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Damages For Emotional Distress in Fraud Litigation - Dignitary Tor
Damages For Emotional Distress in Fraud Litigation - Dignitary Tor
Volume 42 Article 1
Issue 1 Issue 1 - January 1989
1-1989
Part of the Law and Society Commons, and the Torts Commons
Recommended Citation
Andrew L. Merrit, Damages for Emotional Distress in Fraud Litigation: Dignitary Torts in a Commercial
Society, 42 Vanderbilt Law Review 1 (1989)
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol42/iss1/1
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VANDERBILT LAW REVIEW
VOLUME 42 JANUARY 1989 NUMBER 1
I. INTRODUCTION ............................................. 2
II. THE CONFLICT IN COMMON-LAW PRECEDENT: A "BLACK-
LETTER" RULE IN INVISIBLE INK ............................ 3
A. Two Conflicting Rules ............................ 3
B. Four Qualified Approaches ....................... 7
1. Magnitude of Emotional Distress ............. 7
2. Severity of Financial Injury .................. 9
3. Distinction Between Business Fraud and Non-
business Fraud .............................. 10
4. Emotional Distress as a Component of Punitive
Damage Awards ............................. 12
III. ASSESSING THE SIGNIFICANCE OF A SPECIAL RULE FOR FRAUD:
THE RELATION OF FRAUD TO INDEPENDENT TORT ACTIONS
FOR INFLICTION OF EMOTIONAL DISTRESS ................... 15
A. Intentional Infliction of Emotional Distress........ 15
B. Negligent Infliction of Emotional Distress ......... 21
IV. SUPPLYING THE MISSING POLICY ANALYSIS: TOWARD A CON-
CEPTION OF FRAUD AS A DIGNITARY TORT .................. 23
A. Compensation for Emotional Distress in Fraud Cases 23
* Assistant Professor of Law, University of linois College of Law. B.A., Hampshire College,
1977; J.D., Columbia University, 1980. I am grateful to my colleagues Deborah Jones Merritt and
Elaine W. Shoben for their comments. I also thank my research assistants, Leonard Rumery and
Lynn Coyle.
VANDERBILT LAW REVIEW [Vol. 42:1
I. INTRODUCTION
One of the most dynamic developments in modern tort law has
been the increased focus on damages for emotional distress. During the
past few decades courts have fashioned several new tort theories to al-
low recovery of emotional distress damages as independent causes of
action.1 At the same time, lobbyists and legislators have attacked these
damages for contributing to "runaway" jury verdicts. As a result of
these attacks, a growing number of states are enacting statutes that
limit recovery of emotional distress damages in traditional tort areas
such as medical malpractice.2 Thus, damages for emotional distress are
at a crossroads between broad trends of expansion and contraction.
One largely unexplored battleground for these conflicting trends is
the awarding of emotional distress damages in commercial tort cases,
particularly in cases of fraud and deceit. No judicial consensus exists on
the propriety of awarding damages for emotional distress in fraud cases.
Many jurisdictions limit damages for fraud to pecuniary injuries; this
view. has had the most influence on legal commentators and treatise
writers.3 Nevertheless, a substantial group of jurisdictions has awarded
emotional distress damages in fraud cases. 4 Few of the decisions on ei-
ther side of this issue have examined closely other jurisdictions' treat-
ment of the issue, and most of these decisions have not analyzed the
policies favoring or opposing the award of emotional distress damages
in fraud cases. Perhaps this lack of detailed consideration in the case
law has been the greatest hindrance to the development of a judicial
consensus.
5. Compare Smith v. Bolles, 132 U.S. 125 (1889) (adopting an out-of-pocket measure) and
Beardmore v. T.D. Burgess Co., 245 Md. 387, 226 A.2d 329 (1967) with Kinsey v. Scott, 124 Ill.
App. 3d 329, 341, 463 N.E.2d 1359, 1367 (1984) (using a benefit of the bargain standard).
6. RESTATEMENT (SECOND) OF TORTS § 525 (1977) [hereinafter RESTATEMENT].
VANDERBILT LAW REVIEW [Vol. 42:1
7. D. DOBBS, HANDBOOK ON THE LAW OF REMEDIES § 9.2, at 602 (1973). For a contrasting
view, see R. DUNN, RECOVERY OF DAMAGES FOR FRAUD 147-52 (1988) (recognizing the conflict in the
case law and urging that recovery for emotional distress is appropriate).
8. 21 Ohio C.C. 53 (1900).
9. Id. at 54 (syllabus by the court).
10. Schusler v. Clark, 50 Pa. Super. 459, 466 (1912).
11. Jurisdictions that specifically have addressed the award of emotional distress damages
are divided almost evenly between those denying recovery and those supporting recovery. For pre-
cedent denying recovery, see Moore v. Slonim, 426 F. Supp. 524, 527 (D. Conn.) (applying Con-
necticut law), aff'd mem., 562 F.2d 38 (2d Cir. 1977); Kantor v. Comet Press Books Corp., 187 F.
Supp. 321, 323 (S.D.N.Y. 1960) (applying New York law); Umphrey v. Sprinkel, 106 Idaho 700,
711-12, 682 P.2d 1247, 1258-59 (1983); Cornell v. Wunschel, 408 N.W.2d 369, 382 (Iowa 1987);
Harsche v. Czyz, 157 Neb. 699, 710-11, 61 N.W.2d 265, 272 (1953); Carrigg v. Blue, 283 S.C. 494,
497 n.1, 323 S.E.2d 787, 789 n.1 (Ct. App. 1984). For precedent permitting recovery, see Holcombe
v. Whitaker, 294 Ala. 430, 434, 318 So. 2d 289, 293 (1975); Rosener v. Sears, Roebuck & Co., 110
Cal. App. 3d 740, 755, 168 Cal. Rptr. 237, 246 (1980), appeal dismissed, 450 U.S. 1051 (1981);
Trimble v. City of Denver, 697 P.2d 716, 730 (Colo. 1985); Food Fair, Inc. v. Anderson, 382 So. 2d
150, 154-55 (Fla. Dist. Ct. App. 1980); Captain & Co. v. Stenberg, 505 N.E.2d 88, 100 (Ind. Ct.
App. 1987); Crowley v. Global Realty, Inc., 124 N.H. 814, 818-19, 474 A.2d 1056, 1058 (1984);
McRae v. Bolstad, 32 Wash. App. 173, 178-79, 646 P.2d 771, 775-76 (1982), aff'd, 101 Wash. 2d 161,
676 P.2d 496 (1984); cf. Emmons v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 532 F. Supp. 480,
485 (S.D. Ohio 1982) (allowing damages for emotional distress under Ohio law, at least for "mali-
cious" fraud). Two jurisdictions contain conflicting precedents. See cases cited infra note 15. The
status of the law in some jurisdictions is difficult to classify. One court, for example, has stated
that Missouri law would deny emotional distress damages in fraud cases, but has qualified that
opinion as being inapplicable to tortfeasors who acted "willfully"-an exception that would seem
to include most cases of fraud. Walsh v. Ingersoll-Rand Co., 656 F.2d 367, 371 (8th Cir. 1981).
12. See, e.g., Posner v. Davis, 76 Ill. App. 3d 638, 395 N.E.2d 133 (1979) (assuming that
19891 DIGNITARY TORTS
plaintiffs in a fraudulent property sale case should have introduced evidence of the monetary value
of their efforts to clean up a water-logged basement); Lobe Enters. v. Dotsen, 360 N.W.2d 371, 373
(Minn. Ct. App. 1985); Dugan v. Jones, 615 P.2d 1239 (Utah 1980) (stating that a defrauded party
may recover the benefit of his bargain plus any additional damages that are a natural and proxi-
mate consequence of the defendant's misrepresentations).
13. See supra note 11.
14. An "old" rule and a "new" rule on this issue apparently do not exist. Courts addressing
the issue within the past several years have added support to both lines of precedent. See supra
note 11.
15. Compare Ellis v. Crockett, 51 Haw. 45, 52, 451 P.2d 814, 820 (1969) (denying recovery)
and Hudson & Hudson Realtors v. Savage, 545 S.W.2d 863, 868 (Tex. Ct. App. 1977) (denying
recovery), overruled by United Plastics, Co. v. Dyes, 588 S.W.2d 857 (Tex. Civ. App. 1979) with
Knox v. Anderson, 159 F. Supp. 795, 806 (D. Haw.) (allowing recovery), aff'd, 297 F.2d 702, 729-31
(9th Cir. 1961), cert. denied, 370 U.S. 915 (1962) and Kneip v. Unitedbank-Victoria, 734 S.W.2d
130, 136 (Tex. Ct. App. 1987) (allowing recovery). California courts generally award emotional dis-
tress damages in fraud actions, see, e.g., Jahn v. Brickey, 168 Cal. App. 3d 399, 214 Cal. Rptr. 119
(1985); and Rosener, 110 Cal. App. 3d at 758, 168 Cal. Rptr. at 246, but deny these damages to
plaintiffs suing for fraud under a particular statutory section governing fraud in the purchase, sale,
or exchange of property, see Channell v. Anthony, 58 Cal. App. 3d 290, 315, 129 Cal. Rptr. 704, 720
(1976) (interpreting CAL. Civ. CODE § 3343 (1971)); and Sierra National Bank v. Brown, 18 Cal.
