886 F. Supp. 2d 14
D.D.C.2012Background
- Amtrak sued Veolia for aiding and abetting the breach of fiduciary duties by three Amtrak employees.
- A jury found the employees breached their duty, Veolia knew or substantially assisted, but did not prove Veolia caused Amtrak to lose the Tri-Rail contract.
- Amtrak sought disgorgement of Veolia’s profits earned to date (over $2.2 million) and a constructive trust on future profits.
- The court previously allowed disgorgement to be pursued but reserved the decision to the judge, not the jury.
- The court conducts an equity-based review under District of Columbia law and the Restatement of Restitution.
- The court denies Amtrak’s disgorgement claim as unwarranted, finding lack of causation and that profits are too remote.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether disgorgement of Veolia’s profits is available | Amtrak argues restatement-based disgorgement cures unjust enrichment. | Veolia asserts disgorgement is extraordinary and requires causation and proper attribution. | Disgorgement denied; not warranted. |
| Whether causation between Veolia’s breach and Veolia’s profits is required | Restatement allows disgorgement without proving injury if breach caused profits. | Causation is required and profits must be attributable to the breach. | Causation required; profits not shown to be attributable to the breach. |
| Whether Veolia’s profits are attributable to the breach or too remote | All Veolia Tri-Rail profits are attributable to the disloyal conduct. | Profits result from multiple factors beyond the breach and are too remote. | Profits not attributable; too remote to disgorge. |
| Whether the remedy should be constructive or punitive rather than restitutive | Disgorgement serves deterrence and restitution. | Disgorgement would be punitive and inappropriate where no compensatory loss is shown. | Disgorgement denied; remedy not warranted or proportionate. |
Key Cases Cited
- Remsen Partners, Ltd. v. Stephen A. Goldberg Co., 755 A.2d 412 (D.C. 2000) (restatement-based disgorgement discretion; rarely awarded)
- Smith–Haynie v. District of Columbia, 155 F.3d 575 (D.C. Cir. 1998) (equitable remedies limited; discretion governs disgorgement)
- Hendry v. Pelland, 73 F.3d 397 (D.C. Cir. 1996) (forfeiture of fees may be allowed where no damages shown; distinguishes from profits disgorgement)
- Bode & Grenier, L.L.P. v. Knight, 821 F. Supp. 2d 57 (D.D.C. 2011) (disgorgement rarely awarded; need strong justification)
- First City Fin. Corp. v. SEC, 890 F.2d 1215 (D.C. Cir. 1989) (disgorgement as equitable remedy; not punitive)
- Design Innovation, Inc. v. Fisher-Price, Inc., 463 F. Supp. 2d 177 (D. Conn. 2006) (disgorgement tied to profits as proxy for lost profits; limits)
- Griffith v. Barnes, 560 F. Supp. 2d 29 (D.D.C. 2008) (disgorgement as remedial, not punitive)
- In re Randolph-Bray, 942 A.2d 1142 (D.C. 2008) (limits on restitution for fiduciary breaches; non-applicability to this case)