Breach of Fiduciary Duty
Business depends on trust. Trust that suppliers will deliver, employees will show up, and partners and managers will act in good faith, with honesty, and competently. When that trust is violated, it could mean financial losses, reputational damage, and unnecessary burdens. Breach of fiduciary duty claims can be complicated due to the nature of Texas law, but legal remedies are available. It may be difficult to determine if you have a claim, but the business attorneys at Adair Myers Stevenson Yagi have the experience and breadth of knowledge to answer your questions and help you move forward strategically.
What is a fiduciary?
A fiduciary is a legal term for someone who owes a special relationship of trust and confidence to another person or group of people. Ordinarily, a fiduciary relationship involves a professional with superior subject matter knowledge than those to whom they owe a duty, also called principals or beneficiaries depending on the relationship.
Fiduciaries – such as trustees, business partners, and officers and directors of companies – are charged with acting in the best interests of the individuals and/or companies they represent. When a fiduciary fails to act in the beneficiary’s best interest, they can be held legally responsible for the damages caused through a breach of fiduciary duty lawsuit.
Formal vs Informal Fiduciary Relationships
In Texas, both formal and informal fiduciary relationships are legally recognized; however, formal relationships – also called express fiduciary relationships – are created as a matter of law. Common types of express fiduciary relationships include:
- Agent and principal
- Trustee and beneficiary
- Attorney and client
- Corporate officers and the corporation
- A general partnership and its partners
- Members of joint ventures
- A real estate broker and a client
Informal fiduciary relationships, however, are not as easily defined. Your attorney will have to prove to the court the nature of your relationship with the alleged breaching party reached the level of a fiduciary duty. This can be accomplished through a number of strategies, but speaking to an attorney about the details is the best option.
Because of the nature of the relationship, fiduciaries are prohibited from engaging in certain activities by law. Fiduciaries may not benefit – financially or otherwise – from the relationship to which they owe their duty without the beneficiary’s express consent. Fiduciaries must also avoid any conflicts of interest between themselves and their principals.
What Constitutes a Breach of Fiduciary Duty?
In order to file a claim for a breach of fiduciary duty, an attorney must establish you or your business had a formal fiduciary relationship with the party from which you are seeking redress. Next, your attorney will have to show the fiduciary breached their duty. A breach of fiduciary duty can occur in one of many ways, including intentionally failing to act in good faith, failing to use reasonable care, or acting negligently. The details surrounding these claims are extremely important to determining the best course of action, and require a thorough investigation.
There are countless examples of breaches of fiduciary duty. Some include an employee misappropriating trade secrets, a trustee stealing or embezzling a beneficiary’s money, a corporate officer engaging in severe corporate mismanagement, lies, misrepresentations, or omissions of significant information. All of these actions constitute breaches which can cause significant harm, and are worth speaking to an attorney about.
Lastly, the claim will need to identify the injuries and damages caused by the breach, the benefits the fiduciary received, and/or the fees they were paid despite failing to adhere to the obligations imposed by the fiduciary duty. The trial attorneys at Adair Myers Stevenson Yagi have worked on numerous breach of fiduciary cases and can provide prudent counsel in complex cases.
Breach of Fiduciary Duty Damages
Depending on the details of the case, Texas law provides for various types of damages in a successful breach of fiduciary duty lawsuit. Damages can include compensation for financial losses, such as lost profits or “out-of-pocket” losses. In some cases, you may be entitled to additional punitive damages if fraud or gross negligence were involved. Other remedies may also be available depending on the details of your case and how severe and damaging the fiduciary’s breach was to you and/or your business.
Breach of Fiduciary Duty Statute of Limitations
In Texas, under Section 16.004 of the Texas Civil Practice and Remedies Code, the statute of limitations for a breach of fiduciary duty action is four years from the date of the breach. It is important to discuss the details of your claim with an attorney to determine the exact date the breach caused an injury so that your deadline to file is not missed.
Breach of Fiduciary Lawyers
While it is important to consider the statute of limitations for a breach of fiduciary claim, the lawyers at Adair Myers Stevenson Yagi know that every case is unique and litigation is only one of many available tools for dispute resolution. Other options that may be more efficient or cost effective could be available to you. With decades of experience serving individuals and businesses the Houston area, we invite you to contact us to discuss the details of your legal issues, so that we may further investigate what your best pathway to resolution may be.