Breach of Fiduciary Duty
When one party has a legal duty to act in a way that solely benefits another party, the party with the legal duty to act is known as a fiduciary. The party to whom the fiduciary owed the duty is known as the principal or beneficiary. In a fiduciary relationship, the fiduciary owes a heightened duty of care toward the beneficiary. The trust the fiduciary is burdened with is supposed to exist between the parties. If the fiduciary breaches its duties, the fiduciary may be personally liable for any damages to the beneficiary.
Our firm has extensive experience representing fiduciaries and beneficiaries helping to ensure their rights are protected and the action is favorably and efficiently resolved.
Understanding When a Fiduciary Duty Exists
Fiduciary duties apply when there is a special relationship of trust between the parties, such as a trustee and beneficiary, executor and heir, attorney and client, guardian and ward, and partners in a business.
Corporate officers and directors also have fiduciary duties to their company and its shareholders. In some cases, majority shareholders may also have duties to minority shareholders. In a corporate setting, parties must look at applicable state law and the corporation’s documents – by-laws or shareholder agreement to determine whether and when a fiduciary duty exists between parties. With partnerships and Limited Liability Companies, parties should also look to state law and partnership and operating agreements.
Types of Fiduciary Duties
Several types of duties may apply to a fiduciary:
- Duty of Care: Fiduciaries have a duty to inform themselves and analyze all relevant information reasonably available to them before making a decision that affects the beneficiary.
- Duty of Loyalty: A fiduciary must put the beneficiary’s best interests first and not the fiduciary’s personal interests.
- Duty of Good Faith: This duty requires that fiduciaries exercise their duties in compliance with the law.
- Duty of Confidentiality: Fiduciaries must protect the confidentiality of information relating to the beneficiary.
- Duty of Prudence: When acting on behalf of the beneficiary, the fiduciary must exercise a high level of care, skill, and caution.
- Duty to Disclose: A fiduciary has a duty to disclose all relevant information that may affect the fiduciary’s ability to carry out its duties or affect the best interests of the beneficiary.
These duties may not all apply to all fiduciaries. Fiduciary duties differ depending on the type of beneficiary, state law, and a company’s legal documents.
Breach of Fiduciary Duty
When a fiduciary fails to uphold its obligations, a breach of fiduciary duty may occur resulting in liability. Common examples of breaches of fiduciary duty include:
- Self-dealing
- Theft of corporate opportunity
- Failure to reveal a conflict of interest
- Commingling the fiduciary’s and beneficiary’s funds
To establish a case against the fiduciary for breach, the beneficiary must show the existence of a fiduciary relationship, a breach of the fiduciary’s duty, the beneficiary suffered damages, and the fiduciary’s breach caused the damages. If liability is found, the fiduciary may have personal liability for compensatory and punitive damages. In some cases, the fiduciary may also be subject to professional sanctions such as loss of their license or other disciplinary action.
How We Help
We advise fiduciaries regarding their legal obligations so they avoid or minimize the risk of breaching their duties. If a problem arises, regardless of which side we are representing, our attorneys advocate for our client’s best interests in negotiations and litigation. At every stage, we help clients determine the most cost-effective and efficient way to achieve a positive result in their case.
If you have concerns about acting as a fiduciary or you are a fiduciary or beneficiary facing the threat of litigation, contact us for a consultation today.
CONTACT US
*Indicates Required Field
HOW WE CAN HELP
PRACTICE AREAS
Transactional and Corporate Law
Securities and Finance
Tax Planning and Tax Controversies
Commercial Litigation
Mergers and Acquisitions
RELATED POSTS
What are the Fiduciary Duties Owed by Officers and Directors?
In a corporation, the corporate officers and directors owe many fiduciary duties to the shareholders and the company. This means they legally have to act in the best interests of the company. Among the primary fiduciary duties owed by officers and directors are the...
New York Commercial Litigators
Discourage litigation. Persuade your neighbors to compromise whenever you can. As a peacemaker, the lawyer has superior opportunity of being a good man. There will still be business enough.” — Abraham Lincoln
In business, it’s a given that things won’t always go as planned. No matter how well-drafted a document may be, disputes invariably arise. Those disputes need to be addressed and practically worked out. Our basic philosophy is inspired by Abraham Lincoln – before rushing to court our commercial litigation lawyers look for ways to help our clients compromise, resolve disputes to avoid going to court.
Our tempered approach minimizes the burden on our small-cap clients. Our clients have businesses to run and will often be unprepared for the distraction or expense of litigation. All too often the only winners in a court will be the lawyers who collect their fees, while plaintiffs and defendants both end up dissatisfied with the results.
Sometimes compromise does not work and there is no choice but to litigate.
When that happens, Brinen & Associates is always ready for the fight. Our New York-based commercial litigators regularly represent our clients in State and Federal courts nationwide.
We are staunch advocates and gladiators in suits. Each litigation is approached strategically. We first work with our clients to define their goals and objectives up front, and then develop a tactical plan to best achieve them.
We stay true to our firm philosophy by staffing leanly and avoiding unnecessary expenses so our clients are better positioned to endure the rigors of a long campaign.
Commercial Litigation Experience:
Over the years, our commercial litigation lawyers have successfully litigated many matters for our clients nationally and particularly in and around New York such as:
- Complex commercial litigation, involving disputes relating to corporate ownership and governance including defending against shareholder class actions and derivative actions;
- “Corporate divorces” with a particular emphasis on closely held or family-owned businesses, shareholder agreements, franchisee-franchiser agreements, joint ventures, and trademark and copyright;
- Securities and finance litigation involving federal and state actions and litigation of contested acquisitions and mergers, public offerings, takeovers, and general securities fraud;
- Employment disputes involving the prosecution or defense of wrongful termination, discrimination, and harassment claims, and unfair competition matters, such as the recruitment of a competitor’s employees, the protection of customer lists and trade secrets, the theft of corporate opportunities, and the enforcement of non-disclosure and restrictive covenants; and
- Other complex commercial litigation relating to tax, commercial real estate, and estates. We have regularly represented corporate clients who operated REITs and REOCs in the commercial real estate sector.