would allow them to recover the value of the gain to defendant, rather
than damages tied to plaintiff’s losses.
When measuring market value, courts usually measure damages at the time of the loss. In cases involving
items that fluctuate in value, however, such as stocks or crops, courts sometimes show greater flexibility. As to
stocks, courts are split on approaches, with many states “resolv[ing] doubts against defendant by awarding the
highest value between the time of the wrong and the time of trial, the time of filing suit, or some similar
date.” See LAYCOCK p. 34. Similar kinds of issues arise when there is damage to a farmer’s crops before those
crops have matured. Assuming that a farmer may prove damages with reasonable certainty (see Chapter 6.1), a
court might allow damages measured from the time the immature crops would have been harvested rather
than at the time of the loss.
Reconsider the fact pattern in Example 1: Heidi flattens Gary’s 1966 Thunderbird convertible with a
steamroller. The original purchase price of the car in 1966 was $3,000. Its current retail value as a collectible is
$30,000. Gary recently turned down an offer to sell the car for $50,000. Putting aside possible emotional
distress damages, how does the law measure Gary’s loss of the car?
Putting aside any emotional distress damages and assuming that the car has no scrap value that Gary can
recover, a court will likely award Gary $30,000. The $3,000 original purchase price might ordinarily be
evidence of a car’s current market value; cars tend to lose value with age. But this is a collectible car, and it has
gained value over time. We generally measure market value at the time of the loss, and therefore the $30,000
figure is appropriate. It appears that Gary valued the car at more than its market value; that is at least implicit
in his failure to sell the car for above-market value. But courts generally will not allow Gary to recover this
subjective measure of damages. Does the law’s answer jibe with your own values as expressed in your answer to
Victor, while jogging carelessly, entered Wanda’s garden and stepped on Wanda’s prized tulips, which she had
grown herself. The cost of tulip seeds is $50. The cost to buy fully grown replacement tulips is $500. Wanda
had planned to cut these tulips and enter them in a flower contest, where the first prize was $1,000. She
cannot enter purchased tulips into the contest. The value of Wanda’s home is the same with and without the
tulips. To what amount in compensatory damages is Wanda entitled if she can successfully sue Victor for
A court is likely to award Wanda $500 for the tulips. Although it is true that the market value of her home
has not decreased because of the loss of the tulips, the evidence shows that Wanda was growing these tulips
for fun and potential profit; they were not like Samir’s unnoticed lost tree in the earlier example. The fact that
Victor acted negligently rather than deliberately, however, is an argument in favor of no damages (that is,
damages as measured by the loss in value of the house). It seems least likely that Wanda will receive $1,000, or
the amount she could have won if she could have entered her tulips in a flower contest. As we will see in
Chapter 6.1, damages must be proven with reasonable certainty, and it is too speculative to say whether
Wanda would have won the contest with her tulips. And again, we are ignoring the possibility that Wanda
will ask for an additional amount of damages for her emotional distress.
Victor might try to argue he is liable to pay for only the cost of replacement seeds. But that appears
undercompensatory, because it accounts neither for the value of whatever work Wanda put in to grow her
tulips nor for the risk that the tulip seeds would not grow. It also does not follow the principle that we
generally measure value at the time of the loss.
Xavier puts in a “buy” order to his stockbroker Yolanda for 100 shares of Futurco stock, at $5.00 per share.
Xavier sends $500 electronically to Yolanda. Yolanda bought the stock for Xavier (at a total cost of $500), but
negligently sold it the same day (for the same $500 price). She failed to inform Xavier, putting the $500 into a
general account for clients. One month later, Futurco stock is trading at $20.00 per share and Xavier puts in a
“sell” order. Yolanda then tells Xavier of her error. Xavier sues, and at the time of trial Futurco stock is trading
at $15.00 per share. To how much is Xavier entitled in damages?
