How to Prove Breach of Fiduciary Duty to Recover the Damages You Suffered
When a person owes a fiduciary duty to another person or entity, they have the responsibility to act in the best interest of the other party. A fiduciary duty is the highest standard of care you can ensure to another person. Oftentimes, fiduciary duties are designed to benefit a person or entity that is dependent on the fiduciary. Fiduciaries can be business partners, trustees, investment advisors, agents, or executors, for example.
While fiduciary duty is designed to ascertain the highest degree of loyalty, some may go against their fiduciary responsibility and act in the best interest of themselves. A breach of fiduciary duty can lead to disastrous consequences for the affected party. If you have fallen victim to someone else's breach of fiduciary duty, you may be able to pursue legal action against them. In order for a breach of fiduciary duty claim to be successful, it is important to establish the following fiduciary duty elements in the case.
A Fiduciary Relationship Exists
A fundamental element that must be proven is that a fiduciary duty existed between the defendant and the plaintiff. The lawyer must be able to show that the plaintiff had a fiduciary relationship with the defendant in the first place. Some of the most common fiduciary relationships include:
Attorney-Client Relationship: Attorneys have a fiduciary duty to act in the best interests of their clients, maintain confidentiality, and avoid conflicts of interest.
Trustee-Beneficiary Relationship: Trustees are obligated to manage and administer assets for the benefit of beneficiaries in accordance with the terms of the trust.
Guardian-Ward Relationship: Guardians have a fiduciary duty to protect the best interests of their wards, who are typically minors or incapacitated individuals.
Executor-Beneficiary Relationship: Executors of an estate have a fiduciary duty to manage and distribute assets to estate beneficiaries in accordance with the decedent's wishes.
Corporate Officer-Shareholder Relationship: Corporate officers owe a fiduciary duty to a company's shareholders and must act in the best interests of the shareholders.
Financial Advisor-Client Relationship: Financial advisors have a fiduciary duty to act in their clients' best interests, provide suitable advice, and disclose any potential conflicts of interest.
Real Estate Agent-Client Relationship: Real estate agents have a fiduciary duty to act in the best interests of their clients when buying, selling, or leasing properties.
Business Partner Relationship: Business partners often owe each other fiduciary duties, requiring them to act in good faith and loyalty towards the partnership and its members.
Principal-Agent Relationship: Agents have a fiduciary duty to act on behalf of and in the best interests of their principals, and avoid conflicts of interest.
These relationships may be governed by specific laws and regulations in different jurisdictions, and the exact scope of fiduciary duties may vary. Additionally, other professional relationships and roles can also involve fiduciary responsibilities depending on the specific circumstances involved. The important thing to remember is that breaches of fiduciary duty can occur if the fiduciaries act primarily for their own personal gain and not in the client or beneficiary's interests.
Elements of Breach of Fiduciary Duty
The elements of a breach of fiduciary duty claim can vary slightly depending on the jurisdiction and the specific fiduciary relationship involved. However, in general, the following elements are typically required to establish a breach of fiduciary duty:
Existence of a Fiduciary Duty
There must be a recognized fiduciary relationship between the parties. This means one party must have a legal duty to act in the best interests of the other party due to a special trust, confidence, or reliance.
Breach of the Fiduciary Duty
The fiduciary must have failed to fulfill their obligations or duties as required by the relationship. This breach can be due to acts of dishonesty, self-dealing, conflicts of interest, negligence, or other violations of the fiduciary duty.
Causation
The breach of fiduciary duty must have caused harm or resulted in some sort of damages to the party who trusted the fiduciary. Or, the breach of fiduciary duty must be the direct and foreseeable cause of the damages suffered by the harmed party (proximate cause).
Damages
The harmed party must have suffered actual damages as a result of the breach. These damages can be financial losses, emotional distress, or other measurable harm.
In all cases, an attorney must establish proof of a fiduciary's breach of duty through evidence. This may include documentation, witness testimony, or other forms of evidence. The fiduciary typically cannot escape liability for the breach by showing that their actions were justified or that there was a valid legal defense for their conduct.
Establishing a breach of fiduciary duty can be complex, and the specific elements and requirements can vary depending on the nature of the fiduciary relationship involved and the laws of the jurisdiction where the breach occurred. If you believe you have a breach of fiduciary duty claim, it is advisable to seek legal counsel from a qualified attorney experienced in this area of law.
What are Common Examples of Breach of Fiduciary Duty?
