Breach of Fiduciary Duty Examples

Examples of Breach of Fiduciary Duty

Trust is important. There is no doubt about that. Whether it involves a business relationship or managing an estate, breaking that trust is called a “breach of fiduciary duty” and can lead to all kinds of problems. Discovering suspected legal or financial misconduct among partners, managers, employees, or trustees can create significant burdens for businesses and individuals.

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

Before that, however, it helps to understand what a breach of fiduciary duty involves and how to recognize it.

Understanding Breach of Fiduciary Duty

In simple terms, a breach of fiduciary duty occurs when an individual or entity with a legal responsibility to act in another person’s or entity’s best interests fails to do so.

Generally, a claim for breach of fiduciary duty turns on four main elements: duty, breach, damages, and causation.

1. Duty: First, you must 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.
2. Breach: Then you must identify the breach and show how the other party violated their fiduciary duty by acting against your interests.
3. Damages: Next, you must show that you suffered a loss because of the breach. Failing to show how you were affected may prevent you from recovering any damages.
4. Causation: Finally, you must connect the breach of fiduciary duty to 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’s (employer’s) 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 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 also on 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 of 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 is 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 a breach of fiduciary duty, the best way to proceed is with an attorney. An experienced, qualified legal team will help gather evidence to support your claim and build your case.

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