Suffered A Breach Of Fiduciary Duty? What Are The Remedies Available?
Remember the famous Ponzi scheme scam? Similarly, did your advisor scam you too? Did they have you invest in a fraud scheme?
Did your doctor neglectfully diagnose you with the wrong illness or cause a surgery error? Has the wrong judgment led to damage?
Has your lawyer given you incorrect advice? Did it cost you the lawsuit? Has the wrong advice led you to financial harm?
Did the executor of your estate or your estate planning attorney embezzle funds that you trusted them with?
Has your real estate agent misled you, or hidden defects in the property?
Did frauds mishandle your assets and take away your inheritance?
Well, if all of the things above have happened to you, you are a victim of breach of fiduciary duty.
What Is A Breach Of Fiduciary Duty? What Does Fiduciary Duty Mean?
“Fiduciary” responsibility is kind of a special responsibility. You expect the one with the fiduciary duty to put your needs ahead of their own. Now, when they don’t, they break a promise to you. Not just that. Since they were legally required to take care of you, you can actually sue them for not doing that.
What Are The Various Elements Of Breach Of Fiduciary Duty?
Let us explain the legal elements of a breach of fiduciary duty to you. It is an ethical and legal violation where the person illegally goes against their obligations to one person. The person, in this case, can be an individual or a legal person (a company, organization, corporation, etc.).
Who Is The Fiduciary?
The person who has the obligation to perform the duties is the fiduciary. On the other hand, the person that they perform the duties for is the beneficiary. Legally, their relationship is one of trust and confidence.
How Does A Fiduciary Duty Begin?
Typically, a fiduciary duty can start from a contract. The contract can specify what kind of a relationship you, as a beneficiary and a fiduciary, will have.
- However, it does not always have to be a formal or written contract. If both parties are fit to enter into a contract and are entering into the arrangement with free will, the fiduciary relationship begins.
- Sometimes, fiduciary duties can result out of laws and regulations. The directors of a company, by law, have a fiduciary duty to the rest of the company members, especially the shareholders.
- When you hire anyone for their services, their fiduciary duty towards you begins. So, when you hire a person as a financial advisor or a lawyer, they owe it to you, the beneficiary/their client, to protect your finances or represent your interests in court.
- Some fiduciary duties are inherent in nature. For example, a trustee or an agent acting on behalf of a person automatically has the fiduciary duty to act in favor of the person.
Some fiduciary duties can also be the result of court orders when they are imposed by the court. The court does it to protect the rights and interests of the parties and prevent wrongdoing. or ensure fairness.
Simply Put, What Constitutes A Breach Of Fiduciary Duty?
A breach of fiduciary duty is something most of us have seen happen, either to loved ones or on the news, etc. When you trust a person legally, you expect them to look out for your best interests. It can be like a financial advisor, your family doctor, or your lawyer. However, imagine a circumstance in which these people that you trust do not do what’s best for you. Picture their breach of your duty causing you financial harm. Simply put, this is a case of breach of fiduciary duty.
What Are The Components Of Fiduciary Duty?
Fiduciary duty, breach of fiduciary duty, and remedies to the breach are all critical concepts. Fiduciary duties can originate in different spheres of life. You, as a beneficiary, can have a fiduciary in business, finance, estate planning, and more areas.
Types Of Breach Of Fiduciary Duty
Breach of fiduciary duty can come in various forms. You may see instances of it in your day-to-day life.
Your fiduciary may:
- display misconduct,
- participate in actions that harm you and serve their own purposes instead,
- improperly use the company assets,
- carry out actions that lead to conflicts of interest, and
- and misappropriate finances.
Thus, breaches of fiduciary duty lead to the benefit of the fiduciary and harm to the beneficiary. There are civil consequences and criminal charges if things get too severe. For instance, embezzlement or fraud from a fiduciary will definitely lead to criminal against them.
Let us look at some of the most common types of breaches of fiduciary duty.
A. Self-Serving Actions
As the name suggests, this occurs when a fiduciary uses the assets of the beneficiary for their own gain. They also might take actions that serve their own interests but harm the beneficiary. Let’s say that a director of a company is using shareholder’s funds for personal expenses. This is definitely a breach of fiduciary duty.
B. Misuse of Beneficiary’s Assets
This situation is another instance of what constitutes a breach of fiduciary duty. Fiduciaries illegally making use of the assets of the company is definitely unethical and illegal. These assets are for the beneficiary’s benefit, which is the company in this case. If a trustee keeps the trust assets to himself and does not give them to the beneficiaries, it is definitely a breach.
C. Fiduciaries Acting In Conflicts of Beneficiary’s Interest
A fiduciary is supposed to act according to the best interests of the beneficiary. Let’s say that the fiduciary urges the beneficiary to take a decision so that they might make a personal or financial gain out of it. If they are using their position as an advisor to serve their personal gain without the knowledge of the beneficiary, the betrayal is indeed a breach of fiduciary duty.
D. A Negligent Fiduciary Is As Good As None
If you are a fiduciary, your beneficiary, the law, and the courts all expect you to carry out your duties with due diligence and care. Negligence while carrying out these duties can lead to the beneficiary suffering harm. For example, if you hire a financial advisor and they are negligent. Turns out that their negligence has cost you substantial financial damage. This is definitely a breach of their fiduciary duty.
Breach of fiduciary duty comes in multiple forms. It can be misrepresentation of facts, intentional deception, fraud, misrepresentation of facts, or embezzlement of assets. Etc.
Conclusion- What Are The Remedies Available For Breach Of Fiduciary Duty?
To understand what remedies are available to you in case of a breach of fiduciary duty, read this section. You must first know how to assess the type and extent of your damages. Only after careful consideration are these the types of remedies that the court might award you.
- The court may ask the fiduciary in breach to give the lost profits back to you.
- Authorities may ask the fiduciary to pay back the difference between the paid amount and the amount you were supposed to receive but did not.
- The court may award you compensation for emotional distress in addition to economic losses.
- Canceling the contract might be another option available to you.
- The fiduciary, who is the wrongdoer, may have to surrender the illegally acquired profits from the breach.
Remember, the type of damages or compensation will vary from one state to another.