When a breach of fiduciary duty happens, it can be costly and devastating to those affected. That is why it’s essential for the party owed the protection of the fiduciary relationship to understand who can be held liable for the damages caused by a breach of duty.
In this article, we will cover the elements of a fiduciary claim, the types of fiduciary relationships and duties, and what you can do in case you find yourself in the position of an aggrieved party.
What Is a Fiduciary Duty?
A fiduciary duty is a responsibility to act in the best interest of another person or entity to whom one owes a duty. A fiduciary must ensure that no conflict of interest arises that will endanger the interests of his or her beneficiary.
In a fiduciary relationship, an individual bound to fulfill duties of good faith, care, loyalty, and more to someone else is called a fiduciary. Some common examples of fiduciary relationships are an attorney’s fiduciary duty to his or her client, a trustee’s duty to the trust beneficiaries, or a board member’s fiduciary duty to the company’s shareholders.
For a fiduciary duty to be considered legally binding, the agreement must be created under the law, contract, statute, or factual circumstances of the relationship.
Fiduciaries must act with integrity and transparency at all times. They are prohibited, in any way, to benefit at the expense of their clients.
What Constitutes a Breach of Fiduciary Duty?
A breach of fiduciary duty occurs when a fiduciary acts in his or her interest rather than the interest of the beneficiary or principal.
A fiduciary’s actions must be devoid of conflicts of interest and self-dealing, which means he or she cannot use his or her relationship with the principal for his or her personal advantage or pursuits.
When a fiduciary fails to comply with the stipulations of an agreement or acts dishonestly, there is a good chance that a fiduciary duty breach has been committed.
The Four Elements of a Breach of Fiduciary Duty Claim
Although jurisdictions differ, the following four elements must be demonstrated to prove a breach of fiduciary duty and for a beneficiary to be able to seek damages.
A fiduciary duty existed
The fiduciary and beneficiary must have an established fiduciary relationship for the former to be held accountable for his or her actions. It must also be proven that he or she deliberately accepted the role. A fiduciary duty is typically established through a contract or written agreement.
The fiduciary breached their duty
The complainant must demonstrate that the other party failed to fulfill his or her fiduciary duty to the plaintiff by acting contrary to his or her best interests.
The beneficiary incurred damages or losses
The plaintiff must prove there was an infringement and be able to show that the plaintiff suffered damages due to the breach to win a breach of fiduciary duty suit.
If the breach did not affect the complainant in any way, there is usually no basis for a fiduciary duty breach, and the plaintiff cannot recover damages.
Plaintiffs can sue for breach of fiduciary responsibility for both economic (e.g., profit loss) and noneconomic injuries (e.g., emotional distress). The more specific they can be with the details, the higher the chances of making a successful fiduciary breach claim.
The damages are caused by the breach
Proving the person you put trust and confidence in is liable for a breach of fiduciary duty is not enough. You should also be able to establish that the fiduciary’s dishonest conduct directly caused the injuries you suffered. If you incurred damages, but they are unrelated to the breach, you might not be able to file a successful claim.
Types of Fiduciary Duties
A fiduciary is a person who is in a position of trust. His or her duties may differ depending on the type of beneficiary he or she serves. However, in general, the legal and ethical obligations involved in the protection of the best interest of a fiduciary’s clients include the following duties.
Duty of Loyalty
A fiduciary must always act in the beneficiary’s best interest at all times. This means the client’s well-being must be prioritized above all.
Duty of Good Faith
A fiduciary must act in good faith to advance the beneficiary’s interests. In no way should a fiduciary do anything outside of legal constraints.
Duty of Care
A fiduciary is responsible for informing oneself as thoroughly as possible so that any decision is sound and aligned with the beneficiary’s interests. Fiduciaries act on behalf of their clients, so it’s only fitting that they exercise their due diligence at all times.
Duty of Prudence
Acting prudently means that a fiduciary must be able to handle matters and make sensible decisions concerning the beneficiary’s interests with caution, skill, and awareness of risk.
Duty to Disclose
A fiduciary must be honest and disclose all relevant information that could impact the ability to fulfill duties.
Duty of Confidentiality
Maintaining confidentiality means a fiduciary must preserve the privacy of all information relating to the beneficiary. None of it, whether written or spoken, may be used for the fiduciary’s personal motives.
Examples of Fiduciary Relationships
Fiduciary-beneficiary agreements are sometimes based on informal relationships but are usually initiated through a legal contract.
There are many types of fiduciary relationships, such as between an accountant and a client or an employer and an employee. Here are some other common examples:
- Guardian and ward: A guardian owes fiduciary duties to their ward. They are tasked with ensuring that all matters related to the beneficiary’s welfare are dealt with properly and in the child’s best interests.
- Trustee and beneficiary: This type of relationship requires the fiduciary (i.e., a law firm, bank, or private individual) to make decisions relating to assets and property that are in the best interests of the beneficiary.
- Agent and principal: An agent-principal relationship exists between a corporation and its board of directors or shareholders. The latter must make well-considered decisions for the company and its owners.
- Attorney and client: As one of the most stringent fiduciary relationships, a high level of trust must exist between an attorney and a client. An attorney breaching his or her fiduciary duty may result in serious legal consequences.
- Executor and heir: The executor of a will must carry out the wishes of the deceased person based on instructions stated in their will, ensuring that the assets are given to the intended beneficiaries.
Can You File a Breach of Fiduciary Duty Lawsuit?
Yes, you can file a breach of fiduciary duty lawsuit. To do so, you will need to speak with an experienced litigation lawyer to determine if your fiduciary can be held personally liable for failing to act in your best interests.
It is essential to prove that a violation occurred, damages were caused, and that the breach of the fiduciary duty directly caused you harm to win a breach of fiduciary duty case.
How Can Serafini Law Office Help?
If you believe you have been a victim of a breach of fiduciary duty, the Serafini Law Office can provide you with the best representation possible.
Mr. Richard A. Serafini has 40 years of experience practicing law, and you can trust him to handle your case.
The Serafini Law Office currently offers legal services to the following cities and states: Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Florida, Pennsylvania, and New York.
Contact us at (754) 223-4718 for a free consultation.