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What Is a Breach of Fiduciary Duty?

Fiduciary duty refers to a party's obligation to act in the best interest of another party. For example, a corporate board member has a fiduciary duty to act in the best interest of their company's shareholders. When a party fails to uphold their obligation or duty to another party, it is called a breach of fiduciary duty. The person with the obligation is called the fiduciary, while the person to whom the obligation is owed is called the principal or the beneficiary.

The actions of the fiduciary must be performed to benefit the beneficiary. If a person fails to uphold their fiduciary duty, the beneficiary can sue them for damages. There are certain relationships universally regarded as fiduciary. This includes: attorney and client, broker and principal, principal and agent, trustee and beneficiary, and executors and the heirs of a decedent's estate.

In order for a fiduciary relationship to be valid, the relationship has to have been established under the law by either statutes, legal proceedings, or contracts. A fiduciary duty can also be created through the factual circumstances of the relationship using established case law.

The following must be proven for a breach of duty claim:

  • The defendant had a duty or duties to the plaintiff
  • The defendant somehow breached or misrepresented their duty
  • The plaintiff suffered damages caused by the breach in question

A plaintiff who is successful in their breach of fiduciary duty lawsuit will usually be able to recover the damages they incurred. In some cases, a plaintiff can even recover punitive damages if the breach is proven to have been committed out of malice or fraud. However, calculating the amount of damages that were actually caused by the breach can be a difficult and complex process.

Do you have more questions about breach of fiduciary duty? Contact our Dallas team of business law attorneys to schedule a confidential consultation today.

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