Restitution When P Mistakenly Confers a Benefit on D (as in Sauer & Somerville )

1. Restitution When PMistakenly Confers a Benefit on D (as in Sauer & Somerville) • A truly innocent mistake by P/improver/payor is most likely to result in restitution. • As P’s culpability increases, the likelihood of restitution decreases • But with a truly innocent victim (D/improvee/payee), courts may “balance the hardships” and refuse to grant restitution if returning the benefit will be hard on D • (But see Somerville) – somewhat unique situation • Bottom line – whether restitution is granted depends on culpability of both parties and hardship on D. (See Restatement 3rd) • General measure of U.E. in mistake cases = value (actual cost) of improvement/payments to D

2. Grounds for Restitution from Innocent Defendants • Mistake – see previous slide • Emergency – one who reasonably provides essential goods/services during emergencies need not get a promise to pay beforehand • Measurement of U.E. for lives saved – FMV of treatment (NOT value of life saved) • Measurement of U.E. for property saved – lesser of value of services or property damage avoided • Performance of Duties to 3rd Parties – e.g., paying brother’s bills • Measurement of U.E. – reasonable value of services/bills paid for • Joint Ownership of Property – payment ofnecessaryexpenses • Measurement of U.E. – reasonable value of other’s proportionate expenses • Quantum Meruit or Unenforceable Contracts (more at pp. 638-43) • Four Different Measures - Cost to Plaintiff, Market Value, Agreed Price, or Value in advancing D’s purposes

3. State v. ANW Seed • State obtains default judgment against ANW seed for violations of Consumer Protection Act. • ANW Seed appealed default judgment. • While appeal pending, State obtained writ of execution on judgment. Sheriff seized ANW seed’s property per writ to fulfill judgment. Property sold at execution sale for $16,588.50. • ANW Seed moved for restitution after appellate court vacated the default judgment. • What could ANW Seed have done to avoid losing the property in the first place? • What is the appropriate measure of restitution now that ANW Seed is entitled to either return of its property or the property’s “value”?

4. Measuring the unjust benefit to be returned – innocent wrongdoers • Problem in ANW Seed re “value” of sold property • State received $16,588.50 for property at execution sale • BUT ANW Seed lost property worth $57,631.50 (FMV) • To which amount is P entitled in restitution? • When D is innocent, courts generally say P is entitled to restitution only of the amount D was unjustly enriched – here that is “$16,588.50 (auction value of sold property) • This is true even if P lost far more than D actually gained • Theme throughout restitution with innocent wrongdoers: • When given a choice of measurement of unjust enrichment, courts will usually choose the lower amount (which it believes represents unjust enrichment to innocent D)

5. Olwell v. Nye & Nissen Co. • D temporarily converted P’s egg washer (1 day/week for 156 weeks). P offered to sell but D refused to buy. P sued for benefit D gained while using converted egg washer. • http://i01.i.aliimg.com/photo/v0/122600771/NABEL_Egg_Washer.jpg • What are P’s damages if P sues for temporary conversion? • What is the amount of compensation P is awarded as unjust enrichment for D’s conversion? • Is there another way to measure unjust enrichment to D other than the measure used by the court?

6. Why did Olwellchoose the measure for unjust enrichment that it did? • In ANW Seed the court chose the lower measure of compensation as the appropriate measure of restitution. In Olwell, the Court chose the higher measure (aka it required D to disgorge its profits from use of P’s property). Why did the courts choose different measures? • Do these reasons distinguish the outcomes in Edwards (p. 651) (award of profits) and Beck (p. 654) (award of rental value)?

7. Who are conscious wrongdoers? • Under Rstmt (3d), misconduct = “tortious or otherwise wrongful” interference “w/ claimant’s legally protected interest” • Note grounds defined as misconduct at p. 655 n.1 • Disgorgement of profits/gain is appropriate for “misconduct” (aka conscious wrongdoers) • Disgorgement = D must return to P the “net profit attributable to underlying wrong” (p.654 n. 9b) • Profit = use/rental value of property taken, proceeds from sale/exchange of property taken & any consequential gains from use of property • Note that Rstmt(3d)/courts recognize wrongdoers of lesser degree of culpability (p. 656 n.3) • Courts adjust measure of restitution depending on whether they think D is closer to innocent or culpable D

8. Apportionment of Profits (even w/ conscious wrongdoers) • Sheldon v. MGM (p. 665) • P’s argue that D/MGM stole their play and based its film, Lettie Lynton, on it. P’s sought an accounting of profits (form of restitution resulting in a monetary judgment). DCT agreed and awarded all net profits ($587,604.37). http://en.wikipedia.org/wiki/Letty_Lynton • Was it appropriate to award all of the net profits from the film to Ps? • Answer: Even with conscious wrongdoers, courts only require Ds to disgorge profits resulting from their wrongdoing. Ds are allowed to keep profits that result from their “lawful” conduct associated with the wrongfully taken or misappropriated thing.

9. Mechanics of Apportionment • P has initial burden of proving D’s gross receipts from activity (i.e., the movie) • D then has the burden of proving expenses that can be deducted from gross receipts to reach “net profits” figure • Beginning w/ net profits figure, D has burden of proving • Feasibility of • need for & • amount of apportionment

10. Method of Apportionment • Sheldon – factors of production • Involves a pro rata apportionment where the court determines how much each of D’s “production factors” other than the misappropriated work contributed to the final product (movie) • Contributing factors – contributions of movie stars, writers, directors . . . • Factors not to be considered – MGM’s standing in community, things “not bought and paid for” • Mishiwaka(p. 669 n.5) – apportionment by sales • A pro rata apportionment where the court measures the amount D must disgorge by the profit from sales that can be attributed to D’s wrongful act of trademark infringement. • Note – with either method courts don’t require mathematical certainty re apportionment but, rather, merely a “reasonable approximation” of who is responsible for each portion of the profits.