App. 3d 98, 103, 95 Cal. Rptr. 742, 745 (1971).
16. Savage, 545 S.W.2d at 868 (citing decisions denying recovery without acknowledging the
existence of any precedent supporting recovery).
17. Aaron v. Hampton Motors, Inc., 240 S.C. 26, 39, 124 S.E.2d 585, 591 (1962). It appears
that on some occasions courts' denial of recovery is shaped in part by counsel's failure to cite the
case law that has allowed recovery. See In re Romero, 535 F.2d 618, 623 (10th Cir. 1976) (rejecting
the litigant's contention that a bankruptcy court properly allowed consequential damages for in-
convenience and mental suffering; noting only that "[tihis claim is presented without cogent
authority").
18. E.g., Knox, 159 F. Supp. at 806 (stating that "[tihe Court further awards $2,500 for
mental suffering").
VANDERBILT LAW REVIEW [Vol. 42:1
26. The general concept of mental distress is very broad. It can encompass "nervousness,
grief, anxiety, worry, shock, humiliation and indignity as well as physical pain." Crisci v. Security
Ins. Co., 66 Cal. 2d 425, 433, 426 P.2d 173, 178, 58 Cal. Rptr. 13, 18 (1967).
27. Haggerty v. March, 480 So. 2d 1064, 1068 (La. Ct. App. 1985) (stating that "[d]amages
like any other fact should be proven by a preponderance of the evidence and to constitute a pre-
ponderance, such evidence must show the loss is more probable than not"). This court noted that
"[tihe plaintiff made no effort to prove mental anguish or any other specific loss." Id. at 1067; see
also Rosener, 110 Cal. App. 3d at 755, 168 Cal. Rptr. at 246 (noting that the plaintiff's evidence of
mental suffering was "considerable, and convincing").
28. See, e.g., Malandris v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 703 F.2d 1152, 1157
& n.1 (10th Cir. 1981) (upholding one million dollar verdict apparently attributable to emotional
distress), cert. denied, 464 U.S. 824 (1983); Lewis v. Upton, 151 Cal. App. 3d 232, 237, 198 Cal.
Rptr. 494, 497 (1984) (holding that a jury could award a total of $13,000 in compensatory damages
to a plaintiff who proved only $11,119.20 in pecuniary losses because the plaintiff suffered great
emotional distress); Trimble v. City of Denver, 697 P.2d 716, 730 (Colo. 1985) (upholding $35,000
verdict); Kneip, 734 S.W.2d at 134 (valuing emotional distress at $40,000 for each of two plaintiffs
and $30,000 for a third plaintiff).
VANDERBILT LAW REVIEW [Vol. 42:1
29. McGregor v. Mommer, 714 P.2d 536, 545 (Mont. 1986); Roberts v. U.S. Home Corp., 694
S.W.2d 129, 136 (Tex. Ct. App. 1985).
30. Roberts, 694 S.W.2d at 136 (quoting Trevino v. Southwestern Bell Tel. Co., 582 S.W.2d
582, 584 (Tex. Ct. App. 1979) (finding emotional distress compensable in an action for invasion of
privacy)). In Trevino, the court denied emotional distress damages to a plaintiff who introduced a
third person's testimony that the plaintiff was "very upset" when the telephone company entered
his store and took his telephones. The Trevino court contrasted the plaintiff's evidence with the
evidence in another invasion of privacy case that properly awarded emotional distress damages. In
the comparison case the plaintiffs had "testified at length as to their feelings of humiliation, stom-
ach aches, loss of sleep, nervousness and embarrassment," all of which made one plaintiff feel
"'like the size of a red ant,'" and troubled the plaintiff's wife to the point that she "could not
sleep at night." Trevino, 582 S.W.2d at 584. Presumably the Roberts case would have allowed
emotional distress damages in fraud cases with this type of evidence.
31. Roberts, 694 S.W.2d at 133 (recounting the trial court's instruction to the jury).
32. McGregor, 714 P.2d at 545. This court overturned emotional distress damages in a case
raising both fraud and contract claims by invoking standards from a false imprisonment case that
limited such damages to tortious conduct which "'results in a substantial invasion of a legally
protected interest and causes a significant impact upon the person of plaintiff.'" Id. (quoting
Johnson v. Supersave Markets, Inc., 211 Mont. 465, 473, 686 P.2d 209, 213 (1984) (emphasis in
original)). In McGregor the court deemed the plaintiff's testimony that his financial problems
caused by the fraud "bothered him a lot" and "'at times it would show up at home'" insufficient
to support recovery. Id.
In part, the McGregor court was worried that the trial court's instruction would have permit-
ted the plaintiff to recover emotional distress damages "even if [he] recovered only on [his] con-
tract claim." Id. at 544. The McGregor court's limit appears equally applicable, however, to the
plaintiff's claims of fraud, because the court drew these standards from the tort context of false
imprisonment. For a later case applying the McGregor court's "significant impact" requirement to
a tort claim of bad faith, see Noonan v. First Bank Butte, 740 P.2d 631, 635 (Mont. 1987) (require-
ment applied over the objections of a dissenting judge).
33. Roberts, 694 S.W.2d at 136.
34. Id. Any such standard is inherently imprecise in its application. Thus, a plaintiff appar-
ently cannot recover if he "feels like scum," id., but can recover if he feels "'like the size of a red
1989] DIGNITARY TORTS
ant,'" at least if he testifies to symptoms such as loss of sleep and stomach aches, see supra note
30. The difficulty of applying this approach is indicated by the jury's reaction to the plaintiff's
testimony in Roberts. In that fraud case the jury agreed to assign a value of $10,000 to mental
distress, but the court regarded the mental distress as too insubstantial to support any recovery.
Roberts, 694 S.W.2d at 136. Similarly, in McGregor a jury awarded $5,000 for mental anguish, but
the court regarded the mental anguish as too insubstantial to support any recovery under a re-
quirement of "significant" impact on the plaintiff. McGregor, 714 P.2d at 544-55.
35. See Walker v. KFC Corp., 515 F. Supp. 612, 619 (S.D. Cal. 1981) (trial court instructed
jury using Book of Approved Jury Instructions, No. 12.85, quoted infra note 36), aff'd in part,
rev'd in part on other grounds, 728 F.2d 1215 (9th Cir. 1984). Dictum in Montana precedent might
support a similar approach. See McGregor, 714 P.2d at 545; see also supra note 32. Although the
McGregor court's opinion focused on the plaintiff's failure to establish a "significant" impact, it is
possible that in other cases the court might invoke the second branch of this requirement and
require a "substantial" invasion.
36. A standard California jury instruction generalizes this rule in a manner that includes
fraud cases and extends to other cases of financial injury as well:
Emotional Distress Resulting From FinancialInjury
A plaintiff who has suffered a substantial financial injury which was [proximately] [le-
gally] caused by a defendant's intentional or reckless wrongful conduct, is entitled to recover
damages from that defendant for any mental or emotional distress [proximately] [legally]
resulting from such financial injury.
2 COMMITTEE ON STANDARD JURY INSTRUCTIONS OF THE SUPER. CT. OF Los ANGELES COUNTY, CALI-
No. 12.85 (C. Loring 7th
FORNIA, JURY INSTRUCTIONS: CIVIL, BOOK OF APPROVED JURY INSTRUCTIONS,
ed. 1986) [hereinafter BAJI].
37. See Crisci v. Security Ins. Co., 66 Cal. 2d 425, 434, 426 P.2d 173, 179, 58 Cal. Rptr. 13, 19
(1967) (en banc) (suit against insurer for bad faith refusal to settle suit within policy limits);
Jarchow v. Transamerica Title Ins. Co., 48 Cal. App. 3d 917, 937, 122 Cal. Rptr. 470, 483-84 (1975)
(suit by buyers of real estate against title insurance company for failing to discover, disclose, or
eliminate easement). The Jarchow court purported to apply this standard to cases of mere negli-
gence, although Jarchow also involved claims of bad faith. Jarchow has been criticized for purport-
ing to expand the standard's coverage to merely negligent infliction of emotional distress without
regard to bad faith. See Quezada v. Hart, 67 Cal. App. 3d 754, 762, 136 Cal. Rptr. 815, 820 (1977).
