There is no worse feeling than the feeling of betrayal. This is true whether it occurs on a personal or a professional level, or both. On the professional level the feeling of betrayal can occur when one in whom you have entrusted an important legal matter (called a fiduciary) violates that trust. Under Texas law, a fiduciary owes its principal (you) one of the highest duties known to law. Texas courts, in fact, describe the fiduciary relationship as a very special relationship. It is a relationship premised on trust, loyalty and duty. Fiduciary relationships include formal relationships such as executor or administrator and beneficiary, trustee and beneficiary, attorney and client, partners, and joint venturers. It also can include certain informal relationships “where one party trusts in and relies upon another.”

A fiduciary owes its principal the duties of loyalty and good faith, strict integrity, and fair and honest dealing. The term “fiduciary” thus refers to integrity and fidelity. When a fiduciary relationship is created, the fiduciary consents to honor and comply with these high standards. A violation of these high duties owed by the fiduciary to his principal thus in a very real sense constitutes a betrayal.

As a result, Texas law provides a broad array of remedies when a fiduciary breaches the duties owed his principal. Many of these remedies are similar to those available to plaintiffs in non-fiduciary litigation. These similar remedies are called “actual damages.” There are, however, two remedies available to a party aggrieved by a fiduciary that vary from the typical remedies. These are the remedies of forfeiture and disgorgement. Importantly, a plaintiff in litigation against his fiduciary need not prove actual damages in order to avail himself of these remedies.

The remedy of forfeiture relates to fees and compensation. When a plaintiff proves his fiduciary violated his duties, the court may order the fiduciary to forfeit the compensation he has been paid or is to be paid. The rationale behind this remedy is to return to the principal the value of what he paid his fiduciary since the principal did not receive the trust, integrity and loyalty owed to him. Disgorgement is similar to forfeiture but has one important distinction. Instead of referring to fees and compensation, disgorgement refers to profits or benefits. In other words, besides whatever fees and/or compensation are paid to the fiduciary, a fiduciary that breaches his duties to his principal may be required to disgorge any profits he made from this relationship. Indeed, Texas courts have concluded that a fiduciary must account for and yield to his principal any profits he makes as a result of the violation of his duties.

A court considers several factors in deciding whether to apply the remedies of forfeiture and/or disgorgement. These factors include (1) whether the fiduciary acted in good faith, (2) whether the breach was intentional or negligent, (3) whether the breach of trust related to the whole or only a part of the principal’s interest, (4) whether the fiduciary’s breach of his duties caused the principal to incur a loss, and (5) whether the services provided by the fiduciary were of any value to his principal. If these factors weigh in favor of the plaintiff, then the court can order the fiduciary to forfeit his fees and disgorge his profits, in addition to any other actual damages the principal his incurred.                    

Next Steps

If you are facing a probate, estate, or trust dispute, reach out to one of our Dallas-based attorneys for a consultation. Our lawyers can meet with you either in person in Dallas, or via telephone or web interview to discuss your issues. Whether you are facing a will contest, a trust or estate dispute, or other type of inheritance dispute, let our team consult with you, review the facts, and then access Texas law.