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Law School Case Brief

Rash v. J.V. Intermediate, Ltd. - 2008 U.S. Dist. LEXIS 47783

Rule:

Under Texas law, forfeiture only applies to clear and serious violations of fiduciary duty. The considerations relevant to whether forfeiture is appropriate are: the gravity and timing of the violation, its willfulness, its effect on the value of the agent's work for the principal, any other threatened or actual harm to the principal, and the adequacy of other remedies. The issues particularly identified by the Burrow v. Arce Court as being amenable to jury consideration are: the agent's culpability--whether he acted intentionally, with gross negligence, recklessly, negligently, or as merely inadvertent, and the value of the agent's services and the existence and amount of harm to the principal.

Facts:

Plaintiff Clayton Rash was hired by defendant J.V. International  and related companies (JVIC) under an employment contract. In the first trial, the jury returned a verdict for Rash of $444,933 on his breach of contract claim, and a verdict for JVIC of $71,500 on its breach of duty of loyalty claim. JVIC did not recover on its breach of contract claim. On appeal the Tenth Circuit found that JVIC was entitled to judgment as a matter of law on its breach of fiduciary duty claim against Rash and remanded the case for further proceedings, including a trial on the amount of damages Rash owes for that breach and for judicial determination of whether, applying the law of Texas, the equitable remedy of forfeiture is appropriate.

In the present case, JVIC argued that the willfulness of Rash's breach of fiduciary duty and the value of the services Rash provided to JVIC in light of the breach of fiduciary duty should also be submitted for jury consideration.

Issue:

  1. Was JVIC correct in forwarding that willfulness of Rash's breach of fiduciary duty should be submitted to the jury?
  2. Was JVIC correct in forwarding that the value of Rash’s services should be submitted to the jury?

Answer:

1. Yes. 2. No.

Conclusion:

The district court held that the issue of willfulness should be submitted to the jury. Although the analytically similar claim for breach of the duty of loyalty is distinct from the claim for breach of fiduciary duty, the Court found that the contractual obligations were also distinct from those imposed by the fiduciary duty. Therefore, the first jury's implied finding of Rash's good faith with respect to substantial performance of the contract did not completely answer the question of whether he acted willfully with respect to his breach of fiduciary duty. Because there were factual questions surrounding the willfulness of Rash's breach of fiduciary duty, and since that question is one which has been singled out as being especially appropriate for jury determination, that question will be submitted for jury consideration by way of special interrogatory.

The jury's involvement in the equitable remedy of forfeiture is limited to resolving contested fact issues. Unlike the arguments on the other factors addressed in its papers, JVIC did not point out to the district court any contested facts related to the value of Rash's services. Because the same facts that supported JVIC's breach of loyalty claim also support the breach of fiduciary duty claim, and because breach of loyalty claim was fully tried to a jury, and because JVIC has not pointed to any additional factual disputes, the court found that there are no contested facts concerning the value of Rash's services to JVIC to be submitted to a jury.

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