This problem raises an issue about property whose value fluctuates over time. If we measure the value at the
time of the loss (which presumably occurred the same day as the purchase and sale of the stock), Xavier would
be entitled only to $500. But we could choose a more generous measure, such as the highest value before
Xavier discovered the loss (yielding damages of $2,000 (100 shares at the $20/share price)) or at the time of
trial (yielding damages of $1,500 (100 shares at the $15/share price)). The rule to be applied will depend upon
When markets work well, the dispute is primarily an evidentiary one: what is the going price for mature tulips,
or rebuilding a home, or emergency room visits? The parties may have pitched battles over this evidentiary
question in particular cases, but the court’s mission is clear: to figure out the market value to repair or replace
the item damaged or lost. But not every loss has a potential repair or replacement value in a well-functioning
market. For some losses, there is no market at all—most important, there is no good market for losses caused
by emotional distress (or pain and suffering). We cannot refer to a market in pain to compute damages for
Dan’s broken arm. The next chapter will consider how courts value such losses (termed noneconomic losses or
special damages by some courts, as compared to economic losses or general damages for losses that have a readier
market measure).
Here we consider economic losses that occur in less than perfectly functioning markets. A good example is
Barbara’s refrigerator, destroyed in the fire set by Alex. Suppose Barbara bought the fridge five years ago for
$600. A comparable fridge today costs $800. But if Barbara had tried to sell her five-year-old fridge just
before it was destroyed, she would have been lucky to get $100 for it. Unfortunately for Barbara, the law
generally uses market value at the time of loss, so she stands to get only $100 for the lost fridge.
Some courts will be more generous and allow a higher value based on replacement cost less depreciation for
household goods and apparel. See, e.g., Lane v. Oil Delivery Co., 524 A.2d 405 (N.J. Super. 1987). But that
more generous rule typically is not applied to other consumer goods, including cars.
Why is the fridge’s value so low? Part of the reason is that there is not a robust market for certain used
goods, and even where there is a market, prices tend to be depressed. Economist George Akerlof described a
“lemon” effect that makes the market for such goods—he used the example of cars—poorly functioning.
George Akerlof, The Market for Lemons, 84 Q.J. ECON. 488 (1970). It is difficult to judge the quality of these
goods, and uncertainty about whether the good is of high quality or is a poor-quality “lemon” pervades the
market. Buyers offer lower prices for these goods to take into account the uncertainty, and the lower price
means that fewer sellers with the high-quality goods would choose to sell. In this way, higher-quality goods are
driven from the market, leaving an abundance of “lemons.”
Thus, when Barbara gets the $100 in damages for her fridge, she is taking a chance if she goes out to buy a
used fridge at this price—it might be a lemon. If Barbara is lucky, she has purchased homeowners’ insurance
that provides for the cost of replacing lost items with new items of similar quality.4 If she doesn’t have
insurance, she might look for another source of money to buy a new, comparable refrigerator. For these
reasons, the $100 damage award likely will be undercompensatory.
Another circumstance in which markets don’t function well is when there are few buyers or sellers.
Consider a collection of family home movies, also destroyed in Barbara’s fire. Before the fire, virtually no one
would have been interested in buying those goods, but for Barbara they were very valuable. The movies are
irreplaceable, and their only market value is sentimental value. In such cases, courts will sometimes allow
recovery for their value—again, these are sometimes allowed not for the economic value of the destroyed
goods, but as part of the noneconomic emotional distress damages. See Williford v. Emerton, 935 So. 2d 1150
(Ala. 2004).
