Breach of Fiduciary Duty in California
One of the most common legal issues facing California shareholders, members, executives and employees alike is the breach of fiduciary duty. A breach of fiduciary duty claim is often associated with those in a position of power over another in a business setting, as well as those with power over decisions and finances.
This is often a majority shareholder, executive or board member but can also be a C-level officer, member or even an employee. In the business world, any officer or director owes a fiduciary duty to not only the company itself, but to other shareholders, investors or members including those with a minority interest. Partners and members of an LLC owe a fiduciary duty to one another. Those with access to and responsibilities over accounting and financial accounts and assets owe a fiduciary duty to the business and its stakeholders. It often surprises people to learn that employees owe a fiduciary duty to their employers.
Fiduciaries must exercise their highest and best judgment in all of their duties and actions associated with their responsibilities and work for the business. Anyone who owes a fiduciary duty to the company must put the interest of the company ahead of their own self-interest. Fiduciaries must maintain the highest professional standards and apply extensive due diligence in their decisions and actions. This precludes the opportunity to act as what would essentially be known as a “dual-agent.” If a fiduciary intends to take any action as a dual agent or put themselves into a position that might affect the interests of those to whom they owe a fiduciary duty must provide full disclosure to and receive substantial authorization from those they are required by law to protect.
What are some examples of a breach of fiduciary duty?
The breach of fiduciary duty is often associated with “self-dealing” or negligence in their duties and decision-making. This can involve a conflict of interest, withholding access to appropriate information and company records and record-keeping, modification or the limitation of access to financial statements, commingling or embezzlement. Any element of fraud or action with the intent to reduce the value of or rightful powers of those to whom they owe this important duty would be considered to be a breach.
The primary legal remedy for the breach of fiduciary duty is financial damages. In order to pursue legal claims, your experienced business attorney must be able to prove that the fiduciary duty existed between the parties, and that the fiduciary took actions (or exercised inaction) in a manner that violated or breached the interests of the affected parties. Your attorney must also prove that the breach of fiduciary duty resulted in genuine, measurable financial damages and that those damages were the direct result of the violation or breach of the associated fiduciary duty.
While the breach of fiduciary duty is a common element in many business disputes and lawsuits, the legal challenges to successfully bring a case require extensive experience, legal knowledge and skill as well as the knowledge of how to investigate, execute discovery (documentation and witness testimony) and ultimately resolve the matter through negotiation, mediation, arbitration or at trial. Look for an attorney with extensive experience in these types of business disputes over a long period of time in California.