© Springer International Publishing Switzerland 2015Ewoud Hondius and André Janssen (eds.)Disgorgement of ProfitsIus Comparatum – Global Studies in Comparative Law810.1007/978-3-319-18759-4_24
24. Disgorgement of Profits in Brazilian Law
University of State of Rio de Janeiro UERJ, Rio de Janeiro, Brazil
Aline de Miranda Valverde Terra
Brazilian law offers no generic provision to permit disgorging ill-gotten gains from an agent’s wealth. Some doctrines actually do provide this, either directly or indirectly, for instance in the case of unjust enrichment, especially when viewed as profit from intervention. Likewise, business administration on one hand enables any profit obtained from such administration to be retrieved from the agent’s wealth, since this benefit belongs to the owner of the business; on the other hand, this avoids unjust enrichment on the part of the owner of the business, obliging him to compensate the manager for any necessary or useful expenses incurred by the latter. Although the structure and function of civil liability are not compatible with disgorgement of profits, one can see a (non-technical) tendency in jurisprudence to use the doctrine for this purpose, especially when the profit obtained by means of the agent’s damaging conduct is greater than that suffered by the victim. Indeed, a detailed analysis of Brazilian law shows that since certain concrete situations are not provided for, there are occasions when illicit activity unfortunately renders benefits for the agent.
KeywordsDamagesDisgorgement of profitsUnjust enrichment
is a Professor at the Pontifical Catholic University (PUC-Rio), Brazil.
This article sets out to analyze disgorgement of profits in Brazilian law, based on the questions that appear in the text written by Professors Ewoud Hondius and André Janssen for the 19th Congress of the International Academy of Comparative Law held in Vienna. First of all emphasis should be made on the non-existence, in Brazilian law, of a single systematic discipline on the theme, which in a way contributes to the scant academic production on the matter.
This being so, the focus will be on the doctrines that can fulfill the function of reclaiming ill-gotten gains from an agent’s wealth, as well as those which on the other hand are not meant for that purpose; the paper will also ascertain the existence or not of specific solutions to some particular situations.
The Incompatibility of the Structure and Function of Civil Responsibility with Disgorgement of Profits
Brazilian law includes no autonomous sort of damage designated disgorgement damages. This is so because in the sphere of civil responsibility only two types of damage1 are recognized, namely, moral damage, understood as injury to a person’s dignity,2 which embraces in one single category all non-property damages; and property damage, which is subdivided into pecuniary loss, related to actual decrease of assets or increase of liability, and lost profits, defined as the non-increase of assets or the non-decrease of liability.3 Therefore, tertium non datur: either the injury affects the victim’s property and incurs property damage, or it is a case of injury to a person’s dignity, which causes moral damage.4
Besides not configuring as an autonomous category of damage, disgorgement of profits also does not fit into the concept of damage adopted by Brazil’s juridical system. Damage is not confused with anti-juridicity, with infringement of some right or norm; damage is injury to juridically protected interest.5 Property damage corresponds to actual decrease of the victim’s property or to non-increase of same caused by the wrongdoer; consideration of any other parameter requires express legislative authorization, as in article 402 of the Civil Code. The anti-juridicity of the conduct or the wrongdoer’s obtaining profit as a result of such conduct does not impact on extending the harm to the victim’s wealth, and consequently should not be used as a parameter to define the compensation. Furthermore, the function of compensation for property damage is to return the victim’s property to the state in which it would be had there been no injury, in other words to recompose his patrimony. So, it is not the function of this compensation to disgorge from the wrongdoer’s wealth any benefit that has been obtained illegitimately through damaging conduct.