Zane owned an acre of land with his home in a rural part of the state. Alice bought land adjacent to Zane’s
land, with the intention of building a ranch to raise emus. Alice brought in a bulldozer to clear the part of her
land with a dense collection of trees. Her workers accidentally cleared some of the dense trees growing on
Zane’s land as well. Zane sued Alice for trespass and sought damages. The uncontroverted evidence showed
that the inadvertent clearing of Zane’s land increased the market value of his land by $15,000. At trial, Zane
testified as follows: “Well, I bought this land to build a retirement home on and I am 57 and my wife is 56,
and she’s not well, so she wants to get out in the country, too. And we bought that for that reason and now we
are afraid to go out of our house. And the reason we’re afraid is because of the exotic animals that will be put
next to us. We hoped the trees would serve as a buffer.” The jury awarded Zane $20,000. Can the award
There is no dispute that the market value of Zane’s land has not decreased; it has increased. The only way that
Zane can recover damages is if the court allows for the award of the subjective value of the land. Many courts
would not allow Zane to recover such damages, but some would allow it when actual damages do not
compensate the plaintiff for the loss. (These facts come from Porras v. Craig, 675 S.W.2d 503 (Tex. 1984).)
Suppose in Example 7 Zane did not claim any losses based upon his loss of his privacy. Instead, he is annoyed
that Alice has sent her workers on his land—even though the workers’ clearing of his land has increased its
value. Is there any incentive for Zane to still sue for damages?
The answer may be “yes.” In cases such as trespass, where there is no actual damage, a plaintiff might sue to
obtain nominal damages, or a trivial sum of damages (such as $1) awarded by a court in lieu of actual
damages. At first blush, it might appear irrational for Zane to sue for $1 in damages. Attorney’s fees are likely
to cost many times more than that expected recovery (and are usually not recoverable by the winning party
(see Chapter17.3)). But the $1 damage award can serve an important “declaratory” function: telling the world
where the property line is between Zane and Alice, and declaring that it is a trespass for Alice to enter Zane’s
land.5 (This can be especially useful if Zane and Alice have a bona fide dispute over the location of their
property line.) Eventually, if Alice continues to trespass on Zane’s land, Zane might go back to the court and
point to the nominal damages award and Alice’s continuing conduct as a reason to get an injunction ordering
Alice to stay off Zane’s land.
In addition, an award of nominal damages might serve as a predicate to allow the jury to award punitive
damages (Chapter 15.1). Many states require an award of compensatory damages before a jury can award
additional punitive damages, and sometimes an award of nominal damages is enough to allow for the punitive
award. See Richard C. Tinney, Sufficiency of Showing of Actual Damages to Support Award of Punitive Damages
—Modern Cases, 40 A.L.R. 4th 11 §§6-9 (1985 & 2016 Supp.) (collecting cases on both sides of issue). But
see N.J. STAT. ANN. 2A:15-5.13(c) (nominal damages cannot support the award of punitive damages).
Finally, an award of nominal damages can serve as a predicate to allow the jury to award attorney’s fees in
cases litigated under statutes that provide for the award of attorney’s fees. But when the jury awards only
nominal damages (and no other relief, such as a declaration or injunction), the amount of attorney’s fees
allowed might be very small or none, as we shall see in Chapter 17.3.
While Barry was sleeping in the grass on the quad, Charlene—who had never met Barry before but liked how
he looked—came over and kissed him on the lips. Barry slept through the whole thing, but later heard about
what happened from some friends. Barry wants to sue for the tort of battery, but tells you that he suffered no
significant emotional distress. Would you advise Barry to sue for nominal damages?
It depends upon what Barry would like to accomplish. If Barry wants to “send a message” to Charlene (or
others like her), he might want to sue, assuming, as is likely, that he can make out the technical elements of
battery. See RESTATEMENT (SECOND)
TORTS §18 (1965); RESTATEMENT (THIRD)
TORTS—
PERSONS §101 (tentative draft, 2015). Even without emotional
distress damage, he should be able to obtain nominal damages. (He also might be able to recover damages for
dignitary harm, discussed in the next chapter.) Because Barry would have to pay attorney’s fees, it may cost
him much more to sue than what he would recover in nominal damages. So he would have to feel pretty
strongly about sending a message—unless the jurisdiction allows for the award of punitive damages to
accompany nominal damages, and Barry hopes to recover a large amount in punitive damages.
