U.S. Supreme Court, Uzuegbunam v. Preczewski, Docket No. 19–968, J. Thomas

 

Nominal Damages v. Actual, Compensatory or Statutory Damages

 

Article III Standing

 

Common Law

 

 

 

To establish Article III standing, the Constitution requires a plaintiff to identify an injury in fact that is fairly traceable to the challenged conduct and to seek a remedy likely to redress that injury. Spokeo, Inc. v. Robins, 578 U. S. 330, 338.

 

 

We granted certiorari to consider whether a plaintiff who sues over a completed injury and establishes the first two elements of standing (injury and traceability) can establish the third by requesting only nominal damages.

 

 

The dispute here concerns whether the remedy Uzuegbunam sought—nominal damages—can redress the completed constitutional violation that he alleges occurred when campus officials enforced the speech policies against him. The Court looks to the forms of relief awarded at common law to determine whether nominal damages can redress a past injury. The prevailing rule at common law was that a party whose rights are invaded can always recover nominal damages without furnishing evidence of actual damage. By permitting plaintiffs to pursue nominal damages whenever they suffered a personal legal injury, the common law avoided the oddity of privileging small economic rights over important, but not easily quantifiable, nonpecuniary rights.

 

 

The common law did not require a plea for compensatory damages as a prerequisite to an award of nominal damages. Nominal damages are not purely symbolic. They are instead the damages awarded by default until the plaintiff establishes entitlement to some other form of damages. A single dollar often will not provide full redress, but the partial remedy satisfies the redressability requirement.

 

 

(…) An award of nominal damages constitutes relief on the merits.

 

 

A request for redress in the form of nominal damages does not guarantee entry to court. In addition to redressability, the plaintiff must establish the other elements of standing and satisfy all other relevant requirements, such as pleading a cognizable cause of action. Uzuegbunam experienced a completed violation of his constitutional rights when respondents enforced their speech policies against him. Nominal damages can redress Uzuegbunam’s injury even if he cannot or chooses not to quantify that harm in economic terms.

 

 

(…) The parties here agree that courts at common law routinely awarded nominal damages. They, instead, dispute what kinds of harms those damages could redress.

 

 

(…) Dissenting, Lord Holt argued that the common law inferred damages whenever a legal right was violated. Observing that the law recognized “not merely pecuniary” injury but also “personal injury,” Lord Holt stated that “every injury imports a damage” and that a plaintiff could always obtain damages even if he “does not lose a penny by reason of the violation.” Id., at 955, 92 Eng. Rep., at 137. Although Lord Holt was in the minority, the House of Lords overturned the majority decision, thus validating Lord Holt’s position, 3 Salk.17, 91 Eng. Rep. 665 (K. B. 1703), and this principle “laid down . . . by Lord Holt” was followed “in many subsequent cases,” Embrey v. Owen, 6 Exch. 353, 368, 155 Eng. Rep. 579, 585 (1851).

 

 

The dissent correctly notes that English courts differed in some respects from courts under our system, but Lord Holt’s position also prevailed in courts on this side of the Atlantic. Applying what he called Lord Holt’s “incontrovertible” reasoning, Justice Story explained that a prevailing plaintiff “is entitled to a verdict for nominal damages” whenever “no other kind of damages be proved.” Webb v. Portland Mfg. Co., 29 F. Cas. 506, 508–509 (No. 17,322) (CC Me. 1838). Because the common law recognized that “every violation imports damage,” Justice Story reasoned that “the law tolerates no farther inquiry than whether there has been the violation of a right.” Ibid. Justice Story also made clear that this logic applied to both retrospective and prospective relief. Id., at 507 (stating that nominal damages are available “wherever there is a wrong” and that, “a fortiori, this doctrine applies where there is not only a violation of a right of the plaintiff, but the act of the defendant, if continued, may become the foundation, by lapse of time, of an adverse right”).

 

 

Respondents and the dissent thus get the relationship between nominal damages and compensatory damages backwards. Nominal damages are not a consolation prize for the plaintiff who pleads, but fails to prove, compensatory damages. They are instead the damages awarded by default until the plaintiff establishes entitlement to some other form of damages, such as compensatory or statutory damages.

 

 

(…) A plaintiff must maintain a personal interest in the dispute at every stage of litigation, including when judgment is entered, Lujan v. Defenders of Wildlife, 504 U. S. 555, 561 (1992), and must do so “separately for each form of relief sought,” Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U. S. 167, 185 (2000).

