Meaning
A restitutionary remedy strips a defendant of gains obtained through a breach of duty or wrongful act. The process of disgorgement of profits focuses on the enrichment of the wrongdoer rather than the loss suffered by the claimant. It ensures that no party benefits from their own wrongdoing, particularly in cases involving fiduciaries or confidential information.
Fiduciary Accountability
Trust and agency relationships require absolute loyalty to the principal. When a director or agent realizes a secret commission, disgorgement of profits forces the transfer of that gain back to the company. The remedy applies even if the principal could not have made the profit themselves.
Causal Link
The court determines which specific gains flowed directly from the breach of duty. While the claimant does not need to show a financial loss, they must prove that the disgorgement of profits relates to the specific period and scope of the misconduct. Allowances are sometimes made for the skill and effort of the defendant in generating those returns.
Equitable Discretion
Monetary awards of this nature are not available as of right and remain subject to the discretion of the court. A claimant might choose between compensatory damages or the disgorgement of profits through an account of profits. This choice usually happens after the court establishes liability but before the final order is signed..