38. Crisci, 66 Cal. 2d at 434, 426 P.2d at 179, 58 Cal. Rptr. at 19.
VANDERBILT LAW REVIEW [Vol. 42:1
woman to enter into a void marriage.48 Courts also have awarded emo-
tional distress damages to home buyers suing deceptive real estate sell-
ers49 and home owners suing deceptive contractors;50 perhaps these
suits also contain a special personal element, even though they certainly
are economic transactions. Correspondingly, some courts have denied
emotional distress damages in contexts that seem more clearly business
related. For example, courts have denied recovery for emotional distress
to a service station lessee who sued the lessor for misrepresentations
that induced the lessee to enter a franchise agreement51 and to an au-
thor who was defrauded into entering a publishing contract.2
Although these cases could support a generalized distinction be-
tween business frauds and personal frauds, this distinction does not
serve as a very reliable guide to all judicial opinions. Other courts have
denied recovery in contexts that seem distinctly personal. For example,
one court refused to recompense the emotional suffering of a man who
claimed that his paramour defrauded him in order to obtain money "by
promising to marry him when in fact she had no intention of doing
SO. '')53Many years ago a California court refused to grant emotional dis-
tress damages to a woman who had sold her property to a conniving
developer only because the developer falsely claimed to share her dis-
tinctive religious beliefs about communicating with the spirits of the
dead and promised to devote the property to the establishment of a
home for welcoming people of this faith. Other courts have granted
recovery for emotional distress damages in cases that seem distinctly
commercial. These cases include a fast food restaurant franchisee's re-
48. Holcombe v. Whitaker, 294 Ala. 430, 318 So. 2d 289 (1975).
49. E.g., Godfrey v. Steinpress, 128 Cal. App. 3d 154, 180 Cal. Rptr. 95 (1982).
50. E.g., Rosener v. Sears, Roebuck & Co., 110 Cal. App. 3d 740, 168 Cal. Rptr. 237 (1980),
appeal dismissed, 450 U.S. 1051 (1981).
51. Carrigg v. Blue, 283 S.C. 494, 323 S.E.2d 787 (Ct. App. 1984). Similarly, Cornell denied
mental distress damages to a couple allegedly defrauded into purchasing a motel based on mislead-
ing concealment of facts regarding the profitability of the motel complex. The court commented
that "[d]amages for mental distress are not ordinarily contemplated in a business transaction."
Cornell, 408 N.W.2d at 382.
52. Kantor v. Comet Press Books Corp., 187 F. Supp. 321 (S.D.N.Y. 1960). The court stated
that "damages are not recoverable in this type of action for loss of profits, physical pain and
mental anguish or punitive damages." Id. at 323 (citing Toho Bussan Kaisha, Ltd. v. American
President Lines, Ltd., 265 F.2d 418 (2d Cir. 1959)).
53. Harsche v. Czyz, 157 Neb. 699, 700, 61 N.W.2d 265, 267 (1953). In Harsche the court
intimated that it would have allowed recovery if the plaintiff had claimed breach of a promise to
marry. The court, however, would not permit recovery on a fraud claim. Id. at 710-11, 61 N.W.2d
at 272. The case thus reaches an opposite conclusion on facts notably similar to Holcombe. See
supra note 48 and accompanying text.
54. Newman v. Smith, 77 Cal. 22, 18 P. 791 (1888). The court permitted rescission of the
contract based on fraud, but refused to grant damages for "'anxiety, worry, and harassment.'" Id.
at 27, 18 P. at 793.
VANDERBILT LAW REVIEW [Vol. 42:1
55. Walker v. KFC Corp., 515 F. Supp. 612 (S.D. Cal. 1981), aff'd in part, rev'd in part on
other grounds, 728 F.2d 1215 (9th Cir. 1984).
56. Jahn v. Brickey, 168 Cal. App. 3d 399, 214 Cal. Rptr. 119 (1985).
57. Clare v. State, 456 So. 2d 355 (Ala. Crim. App. 1983) (criminal case upholding an order of
restitution by relying on the damage measure that would be applied in a civil action), aff'd, 456 So.
2d 357 (Ala. 1984).
58. This Article later considers whether the distinction between business and nonbusiness
fraud offers a sensible approach that, as a matter of policy, ought to guide the courts in deciding
damage issues in fraud cases. See infra notes 167-74 and accompanying text.
59. See, e.g., Moore Ford Co. v. Smith, 270 Ark. 340, 604 S.W.2d 943 (1980); Kleinfelter v.
Northwest Builders & Developers, Inc., 44 N.C. App. 561, 261 S.E.2d 498 (1980); Barnes v. McKin-
ney, 589 P.2d 698 (Okla. Ct. App. 1978); Green v. Uncle Don's Mobile City, 279 Or. 425, 568 P.2d
1375 (1977); Jeffers v. Nysse, 98 Wis. 2d 543, 297 N.W.2d 495 (1980). Massachusetts, Nebraska,
and Washington courts do not award punitive damages. See 1 J. GHIARDI & J. KIRCHER, PUNITVE
DAMAGES LAW AND PRACTICE §§ 4.07-.12 (1985).
60. See, e.g., Harris v. Wagshal, 343 A.2d 283, 288 n.13 (D.C. 1975); Newton v. Standard Fire
Ins. Co., 291 N.C. 105, 112, 229 S.E.2d 297, 301 (1976) (explaining that "fraud is, itself, one of the
elements of aggravation which will permit punitive damages to be awarded").
61. See, e.g., Randell v. Banzhoff, 375 So. 2d 445, 448 (Ala. 1979) (holding that fraud must be
"gross"), cert. denied, 444 U.S. 1081 (1980); Holcomb v. Hoffschneider, 297 N.W.2d 210, 215 (Iowa
1980) (denying recovery for "ordinary" fraud); Walker v. Sheldon, 10 N.Y.2d 401, 179 N.E.2d 497,
223 N.Y.S.2d 488 (1961). The practical effect of such vague limits is unclear; most cases of inten-
tional fraud arguably establish the reckless indifference to the rights of others or implied malice to
which some of the restrictive cases refer. Cf. Ray Dodge, Inc. v. Moore, 251 Ark. 1036, 1042, 479
S.W.2d 518, 522 (1972) (finding that "malice" to support punitive damages does not require per-
sonal hatred; it includes intentional wrongdoing without just cause or excuse).
1989] DIGNITARY TORTS
62. Willett v. Ford Motor Co., 400 Mich. 65, 71, 253 N.W.2d 111, 113 (1977).
63. Id.; see also Loeblich v. Gamier, 113 So. 2d 95, 103 (La. Ct. App. 1959) (holding that
"exemplary" damages which redress mental anguish are compensatory rather than punitive in na-
ture); Bixby v. Dunlap, 56 N.H. 456, 464 (1876) (stating that damages for willful injury may in-
clude compensation for wounded feelings, though these damages are awarded under the name of
punitive, vindictive, or exemplary damages); Fay v. Parker, 53 N.H. 342 (1873) (allowing exem-
plary damages to compensate wounded feelings). On the confused history and semantics of puni-
tive or exemplary damages in Michigan, see Wade, The Michigan Law of Punitive Damages, in
MICHIGAN LAW OF DAMAGES 27-1 to -27 (1978).
64. Kewin v. Massachusetts Mut. Life Ins. Co., 409 Mich. 401, 420-21, 295 N.W.2d 50, 55
(1980); Gilroy v. Conway, 151 Mich. App. 628, 636-37, 391 N.W.2d 419, 422 (1986); Oppenhuizen v.
Wennersten, 2 Mich. App. 288, 299-300, 139 N.W.2d 765, 771 (1966) (finding fraud in selling a car
with a forged title; exemplary damages awarded for plaintiff's embarrassment in being questioned
over alleged purchase of stolen vehicle).
65. See GA. CODE ANN. § 51-12-5.1(c) (Supp. 1988) (allowing punitive damages not as com-
pensation, but only to punish; effective for causes of action arising on or after July 1, 1987).
66. Id. § 51-12-5. The statute purports to codify the common law. See id. § 51-12-5 editorial
note.
67. See Kelly v. Georgia Casualty & Sur. Co., 105 Ga. App. 104, 107, 123 S.E.2d 711, 713
(1961); King v. Towns, 102 Ga. App. 895, 902-03, 118 S.E.2d 121, 127 (1960).
68. See, e.g., Chrysler Corp. v. Wohner, 499 So. 2d 823, 825 (Fla. 1986) (holding that punitive
damages are intended for punishment and deterrence, not as a means of recovering extra dam-
ages); Moore v. State Bank, 240 Kan. 382, 729 P.2d 1205 (1986) (holding that punitive damages are
not designed for compensation), cert. denied, 107 S. Ct. 2484 (1987); Feingold v. Southeastern Pa.
Transp. Auth., 512 Pa. 567, 517 A.2d 1270 (1986) (holding that the purpose of punitive damages is
punishment rather than compensation).
69. E.g., Rinaldi v. Aaron, 314 So. 2d 762, 763 (Fla. 1975); Iola State Bank v. Bolan, 235 Kan.
175, 192, 679 P.2d 720, 734 (1984); Farrell v. Kramer, 159 Me. 387, 391, 193 A.2d 560, 562 (1963).
70. Leimgruber v. Claridge Assocs., 73 N.J. 450, 456, 375 A.2d 652, 655 (1977); see also Fort
Worth Cab & Baggage Co. v. Salinas, 735 S.W.2d 303, 306 (Tex. Ct. App. 1987) (holding that in
determining whether an award of exemplary damages is reasonable, a court examines many fac-
tors, including the "sensibilities" of the plaintiff); RESTATEMENT, supra note 6, § 908 comment e
VANDERBILT LAW REVIEW [Vol. 42:1
(stating that the jury can consider the "extent of harm" to the plaintiff, including "the fact that
the plaintiff has been put to trouble and expense in the protection of his interests").
