When a person or company owes a fiduciary duty to someone else and fails to act with the required level of care, the injured party can file a legal claim for breach of fiduciary duty.
What Constitutes a Fiduciary Relationship?
In order to understand what may constitute a breach of fiduciary duty, it’s necessary to first understand what types of relationships give rise to a fiduciary relationship. When a relationship of trust and confidence is created either by legal agreement or through moral, social or domestic means, one party may be acting as a fiduciary. Common examples include the following:
- Corporate board member or officer’s duty to the company’s shareholders
- Trustee’s or estate administrator’s responsibility to beneficiaries or heirs
- Attorney/accountant/investment adviser’s responsibility to clients
The fiduciary must act in the best interest of the other party in the relationship, setting aside his or her own personal interests and avoiding conflicts.
How Can Fiduciary Duty be Breached?
When a fiduciary fails to act with the requisite level of care, the fiduciary duty may have been breached. For example, if a fiduciary disclosed material facts about the relationship without authorization to do so, or engaged in self-dealing, a breach may have occurred.
In the context of a commercial fiduciary relationship, the fiduciary cannot use corporate assets or profits for their own gain, or take personal advantage of corporate opportunities.
Proving Breach of Fiduciary Duty
In order to prove that fiduciary duty was breached, several elements must be shown. First, the person claiming breach of fiduciary duty must establish that a fiduciary relationship existed. Next, they need to show that a breach of that duty occurred, and that there were damages as a result of the breach. Damages may be in the form of conflict of interest, theft, fraud, or direct financial damages to income, profits or property.
Generally, it is not necessary to prove criminal intent in order to prove that a fiduciary responsibility was breached; it’s enough to prove that a breach occurred and that there were damages as a result.
Understand Your Rights and Responsibilities
To learn more about breach of fiduciary duty, contact the experienced attorneys at Glassman, Wyatt, Tuttle & Cox, P.C. in Memphis today by calling 901.527.4673.