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Were you accused of breaching your fiduciary duty?

As a business owner or member of a company's board of directors, you owe a duty to the shareholders, partners or investors in the business. This fiduciary relationship results from the trust and confidence another party puts in you. This fiduciary relationship often arises out of federal and California laws or through the circumstances under which your relationship to the other party began.

Your duties as the fiduciary may come about either through a contract or by law. If you make a mistake or commit some act that breaches the duty you owe to the other party, you could face a civil claim for breach of fiduciary duty.

What constitutes a breach?

The other party could view any number of your actions as breaches of your duty. Most breaches of fiduciary duty involve the following three factors:

  • A fiduciary relationship existed
  • The scope of your fiduciary duties
  • A breach occurred during the relationship

As you can see, these are rather broad requirements. The particular circumstances of your situation will dictate whether a breach actually occurred.

What do the courts require for a breach of fiduciary duty claim?

In general, the courts require the following elements of such a claim:

  • You owed a fiduciary duty to the other party
  • You actually breached that duty
  • The other party sustained actual damages due to the breach

If you somehow failed the other party, but no actual harm occurred, no claim exists. If the court rules that a breach occurred and actual damages resulted from it, the other party could receive a judgment for those damages. In addition, if the court rules that the breach happened through fraud or malice, it could award punitive damages as well.

If you find out that a party to whom you owe a fiduciary duty accuses you of breaching that duty, it could have significant ramifications for you and your business. A negative outcome to the dispute could cost you your business or your position in that business. In addition, you could have trouble obtaining employment in the future since faith in your abilities could suffer and jeopardize future employment opportunities.

With so much at stake, you would benefit from taking immediate action to ascertain the details of the other party's complaints. In some cases, the issue could reach a resolution without the necessity of court action. However, if the dispute cannot be resolved outside a courtroom, you may need aggressive and knowledgeable representation on your side.

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