71. See Wilkes v. Moses, 291 S.C. 504, 354 S.E.2d 403 (Ct. App. 1987) (affirming award of
$700,000 actual and $300,000 punitive damages in accident case; the court focused on the extent of
the plaintiff's injuries, including her severe pain and embarrassment); cf. McNeill v. Allen, 35 Colo.
App. 317, 326, 534 P.2d 813, 819 (1975) (accepting for sake of argument counsel's position that
evidence of emotional distress was relevant to the issue of exemplary damages). Conversely, courts
have justified an award of emotional distress damages by observing that the standards for a puni-
tive damage award had been met. See Emmons v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 532
F. Supp. 480, 485 (S.D. Ohio 1982); Food Fair, Inc. v. Anderson, 382 So. 2d 150, 154-55 (Fla. Dist.
Ct. App. 1980).
72. Sierra Nat'l Bank v. Brown, 18 Cal. App. 3d 98, 103, 95 Cal. Rptr. 742, 745-46 (1971)
(attributing plaintiffs' interest in recovering punitive damages to their realization that they could
not recover emotional distress damages as a regular component of compensatory damages).
73. One commentator has pointed to a case retried several times in which three separate
juries returned verdicts for the same total amount, even though only two of the three juries were
permitted to award punitive damages. See Comment, Exemplary Damages in the Law of Torts, 70
HARv. L. REv. 517, 521 (1957). In that case, the jurors who were forbidden to award punitive dam-
ages may have recharacterized the amount of punishment they wished to award as compensation
for emotional distress. Similarly, jurors who are not invited to compensate emotional distress as a
part of the regular compensatory damage award may satisfy their desire to reach a fair result by
calculating this distress in an award of punitive damages. Cf. Durant v. Surety Homes Corp., 582
F.2d 1081, 1088 (7th Cir. 1978) (noting that a trial court's error in allowing the jury in a fraud case
to award emotional distress damages as an aspect of compensatory damages reduced the risk that
the jury had included compensation for emotional distress in its punitive damage verdict).
From this perspective, it is ironic that punitive damages may have originated as an attempt by
the courts to compensate wounded feelings when such compensation was not directly available.
See Comment, supra, at 519; see also Hazelwood v. Illinois Cent. G.R.R., 114 Ill. App. 3d 703, 712,
450 N.E.2d 1199, 1206 (1983). Judicial focus on the punitive purpose of punitive damages may be
counterbalanced by jurors who possibly still regard theie damages as having, in part, a compensa-
tory function.
1989] DIGNITARY TORTS
During the past two decades most courts have recognized indepen-
dent tort actions for intentional or negligent infliction of emotional dis-
tress. Some courts have suggested that, although damages for emotional
distress are not available in fraud suits, plaintiffs may recover those
damages if they can establish separate claims for intentional or negli-
gent infliction of emotional distress. 75 The issue, then, is whether these
independent actions satisfy the claims of fraud victims for emotional
distress damages.
74. See 2 J. GHIARDI & J. KIRCHER, supra note 59, § 19.17, at 54. The authors suggest that in
these jurisdictions
one cannot help but suspect another ratio decidendi, albeit not articulated. The plaintiff who
is thus allowed to recover punitive damages, as is the case with some dignitary torts, is effec-
tively provided a form of rough compensation though in the guise of exemplary damages, for
the harm he or she has suffered because of the tort but has been unable to quantify for the
purposes of the customary compensatory damage award.
Id.
75. See infra notes 80-91 and accompanying text.
76. Recovery of emotional distress damages in this circumstance is not limited to suits
against intentional tortfeasors. Many negligence cases dealing with physical harm include a compo-
nent of emotional distress damages. See, e.g., Grubbs v. United States, 581 F. Supp. 536, 541, 542
(N.D. Ind. 1984); Pretre v. United States, 531 F. Supp. 931, 934 (E.D. Mo. 1981) (stating "mental
anguish attendant upon bodily injuries is a compensible [sic] injury"); W. KErON, D. DOBBS, R
KEETON & D. OWEN, PROSSER AND KEETON ON THE LAW OF TORTS 362-63 (5th ed. 1984).
VANDERBILT LAW REVIEW [Vol. 42:1
77. See Harsha v. State Sav. Bank, 346 N.W.2d 791, 801 (Iowa 1984) (stating the second
criterion quoted in the text); see also Othman v. Globe Indem. Co., 759 F.2d 1458 (9th Cir. 1985),
overruled on other grounds, Bryant v. Ford Motor Co., 844 F.2d 602 (9th Cir. 1987) (en banc);
LeCroy v. Dean Witter Reynolds, Inc., 585 F. Supp. 753 (E.D. Ark. 1984); Plocar v. Dunkin'
Donuts of Am., Inc., 103 Ill.App. 3d 740, 431 N.E.2d 1175 (1981); Roberts v. Auto-Owners Ins. Co.,
422 Mich. 594, 374 N.W.2d 905 (1985). See generally RESTATEMENT, supra note 6, § 46.
78. See, e.g., Spencer v. King County, 39 Wash. App. 201, 692 P.2d 874 (1984), overruled on
other grounds, Frost v. City of Walla Walla, 106 Wash. 2d 669, 724 P.2d 1017 (1986).
79. E.g., Truesdell v. Proctor, 443 So. 2d 107 (Fla. Dist. Ct. App. 1983) (alleging fraud and
negligent infliction of emotional distress); Stewart v. Isbell, 155 Mich. App. 65, 399 N.W.2d 440
(1986) (alleging fraud, intentional infliction of emotional distress, and negligent infliction of emo-
tional distress).
80. 686 F.2d 459 (7th Cir. 1982).
1989] DIGNITARY TORTS
89. Doe v. Yogi, 652 F. Supp. 203 (D.D.C. 1986). The yogi allegedly represented that science
had proved that transcendental meditation could reverse aging, result in enlightenment, and pro-
mote world peace. The yogi also promised to teach the plaintiff to fly, to levitate (an exercise that
consisted of hopping around the floor in a lotus position), and "to manipulate the physical world
and the laws of nature." Id. at 205. The plaintiff sought to recover for the costs of taking courses
from the yogi, for his emotional distress in realizing that he had wasted eleven years of his life in
the movement, and for his physical injuries suffered while trying to learn to "fly." Id.
90. Id. at 209. The court did uphold a separate cause of action for fraud against a challenge
that the yogi's promises were mere opinion. The court did not, however, indicate whether it would
be willing to grant emotional distress damages under the fraud count. Thus, it is unclear whether
the court anticipated allowing the plaintiff some emotional distress damages under the fraud
count, or whether the court envisioned the fraud count as limited to a claim for: (1) the costs
expended on the yogi's courses; and possibly (2) the physical injuries suffered while performing
yoga exercises.
91. See Ochoa v. Superior Court, 39 Cal. 3d 159, 703 P.2d 1, 216 Cal. Rptr. 661 (1985). The
court in Ochoa permitted a mother to recover for the anguish she suffered while the penal facility
holding her son continually declined to give him proper medical treatment. The court specifically
rejected the defendant's argument that claims for negligent infliction of emotional distress should
be limited to those family members who are contemporaneous witnesses to a "sudden occurrence."
92. 703 F.2d 1152 (10th Cir. 1981), cert. denied, 464 U.S. 824 (1983).
93. Id. at 1159. The wife was a Korean immigrant who could neither read nor write Korean
or English. The husband had only a tenth grade education and worked as a manual laborer "al-
most every waking hour, including all major holidays." Id. at 1160. The couple had "adopted a
spartan lifestyle, spending very little for anything other than basic necessities and doing nothing in
1989] DIGNITARY TORTS
the way of entertainment." Id. Both husband and wife recognized that the husband was extremely
gullible and therefore took special steps to put the couple's assets into accounts in the wife's name
alone.
94. Godfrey v. Steinpress, 128 Cal. App. 3d 154, 180 Cal. Rptr. 95 (1982). Similarly, one
might expect that a fraud by a funeral parlor director against the deceased's relatives would satisfy
any court's sense of outrageousness. Thus, emotional distress damages have been granted against a
mortician who falsely represented that the deceased's face had been "eaten up with maggots" in
order to avoid the trouble of preparing the body for viewing by the deceased's family. Ridout's-
Brown Serv., Inc. v. Holloway, 397 So. 2d 125, 127 (Ala. 1981). In that case, the plaintiff had stated
claims for both fraud and intentional infliction of emotional distress. The court endorsed a
$220,000 verdict (almost all of which must have represented compensation for emotional distress)
without specifying whether it was awarded on one or both theories of recovery.
95. Food Fair, Inc. v. Anderson, 382 So. 2d 150 (Fla. Dist. Ct. App. 1980).
96. Id. at 151. Indeed, the employer interpreted the lie detector's finding that her confession
was a lie as an indication that she must have stolen more money than originally stated on the
confession. The employer thus coerced the employee to sign confessions for ever-increasing
amounts. Id.