Compensation for moral damage, in turn, has the primary function of compensating the victim for damage endured, serving as a palliative for non-property harm, which is why the parameters to be used to qualify it should be restricted to analyzing the damage undergone, as well as the effects that the damage causes to the victim, which can vary immensely depending on his or her personal circumstances.6
Thus, whether the damage is property-related or moral, the criteria for defining it should always converge on the damage rather than on the circumstances of the offending party, such as the gains gotten through damaging conduct – except when expressly permitted by law in this sense.7 Civil responsibility has been attributed the function of protecting the victim by means of full reparation of the damage suffered, the exclusive measure of which is the extent of the damage in the precise terms of article 944 of the Civil Code. Any analysis of the conduct of the offending party8 and/or the profits obtained, for the purpose of quantifying the damage, would attribute to civil responsibility a moralizing and punitive function that is incompatible with the national juridical system.9 Attributing any function other than of a reparatory/compensatory nature calls for an express legal provision, which is non-existent in positive law.10
One can therefore see that civil responsibility does not solve the problem of the profits gained by means of conduct that damages rights. Doctrine, geared as it is toward protecting the victim, allows the offender to keep in his property at least part of the benefits obtained whenever the damage is less than the profit pocketed.
Nonetheless, in opposition to the more technical orientation concerning configuration of civil responsibility, one notes in both doctrine11 and jurisprudence a tendency to lend punitive characteristics to the norm, especially as concerns moral damage, compensation for which would serve not only to compensate the victim for the injury suffered but also to punish the wrongdoer,12 as well as preventing and discouraging similar behavior.13 Such functions are quite often incorporated to moral damage transversally by adopting quantifying criteria unrelated to the damage undergone, such as ill-gotten gains, a criterion which ends up indirectly helping to disgorge the illegally acquired benefits from the wrongdoer’s wealth.
Unjust Enrichment: Profit Through Intervention as the Doctrine Functionally Equivalent to Disgorgement of Profits
If, technically speaking, civil responsibility is not concerned with disgorging ill-gotten gains from the wrongdoer’s property, except where a legal provision expresses as much, unjust enrichment appears to be the most appropriate doctrine to fulfill this function. It deserves noting that only with the Civil Code of 2002 did unjust enrichment become expressly provided as an autonomous source of obligations, as a general clause in article 884 of the Civil Code.
The doctrine differs from civil responsibility not only in the diversity of situations that allow applying one or another discipline but mainly because of the function that each one fulfills. Civil responsibility aims to repair the damage suffered by the victim through an illicit act14 or some risk activity.15 As to the cases of unjust enrichment, these belong to the sphere of reproachability by the principles of the system, and their chief function is to disgorge the enrichment from the wealth of the enriched.16 To characterize unjust enrichment, therefore, it matters little whether or not there was any change to the wealth of the person whose juridical status served to enrich the agent; likewise, it is of no importance if damage occurred or not. The relevant question to configure unjust enrichment is only the increase in the wealth of the enriched individual, in other words, his actual enrichment.
Some requisites are necessary to configure unjust enrichment. In the first place, enrichment is necessary, that is, increase in the wealth of the subject obliged to restitute. There are two ways to evaluate enrichment: actual enrichment, related to the object of the enrichment and consisting of the objective quantification of the value in use of the good or right, or of the acquired advantage; and property enrichment, related to the enriched subject and involving the difference between the real and the hypothetical situation, the latter being considered as the circumstances of the agent if the fact that generated the enrichment had not happened. The parameter used for the sake of restitution is patrimonial enrichment, as is made clear further ahead.17
Enrichment can come about as a result of attribution of wealth18 or by exploitation of goods, work or the rights of others.19 Nevertheless, it is the second sort of enrichment, by means of exploitation of goods, work or alien rights, designated as enrichment by intervention, or gains by intervention that features as functionally equivalent to disgorgement of profits. Intervention gains, then, consist of increase in wealth obtained by a party who without any authorization interferes in another’s subjective juridical situation,20 and can derive from either increased assets, decreased liability or saving a certain expense.21
The second requisite necessary to configure unjust enrichment and consequently profit by intervention is for enrichment to occur at another party’s cost. This requisite is analyzed based on the theory of attribution of the content of legal destination of goods, according to which everything that such goods are capable of yielding or producing belongs in principle to the respective owner.22 The person who by intervening in another’s juridical goods obtains advantage in wealth does so at the cost of the holder of that particular right, even if the latter is unwilling to practice the acts from which the advantage derives.
