Chapter 11-4 Restitution (Misappropriation)-Damages

• Jurisdiction: United States

11-4 Restitution (Misappropriation)-Damages

The term "restitution damages" appears in a variety of contexts and with various meanings attached, but as used here—in a misappropriation context—the term references an alternative measure of damages to either benefit-of-the-bargain damages or out-of-pocket damages. While both benefit-of-the-bargain damages and out-of-pocket damages focus on recovery of the loss to the claimant, restitution damages are measured by the positive value to the defendant of what has been misappropriated by the defendant or provided by the claimant.²⁰

Restitution damages often constitute an appropriate measure of damages in cases of breach of contract,²¹ fraud,²² breach of fiduciary duty,²³ misappropriation of trade secrets,²⁴ unjust enrichment,²⁵ or quantum meruit.²⁶ The valuation method for determining the positive value to the defendant may involve valuation of property acquired, or valuation of a business or of a stream of profits acquired.

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Notes:

^[20] Atrium Med. Ctr., LP v. Houston Red C LLC, 595 S.W.3d 188, 193 (Tex. 2020).

^[21] See McFarland v. Sanders, 932 S.W.2d 640, 645-46 (Tex. App.—Tyler 1996, no writ).

^[22] Casstevens v. Smith, 269 S.W.3d 222, 230 n.3 (Tex. App.—Texarkana 2008, pet. denied) ("Texas courts have allowed restitution for these types of claims in a variety of cases: by a defrauded party against the party who committed the fraud [citations omitted]; by a party that made an overpayment [citation omitted]; and by a party that paid or credited money to the wrong person or account [citations omitted].").

^[23] Kinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 573-74, 160 S.W.2d 509, 514 (1942).

^[24] Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 710-12 (Tex. 2016) (raising question as to whether equitable disgorgement is available under either contract or trade-secret law absent a fiduciary relationship and, if so, whether it is cumulative of other remedies or available only to the exclusion of other remedies).

^[25] Sherer v. Sherer, 393 S.W.3d 480, 491 n.22 (Tex. App.—Texarkana 2013, pet. denied). But note the disagreement between courts as to whether or not unjust enrichment is a distinct cause of action. See Pepi Corp. v. Galliford, 254 S.W.3d 457, 460 (Tex. App.—Houston [1st Dist.] 2007, pet. denied); compare with Lilani v. Noorali, No. H-09-2617, 2011 U.S. Dist. LEXIS 440, at *36-38 (S.D. Tex. Jan. 3, 2011) and Davis v. OneWest Bank N.A., No. 02-14-00264-CV, 2015 Tex. App. LEXIS 3470...