In Kaye v. Rosefielde, a case alleging fraud and malpractice against a former general counsel, the New Jersey Supreme Court recently heard oral arguments on whether the Appellate Division erred in affirming that economic damages are a necessary prerequisite for disgorgement of the general counsel's salary. The appellants have argued to the contrary that disgorgement is appropriate in the absence of economic damages, so long as the employee's disloyal conduct negatively impacted the employer's income or posed a serious threat to the ability of the business to function. Though it is unclear what the Supreme Court will decide, Chief Justice Rabner noted during oral argument that previous case law may have left open the possibility of disgorgement without a showing of economic damages. Stay tuned to see what happens.
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