Article 885 in turn requires that there be no justifying cause of enrichment, that is to say, no juridical, legal or conventional title to justify increase in wealth. Lastly, there is also the requirement of subsidiarity of unjust enrichment, which means that the juridical system must contain no other pretension at the disposal of the holder of the right that enables him to obtain the same or a more favorable result than that achieved by means of the pretended unjust enrichment, exercised by an actio in rem verso. In cases of profit through intervention, where the economic benefits gained by the intervening party are greater than the damage caused, the civil-responsibility action cannot be considered as ‘another means’ capable of hindering the exercise of actio in rem verso. After all, with the civil responsibility action the holder of the right will only manage to obtain compensation for damages undergone, and at this juncture not all the profits obtained by the intervening party, thereby allowing the latter to retain a portion of the gains.23
In enrichment by attribution of wealth, the juridical system determines the return of the ill-gotten gains of the enriched party’s property, either by restituting what he has received unduly or by returning to the owner the value of the improvements made to his property.24 With regard to enrichment by intervention, the profit derived there from must be delivered to the holder of the right in the form of restitution. The use of the word restitution does not mean that the interventor has to return something that already existed in the property of the holder of the right prior to the intervention. Restitution refers to the wealth of the interventor, which should therefore be restituted to the status quo ante. 25
Disgorgement Damages in Particular Branches of Law
Since Brazilian law includes no systematic discipline to guarantee full exclusion of the ill-gotten gains of the agent’s wealth, it will be shown below whether or not the juridical system offers any specific solution to certain situations.
Infringements of Personality Rights
Infringement of personality rights sometimes results in considerable enrichment of the infringing party. Generally, civil responsibility offers a satisfactory solution to compensation for damages caused to the victim. Nevertheless, when such conduct causes at the same time injury to personality rights and consequent enrichment of the wrongdoer greater than the damage caused, the doctrine proves inefficient. This is one of the reasons why, as stated earlier, part of the doctrine and jurisprudence attributes a punitive character to moral damage, even without any express legal provision, which eventually allows disgorgement of ill-gotten gains from the wrongdoer’s wealth.
In this sense, the sentence passed by Judge Murillo Fábregas in March 1995 by the 5th Civil Court of the Rio de Janeiro Court of Justice, in respect to Civil Appeal 6.913, is paradigmatic. The discussion involved infringement of the publicity rights of football players on the part of the Brazilian Football Confederation, which allegedly did not obtain the necessary authorization to print and sell albums and photographs. The Court calculated the compensation for the footballers, as moral damage, based on the percentage of the profit obtained by the infringing party.26 Such a decision, besides being incompatible with the current configuration of civil responsibility, is incapable of promoting the complete disgorgement of the wrongdoer’s gains.
Moreover, whenever there is an infringement of publicity rights, it is quite common for the communications media to be condemned to pay, by way of lost profits, the amount that the holder of the personality rights would receive if the right had ceased. This was precisely what happened in the Civil Appeal case number 2009.001.08023, where the claimant, a photography model, sought compensation for material and moral damages on account of the commercial use of her image beyond the limits authorized by contract. The Court condemned the defending company to pay compensation for material damages – lost profits – using the parameter of the value originally agreed for exposure of photographs. Decisions such as this, however, end up legitimizing expropriation of wealth at market price, in other words, they eventually call for enforcement of a contract,27 besides not properly disgorging the gains accumulated by the agent.
It is, then, understood that the proper way to promote disgorgement of gains in the wrongdoer’s wealth in the situations described above is to consider them as unjust enrichment as a result of exploitation of others’ rights. It is actually a matter of enrichment by intervention. The response of restitutory law is precisely that: obliging the intervening agent to return the profits obtained whenever these are greater than the damage caused to the holder of the right.
Infringement of Trans-Individual Rights
Trans-individual rights are classified and defined in article 81 of the Consumer Defense Code28: diffuse rights are of an indivisible nature, the holders being indeterminate people linked by actual circumstances; collective rights are indivisible trans-individual rights held by a group, category or class of people linked to one another or with the opposite party by a basic juridical relation; and homogeneous individual rights