Breach of fiduciary duty is a legal claim that can form the basis for a variety of lawsuits, including shareholder, derivative, and agency suits. Breach of fiduciary duty suits allege that the defendant failed to live up to his obligation as a fiduciary to act for the benefit of the business and other partners and shareholders.
What is a Fiduciary?
A fiduciary is someone charged with taking care of money for another person or company. Fiduciaries include:
- Bank Trust Departments
- Financial advisors
- Investment plan administrators
- Trustees in bankruptcy
- Real estate agents or brokers
- Partners in a company
- Trust account administrators
The key to a fiduciary relationship is that one party places herself in a position of vulnerability by vesting confidence in another party who will aid, advise, or protect the principal (the client) in some financial dealing. The relationship between a fiduciary and his client is one of justifiable trust and confidence. When this trust is violated, a breach of fiduciary duty may result.
What is a Fiduciary Duty?
Fiduciaries must act for the benefit of their principals, never putting their own interests first. A fiduciary duty is the highest standard of care and loyalty in the law. The fiduciary may not take advantage of opportunities arising from his position as a fiduciary to make personal profit, such as by retaining bribes. He may not take on other fiduciary duties which conflict with one he has already undertaken. He may also not withhold information from the principal that would aid the principal in making fully informed decisions.
Damages in Breach of Fiduciary Duty Cases
The law provides for monetary remedies when a fiduciary breaches his duty to his client. Compensatory damages are the most common form of damages in breach of fiduciary duty cases. The court will attempt to put the principal in the position that he would have been in had the fiduciary not breached his duties.
If the fiduciary has violated his duty by making a side profit without the principal’s permission, then the court will order the profit be turned over to the principal. If it is difficult to tell how much money the fiduciary earned from his improper side activities, then the court may order an account of profits. This allows the calculation of profits by separating profit retained as a result of the fiduciary’s position from profit due to independent efforts.
In some circumstances of egregious conduct, courts may also award punitive damages to the plaintiff for breach of fiduciary duty. These damages are meant to punish a defendant for his bad conduct, and are not based on actual economic harm to the plaintiff.
David A. Axelrod & Associates: Proven Results in Breach of Fiduciary Duty Cases
David A. Axelrod & Associates has successfully represented clients in breach of fiduciary duty cases. In one case, David A. Axelrod & Associates represented the officers of a defunct contractor in suits claiming breach of fiduciary duty and conversion, successfully negotiating settlements for all non-equity holders.
In another case, David A. Axelrod & Associates won a verdict for over $1 million from a Chicago real estate broker and investor who cheated his client out of real property and personal wealth. The broker was found to have defrauded the client as well as breached his fiduciary duties, causing the judge to assess punitive damages as part of the award.