97. Id. at 153.
98. Id. at 154-55.
VANDERBILT LAW REVIEW [Vol. 42:1
99. Courts reserve the tort of intentional infliction of emotional distress for occasional cases
that strike them as unusually egregious. See, e.g., Oswalt v. County of Ramsey, 371 N.W.2d 241,
248 (Minn. Ct. App. 1985) (explaining that the tort is "sharply limited to cases involving particu-
larly egregious facts").
100. Food Fair,382 So. 2d at 150. See supra notes 95-98 and accompanying text.
101. For example, a leading decision recognized a separate theory of recovery for intentional
infliction of emotional distress when gangsters threatened a businessman with future injury. The
court did so because it felt the action failed to fit within traditional tort requirements of assault,
battery, or false imprisonment. State Rubbish Collectors Ass'n v. Siliznoff, 38 Cal. 2d 330, 240 P.2d
282 (1952).
102. See RESTATEMENT, supra note 6, § 46 comment d.
103. See MODEL PENAL CODE § 223.3 (Proposed Official Draft 1962) (defining purposeful de-
ception as theft). Federal statutes prohibiting mail and wire fraud authorize penalties of $1,000
and prison terms of up to five years. 18 U.S.C. §§ 1341, 1343 (1982).
104. Most courts require the plaintiff to establish some pecuniary damage or detriment as an
element of a basic cause of action for fraud. See, e.g., Day v. Avery, 548 F.2d 1018, 1028-29 (D.C.
Cir. 1976) (stating that "a sine qua non of any recovery for misrepresentation is a showing of
pecuniary loss proximately caused by reliance on the misrepresentation;" nominal damages held
not available), cert. denied, 431 U.S. 908 (1977). The cases do not require, however, that the plain-
tiff's damages be major; the cases only require that the damages be measurable. For a case award-
ing only $5 in damages, see D.R.W. Corp. v. Cordes, 65 Wis. 2d 303, 222 N.W.2d 671 (1974).
105. See Greater Coral Springs Realty, Inc. v. Century 21 Real Estate, Inc., 412 So. 2d 940
(Fla. Dist. Ct. App. 1982) (awarding "nominal" damages of $1,000 in addition to punitive dam-
1989] DIGNITARY TORTS
fraud cases will not swamp the courts with additional lawsuits.
In short, the policy concerns that justify restrictive requirements
for the separate tort of intentional infliction of emotional distress are
inapplicable to causes of action for fraud. Courts should not view this
new tort theory as excusing a careful consideration of the need to make
emotional distress damages generally more available in fraud claims.
ages); Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37, 477 A.2d 1224 (1984). Several
other jurisdictions award nominal damages when the plaintiff persuades the court that he has
suffered some real damage, but fails to introduce sufficiently detailed evidence to allow the court to
compute the value of the damages with a reasonable degree of accuracy. See, e.g., Long-Lewis
Hardware Co. v. Lightsey, 392 So. 2d 545 (Ala. Civ. App. 1980); In re Busse, 124 Ill. App. 3d 433,
464 N.E.2d 651 (1984); Beavers v. Lamplighters Realty, Inc., 556 P.2d 1328 (Okla. Ct. App. 1976).
Although the awarding of nominal damages for fraud is still the minority rule, one commentator
concludes from these cases that the law is in a state of development, "and the old rules can no
longer be stated with assurance." R. DUNN, supra note 7, § 6.02, at 205.
106. See, e.g., Ramirez v. Armstrong, 100 N.M. 538, 541 n.1, 673 P.2d 822, 825 n.1 (1983)
(stating that emotional distress must have a "severity which no reasonable person could be ex-
pected to endure"); Paugh v. Hanks, 6 Ohio St. 3d 72, 72, 451 N.E.2d 759, 761 (1983) (stating that
distress must be so "severe and debilitating" that a reasonable person would be "unable to cope
adequately").
107. See, e.g., Towns v. Anderson, 195 Colo. 517, 579 P.2d 1163 (1978); Goldberg v. Ruskin,
128 Ill. App. 3d 1029, 1043, 471 N.E.2d 530, 539-40 (1984), af'd, 113 Ill. 2d 482, 499 N.E.2d 406
(1986); Dailey v. LaCroix, 384 Mich. 4, 179 N.W.2d 390 (1970). But see St. Elizabeth Hosp. v.
Garrard, 730 S.W.2d 649, 654 (Tex. 1987) (abandoning a requirement of physical injury or physical
manifestation of emotional distress and noting "an established trend in American jurisprudence
which recognizes the tort of negligent infliction of mental anguish without imposing arbitrary re-
strictions on recovery in such actions"); cf. Alabama Power Co. v. Harmon, 483 So. 2d 386 (Ala.
1986) (holding that emotional distress damages could be awarded in a breach of contract action
without proof of physical symptoms).
108. See Dillon v. Legg, 68 Cal. 2d 728, 441 P.2d 912, 69 Cal. Rptr. 72 (1968). For examples
of courts following Dillon's basic approach, see Eagle-Picher Indus. v. Cox, 481 So. 2d 517, 526
(Fla. Dist. Ct. App. 1985); Ramirez, 100 N.M. 538, 673 P.2d 822.
109. Farmer's Group, Inc. v. Trimble, 658 P.2d 1370 (Colo. Ct. App. 1982), afl'd, 691 P.2d
VANDERBILT LAW REVIEW [Vol. 42:1
1138 (Colo. 1984) (en banc); Green v. Leibowitz, 118 A.D.2d 756, 757, 500 N.Y.S.2d 146, 148 (1986);
Vaillancourt v. Medical Center Hosp. of Vt., Inc., 139 Vt. 138, 143, 425 A.2d 92, 95 (1980). Al-
though a few courts have been attracted to a more liberal rule of pure foreseeability, compare
Rodrigues v. State, 52 Haw. 156, 174, 472 P.2d 509, 520-21 (1970) with Ochoa v. Superior Court, 39
Cal. 3d 159, 190, 703 P.2d 1, 23, 216 Cal. Rptr. 661, 683 (1985) (Bird, C.J., dissenting in part), most
jurisdictions continue to restrain these negligence actions for emotional distress within the bounds
of more restrictive criteria.
110. Courts have been concerned about unfairly imposing "disproportionate" recovery on de-
fendants who were merely negligent. E.g., Smith v. Cote, 128 N.H. 231, 247, 513 A.2d 341, 351
(1986).
111. 792 F.2d 305 (2d Cir. 1986).
112. Id. at 307-10. Although he originally claimed damages for the emotional distress, the
doctor subsequently limited his request to compensation for the economic harm he suffered when
his emotional distress caused him to forego treating other patients. Id. One can only speculate on
the reasons for this retreat from the original claim. It seems unfairly cynical to posit that the
doctor was admitting that he was not really upset by viewing his patients' suffering and was con-
cerned only about the money he would lose in future operations. It seems more likely that the
doctor believed the court would be more receptive to a damage theory that, while linked to emo-
tional distress, stressed an actual pecuniary injury rather than emotional distress alone.
113. Id. at 310.
1989] DIGNITARY TORTS
114. See, e.g., RESTATEMENT, supra note 6, § 901 (stating the compensatory and deterrence
goals of tort damages).
VANDERBILT LAW REVIEW [Vol. 42:1
115. Godfrey v. Steinpress, 128 Cal. App. 3d 154, 166-67, 180 Cal. Rptr. 95, 101 (1982) (tell-
ing the plaintiff's story of marital arguments, destruction of normal sex life, and husband's turn to
alcohol).
116. Malandris v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 703 F.2d 1152, 1164 (10th Cir.
1981), cert. denied, 464 U.S. 824 (1983).
117. Jarchow v. Transamerica Title Ins. Co., 48 Cal. App. 3d 917, 950, 122 Cal. Rptr. 470, 493
(1975).
118. D. DOBBS, supra note 7, at 602.
119. 2 J. GHIARDI & J. KIRCHER, supra note 59, § 19.17, at 48.
120. Maguire, Victims' Needs and Victim Services: Indications from Research, 10 Vic-
TIMOLOGY 539, 549 (1985).
121. Some authors have encouraged victimology studies of white collar crime and illegal busi-
ness practices. See Viano, Theoretical Issues and PracticalConcerns for Future Research in Vic-
timology, 10 VITIMOLOGY 736, 740 (1985). To date, however, apparently no specific studies of the
victims of such violations have been done.
122. Maguire, supra note 120, at 550.
1989] DIGNITARY TORTS
conduct was merely negligent); Crowley v. Global Realty, Inc., 124 N.H. 814, 818, 474 A.2d 1056,
1058 (1984) (distinguishing theories of intentional tort from theories of mere negligent
misrepresentation).
127. For example, a substantial body of case law applies a broader view of proximate cause to
cases involving intentional tortfeasors than to cases involving merely negligent tortfeasors. See
Merritt, A Consistent Model of Loss Causationin Securities Fraud Litigation:Suiting the Rem-
edy to the Wrong, 66 Tax. L. REv. 469, 501-06 (1988).
