The Volokh Conspiracy

Mostly law professors | Sometimes contrarian | Often libertarian | Always independent

Volokh Conspiracy

Fun with restitution law


As I said yesterday, Eugene has invited me to talk a bit about the law of restitution—what it is and why you might care. I've written a new book that explains it, and in this space will touch briefly on some examples of what makes the subject interesting.

Let me come back to an example mentioned in passing yesterday. I steal your $100 and use it to place a bet at a casino. I get lucky and win $100,000. Do I owe you the whole $100,000? Indeed I do. You can collect it all from me in a suit for restitution.

The case shows why it sometimes isn't enough to make wrongdoers just pay for the harm they cause. The harm to you was $100; merely paying it back would leave me too well off and would tempt me to do it again (assuming I'm not in prison!). Sure, you could sue in tort and try to argue for punitive damages, but those are discretionary and are sure to be much smaller. You would be much better off bringing a restitution claim and asserting that the winnings are yours as a matter of right.

Now suppose I buy my chips at the casino using the hundred dollars I took from you plus five thousand dollars of my own. I mix the chips together; it's impossible to say which were bought with your money and which with mine. I bet a pile of the chips—a hundred dollars' worth, in fact—and win handsomely. How do we know which of the winnings I owe you? It's easy: all of them. The law assumes the stolen funds were the source of my gains unless I can prove they weren't because I kept the good and bad money separate. This we call a tracing fiction. We can't really say whether the winnings came from the stolen money, but we pretend we can because throwing up our hands in futility creates an intolerable outcome.

But now suppose that despite my good day at the casino I soon go bankrupt. I have five creditors and owe them each $100,000, and my only wealth is what I won by gambling with your money. In this case you likely don't get to collect the whole $100,000 from me after all. You probably will have to share it with my other creditors. No doubt you will find this an annoying result, but look at it from the creditors' point of view. They aren't being unjustly enriched; they didn't steal anything. The only party who definitely won't share in the money is me, because I'm the one who evidently needs a lesson.