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106 Va. L. Rev. 1569 (2020)


The law often permits substantial harms without liability. Once liability is triggered, compensatory damages require a defendant to pay for the harm caused by his wrongful conduct. But there is significant theoretical and doctrinal ambiguity in how compensatory damages should account for the harm that the defendant could have caused without incurring liability in the first place. These harms are “privileged,” in the sense that the defendant would have been free to impose them in a counterfactual universe in which he complied with the substantive law. Having transgressed that law, he is now responsible for damages, but the question is whether these damages should be reduced to account for the harms he could have imposed without owing damages at all.

The treatment of privileged harms is fundamental to the calculation of compensatory damages. Nonetheless, it has received little scholarly attention, and been the subject of conflicting decisions in the courts. In some areas of law, damages are routinely reduced to account for privileged harms; in others, this credit is given only sporadically, or not at all. Critically, there is not yet any sound theoretical explanation for why the rule ought to be different in one set of cases compared to another.

This Article first explores the effects of crediting or not crediting privileged harm. Based on this analysis, it then positions the treatment of privileged harm within the existing literature on remedial design. Finally, it proposes several general principles that a court or policymaker might follow in determining whether to reduce damages to account for privileged harms.

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