In Ramin’ Corp. v. Wills, an employer sued a former employee for breach of fiduciary duty and other claims based on the employee competing with the employer while she was an employee. No. 09-14-11168-CV, 2015 Tex. App. LEXIS 10728 (Tex. App.—Beaumont October 15, 2015, no pet. history). The trial court found that the employee did breach her fiduciary duty, but held that the employer sustained no damages. The trial court also found for the employee on several of her counterclaims. Both parties appealed.

The court of appeals acknowledged that an employee does not owe an absolute duty of loyalty to her employer, and that absent an agreement to the contrary, an at-will employee may plan to compete with her employer, may take active steps to do so while still employed, may secretly join with other employees in a plan to compete with the employer, and has no general duty to disclose such plans. However, the at-will employee may not act for his future interests at the expense of his employer or engage in a course of conduct designed to hurt his employer.

One of the employer’s arguments was that the trial court erred in not awarding a forfeiture or disgorgement of profits. The court of appeals first held that a party must plead for forfeiture or disgorgement relief and held that the employer had adequately done so. The court then addressed the merits of the argument. It held that under the equitable remedy of disgorgement, a person who renders service to another in a relationship of trust may be denied compensation for her service if she breaches that trust. The court further stated that the objective of the remedy is to return to the principal the value of what the principal paid because the principal did not receive the trust or loyalty from the other party. Disgorgement also involves a fiduciary turning over any improper profit that the fiduciary earned arising from a breach. The party seeking forfeiture and equitable disgorgement need not prove any damages as a result of the breach of fiduciary duty.

The court explained that a trial court has discretion in awarding disgorgement or forfeiture and may consider several factors, including (1) whether the agent acted in good faith; (2) whether the breach of trust was intentional or negligent or without fault; (3) whether the breach of trust related to the management of the whole or related only to a part of the principal’s interest; (4) whether the breach of trust by the agent occasioned any loss to the principal and whether such loss has been satisfied by the agent, and (5) whether the services of the agent were of value to the principal. A court may also consider evidence of the fiduciary’s salary, profits, or other income during the time the breach occurred.

The court affirmed the employer not receiving any disgorgement or forfeiture damages. The court held that there was evidence that the employee was not enriched by her activities: “we conclude that there is an absence of evidence to establish that Wills’ breach of her fiduciary duty was directly connected to her recovery of overtime, or that Ramin incurred any loss resulting from Wills’ breach, and there is no evidence that Wills’ services she performed for Ramin during the overtime hours were of no value to Ramin.”

Interesting Note: This case is important for disgorgement and forfeiture cases in that it requires some causal link between the acts of fiduciary breach and the forfeiture and/or disgorgement. Before a plaintiff is entitled to an award of a forfeiture or disgorgement, it should have to establish some causal link between the act of fiduciary breach and benefit to the fiduciary that is being ordered to be disgorged. Otherwise, the remedy would be merely punitive.

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Photo of David Fowler Johnson David Fowler Johnson

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David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary…

[email protected]

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. Read More

David’s financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class action, RICO actions, usury, various tort causes of action, breach of fiduciary duty claims, and preference and other related claims raised by receivers.

David also has experience in estate and trust disputes including will contests, mental competency issues, undue influence, trust modification/clarification, breach of fiduciary duty and related claims, and accountings. David’s recent trial experience includes:

  • Representing a bank in federal class action suit where trust beneficiaries challenged whether the bank was the authorized trustee of over 220 trusts;
  • Representing a bank in state court regarding claims that it mismanaged oil and gas assets;
  • Representing a bank who filed suit in probate court to modify three trusts to remove a charitable beneficiary that had substantially changed operations;
  • Represented an individual executor of an estate against claims raised by a beneficiary for breach of fiduciary duty and an accounting; and
  • Represented an individual trustee against claims raised by a beneficiary for breach of fiduciary duty, mental competence of the settlor, and undue influence.

David is one of twenty attorneys in the state (of the 84,000 licensed) that has the triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization.

Additionally, David is a member of the Civil Trial Law Commission of the Texas Board of Legal Specialization. This commission writes and grades the exam for new applicants for civil trial law certification.

David maintains an active appellate practice, which includes:

  • Appeals from final judgments after pre-trial orders such as summary judgments or after jury trials;
  • Interlocutory appeals dealing with temporary injunctions, arbitration, special appearances, sealing the record, and receiverships;
  • Original proceedings such as seeking and defending against mandamus relief; and
  • Seeking emergency relief staying trial court’s orders pending appeal or mandamus.

For example, David was the lead appellate lawyer in the Texas Supreme Court in In re Weekley Homes, LP, 295 S.W.3d 309 (Tex. 2009). The Court issued a ground-breaking opinion in favor of David’s client regarding the standards that a trial court should follow in ordering the production of computers in discovery.

David previously taught Appellate Advocacy at Texas Wesleyan University School of Law located in Fort Worth. David is licensed and has practiced in the U.S. Supreme Court; the Fifth, Seventh, and Eleventh Federal Circuits; the Federal District Courts for the Northern, Eastern, and Western Districts of Texas; the Texas Supreme Court and various Texas intermediate appellate courts. David also served as an adjunct professor at Baylor University Law School, where he taught products liability and portions of health law. He has authored many legal articles and spoken at numerous legal education courses on both trial and appellate issues. His articles have been cited as authority by the Texas Supreme Court (twice) and the Texas Courts of Appeals located in Waco, Texarkana, Beaumont, Tyler and Houston (Fourteenth District), and a federal district court in Pennsylvania. David’s articles also have been cited by McDonald and Carlson in their Texas Civil Practice treatise, William v. Dorsaneo in the Texas Litigation Guide, and various authors in the Baylor Law ReviewSt. Mary’s Law JournalSouth Texas Law Review and Tennessee Law Review.

Representative Experience

  • Civil Litigation and Appellate Law