Yesterday, I outlined the argument of Hanoch Dagan that enhancing certain relationships justified the restitutionary remedy of disgorgement. Dagan correctly observed that the law awards supra-compensatory damages for a few wrongful actions, in particular, those involving violations of fiduciary and confidential relationships. These relationships involve a higher degree of trust than the typical commercial transaction. Thus, Dagan concludes, it is the law's goal to ensure that people continue to enter into such trusting relationships by forcing the wrongdoer to give back all that has been gained and not merely what was taken, i.e., disgorgement rather than compensation.
I found Dagan's argument interesting because he presented it as an alternative to autonomy- or efficiency-based ones. Unfortunately, I don't see that it's necessary. Both autonomy and efficiency can explain disgorgement and there is no need to posit a third way to justify it. Fiduciary relationships arise from contract but afford one party great discretion. The law remedies breach of the relationship because such relationships are valuable to the parties. It's not the relationship that we protect but the freedom of individuals to enter into it and/or the social welfare created by giving agents such great discretion. Autonomy or efficiency are enough.
Confidential relationships are not contractual but their abuse is usually wrongful, typically fraud, duress, or undue influence. The remedy of disgorgement is justifiable on ordinary tort theories and doesn't need a third way.
Perhaps we can glean a reason for Dagan's interest in moving the relationship rather than the parties to the center of restitution if we consider his lengthy argument in favor of restitution-based claims between cohabitants. "Allowing recovery for a significant asymmetric contribution facilitates the functioning of cohabitation as an intermediate institution, stabilizing and facilitating a relationship of long-term informal intimacy between marriage and arm’s-length dealings," Dagan writes. Clarifying his academic prose, Dagan intends restitution to provide a middle ground of legal protection for cohabitants between the rights of married individuals and the necessity of formalizing the cohabiting relationship through contract (a rather unlikely state of affairs).
I have no dog in this fight except to suggest that state legislatures and not state courts should lead the way in such matters of public policy. I find it interesting, however, that ultimately Dagan develops the relationship trope not so much to explain the existing remedy of disgorgement but to extend it into a new area.
I found Dagan's argument interesting because he presented it as an alternative to autonomy- or efficiency-based ones. Unfortunately, I don't see that it's necessary. Both autonomy and efficiency can explain disgorgement and there is no need to posit a third way to justify it. Fiduciary relationships arise from contract but afford one party great discretion. The law remedies breach of the relationship because such relationships are valuable to the parties. It's not the relationship that we protect but the freedom of individuals to enter into it and/or the social welfare created by giving agents such great discretion. Autonomy or efficiency are enough.
Confidential relationships are not contractual but their abuse is usually wrongful, typically fraud, duress, or undue influence. The remedy of disgorgement is justifiable on ordinary tort theories and doesn't need a third way.
Perhaps we can glean a reason for Dagan's interest in moving the relationship rather than the parties to the center of restitution if we consider his lengthy argument in favor of restitution-based claims between cohabitants. "Allowing recovery for a significant asymmetric contribution facilitates the functioning of cohabitation as an intermediate institution, stabilizing and facilitating a relationship of long-term informal intimacy between marriage and arm’s-length dealings," Dagan writes. Clarifying his academic prose, Dagan intends restitution to provide a middle ground of legal protection for cohabitants between the rights of married individuals and the necessity of formalizing the cohabiting relationship through contract (a rather unlikely state of affairs).
I have no dog in this fight except to suggest that state legislatures and not state courts should lead the way in such matters of public policy. I find it interesting, however, that ultimately Dagan develops the relationship trope not so much to explain the existing remedy of disgorgement but to extend it into a new area.
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