What is Breach of Fiduciary Duty?

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What is Breach of Fiduciary Duty?

A fiduciary duty is a responsibility to act in the best interests of someone or something else. It is made legally binding either by statute, case law, or by contract. A company’s Board of Directors has a fiduciary duty to shareholders; an attorney has a fiduciary duty to his or her clients. When a breach of fiduciary duty occurs, it means that the fiduciary — someone who has responsibility for the management and/or protection of another person or entity — behaves in a way that is not in the best interests of that person or entity.

How a breach of fiduciary duty may occur

There are a number of ways that a breach of fiduciary duty can occur, but it basically involves the following:

  • Whether a fiduciary duty existed at the time of the alleged breach;
  • The duties of the fiduciary and scope of the relationship;
  • Whether the duties were breached within the scope of the relationship.

Elements of a breach of fiduciary duty claim

There are three elements that must be proven to prevail in a breach of fiduciary duty claim:

  1. Duty. The fiduciary had a duty to the person or entity bringing a breach claim. The exact nature of that duty — good faith, fair dealing, full disclosure, loyalty, etc. — depend on the facts of the case.
  2. Breach. The fiduciary failed in their duty in some way — conflict of interest, acting in bad faith, neglecting responsibilities, misappropriating funds, etc.
  3. Damages. The person or entity to which the fiduciary owned a duty has suffered damages because of the breach.

Potential consequences of a breach of fiduciary duty

Breaching a fiduciary duty is serious and when it leads to litigation, there could be costly consequences, including:

  • Compensatory damages — a financial award to compensate the victim(s) for any losses incurred as the result of the breach.
  • Punitive damages — if the breach involved either fraud or malice, punitive damages may be awarded.
  • Damage to professional reputation — professionals found to have breached a fiduciary duty can suffer long-lasting damage to their professional reputation and in some cases may lose a professional license or accreditation.

Williams Mestaz, L.L.P., has the experience and reputation that you want when you are dealing with a business-related lawsuit. We are here to obtain the best possible outcome for your situation. Do not hesitate to contact Williams Mestaz, L.L.P., at (602) 256-9400, and see how we can help you resolve your legal matter.

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