Breach of Fiduciary Duty, Overview
Fiduciary Duty is when a party has a responsibility towards the bests interests of another party, for instance, the Board of Directors of a publically traded corporation has a fiduciary duty to their shareholders. When the party violates that duty, it is a breach of fiduciary duty and can result in legal proceedings in civil court.
Additional examples of fiduciary relationships include the relationship between an attorney and their client, a principal’s relationship to an agent, and a trustee’s obligation to a beneficiary. These relationships have legal obligations in principle, similar to, the legal obligation of the hotel management to ensuring the safety of their guests.
The violation of fiduciary duty is a business tort, with resolution in civil court.
Breach Of Fiduciary Duty Quick Links
Call Florida Business Litigation
Overview of trustee relations:
A fiduciary relationship at its simplest exists when a party places trust and confidence in another party with the full knowledge of that party. The person or business that is obligated to protect the other party is the trustee. For example, lawyers are their client’s trustees. This duty is typically only considered legally enforceable when the relationship is established by law or by the factual circumstances of the relationship (often based on established case law).
The statutory fiduciary duties include, for example, those owed by a business partner to its other partners or the obligation of the board of directors to represent shareholders’ interests. Where the trust is not implied by a statute, it can be expressly stated in a contract (along with the specific duties owed).
What Constitutes a Fiduciary Breach?
While there are countless ways to breach one’s fiduciary duty, they all tend to boil down to three things.
- Did the fiduciary duty exist when the dispute occurred
- What was the breadth of the obligation
- Were the duties breached within the breadth or scope of that relationship?
For example, a company CEO organizes an agreement to buy a competing company, that just happens to belong to his best friend with an unjustifiably high purchase price. If the acquisition is not in the best interest of the purchaser, and in fact hurts their bottom line, shareholders may proceed against a lawsuit against trustees.
Fiduciary Breach Elements
You must demonstrate the following elements to prevail in a claim for Fiduciary Breach:
- Duty – One must prove that defendant actually had a fiduciary duty at the time and the nature of that Fiduciary Duty.
- Breach – The defendant has somehow failed to perform on their fiduciary duty.
- Damages – The plaintiff must have been damaged by the breach. A Breach that does not result in damages cannot proceed.
Fiduciary Duty Breach: Remedies
Plaintiffs that prevail in Fiduciary Duty Breach lawsuits typically recover actual damages, and can also recover punitive damages if the infringement can be shown to have malice or fraud.
Calculating the exact amount of damages, and even proving that a breach exists, as opposed to poor business judgment can often be difficult. This is where an experienced litigation attorney comes in. Allowing a Fiduciary Duty to be breached without challenge can have catastrophic implications for your business’s finances and reputation.
