However, the Court further explained the Court of Appeals had addressed this issue “on a number of occasions.” The Court then went on to cite various opinions in which the Court of Appeals indicated nominal damages were sufficient to support a claim for breach of fiduciary duty. In an opinion issued on March 12, 2021, the Court noted “the issue of whether a plaintiff is required to prove actual damages in support of breach of fiduciary duty and constructive fraud claims” was one of first impression for the Court. The defendant appealed to the North Carolina Supreme Court. The trial court then pointed to a long line of case law in which courts have held an award of nominal damages is sufficient to support an award of punitive damages. Because “nominal damages” are in fact “damages”, the defendant missed its chance to argue an award of nominal damages could not support a claim for breach of fiduciary duty. He did not specifically argue the claim required proof of “actual damages”. The trial court indicated it was “skeptical” that the defendant was correct, but ultimately held it did not have to decide this issue because the defendant had not properly preserved it at trial.ĭuring the trial, the defendant argued a claim for breach of fiduciary duty required proof of some “injury” or “damages”. Moreover, he could not be punished if there was no underlying claim to support such an award. In short, the defendant argued that if there was no harm, there was no foul. The defendant argued the award of punitive damages could not stand in light of the jury’s determination that the company had not suffered any actual damages. The defendant wondered the same thing and filed a post-trial motion asking the court to set aside the verdict. How could a jury find there were no damages, but award $1 in nominal damages and $250,000 in punitive damages? You would be justified in questioning this odd result. ![]() However, the jury then went on to award the company $250,000 in punitive damages! Yikes. In essence, the jury said, ‘we don’t think the company was damaged by the defendant’s breach, but we’ll throw it a dollar in recognition of the fact the defendant did something wrong.’ ![]() The jury then awarded the company $1.00 in “nominal damages.” This individual claim was dismissed early on by the trial court, but don’t forget it because it will be important later.Īs for the derivative claim, the jury decided the defendant did breach his fiduciary duty to the company, but the company had not been damaged by the breach. This included two separate claims for breach of fiduciary duty: (1) one claim asserted “derivatively” on behalf of one of the companies, and (2) a separate claim asserted directly by the plaintiff on his own behalf. Compagna, the plaintiff brought various claims against his business partners arising out of their alleged efforts to dilute his interest in various limited liability companies. The North Carolina Supreme Court and the North Carolina Business Court have recently indicated this is not a correct assessment. In other words, if a defendant breached a fiduciary duty, but there was no harm resulting from his conduct, there was no claim. For example, the North Carolina Pattern Jury Instruction for a breach of fiduciary duty indicates a plaintiff must prove that “ the defendant’s proximately caused damage to the plaintiff.” ![]() It has typically been understood that a claim for breach of fiduciary duty required a plaintiff to prove some harm resulting from the breach. Such claims seek redress when officers, directors, managers and others who control business operations abuse their power or neglect their responsibilities. Breach of Fiduciary Duty in North Carolina Apby Jeremy Sugg No Harm, No Foul: Are actual damages required to punish a breach of fiduciary duty in North Carolina?Ĭlaims for breach of fiduciary duty are common in business and commercial litigation.
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