Recall Barbara, whose house Alex accidentally burned down. We said that if it would cost $100,000 for
Barbara to rebuild the house, and if Alex paid Barbara the cost of the losses instantly, an award of $100,000
would restore Barbara to the rightful position. But payments do not come instantly in most cases. Alex may
dispute liability or the amount of damages (or, worse for Barbara, Alex may not have enough money to pay for
the damage he has caused).
Suppose that it takes one year from the time that Alex burns down the house until the time of judgment.
Awarding Barbara $100,000 one year after the accident will not put her in the rightful position. To see why,
imagine that the day after the fire, Barbara secured a loan to rebuild the property. The lender charged 10%
interest per year (compounded annually, an assumption we’ll continue to make throughout this chapter to
keep things simple). She rebuilds the house as the lawsuit goes forward. One year after the fire, her loss is
$110,000, not merely the $100,000 loss represented in Figure 2.1. See Figure 2.6.
The jury measures the loss at the time of the wrong, or $100,000. But awarding Barbara $100,000 a year
after the wrong does not restore her to the rightful position. Instead, it brings her only to A*, −$10,000. For
this reason, courts sometimes allow the award of prejudgment interest, measured from the time of the wrong
until the time of judgment. This award helps put plaintiff in the rightful position.
The availability of prejudgment interest depends upon the jurisdiction and sometimes on the type of case.
Traditionally, prejudgment interest was unavailable when damages were not “liquidated” or “ascertainable.” In
practice, this meant that prejudgment interest was not available for personal injury actions. Some states have
abandoned this rule and now allow for prejudgment interest even in personal injury cases.
When prejudgment interest is available, the rate of interest varies by jurisdiction. For example, Rhode
Island sets the amount of prejudgment interest by statute at 12% per year. R.I. GEN. LAWS §9-21-10 (1997).
Other jurisdictions index the amount to some other measure. Iowa, for example, sets prejudgment interest “at
a rate equal to the treasury constant maturity index published by the federal reserve in the H15 report settled
immediately prior to the date of the judgment plus two percent.” IOWA CODE §668.13 (1999).
In federal courts, prejudgment interest is routinely available, but there is no set rate of prejudgment interest.
Accordingly, there is much room for creative arguments about which measure best puts the plaintiff back in
the rightful position. See Michael S. Knoll & Jeffrey M. Colon, The Calculation of Prejudgment Interest (May
31, 2005), http://ssrn.com/abstract=732765.
There is much at stake in these federal cases. As Professors Knoll and Colon note: “When the injury
occurred long before the judgment, prejudgment interest can greatly exceed the original judgment. . . . In
1992, the Seventh Circuit awarded plaintiffs $65 million in damages and $148 million in prejudgment interest
in a suit arising out of the grounding of the supertanker, Amoco Cadiz, off the coast of Brittany on March 16,
1978.” Because of the flexibility of the federal standard, the court’s decision could be worth millions. The
authors note that a 1% increase in the interest rate in the Amoco Cadiz case would have increased the award by
$20 million, and that if the court had compounded interest quarterly rather than annually, the plaintiffs could
have received an extra $11 million.
Postjudgment interest—for the period between the time of judgment and the time that the judgment debtor
pays (or “satisfies”) the judgment—is also necessary to put plaintiff in the rightful position. So suppose that a
court awards Barbara $110,000 for the fire damages, with $10,000 of that money representing the
prejudgment interest. Alex decides to appeal, and it is yet another year before Alex, upon losing the appeal,
pays Barbara the damages. Barbara, who has borrowed money from the bank to pay for her repairs, is still
accruing interest on her loan, so the award of $110,000 will not put her in the rightful position. Assuming she
had to pay for another year of interest at $10,000, compounded annually (on her principal and interest), her
total loan will now cost $121,000 to repay (in the second year, interest accrues at 10% on the $110,000 loan
In the federal courts, postjudgment interest is awarded at the set rate of the 52-week Treasury bill, and
many states set the rate by statute as well. At least some states allow postjudgment interest on the total
amount of damages, including prejudgment interest. See Quality Engineered Installation, Inc. v. Higley South,
Inc., 670 So. 2d 929, 931 (Fla. 1996).
