What Is a Breach of Fiduciary Duty?
There are certain circumstances in everyone's life where they place their trust in another individual or organization to always act in their best interests. The simple act of trusting someone, and any subsequent breaches, is not necessarily a legal concern. However, some relationships are legally protected, especially when an individual has a right to expect a person or company to put the values of the relationship above any self-interest.
Given the legal context involved in a fiduciary relationship, those involved have the right to expect the highest standards. A breach of this trust can lead to severe consequences for those responsible for any breakdown in the relationship.
If you're concerned by a potential breach of fiduciary duty and have suffered loss or injury, you should discuss your concerns and any potential action you can take with a fiduciary litigation attorney.
Speak to a Lawyer from Hardie Alcozer Today
You can trust Hardie Alcozer to treat the fiduciary duty owed to clients extremely seriously. We take every case at face value and provide a personalized service backed by extensive experience and first-class legal expertise to ensure your rights are respected and that you always have a clear understanding of the roadmap for your case.
Our lawyers can help provide context for your fiduciary duty case based on experience, knowledge, and case law, with the highest degree of confidentiality.
If you feel you have been subject to a breach of fiduciary duty or are concerned about any of your fiduciary relationships, contact the Hardie Alcozer offices for an initial consultation today at (512) 374-4922.
Understanding Fiduciary Duties
Fiduciary duties can be defined as the responsibilities of fiduciaries to the beneficiary or principal they act on behalf of. A fiduciary's actions should always reflect the beneficiary's interests, even if that means the fiduciary put's someone else's best interests above their own.
A fiduciary is required to operate in good faith on behalf of the principal and should never take advantage of their position of trust for personal gain or their own personal advantage.
What Are Some Examples of Fiduciary Duty?
There are many types of trusting relationships with a legal component. Some of the most common examples of fiduciary relationships include:
The attorneys of Hardie Alcozer and our clients
Directors and board members of a business and the company's shareholders
A financial advisor and their client
Business partners, both to the company and to each other
There are some examples of fiduciary duties that are not always automatically in place. Most common fiduciary relationships exist in law, but they can be created through specific agreements.
For example, while it has been successfully argued that there are fiduciary relationships between an employer and employee or property owner and tenant, these relationships are not always automatically legally recognized. Such relationships can even extend to a former employer, but the duties involved may need to be specifically written into the contract signed by the tenant or employee.
For employees specifically, they may be contractually obliged to protect their employer's trade secrets or handle client funds honestly and fairly.
These are, of course, not the only fiduciary duty examples, and if you are concerned about whether a fiduciary relationship exists under your specific circumstances, your lawyer will be able to help you determine their responsibilities and whether any breaches have taken place.
When a Breach of Fiduciary Duty Occurs
Holding a fiduciary duty to another individual is extremely serious, and anything that interferes with that duty to someone else can be considered a breach.
So, what is a breach of fiduciary duty?
In the simplest terms, a breach of fiduciary duty occurs when someone with a legal responsibility to operate in the best interest of someone else fails to do so.
What Are Three Examples of Breaches of Fiduciary Duty?
Every case is different, and one of the key benefits of speaking to a lawyer about your specific circumstances is that they will be able to help establish whether a breach has occurred, quantify any losses, injuries, or other negative consequences, and guide you through the process of redress for a successful breach.
Our team is happy to speak to you about your case, but if you have concerns surrounding whether a breach has occurred, consider your position in the context of these examples.
A Board of Directors Refuses Shareholders a Vote
In a business with a board of directors and shareholders, the former are elected by the latter to represent their best interests. As part owners of the company, shareholders have the right to vote on certain issues that affect their holdings. Board resolutions reached without consulting shareholders can have legal consequences beyond lost profits and may prove fraudulent.
If a shareholder can prove that directors failed to operate in good faith, did not exercise care, or were driven by fraudulent or criminal intent, they have the makings of a robust legal case.
Business Partners That Conceal Information From Each Other
In cases of equal ownership, joint business owners have a fiduciary duty to each other and an underlying understanding that they will work in the best interest of the business and not for their personal advantage. A breach occurs through self-dealing, or when they put their own interests first.
There are many possibilities for how this might occur, but in this example, it involves the withholding of information. If there are five owners and one is deliberately excluded from meetings and the decision-making process, the other four breach their fiduciary duty to the one that misses out.
A Fiduciary Financial Advisor Makes Recommendations Based on Commission
While not all financial advisors are fiduciaries, those that do have a fiduciary duty explicitly have the responsibility to utilize their experience and expertise to advise clients while putting their best interests first and profits second. A financial advisor that is also a fiduciary fails to meet their fiduciary duties if they recommend an investment, financial product, or anything else for personal gain rather than a genuine belief that it is the best solution for their client.
The Consequences of a Breach of Fiduciary Duty
When a breach of fiduciary duty occurs, the specific consequences depend on the nature of the relationship and any injury to the beneficiary or benefit to the fiduciary.
Under Texas law, any fiduciary duty claims must meet three key criteria:
A Pre-Existing Fiduciary Relationship
Prior to filing a fiduciary duty lawsuit or any kind of fiduciary duty claim, it is imperative that the claimant can prove the existence of a relevant relationship. If no such relationship exists, there can be no expectation of trust and, therefore, nothing to constitute a breach of fiduciary duty occurs.
A Clear Breach of Fiduciary Duty
For a breach to take place, a fiduciary's actions must explicitly violate their legal responsibilities to the beneficiary. The actions of a fiduciary resulting in loss or damage for the beneficiary are not necessarily enough to justify a fiduciary duty complaint unless the fiduciary acts in a way that also explicitly breaches their legal responsibilities.
The Breach Must Result in a Specific Loss or Benefit
For a fiduciary duty complaint to stand up in court, the beneficiary and their attorney must be able to prove that there was either loss for them or a specific benefit for the fiduciary. While a breach of trust may have taken place, it only becomes a breach of fiduciary duty when there are genuine consequences and, therefore, actionable results.
If a case involves each of these fiduciary duty elements and is proven in court as a breach of fiduciary duty, the consequences can involve:
The award of punitive damages or exemplary damages
A court order based on the fiduciary's actions, canceling the existing relationship or preventing the formation of new ones
Suspension or removal as a trustee or executor
Your attorney will advise on what to expect from a potential case involving a breach of fiduciary duty and what you can expect in terms of outcomes.
Protecting Yourself in a Fiduciary Relationship
Wherever possible, maintaining the integrity of any fiduciary relationship involves an awareness of expectations and monitoring of how your fiduciary acts. A fiduciary's breach could involve doing something for their own personal advantage or neglecting your best interest, and if you know what to look out for, you stand the best possible chance of avoiding personal liability and limiting potential damage.
What Does a Fiduciary Breach Claim Entail?
Any claim for a breach of fiduciary duty can be considered a serious allegation and one that a trustee or any other fiduciaries will take a robust interest in defending. Being found guilty of breaching their duties can have significant repercussions for professionals, especially if they have represented businesses in positions of trust and are a person that has built a career on their reputation.
As noted, if you are a beneficiary and feel compelled to act, our lawyers will help you to understand if you have a case and to clarify the next steps.
Are You Concerned About a Breach of Fiduciary Duty? Call Us Now
We firmly believe that no client should suffer or lose out due to the act of another, especially when that other person has a legal duty to act in the best interest of a beneficiary. While it is not always easy to determine whether that duty has been breached in a legal context, our team is standing by to bring clarity to your situation.
If you're ready to start the attorney-client relationship, reach out to the Hardie Alcozer offices in Austin, Texas, today at (512) 374-4922.