The Consequences of Breaching Fiduciary Duties

Fiduciary duties represent the highest legal standard of care, requiring a licensed professional or corporate officer – such as a financial advisor, doctor, lawyer, realtor, accountant, or corporate officer or board member – to act in the best interests of their client. If these duties are breached, the consequences can be severe for the fiduciary and the affected party, including financial losses, legal action, and reputational damage.?

In this article, we’ll explore the key warning signs, potential legal outcomes, and steps to take if you suspect a breach has occurred.

Understanding Fiduciary Duty

Fiduciary duty is an obligation of licensed professionals and corporate officers to act with loyalty, care, and transparency on behalf of their organization, client, or patient. A breach occurs when a fiduciary fails to act in the best interests of those they represent, whether through negligence, conflicts of interest, or fraud.

In Gantler v. Stephens, corporate officers in a Delaware corporation were found to have breached their fiduciary duties by withholding material information and prioritizing their interests over the company’s. The Delaware Supreme Court ruled that corporate officers owe the same duties to the company as directors.? This case reflects the growing trend of courts holding officers personally liable for actions that harm the entity they serve, as discussed in the Harvard Review on Corporate Governance. (Read more: Recent Trends In Officer Liability .)

Identifying Breaches

A breach of these duties can be subtle or go undetected, as often the fiduciary holds a position of trust. For example, if a realtor fails to disclose all buyer offers to their client, it constitutes a breach and may involve an undisclosed dual agency .

Common breaches include:

• Withholding important information or lack of communication
• Acting in self-interest at the expense of the other party
• Failing to document decisions or actions made on behalf of the other party

Legal Consequences?

When a fiduciary's actions cause harm, the affected party can pursue legal action to recover damages. This may include financial restitution, requiring the fiduciary to repay lost funds or cover damages. In cases of willful misconduct or gross negligence, punitive damages may also be imposed depending on the jurisdiction.

Additionally, a guilty finding can result in the revocation or suspension of the fiduciary's license, damaging their reputation and future business prospects. In Michigan, courts take fiduciary breaches seriously, often awarding significant damages to injured parties although punitive damages are not allowed under Michigan law.

Protect Your Rights

If you suspect a breach of fiduciary duty has compromised your interests, seek legal counsel. The process involves proving the breach by gathering evidence, such as communications and financial records, and filing a lawsuit. An experienced attorney can help you understand your rights and pursue proper compensation.

If your breach occurred in the states of Michigan or Florida, contact August Law . Our professional liability attorneys have over 30 years of experience handling fiduciary duty cases. We’re ready to help you protect your rights and secure the compensation you deserve. Schedule a free consultation today.

For more information on types of fiduciary relationships, check out our article on professional liability .