MBE Rules · Remedies
Accounting and Disgorgement
Accounting / disgorgement
The rule
Equity may order a fiduciary or conscious wrongdoer to account for and disgorge profits attributable to the wrong, even exceeding the plaintiff's loss, to strip incentives for disloyalty.
In plain English
Accounting and disgorgement are equitable remedies that require a fiduciary or wrongdoer to return profits gained from their wrongful actions. This rule is designed to prevent unjust enrichment and discourage disloyalty by ensuring that the wrongdoer cannot benefit from their misconduct, even if the profits exceed the plaintiff's actual losses.
Worked example
A corporate director secretly invests in a competing business and earns $500,000 in profits while the company suffers a loss of $200,000 due to his disloyalty. The court orders the director to account for and disgorge the entire $500,000 in profits, emphasizing that he cannot keep any gains from his wrongful conduct. As a result, the director must return the full amount to the company.
Memory hook
Disgorge the gains, not just the pains!
The trap
Exams may present scenarios where students focus solely on the plaintiff's losses, overlooking the need to account for the total profits gained by the wrongdoer. This can lead to incorrect conclusions about the appropriate remedy.
How examiners test it
Questions often involve fact patterns where a fiduciary breaches their duty, prompting students to analyze both the breach and the potential for disgorgement of profits beyond the plaintiff's losses.
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