How to Prove a Breach of Fiduciary Duty Claim

In the business world, when you place your trust in others, you take a risk that they may wrongfully put their own self-interests ahead of yours. The law recognizes special obligations — known as fiduciary duties — when someone is bound by law or contract to act or give advice for the benefit of another. For example, partners have a fiduciary duty to the partnership, corporate officers to the corporation and employees to their employer.

Under Texas law, fiduciaries owe five duties, namely to act in good faith, refrain from self-dealing, make full disclosure, uphold strict integrity and behave honestly and fairly. If you feel that one or more of these duties has been breached, causing you injury, you have to prove these elements to make out a cause of action:

• Existence of a fiduciary relationship — Some fiduciary relationships are imposed by law, such as trustee and beneficiary, executor and estate, financial advisor and client, or lawyer and client. Others require evidence of an ongoing basis of trust and confidence between two parties based on a history of interaction. For example, a one-time purchase of equipment from a supplier probably doesn’t establish a duty, but a long-time buyer-seller relationship may suffice.
• Breach of fiduciary duty — This means the fiduciary failed to act in the best interests of the party to whom the duty was owed. Common examples of breach of fiduciary duty include fraud, misrepresentation, misappropriation of money, unjust enrichment, misuse of position and withholding of information.
• Resulting injury to one party or benefit to the other — Injury may take the form of direct damages, such as out-of-pocket costs or loss of benefit of a bargain. A plaintiff may also recover incidental damages, such as lost profits, business disruption, damaged customer relationships and harm to reputation. Intangible losses, such as mental anguish, may be compensable if they were foreseeable. Punitive damages may be recovered in cases of fraud or malicious breach.

Other remedies for breach of duty include rescission of the original transaction, disgorgement of profits, forfeiture of professional fees and creation of trusts and receiverships. A court typically orders the fiduciary to make a full accounting in order to get a clear picture of the extent of injury involved.

Fiduciary breach of duty cases are often complex and require thorough examination with the aid of forensic accountants and other experts. It is essential to work with a business litigation attorney who is experienced in establishing a cause of action and pursuing appropriate legal relief.

With 30 years of experience in business law, the Law Office of Paul R. Clevenger in Dallas, Texas has successfully represented businesses and individuals in cases alleging breach of fiduciary duty. For advice about your legal rights and protections, contact us online or call 469-212-9764.