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RDG
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If one wants to make sense out of Blake the following
passage seems to me a starting point though it only takes us so far. The
passage is: "A useful general guide, although not exhaustive, is whether
the plaintiff had a legitimate interest in preventing the defendant's
profit-making activity and, hence, in depriving him of his profit." This
idea covers the uncontroversial cases that require one who violates a
covenant not to compete to disgorge the profits he made from the violation.
Of course, these cases could as well be explained on the reasoning that
the defendant's profits from the improper competition are the best measure
of the plaintiff's loss.
One attraction to using this idea as a starting point
is that it is consistent with requiring the trespasser or converter to
disgorge his profit from infringing upon the owner's property when that
profit exceeds the owner's loss. The owner of property is entitled to
whatever profits can be derived from its use. Disgorgement by the unfaithful
fiduciary also can be explained in these terms. A fiduciary undertakes
to put his own interests aside to serve exclusively the interests of his
principal. The principal has a "legitimate interest in preventing" the
fiduciary's self-profiting activity.
A difficulty with transporting this idea from the law
of trespass, conversion, and fiduciaries into Contract is that you quickly
run into the idea that generally when A contracts with B for the performance
of act x A's interest is in the value to himself from the performance
of x. If B defaults on x, the measure of damages is A's loss from the
non-occurrence of x and not B's gain from x's non-occurrence. If a contractor
abandons a job to take a much higher paying job and the first employer
can hire a substitute who is just as good and only slightly more expensive
we are satisfied with an award of the modest additional cost of cover.
In the terminology of Blake, the problem is determining
when A has a legitimate interest in preventing B from profiting from breach
of contract. The easiest case is where A predictably suffers a significant
but immeasurable loss on breach that may well exceed B's profit from breach,
which is measurable. Here a profits-based remedy is justified on ordinary
deterrence (or efficiency) grounds. Maybe Snepp
and Blake
can be explained along these lines. I don't think of a profits-based remedy
as being particularly punitive in this case. A profits-based remedy begins
to seem more punitive if we generalize the principle to cover any wilful
defaulter who hoped to find a profit in the plaintiff's uncompensated
loss. For an argument that disgorgement of profits is appropriate to deter
and punish opportunistic breach see Andrew Kull, Disgorgement for Breach,
the 'Restitution Interest,' and the Restatement of Contracts, 79 Texas
L. Rev. 2021, 2049-2052 (2001). The City of New Orleans case is famous
example of a case where disgorgement should have been the remedy (it was
not). Defendant promised to supply a certain level of fire protection
service. They did not to cut costs. Happily, no loss was suffered. I would
require Defendant to disgorge its savings from the cut in services reasoning
that had a fire requiring the additional services occurred they never
could have stood by the loss.
"Opportunistic breach" is not much of a solving concept.
What it adds to the question "Did A have a legitimate interest in preventing
B from profiting from breach of contract" is some sense that we are concerned
with the immorality of the defendant's conduct. Reading Esso v. Niad (putting
these cases on the web is an enormous service) it seems to me that the
defendant's "throw-away" arguments about intent to affect legal relations,
indefiniteness, consideration, duress and the like become very much to
the point along with Esso's ample extra-legal remedies. <== Previous message Back to index Next message ==> |
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