Article on Remedies for Breach of Trust
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Daniel B. Kelly recently published an Article entitled, Remedies for Breach of Trust (2017). Provided below is an abstract of the Article:
Private and charitable trusts hold trillions of dollars in assets. Trustees manage, invest, and distribute these assets, subject to fiduciary duties, such as the duty of loyalty and prudence. But remedies for breach of trust, 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, the optimal remedy for fiduciary breach would be the same as the optimal 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. Plus, courts increasingly allow punitive damages for breach of a fiduciary duty, especially if a breach is “egregious”, even though punitive damages were not available as an equitable remedy. Applying insights from optimal deterrence theory and the agency costs theory of trusts, this Article provides an economic framework for analyzing trust law remedies. It argues that disgorgement and punitive damages serve distinct functional purposes and both remedies may be necessary to serve the deterrence and disclosure functions of trust law depending on how likely it is for a trustee to escape liability.
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