ABSTRACT
Private and charitable trusts hold trillions of dollars in assets. Trustees manage, invest, and distribute these assets, subject to fiduciary duties, including the duty of loyalty and prudence. But the remedies for fiduciary breach, and their justifications, are convoluted. The conventional view, especially in law and economics, is to characterize most fiduciary relationships, including trusts, as contractual and most fiduciary duties as implicit contract terms. One might suppose, then, that the optimal remedy for fiduciary breach would be the same as the usual remedy for contractual breach: damages. But the traditional equitable remedies in fiduciary law, and modern remedies in trust law, allow a plaintiff to elect either damages or disgorgement. Moreover, historically, punitive damages were unavailable for breach in both contract and fiduciary law. Yet, some courts now allow punitive damages for a fiduciary breach that is ‘egregious’.
Daniel B Kelly, On Disgorgement and Punitive Damages in Trust Law (2022) 107 Iowa Law Review 2079 (2022)
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