This paper examines the consequences of an agent's breach of the fiduciary duty of loyalty. These consequences are underexplored in academic literature, in contrast to rationales for fiduciary duties more generally. The consequences of an agent's disloyalty are, moreover, not uniform across jurisdictions. The paper begins by differentiating between the meaning and consequences that the law ascribes to agency and its meaning in other academic disciplines, including economics and philosophy. It then considers the extent to which principles derived from contract and tort law can account for the consequences that courts assign to agents' disloyal conduct and concludes that a more complex doctrinal and normative vocabulary is required. The paper focuses more specifically on remedies available to a principal when an agent acts disloyally, then turns to an agent's duty to disclose prior misconduct to the principal and then to the impact of disloyalty on contractual provisions and to the consequence for organizations that carry out agency functions when employees of the organization indulge in self-interested fiduciary transgressions. These specific topics are addressed (often with divergent outcomes) by recent or well-known cases and provide good vehicles for analysis of the implications and limitations of more general questions about the nature and function of the fiduciary of loyalty. In general, the remedies available to a principal when an agent is disloyal are varied, distinctive, and in some respects ferocious, all qualities the paper argues are helpful in understanding the theoretical and functional position of fiduciary duties of loyalty.
Deborah A. DeMott, Disloyal Agents, 58 Alabama Law Review 1049-1067 (2007)