What Is A Breach Of Fiduciary Duty?
A fiduciary is a person or organization that has knowingly accepted a fiduciary duty, or responsibility to act on behalf of another. In business, employees have a fiduciary duty to their employer, board members have a fiduciary duty to shareholders and partners have a fiduciary duty to the company and to one another. There are three criteria required for a legally binding fiduciary relationship:
- One party (the principal) places trust and confidence in another.
- The receiving party (the fiduciary) must be fully aware of that trust and confidence.
- The relationship must be created according to statute, by contract or as a relationship recognized by established case law.
A breach of fiduciary duty happens when actions are taken against the best interests of a principal. The scope of fiduciary duty varies according to the specific relationship between principal and fiduciary, but may include everything from fraud to failing to be completely transparent.
The Basics Of A Breach Of Fiduciary Duty Lawsuit
The first step in a breach of fiduciary duty complaint is to prove that a fiduciary relationship exists. The next step is to prove that the breach happened and that the principal received damages as a result. Damages not only include immediate financial losses, but also may include damages for mental anguish. Breach of fiduciary duty lawsuits often involve abusing positions of influence, embezzlement, self-dealing or withholding information.