Punitive Damages Against Trustees?

Research Handbook on Fiduciary Law (D. Gordon Smith & Andrew S. Gold, eds., Forthcoming)

UCLA School of Law, Law-Econ Research Paper No. 16-17

20 Pages Posted: 8 Nov 2016 Last revised: 17 Nov 2016

Date Written: August 17, 2016


This essay considers whether punitive damages should be awarded against trustees. It concludes that a satisfactory justification for awarding them has not been given. Seen from the rightful-position perspective, punitive damages fail to support the plaintiff’s forward movement to the rightful position. They are also inconsistent with the scope of liability in trust law. From the perspective of optimal deterrence, punitive damages would increase deterrence for those who need it least (risk-averse internalizers), and decrease deterrence for those who need it most (risk-seeking externalizers). From the viewpoint of law and equity, punitive damages in trust law would be an idiosyncrasy requiring an explanation, whereas no explanation is needed for their absence. Even if punitive damages were used selectively, they would likely be overused relative to the constructive trust. Indeed, the uncanny coinciding of the rise of punitive damages against trustees with the decline in American lawyers’ familiarity with the constructive trust raises the possibility that it is not greater knowledge, but greater ignorance, that led to the development. Whatever the reason for this rise, the best verdict that can be rendered for punitive damages against trustees is “not proven.”

Keywords: trustees, punitive damages, equity, constructive trust, restitution, optimal deterrence, risk aversion, remedies, rightful position, fiduciary law, trust law

JEL Classification: K39, K40

Suggested Citation

Bray, Samuel L., Punitive Damages Against Trustees? (August 17, 2016). Research Handbook on Fiduciary Law (D. Gordon Smith & Andrew S. Gold, eds., Forthcoming); UCLA School of Law, Law-Econ Research Paper No. 16-17. Available at SSRN: https://ssrn.com/abstract=2862827

Samuel L. Bray (Contact Author)

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States

HOME PAGE: http://law.nd.edu/directory/samuel-bray/

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