Opinion ID: 783032
Heading Depth: 2
Heading Rank: 3

Heading: Remedy of Disgorgement

Text: 10 The employees also challenge the district court's order requiring them to disgorge their profits from the County of Hawaii contract. We hold that the district court properly ordered disgorgement. 11 The Restatement supports the district court's award of disgorgement as a remedy for breach of the duty of loyalty. It provides, If an agent receives anything as a result of his violation of a duty of loyalty to the principal, he is subject to a liability to deliver it, its value, or its proceeds, to the principal. Restatement (Second) of Agency § 403. This rule applies where the agent makes a profit from competing with the principal. See Restatement (Second) of Agency § 403 cmt. a. Although there are few reported cases addressing the appropriate remedy, those we have found have also required employees to turn over profits received as a result of breaching their duty of loyalty. See Chernow v. Reyes, 239 N.J.Super. 201, 570 A.2d 1282, 1285 (1990); W. Elec. Co. v. Brenner, 41 N.Y.2d 291, 392 N.Y.S.2d 409, 360 N.E.2d 1091, 1094 (1977). 12 The employees contend that the district court erred in awarding disgorgement, arguing that EBI's exclusive remedy is the procedure in the Hawaii Public Procurement Code, Hawaii Revised Statutes chapter 103D, governing procurement. This argument is unpersuasive. Although section 103D-704 of the Procurement Code provides that the Code is the exclusive means available for persons aggrieved in connection with the award of public contracts, Hawaii courts do not read the Procurement Code so literally or so broadly. See CARL Corp. v. Haw. Dep't of Educ., 85 Hawai'i 431, 946 P.2d 1, 29(1997). EBI's claim for breach of the duty of loyalty is not the type of grievance with which the Procurement Code is concerned. The Procurement Code addresses how Hawaii agencies are to administer public bidding to ensure that the procurement system functions fairly and with adequate accountability and fiscal responsibility. See id. EBI's claim does not concern that process, nor will the outcome of the case have any effect on the award of this contract. The Procurement Code is not relevant to EBI's claim. 13 The employees similarly contend that the district court lacked primary jurisdiction over this dispute. Under the doctrine of primary jurisdiction, the court may suspend review of a claim if its resolution involves issues that have been placed within the jurisdiction of an administrative body. See United States v. W. Pac. R.R. Co., 352 U.S. 59, 62, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956). This dispute is not within the jurisdiction of any state administrative agency because, as we have seen, it does not involve the administration of the contracting process. There is no primary jurisdiction in any state agency. 14