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What is a Breach of Fiduciary Duty?

March 1, 2021

Est. Reading: 2 minutes

We all have people who we necessarily rely upon for everyday needs, from our loved ones who we rely on for support, to professionals we rely on to keep our livelihoods running. Only a few of these people, however, have a legal obligation to do so; this obligation exists in law as a fiduciary duty. The penalties for a fiduciary who breaches this duty can be harsh, and they must actively take steps to ensure they act in the best interests of their principal, the person they’re working for.

Many different business relationships can be considered fiduciary in nature, the most common of which are financial advisors, trustees of estates, and executives acting in the interests of stockholders. Some less common and more heavily argued-over fiduciary relationships are employees to their employers, and independent contractors acting on behalf of a company. For this reason, the duties of employees or contractors are usually more clearly defined in their contract agreements, so proving this relationship isn’t always necessary. 

Fiduciary obligations are dependent on the job asked of the fiduciary, but normally consist of always acting in the best interests of the principal, avoiding conflicts of interest, and operating with transparency and honesty. The fiduciary must do what is asked of them to the best of their ability and knowledge, but sometimes unfavorable outcomes are impossible to avoid. A bad outcome is not necessarily a breach of fiduciary duty in and of itself, as breaches of duty have other specific requirements, established by precedent. These are not hard and fast rules for what is considered a breach of fiduciary duty, but are generally the guidelines followed to establish that a breach occurred:

Monahan Law Firm PLC, Breach of fiduciary duty

Duty

First, it must be established that a fiduciary duty was established in the first place. In some cases, this is in writing, and in others, it is assumed based on the type of business relationship. Most importantly, the fiduciary must have knowledge of this relationship and have willingly accepted it.

Breach

The fiduciary must have acted against the best interests of the principal, perhaps in their own interest or in the interests of another client. It is important to establish causation, or that the action taken is both the fault of the fiduciary and that it caused damages to their principal.

Damages

The principal must demonstrate that actual damages occurred due to the breach of duty. Without damages, the fiduciary cannot be held liable for their actions, as there was no impact on the principal. Having hard numbers or examples of material damages goes a long way in these cases.

Proving a breach of fiduciary duty is not an easy feat. Having an experienced attorney is critical in establishing the necessary pieces of a case like this, which is why Monahan Law Firm, PLC is here to help. Call at (623) 385-3190 or contact us through our website to set up an appointment.

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Attorney Patrick Monahan

Patrick Monahan

Patrick Monahan is the managing partner of Monahan Law Firm, PLC. Patrick began his legal career practicing real estate, construction, and general business litigation.
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