What is disgorgement and what are the proper measure of damages when seeking disgorgement?  If you have ever asked yourself these questions, the case of Bailey v. St. Louis, 44 Fla.L.Weekly D128a (Fla. 2d DCA 2018), answers both in a bitter dispute with two appeals dealing with awarded damages associated with claims for breach of fiduciary duty, defamation, conspiracy, slander per se, tortious interference, and violation of Florida’s Deceptive and Unfair Trade Practices Act.  You name it, this case seemed to include it!  Applicable here, however, is the damages associated with disgorgement which is designed to prevent a wrongdoer from profiting from his/her/its own wrongdoing or illicit conduct. 

In the first appeal, the appellate could held that the trial court’s award of disgorgement damages to the plaintiff was inadequate.   On remand, the trial court entered the same award mistakenly believing the appellate court thought that the damages were inadequately explained as opposed to just inadequate.  The trial court tried to explain the damages it found for disgorgement focusing on the plaintiff’s lack of business skills (or unsophistication) as a means to limit the disgorgement damages.  But, this was wrong as best explained by the appellate court in a subsequent appeal discussing disgorgement (including the citations that help explain the purpose of disgorgement and corresponding damages):

The trial court’s focus on the appellants’ supposed lack of business skills as a basis to limit disgorgement shows a complete misapprehension of the principles applicable to disgorgement. Disgorgement is a remedy designed to deter wrongdoers by making it unprofitable to engage in the wrongful behavior. See Duty Free World, Inc. v. Miami Perfume Junction, Inc., 253 So. 3d 689, 698 (Fla. 3d DCA 2018) (“‘Disgorgement is an equitable remedy intended to prevent unjust enrichment.’ ” (quoting S.E.C. v. Monterosso, 757 F. 3d 1326, 1337 (11th Cir. 2014))); Restatement (Third) of Restitution and Unjust Enrichment § 1 (Am. Law Inst. 2011) (“A person who is unjustly enriched at the expense of another is subject to liability in restitution.”); Restatement (Third) of Restitution and Unjust Enrichment § 3 (“A person is not permitted to profit by his own wrong.”). The point of disgorgement is to deter wrongdoers by stripping them of the gains from their conduct:

Restitution requires full disgorgement of profit by a conscious wrongdoer, not just because of the moral judgment implicit in the rule of this section, but because any lesser liability would provide an inadequate incentive to lawful behavior. If A anticipates (accurately) that unauthorized interference with B’s entitlement may yield profits exceeding any damages B could prove, A has a dangerous incentive to take without asking — since the nonconsensual transaction promises to be more profitable than the forgone negotiation with B. The objective of that part of the law of restitution summarized by the rule of § 3 is to frustrate any such calculation.

Id. § 3 cmt. c; see also § 51 cmt. e (“The object of the disgorgement remedy — to eliminate the possibility of profit from conscious wrongdoing — is one of the cornerstones of the law of restitution and unjust enrichment.”).

***

However, the measure of damages for disgorgement is not the profits the appellants might have made absent the wrongdoing — the measure of damages for conscious wrongdoing is the appellees’ “net profit attributable to the underlying wrong.” Restatement (Third) of Restitution and Unjust Enrichment § 51(4); see also Duty Free, 253 So. 3d at 698 (“The equitable remedy of disgorgement is measured by the defendant’s ill-gotten profits or gains rather than the plaintiff’s losses.”). “When the defendant has acted in conscious disregard of the claimant’s rights, the whole of the resulting gain is treated as unjust enrichment, even though the defendant’s gain may exceed” the claimant’s loss.” Restatement (Third) of Restitution and Unjust Enrichment § 3 cmt. c. In fact, disgorgement may be awarded even if the claimant has not sustained any loss. Restatement (Third) of Restitution and Unjust Enrichment § 3, reporter’s note a. (“[I]t is clear not only that there can be restitution of wrongful gain exceeding the plaintiff’s loss, but that there can be restitution of wrongful gain in cases where the plaintiff has suffered an interference with protected interests but no measurable loss whatsoever.”).The trial court’s comments regarding the appellant’s business acumen are misplaced in determining a disgorgement award.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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When it comes to disability discrimination, there are two key federal statutes.  The first is the American with Disabilities Act (ADA) and the second is the Rehabilitation Act.  Both statutes are governed under analogous standards and are designed at prohibiting discrimination against qualified individuals with disabilities.  There are numerous federal cases discussing both the ADA and the Rehabilitation Act and their application to a given factual scenario.  For purposes here, this synopsis will merely highlight key components to a disability discrimination claim.  It is important that a person that believes they have been discriminated against because of a disability to consult with counsel to ensure they understand their rights. 

To prove a claim for disability discrimination, a plaintiff must prove the following three elements: 1) he/she is disabled; 2) he/she is a qualified individual; and 3) he/she was subjected to unlawful discrimination because of his/her disability. 

There is no disability discrimination claim without a plaintiff proving each of these three elements.

First Element.  A person is disabled if he/she has “(A) a physical or mental impairment that substantially limits one or more major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment.”  See ADA and Rehabilitation Act.  “[M]ajor life activities include, but are not limited to, caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.”  Id. 

Second Element.  A person is a qualified individual with a disability if they “with or without reasonable modifications to rules, policies, or practices…meets the essential eligibility requirements for the receipt of services or the participation in programs or activities provided by a public entity.”  See ADA and Rehabilitation Act.  

Third Element.  To prove unlawful discrimination, a plaintiff can either establish disparate treatment or failure to provide reasonable accommodations. 

Disparate treatment requires the plaintiff to prove animus such that they were singled out / discriminated against because of their disability (and people without a disability were treated differently).   In this instance, a defendant can counter this by establishing they had a legitimate reason for its action in which the burden will shift back to the plaintiff to argue that the plaintiff’s so-called legitimate reason is nothing but a pretext for disability discrimination.

A failure to provide reasonable accommodations requires the plaintiff to request reasonable accommodations that would allow them to perform essential functions of the job.  A defendant can counter this by arguing they denied the requested accommodation because it posed an undue hardship, i.e., it was not a reasonable accommodation.    

Both the ADA and the Rehabilitation Act contain an anti-retaliatory framework. So, let’s assume a person requests accommodations and those accommodations were denied and then that person was dismissed from their employment or educational status.  In this instance, the person may argue the defendant violated the ADA and the Rehabilitation Act by failing to provide them a reasonable accommodation.  The person may further argue that they were retaliated against by the defendant through their dismissal.  Similar to the above regarding disparate treatment, the defendant can rebut this by arguing they had a legitimate reason for plaintiff’s dismissal (that had nothing to do with the disability) in which the burden shifts back to the plaintiff to establish that the defendant’s proffered reason is a pretext for disability discrimination.

As mentioned above, there is a lot to disability discrimination claims and it is imperative a person that believes they have been discriminated against because of their disability consult with counsel to understand the nuances of the law and the application of the law to their specific factual claims.  This is just a synopsis relative to the framework of a disability discrimination claim.  

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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