Common examples of breach of fiduciary duty can occur in various fiduciary relationships. Here are some typical examples:
Self-Dealing
When a fiduciary takes advantage of their position to benefit themselves at the expense of the beneficiary. For instance, a trustee might buy property from the trust at a significantly discounted price, effectively transferring wealth from the trust to themselves.
Conflicts of Interest
Fiduciaries are required to act solely in the best interests of the beneficiary, and they must avoid situations where their personal interests conflict with their duty. For example, a financial advisor may recommend investments that pay them higher commissions but are not the best option for the client.
Misuse of Funds or Assets
When a fiduciary uses the funds or assets entrusted to them for purposes other than what they are intended for, it constitutes a breach. This could involve embezzlement or misappropriation of funds.
Lack of Disclosure
Fiduciaries have a duty to provide full and accurate information to their beneficiaries. Failure to disclose relevant information that could impact the beneficiary's interests is a breach of fiduciary duty.
Negligence or Incompetence
Fiduciaries are expected to exercise a certain level of skill and care in managing the affairs of the beneficiary. If a fiduciary's actions lead to losses due to negligence or incompetence, it could be considered a breach.
Unauthorized Use of Information
Fiduciaries often have access to confidential information about their beneficiaries. If they use this information for personal gain or to benefit others, it can be a breach of fiduciary duty.
Failing to Act
Fiduciaries have an affirmative duty to act in the best interests of their beneficiaries. Failing to take necessary actions or make decisions on behalf of the beneficiary can be a breach of duty.
Violation of Legal or Statutory Duties
Fiduciaries are also subject to specific legal and statutory obligations depending on their role. Breaching these legal duties can result in a breach of fiduciary duty claim.
Inadequate Record-Keeping
Proper record-keeping is crucial for fiduciaries to demonstrate transparency and accountability. Failing to maintain accurate records can lead to allegations of breach of duty.
Overcompensation
Fiduciaries must be reasonable and fair in the compensation they receive for their services. Overcompensation, especially when not justified, can be considered a breach.
It is essential for fiduciaries to understand and fulfill their responsibilities to avoid any potential breach and legal consequences. If you suspect a breach of fiduciary duty, you should seek legal advice from an attorney is recommended to explore your options.
What Damages Can a Plaintiff Recover Through a Breach of Fiduciary Duty Claim?
If you believe someone has breached their fiduciary duty towards you, potential damages you may recover can vary depending on the specific circumstances and jurisdiction. Generally, the following damages may be pursued in a breach of fiduciary duty claim:
Compensatory Damages: These are designed to compensate you for the losses you suffered as a result of the breach. It may include financial losses, lost opportunities, and other damages directly related to the breach.
Restitution: This aims to restore you to the position you were in before the breach occurred. It may involve returning property or funds that were misappropriated or improperly used.
Disgorgement: This is a remedy where the fiduciary is required to give up any profits they made as a result of the breach. It prevents them from benefiting from their wrongful actions.
Punitive Damages: In some cases, punitive damages may be awarded if the breach of fiduciary duty was particularly egregious or malicious. These damages are meant to punish the wrongdoer and deter similar conduct in the future.
Injunctive Relief: Instead of or in addition to monetary damages, a court may issue an injunction to prevent the fiduciary from continuing the harmful behavior or require specific actions to rectify the situation.
It's important to note that laws regarding fiduciary duties and available remedies can vary significantly from one jurisdiction to another, and consulting with a legal professional experienced in this area is essential to understand your specific situation fully.
Also, keep in mind that statutes of limitations apply to legal claims, so it's crucial to take timely action if you suspect a breach of fiduciary duty has occurred.
Have You Been Affected by a Breach of Fiduciary Duty?
A fiduciary has a legal obligation to provide the utmost care and loyalty to another person. When a person violates this trust and acts in their own interests instead, the affected party can take legal action. If you are someone who has been affected by another person's breach of fiduciary duty, you may be able to hold the party personally liable and gain back the damages you experienced.
In order to have a successful breach of fiduciary duty claim, you will need an experienced lawyer who can guide you through the entire legal process. Legal procedures are often complex, which is why our team at King & Jones is here to help. Our skilled Chicago breach of fiduciary duty lawyers understand the frustration a breach of fiduciary duty can cause, and we are committed to helping you recover all damages received. To schedule a free consultation with us, please do not hesitate to contact us through our online form, or simply give our office a call at 312-372-4142 today.