California courts have long regarded certain relationships as “fiduciary relationships,” the law imposing duties of the highest degree of trust, loyalty, confidentiality and disclosure. A breach of fiduciary duty can occur where a fiduciary engages in self-dealing, or takes any other action where his or her personal interests are placed above those of the other party. Our experienced Southern California breach of fiduciary duty lawyers know how to handle this complex and often misunderstood area of the law and the related issues of punitive damages.
What is a Fiduciary Relationship?
A fiduciary relationship exists where one party has a duty to act with the utmost good faith and reasonable care for the benefit and interests of the other party. An example would we partners in a business. It is a relationship of undivided loyalty, the fiduciary having a duty to refrain from seizing any opportunity at the expense of the other party, or from taking any action in competition with the other party. Any form of self-dealing is strictly prohibited. A fiduciary relationship is one of complete trust and disclosure, a fiduciary having a duty to protect all confidences and make full disclosure of all material information to the other party.
Traditional examples of fiduciary relationships include attorney/client, trustee/beneficiary, real estate broker/client and other principal/agent relationships. In the business context, fiduciary duties are imposed on directors, officers and majority shareholders of a corporation, as well as partners, LLC managers and joint ventures.
Irvine business law firm of Brown & Charbonneau, LLP is an established and highly regarded Irvine, CA business law firm with extensive experience representing clients involved in breach of fiduciary duty claims. We have handled numerous fraud claims to jury verdict. With 75-years of collective experience and the resources of a big law firm, we are uniquely equipped to help clients develop the best legal strategies in these complex cases.
What is a Fiduciary?
Breach of fiduciary duty is a serious legal matter occurring when an individual or entity entrusted with the care of another’s assets, finances, or interests fails to fulfill their legal obligations. Breach of fiduciary duty attorneys are experts who help clients in such cases. A fiduciary is someone who holds a position of trust and confidence with respect to the property, finances, or affairs of another. This can include professionals such as accountants, financial advisors, and business partners, as well as trustees, executors, and guardians. When a fiduciary breaches their duty, they can be held legally responsible for any resulting harm or loss. In this article, we will explore the concept of breach of fiduciary duty in greater detail, including:
- the types of conduct that can constitute a breach,
- the legal remedies available to victims,
- and some common examples of fiduciary breaches in different contexts.
As stated above, a fiduciary is a person or entity that holds a position of trust with respect to the belongings of another. Hence, the fiduciary has a legal obligation:
- to act in the best interests of the person or entity they are serving,
- and to exercise a high degree of care, loyalty, and good faith in carrying out their duties.
Fiduciaries are held to a higher standard of conduct than ordinary individuals because:
- They have a special relationship of trust with those who have entrusted them with their assets, finances, and interests.
Examples of fiduciaries include trustees, executors, agents, attorneys, financial advisors, and corporate directors. In essence, a fiduciary is someone who is legally obligated to put the interests of their clients or beneficiaries ahead of their own interests.
Breach of Fiduciary Duties
Where a fiduciary engages in self-dealing, conceals material, or takes any action adverse to the other party, he or she breaches their fiduciary duties. The requirements for a legal action for breach of fiduciary duty include proof of:
- The existence of a fiduciary duty;
- Breach of the duty; and
- Damages caused by the breach.
A successful plaintiff may recover all damages caused by the defendant’s breach of fiduciary duty. In addition, due to the seriousness of the offense, punitive damages are often appropriate and may be awarded for a breach of fiduciary duty.
Types of conduct that may constitute a breach of fiduciary duty
There are many different types of conduct that can constitute a breach of fiduciary duty, depending on the specific context and the obligations of the fiduciary in question.
- Self-dealing: A fiduciary may breach their duty if they engage in transactions that benefit themselves at the expense of the person or entity they are serving. For example, a corporate officer might approve a contract with their own company, or a trustee might sell property from a trust to themselves.
- Conflicts of interest: A fiduciary has a duty to avoid conflicts of interest and to disclose any potential conflicts to the person or entity they are serving. They should not act in a way that benefits their own interests at the expense of the one they are serving.
- Mismanagement of assets: A fiduciary has a duty to manage the assets of the person or entity they are serving with care and diligence. In a breach, the fiduciary fails to properly manage assets or invest funds in a way that is not in the best interests of the entity that entrusted them with the duty.
- Failure to provide information: A fiduciary has a duty to keep the person or entity they are serving informed about important matters related to their affairs. If the fiduciary fails to provide information or withholds important information from the person or entity they are serving, it may be considered a breach of fiduciary duty.
- Misuse of confidential information: A fiduciary has a duty to keep confidential any information related to the person or entity they are serving. If the fiduciary misuses or discloses confidential information for personal gain or for the benefit of a third party, it may be considered a breach of fiduciary duty.
Common Examples of the Breach
Corporate context: Corporate directors and officers owe a fiduciary duty to the shareholders of the company. A breach of fiduciary duty in this context may include self-dealing, using company assets for personal gain, or an employee fiduciary failing to act in the best interests of the shareholders.
Trust and estate context: Trustees and executors owe a fiduciary duty to the beneficiaries of the trust or estate. A breach of fiduciary duty in this context may include mismanaging the assets of the trust or estate, failing to account for all transactions, or engaging in self-dealing.
Investment context: Investment advisors owe a fiduciary duty to their clients. A breach may include recommending investments not in the client’s best interest, making trades that benefit the advisor more than the client, or failing to disclose conflicts of interest.
Legal context: Attorneys owe a fiduciary duty to their clients. A breach of fiduciary duty in this context may include failing to act in the client’s best interests, representing multiple clients with conflicting interests, or disclosing confidential information without the client’s consent.
Medical context: Doctors and other medical professionals owe a fiduciary duty to their patients. A breach of fiduciary duty in this context may include failing to provide the appropriate standard of care, providing unnecessary or excessive treatments, or engaging in sexual relationships with patients.
Legal Remedies Available
When a breach of fiduciary duty occurs, the person or entity that has been harmed may be entitled to legal remedies. These remedies aim at compensating the losses and preventing further harm.
- Damages: The person or entity that has been harmed may be entitled to financial compensation for any losses suffered.
- Restitution: If the fiduciary has profited from their breach of duty, you may be entitled to the return of any ill-gotten gains obtained by the fiduciary as a result of the breach.
- Injunction: In some cases, a court may order a corporate officer to cease engaging in self-dealing or require a trustee to properly manage the assets of a trust.
- Rescission: A court may order the cancellation of the contract or transaction and the restoration of the parties to their original position, before the contract was entered into.
Removal or suspension of the fiduciary: Removal or suspension of the fiduciary from their position may also occur.
Getting Legal Help. Call the Breach of Fiduciary Lawyers in Irvine Today!
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Brown & Charbonneau, LLP represents individuals as well as large and small companies in breach of fiduciary disputes, and has extensive knowledge and experience in breach of fiduciary duty claims involving corporate directors, officers and majority shareholders. If you are involved in a breach of fiduciary claim or would like to learn about your rights and how to protect your business, we can provide you with the information you need.