This Article criticizes the award of a penalty surcharge in the name of appreciation damages. Contrary to the statements in the Rothko opinions, neither precedent nor treatises offers clear support for the shocking awards made against Rothko's disloyal executors. Furthermore, even if appreciation damages were to be viewed, against the thesis here advanced, as an appropriate remedy for some kinds of fiduciary breach, the measure is inappropriate for cases which, like Rothko, involve hidden conflicts of interest. This is so because the threat of severe penalties in hidden-conflict cases adds unacceptable legal costs to honest administrations-costs that cannot be justified as a means of deterring undesirable conduct. Finally, Rothko illustrates how a court that surcharges a disloyal fiduciary for a sum exceeding amounts causally related to the breach or justified by the principle of restitution may unintentionally punish a merely negligent fiduciary. In sum, this Article urges that other courts repudiate Rothko: surcharges for disloyalty should not be governed by unique standards.
Richard V. Wellman,
Punitive Surcharges Against Disloyal Fiduciaries--Is Rothko Right?,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol77/iss1/9