 

 

Because nominal damages were available at common law in analogous circumstances, we conclude that a request for nominal damages satisfies the redressability element of standing where a plaintiff’s claim is based on a completed violation of a legal right.

 

 

 

Secondary sources: D. Laycock & R. Hasen, Modern American Remedies 636 (5th ed. 2019).

 

 

 

(U.S. Supreme Court, March 8, 2021, Uzuegbunam v. Preczewski, Docket No. 19–968, J. Thomas)

 

 

U.S. Court of Appeals for the Eleventh Circuit, Acrylicon USA, LLC v. Silikal GmbH, Docket No. 17-15737

 

Distribution Agreement

 

Licensing Agreement

 

Trade Secret

 

Contract Drafting

 

Remedies:

 

Money Recovery for Both Unjust Enrichment and Actual Damages

 

Direct and Consequential Damages

 

Lost Profits

 

Liquidated Damages

 

Nominal Damages

 

Georgia Law

 

Evidence: Videotaped Depositions

 

 

 

The agreement provided that AC-USA and its affiliate, AcryliCon International, Ltd. (“AC-International”), would be Silikal’s exclusive distributors of 1061 SW and that Silikal would not sell the resin without AcryliCon’s written permission.

 

According to AC-USA, Silikal breached the agreement by selling 1061 SW without its written permission, so it sued Silikal under common law for breach of contract (“Contract” claim) and under the Georgia Trade Secrets Act of 1990 (“GTSA”) for misappropriation of the shared trade secret (“Misappropriation” claim).

 

In 2008, AC-USA was incorporated. That same year, AC-USA entered into a licensing agreement with two affiliates of AC-International—Raliz AG and AcryliCon Distribution Est.—that gave AC-USA the right to import, market, and sell « AcryliCon Systems » in the United States, including the 1061 SW resin. AC-USA was not permitted to sell AcryliCon Systems outside of the United States without permission from AC-International.

 

AC-USA’s Contract claim is based on Paragraph 5 of the GSA Contract, titled “Confidentiality and Use of 1061 SW.” Paragraph 5 provides in full:

Silikal represents and warrants that it has not disclosed the formula for 1061 SW resin or sold or distributed 1061 SW resin, directly or indirectly, to anyone other than AcryliCon during the pendency of the Silikal/AcryliCon relationship. Silikal hereby covenants and agrees that it will preserve the secrecy of the formula for the 1061 SW resin. Silikal will not disclose or use in any way, directly or indirectly, the 1061 SW resin or formula for the 1061 SW resin. Silikal further covenants and agrees NOT to sell or distribute 1061 SW resin to anyone other than AcryliCon, or as expressly permitted in writing by AcryliCon. Within 10 days of this Settlement Agreement, Silikal shall ship by DHL to Bjorn Hegstad . . . all laboratory records and other available documents regarding the formulation and development of the 1061 SW resin.

 

(…) AC-USA presented the testimony of seven witnesses via videotaped depositions.

 

To prove a claim for misappropriation of trade secrets under the GTSA, a plaintiff must show that “(1) it had a trade secret and (2) the opposing party misappropriated the trade secret.” Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284, 1290–91 (11th Cir. 2003).

O.C.G.A. § 10–1–761(2) reads in full: (2) “Misappropriation” means:

(A) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(B) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(i) Used improper means to acquire knowledge of a trade secret;

(ii) At the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was:

(I) Derived from or through a person who had utilized improper means to acquire it;

(II) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(iii) Before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

 

(…) Silikal’s violation of the duties created by the GSA Contract gave AC-USA a claim for breach of contract, not for misappropriation of a trade secret.

 

(…) Silikal argues in its supplemental brief that the District Court erred in entering the revised judgment for AC-USA on its Contract claim because AC-USA failed to prove actual damages from Silikal’s breach. We agree, and hold that AC-USA is instead entitled only to an award of nominal damages.

 

(…) Actual damages for breach of contract, by contrast, “are given as compensation for the injury sustained as a result of the breach of a contract.” O.C.G.A. § 13–6–1 (emphasis added). The fundamental difference between restitution and actual damages, therefore, is that the former is measured by the defendant’s gain, while the latter is measured by the plaintiff’s loss. Dan B. Dobbs, Law of Remedies § 4.1(1), at 555 (2d ed. 1993).

