What Is a Breach of Fiduciary Duty

A breach of fiduciary duty occurs when a fiduciary fails to fulfill their legal duties by acting in their own interests. It can take many forms and involve different types of relationships.

A fiduciary duty is acting in someone else’s best interests. The person who owes a duty to another is the fiduciary. They must protect and manage the property or money of a business or another person. Common examples include a trustee being responsible for the beneficiaries of an estate, board members owing a duty to shareholders, or an attorney having a fiduciary duty to their client.

A fiduciary duty is legally binding if the parties involved create an agreement by statute or contract, under state law, or by the factual circumstances of the relationship. It goes into effect when a relationship between two or more people or entities requires dependability or trust on the fiduciary to act honestly on behalf of another.

When a fiduciary relationship exists, a breach of fiduciary duty happens if the fiduciary behaves dishonestly or goes against the other person’s best interests. This can include actions that benefit the fiduciary instead of the person or company they’re supposed to protect.

Common Types of Fiduciary Relationships

There are multiple types of fiduciary relationships, such as:

Common Types of Fiduciary Duties

The duties of a fiduciary can vary based on the type of person or company they have a relationship with. Common types of fiduciary duties include:

  • Duty of care – A duty of care is a fiduciary’s responsibility to exercise adequate judgment in protecting the interests of another person or company. It can involve making sensible decisions and considering options based on the examination of available information carefully.
  • Duty of loyalty – Duty of loyalty means acting in the best interests of another at all times by putting their well-being first. The fiduciary must avoid conflicts of interest and excuse themselves from circumstances that risk the other’s well-being.
  • Duty of good faith – A duty of good faith requires the fiduciary to advance the other party’s interests by acting within the law. A fiduciary must not participate in acts that aren’t within legal guidelines.
  • Duty of confidentiality – A fiduciary must keep someone’s information confidential under a duty of confidentiality. They also can’t use the information for personal gain.
  • Duty of prudence – Duty of prudence means making decisions and handling matters with the highest degree of caution, professional skill, and awareness of risks related to the other party’s interests.
  • Duty to disclose – A duty to disclose refers to engaging in direct behavior by disclosing relevant information that might affect another’s well-being or the fiduciary’s ability to fulfill their obligations.

Proving a Breach of Fiduciary Duty

You must establish these four elements to prove liability for a breach of fiduciary duty:

  • Fiduciary duty – First, you must prove a fiduciary relationship exists between you and another party. You might establish this by submitting a signed contract showing someone owes you a fiduciary duty.
  • Breach of duty – The second element is proving the fiduciary breached their duty. For example, an executor of an estate breaches their duty by using assets for personal gain instead of distributing them to beneficiaries.
  • Damages – You must show the fiduciary’s actions harmed you somehow. The harm can be in the form of financial losses or emotional distress.
  • Causation – The causation element requires proof of the fiduciary’s actions contributing to the other party’s harm.

Compensation for a Breach of Fiduciary Duty

What Is a Breach of Fiduciary DutyIf you sue for breach of fiduciary duty, you might recover compensation for your losses. Multiple remedies are available depending on the type of fiduciary duty owed to you. The most common include:

  • Actual damages – Actual damages can compensate for the harm someone suffers. They can include compensation for out-of-pocket expenses, lost profits, and mental anguish.
  • Exemplary damages – Exemplary damages punish the fiduciary for their actions.
  • Equitable relief – The court might grant a remedy for the fiduciary to act or refrain from particular actions.

Contact Arenson Law Group, PC Today

The business attorneys of Arenson Law Group, PC have over three decades of experience representing clients in Cedar Rapids. We understand the consequences of trusting someone who doesn’t act in your best interests. When a breach of fiduciary duty occurs, it is your right to pursue legal action.

If someone you have a fiduciary relationship with mistreated you somehow, call us at (319) 363-8199 immediately for a confidential consultation. We are ready to help you fight for the compensation you deserve.

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Written by James H. Arenson

Last Updated : December 15, 2023