The Restitution Revival and the Ghosts of Equity
36 Pages Posted: 29 Mar 2011 Last revised: 1 Mar 2016
Date Written: March 25, 2011
A restitution revival is underway. Restitution and unjust enrichment theory, born in the United States, fell out of favor while thriving in Commonwealth countries and beyond. The American Law Institute’s (ALI) Restatement (Third) of Restitution and Unjust Enrichment revives and streamlines the law of unjust enrichment. It also offers bold remedies such as disgorgement of profits for opportunistic breach of contract. It mistakenly, however, erects a law-equity barrier to the remedy. This error mimics recent, flawed Supreme Court injunction jurisprudence. I argue that such critical missteps limit the power of remedies to shape substantive rights. The disgorgement remedy reallocates the breacher’s wrongful profit to the plaintiff if the breach is deliberate and profitable and the contractual entitlement inadequately protected. Disgorgement is an alternate remedy to traditional contract damages and notably would apply without the contractual breach rising to the level of a tort or breach of fiduciary duty. The inadequacy requirement may purposefully narrow a bold, and perhaps feared, disgorgement remedy, but it creates unnecessary confusion by taking the focus away from the breacher’s opportunism and redirecting the focus to the adequacy of plaintiff’s compensation. Restitution is often misinterpreted as categorically equitable given its focus on fairness. Its origins are actually law, equity, and sometimes both. The Restatement will suffer because it adopts language of inadequacy and affirms the hierarchy of remedies, which prefers legal to equitable remedies. The theoretical boundary of contracts rights will be encumbered and narrowed unnecessarily. By limiting the remedy, contract law will not be available to deter opportunistic breaches. Even as the restitution revival garners traction, inadequacy haunts this important restitutionary remedy with equity’s ghosts.
Keywords: disgorgement, contract, opportuntistic breach, restitution, unjust enrichment, equity, legal remedy, equitable remedy, inadequacy, irreparable injury
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