Disorgement 101

disgorgement memeIn Cooper v. Campbell, the Fifth Court reviewed the key principles that govern “equitable remedies such as disgorgement and forfeiture to remedy a breach of fiduciary duty” —

  • “The central purpose of forfeiture as an equitable remedy is not to compensate the injured principal, but to protect relationships of trust by discouraging disloyalty.
  • “Disgorgement is compensatory in the same sense as attorney fees, interest, and costs, but it is not damages. . . . In fact, a claimant need not prove actual damages to succeed on a claim for forfeiture because they address different wrongs. In addition to serving as a deterrent, forfeiture can serve as restitution to a principal who did not receive the benefit of the bargain due to his agent’s breach of fiduciary duty. . . .”
  • “The amount of disgorgement is based on the circumstances and is within the trial court’s discretion.”

The Court then remanded for more fulsome consideration of factors identifed in ERI Consulting Engineers v. Swinnea, 318 S.W.3d 867 (Tex. 2010). No. 05-15-00340-CV (Aug. 24, 2016) (mem. op.) On the general subject of disgorgement, other useful references from the Fifth Court are its recent opinion in Premier Pools Management Corp. v. Premier Pools Inc., and McCullough v. Scarbrough, Medlin & Associates, 435 S.W.3d 871, 904 (Tex. App.-Dallas 2014, pet. denied).

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