128. Several states draw a similar distinction in awarding emotional distress damages to
plaintiffs who were upset by tortious interference with their personal property. Compensation is
denied if the defendant has acted only with negligence, but can be granted if the defendant acted
intentionally or with malice. See, e.g., Walker v. Ingram, 251 Ala. 395, 37 So. 2d 685 (1948) (award-
ing mental distress damages to tenant against landlord for landlord's intentional trespass to prop-
erty under hostile circumstances); Valley Dev. Co. v. Weeks, 147 Colo. 591, 597-98, 364 P.2d 730,
733 (1961) (generalizing that plaintiffs can recover emotional distress damages for injury to prop-
erty if "the act occasioning the injury to property was inspired by fraud, malice, or like motives"
and stating that "proof of a willful or wanton tort as distinguished from a mere negligent injury,
seems to be the most common distinction in the authorities"); Thibodeaux v. Western World Ins.
Co., 391 So. 2d 24 (La. Ct. App. 1980) (concerning intentional trespass and deliberate cutting of
trees); Fredeen v. Stride, 269 Or. 369, 372-73, 525 P.2d 166, 168 (1974) (stating that emotional
distress damages generally are denied in conversion cases, but are awarded if the defendant's con-
duct was "aggravated" and if "mental suffering is the direct and natural result of the conversion").
See generally Annotation, Recovery for Mental Shock or Distress in Connection with Injury to or
Interference with Tangible Property, 28 A.L.R.2d 1070 (1953). In states following this approach,
an award of emotional distress damages for fraud could be supported as an application of rules
generally governing invasions of property interests. Occasional opinions have granted emotional
distress damages for even negligent injury to property. See Campbell v. Animal Quarantine Sta-
tion, 63 Haw. 557, 632 P.2d 1066 (1981).
129. Some fraudulent statements, such as fraudulent statements in a securities prospectus or
an accounting statement, may create potential liability to numerous plaintiffs. The common-law
courts already have determined, however, that in cases of deliberate fraud, as opposed to negligent
misrepresentation, the defendant's interest in avoiding a large measure of liability does not out-
weigh the large plaintiff group's interest in receiving compensation. See Ultramares Corp. v.
Touche, Niven & Co., 255 N.Y. 170, 174 N.E. 441 (1931) (Cardozo, C.J.) (holding that a privity
limit applies to an action for negligent misrepresentation, but not to an action for fraud).
1989] DIGNITARY TORTS
130. This interest, in any event, should not be given undue weight in a policy calculus:
It is the business of the law to remedy wrongs that deserve it, even at the expense of a "flood
of litigation"; and it is a pitiful confession of incompetence on the part of any court of justice
to deny relief upon the ground that it will give the courts too much work to do.
Niederman v. Brodsky, 436 Pa. 401, 412, 261 A.2d 84, 89 (1970) (quoting Prosser, Intentional
Infliction of Mental Suffering: A New Tort, 37 MICH. L. REv. 874 (1939)).
131. Only two potential ways exist through which the recognition of these damages might
increase the amount of litigation. First, recognition theoretically might affect cases in which the
amount of pecuniary damages did not justify the expenses of litigation (even when augmented by
the possibility of a punitive damage award), but in which plaintiffs and their attorneys concluded
that an extra measure of damages for emotional distress would.make the lawsuit cost-effective. It
seems unlikely, however, that many cases without a substantial financial injury or a prospect of
substantial punitive damages would support a significant award for emotional distress. Second,
recognition of emotional distress damages might have some effect if jurisdictions that do not cur-
rently permit fraud actions for purely nominal damages chose to permit these plaintiffs to sue
solely for emotional distress, even absent any proof of other damage. Courts concerned about this
second prospect, however, can retain their insistence that plaintiffs establish some real pecuniary
loss as a predicate to claiming damages for emotional distress.
132. For example, jurors measure emotional distress in cases of assault, offensive battery, or
false imprisonment, in which the emotional distress damages are for fright, embarrassment, or loss
of dignity, rather than for physical pain and suffering. Many cases of physical injury also include
an award for the plaintiff's pain and suffering.
133. See, e.g., State Rubbish Collectors Ass'n v. Siliznoff, 38 Cal. 2d 330, 240 P.2d 282 (1952);
Rodrigues v. State, 52 Haw. 156, 172, 472 P.2d 509, 519-20 (1970); Schultz v. Barberton Glass Co.,
4 Ohio St. 3d 131, 134-35, 447 N.E.2d 109, 112 (1983).
VANDERBILT LAW REVIEW [Vol. 42:1
claims and discourage plaintiffs from seeking recovery for trivial inju-
ries. With alternatives such as these available, concerns about judicial
administration cannot support a total ban on damages for emotional
distress.
Thus, the legitimate interests of plaintiffs, defendants, and society
combine to favor the awarding of emotional distress damages in fraud
cases. Although some courts continue to deny these damages, the ratio-
nales for denial articulated by those courts do nothing to undermine
this conclusion. Some courts deny damages for emotional distress be-
cause they believe that such damages are never awarded in fraud cases.
These courts assert that because fraud is an "economic" tort, damages
should redress only the plaintiff's "pecuniary" injuries.' These courts
oversimplify the case law; a substantial body of precedent has permit-
ted the awarding of emotional distress damages in fraud cases. 1 35 More-
over, the assertion that fraud damages protect only pecuniary interests
is wholly conclusory; that some courts have limited fraud plaintiffs to
economic damages does not explain why they have chosen to do so.
Surely these courts cannot mean that fraud victims suffer only mone-
tary injury. Case law shows the emotional distress suffered by fraud
victims. 13 6
Other courts have denied damages for emotional distress because
37
these damages were not within the "contemplation of the parties."'
These courts, however, have cited no empirical evidence for this prop-
osition. 8' Especially in cases of consumer fraud, persons who have been
defrauded may expect compensation for their frustration and mental
anguish. Even in commercial cases these courts' argument rings hollow.
Fraud is rarely within the contemplation of the innocent contracting
party-otherwise the party would reject the bargain. To expect the de-
frauded party to contemplate specifically not only the fraud, but also
the emotional distress that will flow from the fraud, is unrealistic.
More importantly, a measure of damages based on the "contempla-
tion of the parties" is an application of a contract principle rather than
a tort standard. 3 9 Damages in tort suits should be measured by proxi-
mate cause, not the parties' expectations. 140 A different measure of con-
sequential damages is appropriate in contract cases because the law
does not wish to discourage "efficient" breaches of contracts. 141 Tort
law, on the other hand, seeks to deter fraud, the antithesis of a bar-
gained-for exchange. Fraud is an independent tort action that impli-
cates tort policy. 14 2 Fraud is not merely a suit for breach of contract
dressed in the guise of tort. Using a contract standard to determine
damages based on the "contemplation of the parties," therefore, is
inappropriate.
Finally, courts have justified denying emotional distress damages in
fraud cases because, according to these courts, the purpose of fraud
damages is only to return plaintiffs to the position they occupied before
the fraud. 4 s Again, this rationale is merely a conclusory assertion.
Moreover, the argument actually seems to support compensation for
emotional distress. Recompensing economic loss alone does not return
defrauded plaintiffs to their original position because it fails to redress
the plaintiff's mental anguish. If courts truly wish to "return plaintiffs
139. See, e.g., Scott v. Hurd-Corrigan Moving & Storage Co., 103 Mich. App. 322, 349, 302
N.W.2d 867, 878 (1981) (stating that in a suit for breach of contract "the damages recoverable are
those damages that arise naturally from the breach or which reasonably can be said to have been
in contemplation of the parties at the time the contract was made"); Hadley v. Baxendale, 9 Ex.
341, 156 Eng. Rep. 145 (1854). Even contract cases often broaden the "contemplation of the par-
ties" limit to a test of foreseeability. See E. FARNSWORTH, CONTRACTS § 12.14, at 876-77 (1982). The
concept of foreseeability in contract law, however, "is a more severe limitation than is the require-
ment of substantial or 'proximate' cause" in tort. RESTATEMENT (SECOND) OF CONTRACTS § 351
comment a (1979) [hereinafter RESTATEMENT CONTRACTS].
140. See, e.g., Lowrey v. Dingmann, 251 Minn. 124, 127, 86 N.W.2d 499, 502 (1957) (stating
that "the party guilty of the fraud is liable for all out-of-pocket-loss damages proximately caused
by the fraud, even though the damages were not within the contemplation of the wrongdoer or his
adversary"); see also R. DUNN, supra note 7, § 1.3, at 11-15 (stating that courts generally do not
limit consequential damages in fraud actions to those within the contemplation of the parties, or
even to those that were foreseeable).
141. See R. POSNER, ECONoMIc ANALYSIS OF LAW 107 (3d ed. 1986). Posner explains that the
usual measure of damages in contract law seeks to satisfy "the objective of giving the promisor an
incentive to fulfill his promise unless the result would be an inefficient use of resources." Id. at 108.
