What Is a Breach of Fiduciary Duty?

A fiduciary duty is the highest duty the law imposes: the obligation to act for another's benefit with undivided loyalty and reasonable care. Partners owe it to each other, corporate officers and directors owe it to the company, majority shareholders can owe it to the minority, trustees owe it to beneficiaries, and agents, including real estate brokers, owe it to their principals. A breach occurs when the fiduciary self-deals, competes with the beneficiary, hides material information, or simply manages entrusted affairs with disloyalty or gross carelessness.

The claim has three elements: a fiduciary relationship, conduct that breached it, and resulting damage. Remedies go beyond ordinary contract damages and can include disgorgement of profits the fiduciary earned through the breach, constructive trusts over diverted assets, removal from office, and in egregious cases punitive damages.

In our practice these cases most often arise between business partners and LLC members, against officers who diverted opportunities or funds, and against trustees who treated trust assets as their own. The documents and money trail usually tell the story.