Enid alleges that Deirdre breached a contract to pay Enid $100,000 for a computer system that Deirdre has
used in her business. The dispute takes place in Rhode Island and the issue is litigated in Rhode Island’s court.
If Deirdre is found liable for breach of contract, the court will order her to pay Enid $100,000 plus
prejudgment interest. The current rate of interest that individuals can get on their money in a safe investment
is 5%. Which party to the litigation will want to bring this case to trial quickly? How might that result differ if
individuals can get 20% on their money in a safe investment?
There may be reasons of liquidity (the fact that Enid needs the $100,000 now) that could lead Enid to push
the case to trial as quickly as possible regardless of the interest rate. But putting aside such a concern, you can
see that the rate of prejudgment interest can affect the parties’ incentives to litigate quickly or slowly. When
normal interest rates are low, defendants like Deirdre may want the case to be decided quickly, so that, if
found liable, Deirdre won’t have to pay a very high rate of interest. For Enid in such circumstances,
prejudgment interest may look like a good “investment.” Think of this: If Enid gets her $100,000 today from
Deirdre and invests it in the bank at 5% (annual interest), after a year she will have $105,000. But if the case
drags on for another year, Deirdre will owe her $112,000, because of Rhode Island’s statutory 12% rate of
The incentives are reversed if general interest rates are high. If Enid can get 20% on her money, she’d
rather have Deirdre pay now. Deirdre, on the other hand, would rather invest the $100,000 now in an
investment yielding 20%, eventually paying off Enid under the statutory 12% rate and pocketing the
Prejudgment and postjudgment interest facilitate compensation for plaintiffs for harm that has already
occurred. But sometimes a plaintiff receives compensation for injuries the jury believes plaintiff will sustain in
the future because of the defendant’s past conduct. Consider Frank, who caused serious injuries to Greta when
he negligently ran her over with his Hummer. Suppose Greta, a 30-year-old woman who was healthy before
the accident, is now paralyzed from the waist down. She can no longer work as a letter carrier, and she will
need special medical care for the rest of her life.
By the time Greta’s case against Frank goes to trial, Greta will have already incurred medical expenses and
loss of wages from the time of the accident until the time of trial. The jury can decide the appropriate amount
for these damages that have already occurred. Depending upon the state law, Greta may be entitled to
prejudgment interest on at least some of these damages, and she should be able to obtain postjudgment
interest as well for amounts reduced to judgment. Putting aside additional emotional distress damages, would
compensation for these past losses put Greta in the rightful position?
No. Even if Frank compensates Greta for the harm that has already occurred as a result of Frank’s actions,
Greta still faces future medical expenses and loss of wages. Five years from now, Greta might still need weekly
visits from a nurse and other medical care. She may also never be able to return to work. (If Greta could
perhaps take a different job, a court might reduce her damages for failure to mitigate if she does not do so. See
Chapter 6.2.)
These future damages present special valuation problems. Imagine that this year, Greta’s medical bills as a
result of the accident are $20,000, and the salary she would have earned (but for the injury) as a letter carrier is
$35,000. The experts agree that she will suffer similar damages five years from now. Because we require the
plaintiff to sue for all of her damages in a single trial (rather than come back to court periodically for an
assessment of recent additional damages), a court will have to figure out how much to compensate Greta now
for her future medical expenses and lost wages.
This is indeed a difficult undertaking that involves a host of educated guesses about the future. Will Greta
need the same amount of medical care five years from now? How much will such medical care cost in five
years? How much would Greta have earned five years from now had she not been injured? Would she have
received promotions by then?
