The Measure of Recovery Under Rule 10b-5: A Restitution Alternative to Tort Damages

The thesis of the Article is that much of the confusion about rule 10b-5 remedies turns on the courts' failure to recognize adequately that the rule derives from two separate and independent sources at common law. Rule 10b-5 draws primarily on tort concepts that focus on harm to the plaintiff and limit recovery by principles of legal causation. In addition, the rule, like common-law fraud, traces its lineage to principles based on unjust enrichment. This second source focuses on the defendant's gain and requires the defendant to return all benefit received through the fraudulent transaction, even if that gain exceeds plaintiff's loss.Recovery under rule 10b-5 sometimes is supported by tort principles, sometimes supported by unjust enrichment principles, and sometimes by both ...

This Article traces the unjust enrichment heritage of rule 10b-5 and discusses circumstances in which courts should apply those principles. Part II identifies the sources that courts utilize to deter- mine the defendant's obligation in cases of securities fraud. Part III of this Article considers the available measures of recovery in 10b-5 actions based on tort principles. Part IV discusses remedies based on unjust enrichment/restitution.

Finally, this Article in part V outlines the limitations on the availability of the unjust enrichment remedy.