 

A plaintiff who proves misappropriation of a trade secret under O.C.G.A. § 10–1–763 may recover money for both unjust enrichment and actual damages.

 

Actual damages under Georgia law may be direct or consequential. Direct damages “arise naturally and according to the usual course of things from the breach.” Denny v. Nutt, 375 S.E.2d 878, 879 (Ga. App. 1988) (quoting Quigley v. Jones, 334 S.E.2d 664, 665 (Ga. 1985)). Consequential damages, by contrast, arise “as the probable result of the breach.” Id. The key distinction between direct damages and consequential damages is that the former compensate for the value of the promised performance, while the latter compensate for additional losses incurred as a result of the breach. See Imaging Systems Int’l., Inc. v. Magnetic Resonance Plus, Inc., 490 S.E.2d 124, 127 (Ga. Ct. App. 1997) (noting that consequential damages “may include profits which might accrue collaterally as a result of the contract’s performance,” while direct damages “may include profits necessarily inherent in the contract”).

 

A plaintiff may not recover consequential damages for breach unless such damages are within the contemplation of the parties at the time the contract was made, are “capable of exact computation,” and “are independent of any collateral enterprise entered into in contemplation of the contract.” O.C.G.A. § 13–6–8.

 

Lost profits that are not part of the benefit of the bargain may be recovered as consequential damages. Imaging Systems Int’l., 490 S.E.2d at 127. However, “the profits of a commercial business are dependent on so many hazards and chances, that unless the anticipated profits are capable of ascertainment, and the loss of them traceable directly to the defendant’s wrongful act, they are too speculative to afford a basis for the computation of damages.” Johnson Cnty. School Dist. v. Greater Savannah Lawn Care, 629 S.E.2d 271, 273–74 (Ga. Ct. App. 2006). Accordingly, a plaintiff seeking lost profits must provide “information or data sufficient to enable the trier of fact to estimate the amount of the loss with reasonable certainty.” Bearoff v. Craton, 830 S.E.2d 362, 373 (Ga. Ct. App. 2019) (quoting Pounds v. Hosp. Auth. Of Gwinnett Cnty., 399 S.E.2d 92, 94 (Ga. Ct. App. 1990). “This ‘information or data’ must include evidence showing that the business claiming lost profits had ‘a proven track record of profitability.’” Id. (quoting EZ Green Associates v. Georgia-Pacific Corp., 770 S.E.2d 273, 277 (Ga. Ct. App. 2015)). “The plaintiff must also show the expected profit for the relevant time period” including “the business’s projected revenues, as well as its projected expenses, for that time frame.” Id. (quoting Johnson Cnty., 629 S.E.2d at 274).

 

(…) In line with this principle, we note that while Georgia law enforces provisions for liquidated damages, O.C.G.A. § 13–6–7, it only does so to the extent such provisions are not penal in nature, Broadcast Corp. of Ga. v. Subscription Television of Greater Atlanta, 338 S.E.2d 775, 776–77 (Ga. Ct. App. 1985). A provision for liquidated damages will be treated as an unenforceable penalty unless (1) the injury caused by the breach is difficult or impossible to accurately estimate; (2) the parties intended to provide for damages rather than a penalty; and (3) the stipulated sum is a reasonable pre-estimate of the probable loss resulting from the breach. Southeastern Land Fund v. Real Estate World, 227 S.E.2d 340, 343 (Ga. 1976). “Where a designated sum is inserted into a contract for the purpose of deterring one or both of the parties from breaching it, it is penalty.” Broadcast Corp. of Ga., 338 S.E.2d at 777 (quoting Florence Wagon Works v. Salmon, 68 S.E. 866, 866 (Ga. Ct. App. 1910)).

 

If a plaintiff proves a breach of contract but fails to prove actual damages, the plaintiff “may recover nominal damages sufficient to cover the costs of bringing the action.” O.C.G.A. § 13–6–6.

 

Georgia law permits recovery of attorney’s fees “where authorized by some statutory provision or by contract.” Smith v. Baptiste, 694 S.E.2d 83, 87 (Ga. 2010).

An award of nominal damages is sufficient to make the plaintiff a prevailing party. King v. Brock, 646 S.E.2d 206, 207 (Ga. 2007).

 

 

(U.S. Court of Appeals for the Eleventh Circuit, January 26, 2021, Acrylicon USA, LLC v. Silikal GmbH, Docket No. 17-15737, Publish)