Breach of Fiduciary Responsibilities

Corporate directors and management owe fiduciary duties to the stakeholders and shareholders of corporations, limited liability companies, and other forms of business entities. The same is true for partners in partnerships and joint ventures.

Fiduciary duties require the person or entity to act in good faith with loyalty and care to facilitate business dealings on behalf of the entity and to safeguard assets and other valuable business resources. The fiduciary duty also limits self dealing and usurpation of business opportunities that would otherwise belong to the entity.

What is a Breach of Fiduciary Duty

As mentioned above, fiduciary duty is the duty owed by a party to other stakeholder, parties and individuals involved in the running of the business. Fiduciary duty basically holds its elements in the trust. A breach of this duty is a breach of the trust that was placed in the individual by the rest of the parties and stakeholders.

Different relationships in the context of a business can enjoy a fiduciary relationship with one another. To put it into perspective, some examples of fiduciary relations include:

  • A relationship between the Shareholders and the Directors
  • A relationship between the trustee and the beneficiary
  • A relationship between the clients and a bank

What are the functions involved in a Fiduciary Duty?

When two parties have established a fiduciary duty amongst one another, they have relationship of trust between them. Violation of that duty of trust is when one of the parties acts against the interest of the other party. The primary responsibilities of parties who have a fiduciary duty include:

  • The fiduciary needs to make sure that the treatment of all the people they owe a duty to be done equally. Neither party can be preferred over the other.
  • The fiduciary needs to be careful when handling assets, information or interests of the beneficiary. Utmost care needs to be recognized because a breach of fiduciary duty can be fatal for a business.
  • The person who is supposed to take care of the duty, i.e. the fiduciary needs to act in the interests of the beneficiary at all times.

These are only some of the duties that a fiduciary holds towards the beneficiary. Sometimes in contracts, the duty isn’t as clearly defined and it needs to either be assumed or extracted from the essence of the contract or agreement subjectively. As a good business lawyer will tell you, for a breach of fiduciary duty to exist, the courts need to be shown that there was a fiduciary relationship existing between the two parties.

Grounds for the Breach of Fiduciary Duty

Some of the actions taken by the fiduciary which can result in a breach of fiduciary duty include:

  • Negligence use of the funds entrusted
  • Theft or misappropriation of funds
  • Allowing someone else to commit a breach of the fiduciary duty
  • Committing fraud
  • Not keeping the beneficiaries in the loop about their interests
  • Lack of loyalty to the beneficiaries
  • Situations where a conflict of interest arises

In the case that either of these grounds for breach is present, the beneficiary or the party, whose trust has been breached can take the other party to court and seek a remedy equaling their damage.

Remedies to a Breach of Fiduciary Duty

If you decide to take a fiduciary, which has caused a breach to court, you are looking for certain remedies to allay your damage. Some of the remedies that a court can award include:

  • Stopping the Fiduciary to collect fees payable for their services as a fiduciary
  • If the breach is proven, the court can award punitive damages to be paid by the fiduciary
  • The fiduciary can be removed from their place on the court’s order.

What can you do?

If you want to take a fiduciary that has breached your trust to court or are looking for a plausible defense against the same accusation, Nowland Law is there to help you. The law firm is experienced in litigating cases involving breach of fiduciary duties, self dealing, and usurpation of corporate assets. Contact Nowland Law for a zero commitment and zero cost Case Evaluation.

Business Litigation Lawyers in Orange County California