§ 7.6 Remedies for Breach of Fiduciary Duties and Special Relationships
A party with fiduciary duties is liable for the harm caused by breaching those duties.2166 Recoverable damages are those needed to compensate for the harm that is caused by the fiduciary's breach of duties and may also include disgorgement of any profits the fiduciary obtained through the breach.2167 An accounting may also be a proper remedy when a fiduciary relationship exists.2168
The relationship between the parties will govern the specific measure of damages. So, for example, a trustee will be liable for losses arising from failure to prudently manage a beneficiary's money,2169 and a money manager may be liable for the return that a properly invested portfolio would have earned.2170
Fiduciaries who breach their duties are often precluded from netting profitable transactions against unprofitable ones.2171 This may allow the beneficiary of fiduciary duties to affirm profitable transactions and sue for damages on the unprofitable ones.2172 Damages for emotional distress are also recoverable,2173 as are punitive damages.2174
Equitable remedies including, most prominently, imposition of a constructive trust, are available in an appropriate case.2175 Prejudgment interest on liquidated damages is recoverable.2176 Attorney's fees are recoverable if the fiduciary's tort arises out of contract.2177 But usually fiduciary duties are implied by law and do not depend on a contract for their effectiveness.2178 It is only when the fiduciary duties are created by a contract or when duties are accompanied by a specific contractual obligation that the claim "arises out of contract" for purposes of attorney's fees.2179
Tort damages for breach of special relationships have been liberally allowed in the insurance context.2180 And the Arizona Supreme Court has held that special relationships also exist in other settings.2181 The insurance cases permit recovery of economic losses, consequential damages, emotional-distress damages, attorney's fees, and punitive damages.2182
--------
Notes:
[2166] See Restatement (Second) of Torts § 874 & cmt. b (1979). See generally Revised Arizona Jury Instructions (Civil) Commercial Torts 3 (5th ed. 2013) (providing a jury instruction on the measure of damages for breach of fiduciary duties).
[2167] See Revised Arizona Jury Instructions (Civil) Commercial Torts 3; see also Ariz. Biltmore Hotel Condos. Ass'n v. The Conlon Group Ariz., LLC, 249 Ariz. 326, 333 ¶ 32, 469 P.3d 463, 470 (Ct. App. 2020) (affirming damages against a conflicted director calculated as the out-of-pocket cost of attorney fees caused by the director's breach of his fiduciary duties).
[2168] See Dooley v. O'Brien, 226 Ariz. 149, 151 ¶ 4, 154-55 ¶¶ 21-22, 244 P.3d 586, 588, 591-92 (Ct. App. 2010) (holding that shareholder in close corporation was entitled to an accounting of the corporation's business as well as the business of two limited-liability companies formed by the...
