Fiduciary Duties and Breach of Fiduciary Duties in California
A fiduciary duty is a legal duty owed by someone to someone else. Usually people who are in trusted positions, such as administrators, trustees, executors, lawyers, as well as corporate officers and directors owe a set of legal duties, called fiduciary duties, to the people that they are representing, acting on behalf or for the benefit of. Fiduciary duties can be created:
● By statute, for example the establishment of a business partnership creates fiduciary duties between the partners.
● Through legal proceedings, such as the administration of an estate or trust.
● By way of a contractual relationship, such as an attorney-client relationship, a principal-agent relationship.
● In rare cases fiduciary duties can arise in other situations as dictated by case law (i.e., law created by the courts).
What are Examples of Breach of Fiduciary Duty?
A few examples of fiduciary duties include:
● Duty of loyalty: The person with the fiduciary duty has an obligation to perform in such a way that is in the interests of the person he or she is representing.
● Duty to avoid self-dealing: Anyone in a fiduciary position has a duty to not use his or her position, any knowledge, or any property that is entrusted to him or her, for personal gain or self-dealing.
● Duty of prudent investing: For those individuals who are in the position to make investments for a beneficiary, such as trustees or administrators, they have a duty to make proper and prudent investments.
● Duty of impartiality: When one fiduciary must manage several beneficiaries, such is the case with estate administrators or trustees for example, the fiduciary must treat all of the beneficiaries as equals, or in accordance with a will or trust documents.
● Duty of proper fiduciary accounting: Fiduciaries that are entrusted with money, investments, or property are required to maintain an accounting and to provide an accounting annually and upon request.
What are Some Examples of a Breach of Fiduciary Duty?
A breach of fiduciary duties is a tort that can result in financial or some other loss or damages for the victim. A breach of fiduciary duty can take a number of different forms. For instance:
● Withholding funds from a beneficiary or client, or not disbursing funds in a timely manner.
● Representing a beneficiary, client, etc. when the fiduciary has a conflict of interest.
● Mingling the funds held in trust by the fiduciary with the fiduciary’s own personal funds, or using funds that are held in trust for the fiduciary’s own purposes.
● Exploiting knowledge or influence in order to benefit from opportunities that arise from the fiduciary’s position of trust, i.e., engaging in self-dealing.
● Negligently handling or mishandling the fiduciary relationship or underlying matter; i.e., mismanaging a trust or estate, filing to make prudent investments, failing to act which results in a loss of rights for the beneficiary, client, or company
Our Attorneys have handled numerous cases involving these types of allegations and regularly represent both the victim of such breaches as well as the parties accused of such conduct. We also advise companies, officers, and directors, on their fiduciary obligations in order to minimize exposure to fiduciary duty claims by shareholders. Please contact us to schedule an initial consultation to discuss the specifics of your case.