What Is A Breach Of Fiduciary Duty?
Trust drives business. At Jordan & Zito Attorneys at Law, our attorneys have nearly 70 years of combined legal experience, and we see the damage caused when someone designated as a fiduciary breaks that trust.
A fiduciary is a person or organization that has knowingly accepted a fiduciary duty – the 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.
Once the parties establish a binding relationship, high standards of loyalty and care bind the fiduciary. These duties apply to many roles inside and outside an organization.
Fiduciary Roles And Breaches
Fiduciary relationships go beyond high-level executives. They exist across the corporate structure and extend to outside partners. Internal fiduciaries are often officers, directors and majority shareholders in private corporations. External fiduciaries include agents, trustees or financial advisers. These people manage assets or sensitive information. Regardless of title, the core obligation remains: the fiduciary must put the principal’s interests above their own.
Breaches happen often in competitive business environments. Common examples include:
- Self-dealing: A partner directs a profitable contract to a separate company they own.
- Misappropriation of funds: An officer uses company assets to pay for personal items.
- Usurping corporate opportunity: A director takes a profitable business deal for themselves. They should have offered it to the corporation.
- Insider trading: A person uses non-public information to gain money in the stock market.
These actions are clear violations. However, proving a breach in court often depends on the details of the specific relationship.
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.
Contact The Experienced Business Lawyers At Jordan & Zito
A fiduciary might betray your confidence. The financial and reputational damage can happen fast. You need legal counsel that acts immediately. We help stop the loss and recover what is yours. Call Jordan & Zito Attorneys at Law at 312-489-8174. You can also fill out our online form to set up an initial consultation. We review the facts of your case, identify the breach and outline a strategy to hold the responsible parties accountable.