Breach of Fiduciary Duty Examples

Examples of Breach of Fiduciary Duty

Trust is important. There is no doubt about that. Whether it’s involving a business relationship or managing as estate, the breaking of that trust is called a “breach of fiduciary duty” and can lead to all manner of problems. Discovering that there have been suspect legal or financial incidents among partners, managers, employees, or trustees can result in considerable burdens for businesses and individuals.

If you believe a breach of fiduciary duty has occurred, you’ll want to contact an experienced litigation attorney right away to guide you through your options.

Before that, however, it helps to know a bit more about what a breach of fiduciary duty involves and how to recognize it when it happens.

Understanding Breach of Fiduciary Duty

In the simplest terms, a breach of fiduciary duty occurs when an individual or entity assigned a legal responsibility to act in the interests of another person or entity fails to do so.

Generally, claiming incidents of breach of fiduciary duty comes down to four main elements: Duty, breach, damages, and causation.

First, one has to establish that a fiduciary duty existed. This means demonstrating a special relationship of trust between you and the other party. This could include relationships between employer and employee, attorney and client, or trustee and beneficiary.

Then you have to identify the breach and show how the other party violated their fiduciary duty by doing something that worked against your interests.

Next, you must demonstrate how you have suffered a loss due to a breach of fiduciary duty. Failure to show how you have been affected may keep you from recovering any damages.

Finally, it would help if you made the connection between the breach of fiduciary duty and the damages you suffered. Damages unrelated to the violation or that were not a foreseeable result of the breach would not be covered.

Examples of Breach of Fiduciary Duty

To help recognize a breach of fiduciary duty when it occurs, we’ve listed a few of the most common examples:

Employers and Employees

This typical fiduciary relationship is also often described in terms of agent and principal. The breach occurs when the agent (employee) fails to further the principal (employer) interests or acts in apparent defiance of those interests.

Common examples of an agent breaching a duty to a principal include:

• Personally profiting at the employer’s expense
• Sharing or selling trade secrets
• Improper use of employer funds
• Failing to follow the directions
• Carelessness with duties

While employees are considered agents of their employer, non-employees, such as independent contractors, can also be regarded as agents if they agreed to act on behalf of a company or individual.

Business Partnerships

Building and maintaining a business with another party not only relies on cooperation but a sincere level of trust. Partners need to be confident that everyone will do their part to help the company succeed. A situation in which you have a partner who is excessively careless, fiscally irresponsible, or dishonest is something that needs to be addressed immediately.

Things to look out for include:

• Exposure of the business or other entity to liability through negligence or criminal behavior
• Damage to the reputation of the business or entity
• Mismanagement of company funds or assets, including cases of bribery, theft, or embezzlement
• The hiding or delaying critical documentation or information from partners
• Redirection of business opportunities for individual profit or benefit
• Failure to disclose conflicts of interest

Board of Directors

A corporation’s board of directors is elected by the shareholders and are expected to make decisions on behalf of the company. The board members have a fiduciary duty to act in the interests of the company’s shareholders. In many ways, the relationship that board members have with each other and with shareholders is similar to the relationship and responsibilities you’d see existing between business partners.

In addition to the examples associated with business partners, you may also want to be on the lookout for the following among board members suspected of breach of fiduciary duty:

• Voting for excessively generous compensation for themselves
• Delaying or refusing to pay dividends
• Blocking access to records
• Obstructing shareholders from their voting rights
• Engaging in abusive behavior targeting minority shareholders

Suppose it is determined that a board of directors or an individual board member has committed a breach of fiduciary duty. In that case, the shareholders can bring a lawsuit to protect their interests.

Seek Legal Guidance for Fiduciary Duty Cases

If you suspect you are experiencing a breach of fiduciary duty, the best way to proceed is with the help of an attorney. An experienced, qualified legal team will help gather evidence to prove your claim of a breach and help prove your case.

The experts at Heban, Murphree & Lewandowski, LLC, are ready to help. Reach out to our legal team if you suspect a breach of fiduciary duty has occurred, and learn more about your options.