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Breach of Fiduciary Duty Explained

A fiduciary duty exists when one party has an obligation to act in the best interest of another party. When the fiduciary acts in their own best interests instead of that of the other party, it results in a breach of fiduciary duty. A fiduciary relationship can be created by law or by the circumstances of the situation, and a breach of duty can have serious legal consequences for the fiduciary accused.

How Does Someone Breach Fiduciary Duty?

A breach of fiduciary duty can arise in a number of ways, and in all cases the court typically looks at whether a fiduciary relationship existed at the time of the breach, the scope of the fiduciary relationship, and whether the duties of the fiduciary were breached within the scope of the relationship. The basic elements of a fiduciary breach, regardless of circumstance, are as follows:

  • That the person or party accused had a fiduciary relationship with the victim
  • That the fiduciary breached their duty in some way
  • That as a direct result of that breach, the victim suffered damages

Examples of a Fiduciary Breach

Fiduciary relationships can arise in a number of different circumstances. Some of the most common examples of a fiduciary relationship include attorney/client, principal/agent, and trustee/beneficiary. If a trustee siphons off trust proceeds for their own personal gain, that is a breach of fiduciary duty. The same applies to a CEO that gives false numbers to his investors to bolster the value of the company.

However, it is important to note that not all bad business decisions result in a breach of fiduciary duty. If a fiduciary makes a bad investment for a client with full faith that it was in their best interest, that situation does not rise to the level of a breach. Now if that bad investment was made because the fiduciary was trying to bail out a friend’s business at the client’s expense, that would be considered a breach of fiduciary duty.

Consequences of a Breach of Fiduciary Duty

The consequences of a breach of fiduciary duty can be dire for a person accused of such a breach. Depending on the context of the duty and the breach, a person may have to pay compensatory damages for the harm. The victim of the breach is entitled to compensation for any loss that resulted from the breach of fiduciary duty. In cases in which the breach of duty was particularly egregious, a person may also have to pay punitive damages. Punitive damages go above and beyond compensatory damages and are intended to punish the wrongdoer for their actions as well as deter others from committing the same offense. Finally, there may be serious professional consequences for a breach of fiduciary duty. This can include the suspension or removal of licenses or accreditations, severe reputational damage, and additional lawsuits.

A Lawyer May be Able to Help

If you have further questions regarding a breach of fiduciary duty, fear you may have breached your duty, or believe someone breached a fiduciary duty to you, call or contact the Wagenseller Law Firm today.

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