These problems are increased by the uncertain time frame for damages for serious injuries. Damages will
have to be awarded to compensate Greta for the rest of her life in this single trial. Consider these questions:
When would Greta have stopped working? How much longer will she live and need medical care? Even after
the jury makes determinations of these amounts (in high-value cases, likely based upon the testimony of
dueling experts), there is another complication: the time value of money.
Suppose the jury determines that five years from now, Greta will need the same level of medical care, which
today costs $20,000, and that she would have been promoted two grades at the postal service, to a position
where the current salary is $40,000. These figures do not take into account the issue of inflation. Over time,
prices rise. But predicting how much prices will rise is not easy. Indeed, knowing something about the general
rate of inflation is not enough: the cost of medical care has in recent years exceeded the general inflation rate.
Wages, too, might increase faster or slower than the general rate of inflation. It might be that postal workers’
salaries in general have kept up with the general rate of inflation. And postal workers’ salaries are easier to
predict than salaries of those who have a more uncertain career path, such as that of a first-year associate at a
large law firm. Can you predict with any certainty how much you will be earning ten years from now?
Imagine that the jury determines that the medical care today costing Greta $20,000 would cost $25,000 in
five years, and that the salary for a postal worker who is two grades above Greta will be $45,000 five years
from now. Five years from now, therefore, the jury’s best guess is that Greta would need $70,000 for medical
expenses and lost wages.6
But if the jury awards Greta $70,000 to compensate for expected losses five years from now, Greta would
be overcompensated because she will have the use of that money five years early. If Greta received the $70,000
today, she could invest it for the next five years. At the end of five years, if she invested that $70,000 at 5% per
year compounded annually, she would have over $89,000.
So we need a more sophisticated way to deal with this problem, one that takes into account two
countervailing tendencies. On the one hand, the cost of things like medical care and wages will go up over time.
On the other hand, Greta will have the money from the judgment before she needs it, and because she can
invest the money, she will need less money now.
If these figures were exactly offsetting, we could ignore both the effects of medical and wage inflation and
the benefits of getting the money early. And some courts have said it is permissible to do just that. See Jones &
Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523 (1983) (rejecting this “total offset” method as mandatory in the
federal courts but noting that parties could stipulate to this method of computing damages). This means, to
use the example above, that a jury might simply award Greta $20,000 per year for each year she is expected to
need medical care, and $35,000 to replace her salary for each year she would have worked but for the accident.
She can then take that money and invest it with the expectation that the principal from the judgment plus the
interest income would give her just the right amount at the time she should need the funds.
But plaintiffs and defendants, at least in cases with large stakes, might battle over future cost and wage
increases. They too might disagree over the proper rate of interest that Greta would be able to get for safe
investments. Calculating present value allows jurors (or, more realistically, the expert witnesses upon whose
testimony the jurors will rely) to consider these two countervailing forces at once.
To use a simple example, take Greta’s medical care one year from now, which in today’s dollars will cost
$20,000. Suppose the evidence shows that medical care is expected to rise by 3% in the next year, and that
Greta could invest her money in a safe investment for a year earning 4.5% interest. Rather than increase the
$20,000 by 3% (to account for increased cost) and then decrease it by the 4.5% interest rate (to account for the
amount Greta may earn on her money), we can simply “discount” the $20,000 by the difference in interest
rates, or 1.5% (4.5% − 3%). Using a present value table or a present value calculator (easy to find on the
Internet with a Google search), the value of that amount is $19,704.7 The calculation must be done for each
year of medical expenses and each year of wages.
This example shows how complicated the computation of future damages can be. We have dealt with only
one year out of many years of Greta’s expected future medical expenses. Small changes in assumptions can
make a big difference over time. It is no wonder that in such cases, plaintiffs and defendants are going to bring
in economic experts to present competing models of future damages. In a case with serious personal injuries,
tens of thousands of dollars can be at stake depending upon the discount rate used.
