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What Constitutes a Breach of Fiduciary Duty?

A fiduciary relationship is when one party is contractually bound to act only for the other party's interest. A fiduciary is accountable for the administration and security of an individual or company's funds and estate.

The two parties in a fiduciary relationship are:

· The fiduciary - the guarantor and protector who works only for the interest of the other party

· The beneficiary - the client or ward whose interest the fiduciary will work towards

There are different types of fiduciary relationships. Some of them are:

· An attorney and a client

· A guardian and a ward

· The board of directors and the shareholders

· An employer and their employee

· Business partners

A breach of a fiduciary contract is a legally punishable offense where the fiduciary intentionally fails to work for the other party's benefit. This can look like negligence, lack of transparency, or self-interest. In these cases, the fiduciary has broken the contract, and the beneficiary party can sue the fiduciary for damages or punitive damages for breach of fiduciary duty. Specific criteria must be met for the beneficiary to win the case.

What Makes a Breach Claim Legitimate?

1. A fiduciary relationship existed during the time of the breach meaning the party was legally or contractually bound to work for the interest of the other party

2. The beneficiary suffered damages

3. A link exists between the breach and the damages.

Any behavior that isn't in the client's best interest can be called a breach of contract, and if damages have occurred, the client has the right to sue.

Examples of Breach of Fiduciary Duty

1. An employee leaking a company's trade secrets with a competitor for cash.

2. A board of directors' carelessness or self-interest harming shareholders. An example of this would be if Twitter didn't accept Elon Musk's offer to sell Twitter at a high price. This would mean the board of directors tried to keep their position (their self-interest) over the interest of their shareholders

3. A business partner breach of fiduciary duty could look like a co-owner taking the funds from an estate they oversaw with their partner and using them for personal matters.

4. Breach of fiduciary duty in real estate can happen if an agent makes an under-the-table deal with the seller and doesn't disclose information to the buyer.

Breach Without Damages

There can also be a legitimate breach that doesn't cause any damages but is still cause for a lawsuit. Suppose a manager withdraws a certain amount of funds from the client's account and uses it in a casino. Then he deposits back the funds a week later.

In this case, the client hasn't suffered any apparent damages. However, the contract was still breached, and the client can press for punitive damages for breach of fiduciary duty.

What Can Happen in Court?

So, the breach has happened. And you brought the fiduciary to court. What now? Well, if you win. You can get several different types of compensation, including:

· A disgorgement where the fiduciary is forced to give back all the profits made by the illicit conduct.

· Equitable compensation where the fiduciary will have to compensate for the incurred losses on their own.

· A cancellation of the contract.

Call Us Today

If you've found yourself in a position where you feel like you've suffered because of the negligence of your fiduciary and would like to sue or have been sued yourself for punitive damages for breach of fiduciary duty, contact us now. Helping people navigate these kinds of cases is what we do best.

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