Posner also advises one to "[n]otice how careful the law must be not to exceed compensatory
damages if it does not want to deter efficient breaches." Id. When damage measures are uncertain,
it will be difficult for a party contemplating breach to determine the rationally preferable course of
action.
142. Thus, for example, punitive damages are available under a tort theory of fraud, but not
available for breach of contract.
143. Ellis v. Crockett, 51 Haw. 45, 52, 451 P.2d 814, 820 (1969).
VANDERBILT LAW REVIEW [Vol. 42:1
to the position they occupied before the fraud," courts should award a
full measure of damages, including damages for emotional distress.
144. In a related sense, actions such as libel and slander per se are dignitary torts. Within
first amendment limits, the common law permits jurors to award substantial presumed damages
even without proof of actual injury to reputation.
145. See supra notes 76-78 and accompanying text.
146. See, e.g., Nader v. General Motors Corp., 25 N.Y.2d 560, 255 N.E.2d 765, 307 N.Y.S.2d
647 (1970). Courts continue to recognize new tort actions in which recovery for emotional distress
is an important element of damages. See, e.g., Note, Breach of Confidence: An Emerging Tort, 82
COLUm. L. REv. 1426, 1446 (1982) (stating that mental distress is "the major injury in many breach
of confidence cases"); Note, Bad Faith Refusal to Pay First-PartyInsurance Claims: A Growing
Recognition of Extra-ContractDamages, 64 N.C.L. REv. 1421, 1422-23 (1986) (stating that an in-
surer's bad faith refusal to settle with its insured may permit the insured to recover damages for
emotional distress).
1989] DIGNITARY TORTS
policy views. 47 Citizens today are as likely to suffer distress from com-
mercial deception as from bodily assault or false imprisonment. 148
Rather than ignoring the claims of fraud plaintiffs who have suffered
substantial frustration or perhaps severe emotional distress, courts
should recognize that fraud is at least in part a dignitary tort and
should award damages for that distress.
Allowing recovery for emotional distress in fraud actions does not
mean that all defrauded plaintiffs automatically will recover those dam-
ages. Plaintiffs bear the burden of proving that their distress is genuine,
and jurors may reject as inherently improbable any claims for substan-
tial emotional distress based upon trivial harms. In addition, just as
battery requires contact, assault requires apprehension, and false im-
prisonment requires confinement, fraud requires proof of some underly-
ing financial injury.1 49 Courts may maintain the traditional elements of
147. New Jersey's Supreme Court recently decided to award nominal damages in actions for
fraud even without proof of a specific amount of loss, so long as the plaintiff established "some
loss, detriment, or injury." Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37, 48, 477 A.2d
1224, 1229-30 (1984). In endorsing the availability of nominal damages in a fraud action, the court
determined that the traditional insistence on proof of compensatory damages was based more on
outmoded historical distinctions between the old English writs than on any considered policy judg-
ment. Id. at 52, 477 A.2d at 1232. A similar fresh look valuing policy over history is appropriate in
determining whether emotional distress damages are appropriate.
Refining fraud damages to include compensation for emotional distress is not inconsistent
with recent legislative reforms of tort damages. See statutes cited supra note 2. Those reform
statutes impose ceilings-typically very high ceilings-on emotional distress damages to prevent
runaway jury verdicts; they do not deny these damages entirely. See, e.g., MINN. STAT. ANN. §
549.23 (West 1988) (limiting damages for intangible loss in civil actions to $400,000); N.H. REv.
STAT. ANN. § 508:4-d (Supp. 1988) (capping damages for noneconomic loss in personal injury ac-
tions at $875,000). Moreover, some of the statutes are explicitly limited to negligence claims and
do not purport to cover intentional torts. See ALASKA STAT. § 09.17.010 (Supp. 1988) (placing
$500,000 cap on damages for noneconomic losses in personal injury claims based on negligence);
HAWAII REV. STAT. §§ 663-8.5, -8.7 (Supp. 1987) (applying $375,000 cap to actual physical pain and
suffering, but not to other mental anguish and not to any intentional torts). Other statutes limit
damages only in medical malpractice litigation, in which a particular insurance crisis has prompted
passage of these measures. See, e.g., CAL. CIV. CODE § 3333.2 (West Supp. 1988) (limiting damages
for noneconomic loss in medical negligence cases to $250,000); IND. CODE ANN. § 16-9.5-2-2 (Burns
1983) (limiting patient's recovery for injury or death to $500,000).
148. E. SUTHERLAND & D. CRESSEY, CRIMINOLOGY 42 (8th ed. 1970) (stating that "[i]t is proba-
ble ... that fraud is the most prevalent crime in America"). Comparative statistics are not readily
available because the Federal Bureau of Investigation (FBI) does not include fraud in its statistical
index of crime. The FBI excludes the various forms of fraud "not because they are unimportant
predations but because they are difficult for the police to know about very fully, and because they
are often difficult to count even when much detail on them is known." HANDBOOK OF CRIMINOLOGY
62 (D. Glaser ed. 1974).
149. See, e.g., Berkel & Co. Contractors v. Providence Hosp., 454 So. 2d 496 (Ala. 1984);
Downer v. Bramet, 152 Cal. App. 3d 837, 199 Cal. Rptr. 830 (1984); Courtney v. Feldstein, 147
Mich. App. 70, 382 N.W.2d 734 (1985); Jurcich v. General Motors Corp., 539 S.W.2d 595, 600-01
(Mo. Ct. App. 1976). Courts recognizing emotional distress damages for fraud have done so to
grant full compensation for misconduct that the law has deemed independently tortious and ac-
tionable; the plaintiff must establish all elements of a cause of action for fraud, including some
VANDERBILT LAW REVIEW [Vol. 42:1
a cause of action for fraud while redefining the scope of damages recov-
erable by plaintiffs who establish that cause of action. Proximate cause
limits also will protect defendants against far-fetched claims of emo-
tional distress that are tied to the fraud more by the ingenuity of the
plaintiff's imagination than by a reasonable response.1 5
pecuniary harm. On the other hand, those few courts that have decided to allow an action for
purely nominal fraud damages even without proof of specific, quantifiable damage, see cases cited
supra note 105, appropriately might permit jurors to award compensation for emotional distress
even absent specific proof of financial injury.
Cases of deception unaccompanied by financial injury may, of course, support claims of emo-
tional distress if the deception or "fraud" is a means of accomplishing another recognized tort (for
example, a battery committed through fraudulently obtained consent), or is conduct that satisfies
the independent, stringent standards for intentional infliction of emotional distress.
150. See Cable v. Hechler, 532 F. Supp. 239, 245 (E.D.N.Y. 1981) (holding that the defend-
ant's allegedly fraudulent stock market transactions were not the proximate cause of the injury to
the plaintiff's reputation that occurred when the defendant's transactions triggered an inquiry by
the American Stock Exchange; the plaintiff's misleading answers during this inquiry inspired an
investigation of the plaintiff by the Securities and Exchange Commission).
151. See supra notes 26-74 and accompanying text.
152. See supra notes 114-50 and accompanying text.
153. See supra notes 26-34 and accompanying text.
154. See supra note 34.
155. See supra note 34. Perhaps some of the diverse results reached in similar cases may be
reconciled by reference to the plaintiff's ability or inability to establish objective symptoms of
emotional distress, such as headaches or loss of sleep. On the other hand, the jurisdiction that
1989] DIGNITARY TORTS 33
most clearly has required serious distress in fraud cases currently does not require proof of severe
distress by objective symptomology from plaintiffs who bring suit under other tort theories such as
negligent infliction of emotional distress. See St. Elizabeth Hosp. v. Garrard, 730 S.W.2d 649 (Tex.
1987).
156. A requirement of particularly substantial emotional distress, of course, might discourage
some plaintiffs from introducing any evidence of emotional distress and enable courts to dismiss
other claims for emotional distress based on the pleadings. This preservation of judicial time, how-
ever, is unlikely to outweigh the time spent litigating the severity of emotional distress issue in
both trial and appellate courts. Once plaintiffs have expended the time and money necessary to
come to court, they have an incentive to litigate any issue that might increase their monetary
recovery.
157. When the jury grants an award greater than the amount that the judge believes reasona-
bly can be awarded, the judge can order remittitur or a new trial. The judge need not deny all
recovery. Moreover, judges should consider a substantial jury award as an indication that ordinary
individuals do not regard the plaintiff's distress as an insubstantial frustration unworthy of
recovery.
158. Cf. Garrard, 730 S.W.2d at 652 (stating that the requirement that plaintiffs establish
physical symptoms of severe distress in a negligent infliction case is undesirable because it encour-
ages victims to exaggerate symptoms).
