Court of Appeals Clarifies Damages Required for Breach of Fiduciary Duty Claim

August 10, 2015

The Court of Appeals held that dismissal of a law firm’s breach of fiduciary duty claim against a former managing member was unwarranted, even though the law firm failed to demonstrate it incurred damages or that the managing member obtained a benefit from his independent marketing activities. Helms & Greene, LLC v. Willis, No. A15A0361 (2015). Kirk Willis (“Willis”) was the former managing member of the Dallas, Texas office of Helms & Greene, LLC (“the law firm”) who eventually left the firm to start his own practice. While he was at the law firm, Willis was also marketing his own practice.

Willis filed an action against his old law firm to recover incentive and bonus compensation and the law firm asserted counterclaims including a breach of fiduciary duty. In an order granting in part and denying in part the parties’ cross motions for summary judgment, the trial court granted summary judgment in Willis’ favor on the breach of fiduciary duty counterclaim. The trial court stated that although Willis breached his fiduciary duty, the law firm, Willis was entitled to summary judgment because the law firm “could not show that it incurred damage or that Willis obtained any benefit through his unsuccessful marketing efforts.”

The law firm appealed arguing in its sole enumeration of error that it should have been allowed to proceed because it should be able to recover compensation it paid Willis during any period of disloyalty. The Court of Appeals agreed finding that compensation the principal paid to the agent during the time the agent breached a fiduciary duty was recoverable during the period of the agent’s malfeasance. The Court cited O.C.G.A. § 10-6-31 which states that: “[a]n agent who shall have discharged his duty shall be entitled to his commission and all necessary expenses incurred about the business of his principal. If he shall have violated his engagement, he shall be entitled to no commission.” The Court also relied upon its holding in Vinson v. E.W. Buschman Co., where it concluded that “[i]t is well established in this state . . . as well as in other jurisdictions, that a breach of fiduciary duty negates the unfaithful agent’s right to any compensation and renders him liable to his principal for his dealings with the latter’s property.” 172 Ga. App. 306, 309-310, 323 S.E.2d 204 (1984). The Court found that the statute and the case law stand for the proposition that a breach of fiduciary duty negates an unfaithful agent’s right to compensation.

A copy of the opinion can be found here.