Texas Breach of Fiduciary Duty - Forfeiture of Attorneys Fees
In Burrow v. Arce, the Texas Supreme Court addressed the issue of whether an attorney can be required to forfeit his fee for breach of a fiduciary duty when his client suffered no actual damages due to the breach. Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999).
After indicating that the forfeiture of attorney's fees is an equitable remedy similar to a constructive trust, the court restated the law that "if a fiduciary takes any gift, gratuity, or benefit in violation of his duty, . . . without a full disclosure, it is a betrayal of his trust . . . and he must account to his principal for all he has received." Id. at 239, citing Kinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509, 514 (1942).
The supreme court then went on to state that the central purpose of this rule is to protect relationships of trust by discouraging an agent's disloyalty. Burrow, 997 S.W.2d at 238.
The court explained that this remedy "removes any incentive for an agent to stray from his duty of loyalty based on the possibility that the principal will be unharmed . . . ." Id.