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Breach of Fiduciary Duty Explained

If you’ve ever had a business partner work against your company’s best interests, you know how financially devastating it can be for a growing business. If you trust someone to act in your best interests, and they’ve agreed to such an obligation, they may have a fiduciary obligation to you. If they then violate that obligation, you may have grounds for a breach of fiduciary duty complaint.

Establishing a Fiduciary Obligation

Before a fiduciary duty exists, the relationship must be defined. When one party places their trust in another party, and the other party fully acknowledges and accepts that responsibility, you have the groundwork for a fiduciary relationship. Legally, this relationship must be created via a contract or existing law, or through the establishment of a relationship that has been legally demonstrated to be fiduciary in nature. For the latter, for example, the relationship between an attorney, and their client is by definition fiduciary.

Examples of Fiduciary Obligations

There are several relationships in which a fiduciary duty is part of the professional agreement. Examples include:

  • An attorney’s duty to his client
  • Executor and heir
  • Trustee and beneficiary
  • Employer and employee
  • Accountant and client
  • Corporate board member and shareholder

What Defines a Breach of Fiduciary Duty

Someone may breach their fiduciary duty in a wide variety of ways, depending on the relationship. Generally speaking, a breach exists when the trusted party acts against a client’s best interests, acts in their own interests, or fails to disclose important information to a client. Consider, for example, an attorney who acts against their client’s best interests by striking a deal that suits their own interests. In another example, a CEO could be in breach of fiduciary duty if they purchase their best friend’s failing business. If this action financially hurts the company and is only done to benefit the CEO’s best friend, shareholders could file a complaint

To have a successful breach of fiduciary duty complaint, you must prove several elements:

  • The existence of the fiduciary duty. You must demonstrate that the fiduciary duty existed at the time of the alleged breach.
  • The other party’s breach. You must show that the other party acted in a way that violated the relationship.
  • Damages suffered. You must have proof of the damages you suffered as a result of the breach.

Determining Damages

Once it’s been established that a breach occurred, the court must determine how much the violated party deserves in damages. Everything comes down to the financial damages you suffer as a result of the breach. If a CEO’s decision to buy a failing business costs shareholders $100,000, they may sue for that amount of money. If an accountant’s breach of duty costs a client $2,000 in late tax fees and penalties, the client may try to recover $2,000 in court.

If you’ve been wronged by a business partner, client, or investor, you need to work with an experienced business lawyer who can help you get the compensation you deserve. Take the first step now and call Trembly Law at 305-431-5678.


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