Breach of Fiduciary Duty and Compensation Forfeiture
A breach of fiduciary duty occurs when an individual or entity fails to follow his, her or its fiduciary obligations. More often than not, it is used by a plaintiff as a legal basis for damages against someone who breaches his or her fiduciary duty (e.g., failure to manage property, misappropriation of funds, etc.). It can, however, also be used as a defense to a lawsuit in certain circumstances.
There are (as of this writing) at least two cases in Missouri addressing a situation in which a breach of fiduciary duty can result in a fiduciary forfeiting his/her compensation. Zakibe concerned whether a corporate officer was entitled to bonus and severance pay under a contract. Zakibe v. Ahrens & McCarron, Inc., 28 S.W.3d 373, 385 (Mo. Ct. App. 2000). The Court observed that breach of fiduciary duty is a defense to an action by an agent against a principal for compensation for services. Id. at 385. Sunset Acres related to a suit for breach of trust and fraud brought by a principal against an agent in a real estate transaction. Sunset Acres Motel, Inc. v. Jacobs, 336 S.W.2d 473, 483 (Mo. 1960). In both cases, the Courts found that a breach of fiduciary duty may operate as a bar to the claimed contractual compensation.
Separately, and by statute, the Court is authorized to withhold compensation to a trustee who breached his or her fiduciary duty. See Section 456.10-1001.2(8), RSMo (the Court may “reduce or deny compensation compensation” to remedy a breach of trust).
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