In Holliday v. Weaver, clients obtained a fee forfeiture award against an attorney for breach of fiduciary duty related to the improper use of settlement proceeds. No. 05-15-00490-CV, 2016 Tex. App. LEXIS 7264 (Tex. App.—Dallas July 7, 2016, no pet. history). After a bench trial, the trial court found for the clients and further found that the appropriate remedy for the attorney’s breach of fiduciary duty was “complete disgorgement of Holliday’s fee including certain expenses” which totaled $10,786.84. The trial court also awarded almost $3,000 in prejudgment interest on the fee forfeiture award, and the attorney appealed.

The court of appeals affirmed the prejudgment interest award. The court held that “[i]nterest is awarded as compensation for the loss of use of money” and that “[i]t is intended to fully compensate the injured party, not to punish the defendant.”  “An award of prejudgment interest may be based on either an enabling statute or general principles of equity.” Further, the court held that there is no statute authorizing an award of prejudgment interest on amounts recovered for breach of fiduciary duty. Therefore, the court held that “[w]here no statute controls, the decision to award prejudgment interest is left to the sound discretion of the trial court.”

The attorney argued that prejudgment interest may not be awarded on fee forfeiture awards because those are allegedly not compensatory damages. The court disagreed and held that “[w]here there has been a clear and serious violation of a fiduciary duty, equity dictates not only that the fiduciary disgorge his fees, but also all benefit obtained from use of those fees,” which included prejudgment interest. The court concluded: “Because the award of prejudgment interest in this case fits the purpose of such interest, which is to fully compensate the Weavers, we conclude the trial court did not abuse its discretion in granting the award.” The cited the following cases for further support: Dernick Res., Inc. v. Wilstein, 471 S.W.3d 468, 487 (Tex. App.—Houston [1st Dist.] 2015, pet. filed) (allowing prejudgment interest on fee forfeiture award in a trustee’s breach of fiduciary duty case); Lee v. Lee, 47 S.W.3d 767, 800 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) (same).

Tags: disgorgement, prejudgment interest
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Photo of David Fowler Johnson David Fowler Johnson

[email protected]
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary…

[email protected]
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. Read More

David’s financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class action, RICO actions, usury, various tort causes of action, breach of fiduciary duty claims, and preference and other related claims raised by receivers.

David also has experience in estate and trust disputes including will contests, mental competency issues, undue influence, trust modification/clarification, breach of fiduciary duty and related claims, and accountings. David’s recent trial experience includes:

  • Representing a bank in federal class action suit where trust beneficiaries challenged whether the bank was the authorized trustee of over 220 trusts;
  • Representing a bank in state court regarding claims that it mismanaged oil and gas assets;
  • Representing a bank who filed suit in probate court to modify three trusts to remove a charitable beneficiary that had substantially changed operations;
  • Represented an individual executor of an estate against claims raised by a beneficiary for breach of fiduciary duty and an accounting; and
  • Represented an individual trustee against claims raised by a beneficiary for breach of fiduciary duty, mental competence of the settlor, and undue influence.

David is one of twenty attorneys in the state (of the 84,000 licensed) that has the triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization.

Additionally, David is a member of the Civil Trial Law Commission of the Texas Board of Legal Specialization. This commission writes and grades the exam for new applicants for civil trial law certification.

David maintains an active appellate practice, which includes:

  • Appeals from final judgments after pre-trial orders such as summary judgments or after jury trials;
  • Interlocutory appeals dealing with temporary injunctions, arbitration, special appearances, sealing the record, and receiverships;
  • Original proceedings such as seeking and defending against mandamus relief; and
  • Seeking emergency relief staying trial court’s orders pending appeal or mandamus.

For example, David was the lead appellate lawyer in the Texas Supreme Court in In re Weekley Homes, LP, 295 S.W.3d 309 (Tex. 2009). The Court issued a ground-breaking opinion in favor of David’s client regarding the standards that a trial court should follow in ordering the production of computers in discovery.

David previously taught Appellate Advocacy at Texas Wesleyan University School of Law located in Fort Worth. David is licensed and has practiced in the U.S. Supreme Court; the Fifth, Seventh, and Eleventh Federal Circuits; the Federal District Courts for the Northern, Eastern, and Western Districts of Texas; the Texas Supreme Court and various Texas intermediate appellate courts. David also served as an adjunct professor at Baylor University Law School, where he taught products liability and portions of health law. He has authored many legal articles and spoken at numerous legal education courses on both trial and appellate issues. His articles have been cited as authority by the Texas Supreme Court (twice) and the Texas Courts of Appeals located in Waco, Texarkana, Beaumont, Tyler and Houston (Fourteenth District), and a federal district court in Pennsylvania. David’s articles also have been cited by McDonald and Carlson in their Texas Civil Practice treatise, William v. Dorsaneo in the Texas Litigation Guide, and various authors in the Baylor Law Review, St. Mary’s Law Journal, South Texas Law Review and Tennessee Law Review.

Representative Experience

  • Civil Litigation and Appellate Law
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