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Breach of Fiduciary Duty

Fiduciary duty is the duty of someone taking care of another’s finances and other assets, i.e., the fiduciary, to act in the interest of the person that they are serving. The relationship between a fiduciary and the “person” that they serve does not necessarily have to only be between two individuals – they can be between entities. Ultimately, it is paramount that the fiduciary always acts in the best interest of the person they are serving. To do otherwise constitutes a breach of fiduciary duty.

In the business litigation context, the claim of breach of fiduciary duty often involves corporation officers and directors who have used their position to advance their own financial and otherwise personal interests to the detriment of the company, its owners, or other stakeholders. But there are other factors that must be considered in a breach of fiduciary duty claim: under Delaware corporate law (important in the business law context, as many major companies are incorporated in Delaware), there are three prongs to the concept of fiduciary duty: the duties of care, loyalty, and good faith.

The duty of care implies that the fiduciary should act on an informed basis and consider alternatives. In other words, they should think critically and not blindly follow any suggestions or information that may come their way. The duty of loyalty means that fiduciaries should not use their status, power, or other information they have obtained in their fiduciary role to advance their personal or financial interests over the interest of the company. Lastly, the duty of good faith means that those holding a fiduciary duty should act with the best care possible in their position. Any improper action that hurts the company, even if not necessarily illegal, could constitute a breach of good faith if the purpose was improper and incongruent with what another person, with the same knowledge and/or expertise, would do in the same situation.

Other state laws have an effect on what exact claims can be made – and what damages can be sought – regarding a breach of fiduciary duty claim. Attorneys must thus give a close eye to what laws are applicable in the matter at hand, as well as pay close attention to the evidence which suggests a breach has taken place. At KHF, our attorneys and associated experts can get to the bottom of the issue to investigate your claim.