The Equipoise Effect
44 Pages Posted: 1 Dec 2016 Last revised: 15 Dec 2016
Date Written: November 28, 2016
This Essay explores an overlooked way to use the remedy of disgorgement in torts, contracts, and regulation. It begins with a reminder that disgorging net gains does not force the liable actor to take a loss; by definition, it allows him to break even. As a matter of incentives, it places him in a sort of equipoise. This equipoise effect has a logical upshot that might seem counterintuitive: Substituting disgorgement for any other remedy, part of the time, can emulate the incentive effect of using that other remedy all of the time.
In theory, then, courts or regulators can sometimes substitute disgorgement for compensatory or expectation damages without undoing the benefits of harm internalization. This flexibility may prove especially useful in contexts where harm can be hard to measure. The accuracy of such emulation will depend on certain ideal conditions, however, and circumstances such as information costs will affect whether the approach is feasible and attractive.
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