A version of the Ola B. Smith Lecture delivered at the University of Virginia School of Law on April 20, 2005.
Issue 3
Restoring Restitution
The law of restitution received its decisive impetus in the United States in the First Restatement of Restitution (1937), but over the last half-century it has more or less died as a distinct area of American private law. By contrast, the law of restitution has flourished in the common law jurisdictions of the British Commonwealth. The death of restitution in the United Stated has been ascribed to the influence of the Legal Realists, whose intrumentalism subverted the kind of reasoning that is needed to sustain and develop a sophisticated regime of private law liability. Hanoch Dagan’s book, The Law and Ethics of Restitution (the first book on the law of restitution addressed to an American academic audience in many decades), attempts to show how a Realist approach to law, far from being destructive of the law of restitution, can assist in elucidating this branch of liability.
This Review first outlines the assumptions implicit in the Restatement and Commonwealth approaches to restitution. The Restatement begins with the basic principle of unjust enrichment, that a person who has been unjustly enriched at the expense of another is liable to make restitution to that other. The first assumption is express: that this principle is the unifying theme of what were previously considered to be separate pockets of liability, and that we can understand the these separate instances of liability only when we appreciate the principle that they all instantiate. The principle thus acts as to make the law coherent across different transactions. The second assumption is tacit: that liability under unjust enrichment works justice as between the parties, i.e., that, in the language of contemporary legal theory, it exemplifies corrective justice. This means that the principle provides a fair and coherent ordering within each transaction that it governs. In order for the principle of unjust enrichment to do this, it must represent a justification that normatively links the parties into a unified relationship, where the injustice that liability corrects is the same from the viewpoint of both parties. This can be done only through the non-instrumental reasoning of a system of rights: the plaintiff must be understood as claiming that what was rightfully the plaintiff’s has been ineffectively transferred to the defendant and therefore should be restored. These two assumptions are related, because coherence across transactions does not make sense unless there is also coherence within each transaction.
The peculiar feature of Dagan’s book is that, while purporting to resurrect the law of restitution, he is repudiating the two assumptions on which it is based. He does not think that it makes sense to a general principle of restitution, because such a principle is just circular and conclusory. Instead he favors a “contextual normative” inquiry where the particular normative considerations of different types of situation are elucidated. He thereby expressly repudiates the impulse to unify across transactions that was always the driving force in developing the law of restitution. He also repudiates the corrective justice approach, in favor of the instrumentalist promotion and balancing of different values, such as autonomy, utility, and community.
Dagan’s book is dense, full of detailed argument across the whole field of restitution. This Review focuses on his account of two occasions for restitution: mistaken payments and unrequested benefits. (Most contemporary restitution scholars regard these two contexts as the most basic cases of unjust enrichment.) My argument is that the values that Dagan deploys in each of these contexts attach separately to one or the other of the parties and therefore do not provide a reason for a court’s taking money from the defendant and giving it to the plaintiff. The values that Dagan invokes, although laudable in their own terms, are structurally incapable of elucidating restitution as a species of private law liability. In order to get his “values” project off the ground at all, he must (and occasionally does) implicitly smuggle into the account the very idea of corrective justice that he repudiates. Once he does this, there is no need to invoke his out-of-place values.
Finally, the Review turns to the reason for Dagan’s rejection of corrective justice. His argument (which in the book he specifically directs against me) is that corrective justice has a distributive basis because it must work with a notion of property that has distributive consequences. This argument is wrong on several grounds. First, whether a legal operation is distributive does not depend on the fact that it has an effect on what a party has or does not have (any operation in private law of course has an effect) but depends on the structure of the reason that grounds the effect. Second, if Dagan’s claim is to succeed, it must be that property is necessarily justifiable only on the basis of distributive justice. This is a popular academic claim, but in fact it is mistaken, as the history of political theory is full of arguments that put property on a non-distributive basis. The stongest of these arguments was made by Kant, who shows that Grotius’s idea of private property as a distribution of property held by the community in common simply misses the point. What the argument has to justify is how property as a right that is external to oneself can exist at all, whether held individually or in common. Grotius’s approach (and that of his modern heirs such as Dagan) simply assumes that property exists, and therefore does not explain how this existence is possible. The only way to resolve the problem is to show how property presupposes the very ideas of right and freedom that are integral to corrective justice.
Preserving Collective-Action Rights in Employment Arbitration
Arbitration has great promise as a vehicle for efficiently and cost-effectively resolving work-related disputes on the merits—and doing so in a way that is more likely than litigation to satisfy all concerned parties. To preserve this promise, judges and policymakers must be vigilant in monitoring the use of arbitration by nonunion employers, lest it become a tool for exacerbating the imbalances of power between workers and management, and, thus, ultimately discredited. Of particular concern are attempts by employers to use predispute arbitration agreements as a means of class-action avoidance. Indeed, the prospect of limiting exposure to large-scale employment litigation through arbitration has given companies a substantial incentive to require their workers, as a condition of employment, to waive the right to sue in court and instead submit claims to binding arbitration.
The proliferation of employer-promulgated arbitration pacts that explicitly or implicitly prohibit multiparty actions likely will bring to the fore a question which courts have yet to confront directly: whether such an agreement, entered into as a precondition of employment, constitutes an unfair labor practice by interfering with the rights of employees to engage in “concerted activities for the purpose . . . of mutual aid or protection,” as guaranteed by Section 7 of the National Labor Relations Act.
Precedent indicates that many employment arbitration agreements are, in fact, vulnerable to unfair-labor-practice charges to the extent that they require employees to surrender their rights to collaborate in dispute resolution as a condition of employment. This Note suggests, however, that employers can preserve a form of mandatory individual arbitration without undermining the policies behind Section 7, offering a solution through which employers and employees can retain the practical benefits of arbitration within a system that allows employees to work in conjunction with one another to resolve claims of mutual concern. Specifically, it advocates that employers embrace transparency in their arbitration systems by instituting procedures that provide for public disclosure of outcomes and the right of participants to present relevant prior awards as persuasive precedent.
Such an approach—which this Note terms “open arbitration”—not only would allow courts to reconcile the “liberal federal policy favoring arbitration agreements” with the objectives of Section 7, but it also would mute many of the criticisms that have led courts to invalidate mandatory ADR agreements.