You are Frank’s lawyer. Do you want an economic expert who predicts that medical inflation and wage
inflation will be high, or one who predicts it will be low? Do you want an expert who predicts a high rate of
return on safe investments, or one who predicts a low rate? Is it ethical to shop for an expert on the basis of
the expert’s expected opinions?
Generally speaking, it is better for defendants when the expert predicts that medical care inflation and wage
inflation will be low, and that the general rate of return on investments will be high (plaintiffs will want the
opposite assumptions to be made). Consider Greta’s costs in ten years. A prediction that medical inflation and
wage inflation will be low means that Greta won’t need much more money ten years from now than she does
today to make up for what she’s lost. And the more money she can earn on her investments, the less principal
she’ll need today to yield the right amount tomorrow.
Ethically, one should not choose an expert who is going to commit perjury or sell her testimony to the
highest bidder. But it is common practice to look at an expert’s track record before retaining that expert and
using that expert in a case. The most credible experts are those who sometimes testify for plaintiffs and
sometimes testify for defendants.
A jury awards Greta a sum of damages based upon the assumption that she will be able to earn 5% per year on
her investments. Five years after judgment, Frank discovers that Greta invested her money in the stock market
and earned an average of 18% on her money in the first five years. Can Frank go back to court and ask for a
No. The same is true if Greta was unable to earn as much on her money as the jury assumed, or if medical
costs increased at a much faster rate than the jury predicted. Whatever damages are awarded at trial is usually
One way to deal with this uncertainty is to have defendants make periodic payments to plaintiffs every few
years that are adjusted for inflation. Sometimes cases are settled to provide for such payments, with the
defendant paying a lump sum to an insurer, who bears risks such as a change in the rate of inflation. Some
states require the use of periodic payments in certain kinds of cases, such as medical malpractice cases.
1. Ernest J. Weinrib, Corrective Justice in a Nutshell, 52 U. TORONTO L.J. 349, 349 (2002) (footnote omitted). Aristotle writes of a situation
where plaintiff’s loss equals defendant’s gain, which, as we shall see in the chapter on restitution, is not always the case.
2. Economists care about this question because they want courts to choose legal rules that promote “Kaldor-Hicks efficiency,” or maximizing
overall social wealth for society. Creating the right incentives for defendants and plaintiffs is part of a court’s task in promoting efficiency. For
an introduction to the concept of Kaldor-Hicks efficiency and economic analysis in general, see RICHARD A. POSNER, ECONOMIC ANALYSIS
LAW 14-17 (9th ed. 2014).
3. He also would choose to sell to a new buyer if he found a buyer willing to pay $40,000. Remember, the market price is $35,000, which forms
the basis for Irina’s compensatory damages. In the case of a new buyer willing to pay over the market price, Juan could pay Irina the $35,000 and
still end up with a $5,000 profit. Economists call this idea “efficient breach,” and it is one to which we shall return in Chapter 4.2.
4. We put off until Chapter 6.4 the question whether Barbara would be allowed to keep both her insurance proceeds and damages from Alex.
5. See Chapter 16 for a discussion of declaratory judgments, the quintessential declaratory remedy.
6. Here, as elsewhere in this book, we are ignoring the issue of how taxation affects these calculations.
7. For those using a present value table, one would look under the column for the 1.5% discount rate at period 1. The rate there is 0.98522157,
which, when multiplied by $20,000, yields $19,704.
This chapter considers special issues that arise in the context of tort damages, beginning with the general
measure of tort damages. When we speak of the rightful position in torts cases, we are almost always
comparing the position of plaintiff before the wrong committed by the defendant (the “status quo ante,”
which we set at 0) and the position of plaintiff after the wrong.1 See Figure 3.1.
