Fiduciary duty is a legal term that described the responsibility that one individual or entity has to another to act in another’s financial interest. Though a fiduciary duty refers to living up to the trust that one person or entity places in another to live up to that standard, it also describes a legal relationship and obligation that the fiduciary knowingly accepts and commits to.
A fiduciary can be an attorney, a financial advisor, a trustee, a guardian, or even an employee, all of whom are expected to be loyal to their client or the person on whose behalf they are acting. When they fall short – and especially if they act unethically – it can represent a breach of fiduciary duty.
To prove a breach of fiduciary duty, there are four elements that must exist. They are:
- Duty – There must be proof that a fiduciary relationship existed
- Breach – Evidence that the fiduciary violated their responsibility and acted in a way that was contrary to the interests of the person or entity to whom they had a duty
- Damages – There must be provable damages that resulted from the breach
- Causation – The person whose interests were betrayed must be able to show that the breach of duty specifically and directly caused the damages that they incurred
There are multiple ways in which a fiduciary can breach their duty, and many of them depend upon the specific role that the fiduciary plays. These include:
- Self-dealing by a partner
- An employee can publish or share their employer’s trade secrets or act on behalf of a competitor
- Misuse or mismanagement of funds or assets by a partner
- A partner’s negligence or malfeasance
- An employee or partner damaging the company’s reputation or goodwill through illegal or unethical behavior
- Failure to reveal essential information to an employer or partner
- Board of directors denying shareholders access to records or the ability to exercise voting rights
- Refusal by a board to pay dividends
- Trustee or estate executor embezzling estate funds
- Attorney failing to reveal conflict of interest to a client
In some cases, a breach of fiduciary duty can occur without damages being incurred. An example of this would be if the fiduciary used their client’s funds for personal purposes, then replaced the funds with the client suffering no actual losses. In this case, the court may provide a nominal award.
If you believe that you have been the victim of a breach of fiduciary duty, we can help. Contact us today to set up a time for us to meet.