Understanding Breach of Fiduciary Duty in Business Litigation

by | Apr 7, 2014 | Business Litigation

A fiduciary relationship can arise in a wide variety of circumstances. In a business relationship, the person managing the business affairs is the fiduciary, while the party who places his trust in the fiduciary is known as the principal. Partners in a partnership owe a fiduciary duty to one another, for example, as do officers and directors in a corporation.

The fiduciary relationship is a common topic in business litigation. Specifically, the breach of such is a common claim in lawsuits where a relationship of trust is understood to exist between parties. The relationship of trust is predicated upon the various duties that the fiduciary is expected to fulfill in his relationship with the principal.

Types of Duties Owed in a Fiduciary Relationship

Perhaps the most important duty owed by a fiduciary is that of loyalty. The fiduciary is charged with acting in the best interests of the principal, being certain not to undertake any actions that can harm the business affairs of the principal. Another key duty owed by a fiduciary is the duty of care. The duty of care requires that a fiduciary acts prudently, or as an ordinary, reasonable person would act in managing his own affairs. In other words, the fiduciary manages the principal’s affairs in the same manner that he would manage his own affairs.
Fiduciaries may also be bound by a duty of obedience, which requires the fiduciary to act only within the limits of the authority set by the fiduciary relationship.
Many other duties owed by the fiduciary are outgrowths of the duties of loyalty, care and obedience – fiduciaries are expected to provide full disclosure of material information related to business affairs, are expected to refrain from self-dealing and conflicts of interest, and act with the utmost integrity when it comes to the business affairs of the principal.
Unfortunately, business relationships can suffer greatly when a fiduciary fails to fulfill one or more of his duties.

Breach of Fiduciary Duty Claims

In order to recover in a breach of fiduciary duty claim, the principal must prove:

  1. The existence of a fiduciary duty – Certain types of fiduciary relationships are established by law. In most circumstances, for example, directors, officers, and partners are typically determined to be fiduciaries.
  2. A breach of that fiduciary duty – Evidence supporting this element will vary depending on which duty is alleged to be breached. For example, a partner who engages in a transaction for his own benefit rather than for the benefit of the partnership may be in violation of the duty of loyalty.
  3. Damage caused by the breach ­– Damages can be awarded for a variety of losses, including lost profits, lost business opportunities , and may even include punitive damages.

Consult With a Trusted Attorney for Your Business Litigation Needs

If you believe you have a breach of fiduciary duty claim, it is important that you discuss your options with a respected business law attorney. At the Law Firm of Peter M. Feaman, P.A., we have over 30 years of experience providing top-notch legal services to our clients.. Contact us today at 561-469-0019 to set up your initial consultation with a trusted Florida business litigation lawyer.


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