To use the final example of the last chapter, Greta was at B, or 0, before Frank ran her over. The accident
moved her to some point below zero, at A. Tort damages are measured as (B − A), and at least theoretically,
the award of damages equal to (B − A) should put Greta in the position she would have been in but for the
Greta’s example presents many complications, especially because of the difficulty of measuring her damages
for pain and suffering. Before we consider her case further, let’s return to a simpler example from the last
chapter, the case of Alex burning down Barbara’s house:
Mathematically, the court awards Barbara (B − A), or (0 − (−100,000)), or $100,000 (remember, convert
the two minus signs into a plus sign). See Figure 3.2. Though the parties may vigorously dispute the correct
value of A, the parties usually do not dispute that the court should award damages meant to put plaintiff in
the position she would have been in but for the wrong, the goal of the (B − A) formula.
The use of this (B − A) formula for tort damages (which some call “reliance damages” for reasons that will
become clear in the next chapter, dealing with contract damages) nicely illustrates cases where only nominal
damages may be available. Recall Charlene, who committed a battery by kissing Barry in the quad while he
was sleeping. Barry suffered no measurable damages (the facts told us he suffered no emotional distress), so in
that case A = 0, and therefore (B − A) equals zero. Because Barry suffered no damages, he will lose his case for
failure to prove damages, unless the court allows him to recover nominal damages or allows him to recover for
loss of dignity apart from emotional distress.
As we have already seen in earlier chapters, the idea that tort damages restore the plaintiff to the position
she would have been in but for defendant’s wrong can sometimes be little more than a fiction. The use of
market valuation rather than subjective valuation, the inability of some plaintiffs to obtain prejudgment
interest, and the lack of recovery (in most cases) of plaintiff’s attorney’s fees are all reasons we have already
considered why a plaintiff’s tort damages may be undercompensatory, thus putting plaintiff in a worse position
than she would have been in had the defendant not injured her.
In tort damages, by far the largest gap in restoring plaintiff to the rightful position arises in serious personal
injury cases such as Greta’s. While in theory Barbara may be indifferent between her house being burned
down by Alex and a sum of money compensating her for the loss of the house in the fire, it is hard to imagine
that Greta, or anyone else, would agree to be permanently paralyzed or disabled in exchange for any sum of
money, even if she were to be perfectly compensated for her medical expenses and future lost wages.
Furthermore, if we are going to use money to compensate Greta for the emotional distress she has suffered,
what is the proper measure of such damages? It is to this issue that we turn in the next section.
Hillary steals Ira’s digital camera and throws it into the river, destroying it. Ira bought the camera for $300
one year ago. Today a camera with similar features is worth $200. The market value of Ira’s camera at the
time Hillary stole it was $75. Ira sues Hillary in tort. What is the value of B in Figure 3.1? What is the value
of A? How much are Ira’s total damages in his tort suit against Hillary?
The value of B is the easy part of this question. It is always zero. From the preceding chapter, we know that
courts typically use market value at the time of the loss to measure plaintiff’s losses. This means that A would
be $75. But Ira might be able to argue for the higher replacement cost measure of $200 less depreciation (the
camera is a year old, and thus worth less than a new camera). Recall that some courts allow for the higher
measure of damages based upon replacement costs for certain household and consumer goods. (Alternatively,
Ira might argue for the higher measure of damages based upon Hillary’s bad conduct.) The total
compensatory damages would therefore likely be either $75 or some amount near $200, plus (potentially,
depending on the jurisdiction) prejudgment interest and likely postjudgment interest. There are no future
expected losses, so there is no need to reduce any amounts to present value. This may also be a case where
additional punitive damages are available (see Chapter 15).
3.2 PAIN AND SUFFERING, EMOTIONAL DISTRESS, AND OTHER
“NONECONOMIC” DAMAGES
Courts and lawyers use different terminology to describe types of compensatory damages; “general,” “special,”
“actual,” “pecuniary,” and “consequential” are some of the common names.2 The labels are sometimes
inconsistent and contradictory; to the extent possible, this book avo