Chapter 11-1 Choosing the Right Damage Model

• Jurisdiction: United States

11-1 Choosing the Right Damage Model

A plaintiff may plead alternatively into more than one cause of action which different remedies available depending on the jury's findings. It is thus important to determine the appropriate damage model for each cause of action, especially where more than one damage model can be pleaded for the same cause of action, such as "benefit-of-the-bargain" and "out-of-pocket" damages which may be alternative for remedies for breach of contract. Even within a broad category such as benefit-of-the-bargain are more discrete damage models like lost profits or the loss of value of a business that can be employed to determine the amount of benefit-of-the-bargain damages.

Alternative pleading is available for both alternate causes of action and alternate damage models, which requires knowledge and awareness of the "economic loss rule" and its application in Texas. The economic loss rule is actually an amalgamation of judicially created limitations on the recovery of economic damages in some tort actions.¹ The economic loss rule is not an affirmative defense that must be pleaded but is instead a principle for determining the proper measure of damages.² Thus, the economic loss rule may be raised by the defendant for the first time after the close of discovery or after the close of evidence. Depending on the timing, the defendant can raise the issue by summary judgment, directed verdict or via objection to a proposed damage submission in the jury charge.³ The economic loss rule is discussed in Chapter 11, Section 11-1 and Chapter 12, Section 12-3.

The various Restatements of the Law (for contracts, economic torts, etc.) each categorize damages into conceptual frameworks appropriate for that particular area of law.⁴ This book takes a broader approach recognizing that many of these conceptual frameworks have overlapping applications (e.g., a "lost profits" damage model works within multiple conceptual frameworks), and focuses on the common damage models which apply in business litigation, suggesting which damage models might best fit particular business litigation cases.

* The authors thank Juan Antonio Solis for his assistance in the updating of this chapter.

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Notes:

^[1] "[T]here is not one economic loss rule broadly applicable throughout the field of torts, but rather several more limited rules that govern recovery of economic losses in selected areas of the law." Vincent R. Johnson, The...