159. See, e.g., Clark v. I.H. Rubenstein, Inc., 335 So. 2d 545 (La. Ct. App. 1976) (awarding
$500 to compensate the plaintiff for embarrassment resulting from a mistaken accusation of shop-
lifting, even though the plaintiff was detained wrongfully for only five minutes and was treated
courteously); Smith v. Hubbard, 253 Minn. 215, 91 N.W.2d 756 (1958) (awarding $1,000 to com-
pensate a police officer for "ribbing" and kidding from his friends after the officer had suffered
only lost buttons in an assault). In general, cases that address these torts state no express require-
ment that distress be particularly serious or severe. In contrast, courts that have articulated special
standards for serious distress in developing the torts of negligent and intentional infliction of emo-
tional distress have been particularly careful to announce requirements of severe distress. See
supra note 77 and accompanying text. These courts, presumably, have found it important to em-
phasize this quantum of distress requirement because the law generally has not required a particu-
lar level of emotional distress in order to extend compensation.
A rule that would eliminate recovery for modest amounts of distress resulting from torts such
as assault, battery, and false imprisonment might be largely meaningless in any event, because
jurors are permitted to award nominal damages for these torts even without a showing of injury.
See, e.g., Perna v. Pirozzi, 92 N.J. 446, 457 A.2d 431 (1983) (allowing the plaintiff to recover nomi-
nal damages for battery even though the act was harmless).
VANDERBILT LAW REVIEW [Vol. 42:1
recovery, but does not mark the difference between recovery and denial
of all emotional distress damages. Similarly, courts should recompense
a fraud plaintiff's mental distress without requiring a threshold of
severity.
Most jurisdictions demand proof of severe emotional distress
before allowing recovery for intentional or negligent infliction of emo-
tional distress. 160 The special policy considerations that shaped the re-
quirements for these torts, however, do not apply to fraud cases. Fraud
is a traditional, well-established tort, not a novel theory of recovery.
Recognizing recovery for modest emotional distress, therefore, will not
create claims for plaintiffs who otherwise would not have had a cause of
action. Moreover, the requirement of pecuniary harm already limits the
number of plaintiffs who may sue successfully for fraud. In this context,
an additional requirement of severe emotional harm serves no useful
purpose.
On the other hand, courts in a few jurisdictions have hinted that
they may require substantial distress even in traditional dignitary tort
actions. 61 Texas cases that require a high degree of mental anguish in
fraud cases may be justified as an application of a general rule that
Texas courts have applied to other dignitary torts.1 62 In jurisdictions
such as Texas, however, the policy analysis suggested above' 63 provides
a basis for relaxing the requirement of severe emotional distress in all
dignitary tort cases.
If, on the other hand, these courts want the plaintiff to establish a high
degree of pecuniary harm before recovering emotional distress damages,
this approach poses several problems. First, attempting to distinguish
substantial from insubstantial pecuniary loss creates the same difficul-
ties as trying to distinguish serious from slight emotional distress. Par-
ties will consume valuable court time debating the value of the
plaintiff's financial loss, and both judges and juries will reach conflicting
conclusions on whether a particular loss qualifies as substantial. Thus,
society's interest in efficient judicial administration disfavors a require-
ment of substantial pecuniary loss.
Nor is this limitation necessary to protect a defendant's interest in
avoiding vexatious litigation and burdensome liability. Absent serious
financial damage, the plaintiff is unlikely to pursue an action for fraud
or obtain a large damage award. Jurors will be skeptical of plaintiffs'
claims that trivial financial losses triggered severe emotional distress. A
requirement of substantial pecuniary injury, therefore, is largely
unnecessary.
Traditional dignitary torts do not link recovery for emotional dis-
tress to a particular quantum of physical or economic harm. A plaintiff
in a battery action, for example, can recover for humiliation and anger
even if the defendant's offensive touching did not cause the slightest
physical harm.16 Courts in these cases have recognized that emotional
distress is an independent harm that deserves compensation despite the
absence of other injuries. Similarly, the plaintiff's key to recovery of
emotional distress damages in fraud actions should be proof of the un-
derlying elements of fraud. Once the plaintiff has established those ele-
ments, the availability of emotional distress damages should rest on the
plaintiff's ability to prove the harm, not on the extent of the plaintiff's
financial loss.
emotional distress claims." Id. at 937, 122 Cal. Rptr. at 484. The court opined that any further
requirement of damage would "add little to the guarantee of genuineness." Id. The court's discus-
sion of this issue, however, is dictum, because the plaintiff established substantial financial injury
of $170 for loss of property use and $7,100 for attorney's fees in an action to quiet title. Id. at 937
n.11, 938, 122 Cal. Rptr. at 484 n.11, 485.
166. See, e.g., Whitley v. Andersen, 37 Colo. App. 486, 488, 551 P.2d 1083, 1085 (1976);
Southern Fin. Co. v. Alexander, 113 Ga. App. 740, 149 S.E.2d 526 (1966); Green v. Washington
Suburban Sanitary Comm'n, 259 Md. 206, 269 A.2d 815 (1970); Conway v. Kansas City Pub. Serv.
Co., 234 Mo. App. 596, 125 S.W.2d 935 (1939); Fisher v. Carrousel Motor Hotel, Inc., 424 S.W.2d
627 (Tex. 1967); S.H. Kress & Co. v. Musgrove, 153 Va. 348, 149 S.E. 453 (1929) (concerning bat-
tery and false imprisonment).
VANDERBILT LAW REVIEW [Vol. 42:1
business fraud cases, but allow them for other kinds of fraud. 1 7 A dis-
tinction between business frauds and personal frauds, however, is
largely unworkable. Some frauds, such as those involving promises of
marriage or the mishandling of funeral arrangements, are clearly per-
sonal.168 Deception in the sale of personal insurance may also be per-
sonal, because "a primary consideration in purchasing insurance is the
peace of mind and security it will provide when the contingency insured
69
against arises.' On the other hand, how should one classify an em-
ployee's claim that he was defrauded into executing a contract under
which he gave up five years' worth of back wages; 70 or a small inves-
tor's claim that a securities fraud destroyed her family's financial secur-
ity;17 or a real estate owner's claim that she was induced to sell a piece
of commercial property by misrepresentations that catered to her dis-
tinctive religious beliefs?1 2 If courts adhere to a distinction between
business and personal frauds, adjudication of these claims will burden
the courts with lengthy debates over whether the transaction was of a
business or personal nature.
Inmost cases, moreover, the plaintiff's legitimate interests strongly
favor recovery, regardless of the business nature of the fraud. Consumer
purchases are business transactions, but are rife with the potential to
inflict severe frustration on a defrauded consumer. It is certainly fore-
seeable that a person who is deceived into purchasing a termite-infested
dwelling or paying thousands of dollars for a defective automobile will
suffer substantial distress. To deny recovery in these cases would leave
plaintiffs badly undercompensated.
173. A more technical distinction might suggest that individuals could not recover for busi-
ness frauds in which their corporate entities were swindled. Thus, one court denied the president
(and apparent founder) of a corporation the right to seek recovery for the emotional distress he
suffered when an insurance company allegedly defrauded him into signing a release. Gibbs v. Jef-
ferson-Pilot Fire & Casualty Ins. Co., 178 Ga. App. 544, 343 S.E.2d 758 (1986). The court reasoned
that the president could not sue individually to recover damages for his mental anguish based on
fraud because "he admits he procured the insurance for his corporations for the benefit of the
corporations and signed the releases as president of the corporations." Id. at 545, 343 S.E.2d at
759. Presumably, the court's opinion foreclosed any recovery of emotional distress damages; al-
though corporations are fictional legal "persons," they feel no pain. See Ailetcher v. Beneficial Fin.
Co., 2 Haw. App. 301, 632 P.2d 1071 (1981); Hogan Exploration, Inc. v. Monroe Eng'g Assoc., 430
So. 2d 696 (La. Ct. App. 1983) (holding that corporate plaintiffs cannot experience mental dis-
tress); In re James Noel Flying Serv., 61 Bankr. 335 (Bankr. W.D. La. 1986).
Perhaps one can justify this result as one burden accepted by an entrepreneur in exchange for
the benefits of doing business in the corporate form. To deny the legitimacy of the anguish suf-
fered by the founder and president of a corporation because he chose to file a corporate certificate
with the secretary of state's office rather than to do business as an unincorporated proprietor,
however, does seem to ignore the realities of reasonable human reactions.
174. For an example of a court that adopted this case-by-case approach, see Baker v. Ameri-
can States Ins. Co., 428 N.E.2d 1342, 1349 (Ind. Ct. App. 1981) (holding that a worker's fraud
claim against an insurance company stated a claim on which relief could be granted for emotional
distress).
VANDERBILT LAW REVIEW [Vol. 42:1
V. CONCLUSION
Woody Guthrie observed in song that "[s]ome will rob you with a
six gun, and some with a fountain pen.'17 6 The law always has compen-
sated victims of armed robbery for their mental distress, but many
courts have been unwilling to extend that relief to the targets of more
genteel extortions. The modern focus on compensation for dignitary
harms, combined with a recognition that fraud victims suffer distress
ranging from anger to debilitating anguish, suggests that the distinction
between fraud victims and victims of other wrongful acts is outdated.
In a commercial society, wrongdoers may violate individual integrity by
pen point as well as by gun point. By acknowledging the dignitary di-
mension of fraud and allowing recovery of emotional distress damages
in fraud cases, courts will better serve both the compensatory and de-
terrent functions of tort law.