When does a person breach their fiduciary duty?

A fiduciary is a person who is obligated to act in the best interests of another party. For example, a board member has a fiduciary duty to act in the best interests of the company or in the interests of the company’s shareholders.

While the concept is simple enough, it wouldn’t be a source of litigation if things weren’t easily complicated. It’s important to understand the elements of a breach of fiduciary duty claim to help you better understand when a breach may have occurred.

The elements that must be present to prevail on your claim

To prevail on a breach of fiduciary duty claim, you must prove three elements:

• Duty: In keeping with the board member example, you must show that the board member owed a duty to you, your company, or the shareholders of your company.
• Breach: Stating the obvious, you must show some type of breach of this duty. A breach may involve the misappropriation of funds, neglecting to perform the duties of a board member, or any act that is not in your best interests.
• Damages: You must be able to show that the breach actually caused harm to you or your company. If there was a breach but no actual harm occurred as a result of the breach, you don’t have legal claim.

If a fiduciary is not an expert on a certain subject, it’s their duty to hire an expert to help them out. Failure to do so may be a breach of fiduciary duty. Another example would be a board member hiring an unqualified person to perform a contract. If hiring this person benefits the board member more than the company, a breach of fiduciary duty has likely occurred.

Fiduciary duties can extend to a wide range of people. A fiduciary may be nearly anyone who owes a duty to another party, such as investment portfolio managers and an executor of an estate. A legal professional can let you know what your options are if you believe you’ve suffered harm from a person’s breach of their fiduciary duty.