In Kaye v. Rosefielde, the New Jersey Supreme Court held that disgorgement of a disloyal employee’s salary can be an appropriate remedy for breach of loyalty claims even in the absence of proof of actual economic loss. In an unanimous decision, the Court noted the trial court’s broad discretion to fashion equitable remedies, including disgorgement of an employee’s salary, and instructed lower courts that the amount of the disgorgement should be limited to the compensation that the employee received during the employee’s period(s) of disloyalty.
Plaintiff Bruce Kaye was the controlling principal of three entities that sold and managed several timeshare interests in properties in Atlantic County, New Jersey. In 2002, Kaye hired Defendant Alan Rosefielde and for about two years, Rosefielde served as Chief Operating Officer and General Counsel for two of Kaye’s timeshare entities. Approximately two years later, Kaye terminated Rosefielde after he discovered that Rosefielde had, among other things, engaged in numerous, egregious instances of “self-dealing,” including the diversion to himself and to several of his companies interests in a number of Kaye’s investment opportunities. Kaye then brought suit against Rosefielde and his companies, asserting claims for breach of fiduciary duty, fraud, legal malpractice, unlicensed practice of law, and breach of the duty of loyalty.