Posted by: Apr 21, 2020

Proving Breach of Fiduciary Claim

A fiduciary duty is a responsibility to look out for the interests of another person and put them before your own.

Every person has a duty to act reasonably to avoid harming others.

But beyond that, we generally don’t have a responsibility to look out for the well-being of strangers.

However, a fiduciary duty may arise when one person has a special relationship with another person in which they take on the responsibility to act for the other person’s benefit.

Because of that special relationship, the fiduciary owes special duties to the other person beyond the duties they owe to the world at large.

What Constitutes a Breach of Fiduciary Duty in Texas?

To prove a breach of fiduciary duty in Texas, you must demonstrate four elements:

  • The person owed you a fiduciary duty;
  • The person breached their fiduciary duty;
  • You suffered harm or the other person wrongly benefited as the result of the breach; and
  • The amount of your damages or the defendant’s ill-gotten benefits.

Duty

A person can be held responsible for a breach of fiduciary duty only if they owed you such a duty. To establish the existence of a duty, you must demonstrate that a fiduciary relationship exists between you and the other party.

A fiduciary relationship can be either formal or informal.

Formal fiduciary relationships are established when one party takes on a particular role with where they agree to act for the benefit of the other party. Examples of formal fiduciary relationships include:

  • Agent/principal,
  • Broker/client,
  • Insurance company/insured,
  • Corporate officer/company,
  • Attorney/client,
  • Trustee/beneficiary,
  • Employer/employee, and
  • Partners.

Informal fiduciary relationships arise based on the inherent nature of the relationship. To establish an informal fiduciary relationship, you must show that you had a special relationship of trust and confidence with the other party prior to and outside of any agreements on which the lawsuit is based. Examples of informal fiduciary relationships might include:

  • Teacher/student,
  • Parent/child, and
  • Friends.

Informal fiduciary relationships can be more difficult to establish than formal ones because they depend on individual circumstances.

Breach

Once the existence of a fiduciary relationship is established, the next step is to prove that the other party breached one or more of their fiduciary duties.

In Texas, a fiduciary generally owes six types of duties:

  • Duty not to engage in self-dealing,
  • Duty to deal fairly and honestly,
  • Duty of good faith and loyalty,
  • Duty to act with strict integrity,
  • Duty of full disclosure, and
  • Duty of candor.

Fiduciaries may also owe special duties depending on the relationship. For example, attorneys have a duty to keep their clients informed, and employees have a duty not to undermine their employer’s business.

To prove a breach of fiduciary duty claim, you must establish that the defendant failed to fulfill their fiduciary duty.

Causation

For most types of claims, a plaintiff has to prove that the defendant’s breach caused harm to them in some way.

But for breach of fiduciary duty claims in Texas, you have another option: you can prove instead that the breach resulted in a benefit to the defendant.

If the breach resulted in either harm to the plaintiff or a benefit to the defendant, the plaintiff will be entitled to a monetary award.

Damages

Finally, you must prove the amount of the damages you suffered as a result of the defendant’s breach. The following damages may be available for a breach of fiduciary duty claim:

  • Lost profits,
  • Financial losses, and
  • Mental anguish.

Additionally, if the defendant benefited from their breach, they may be required to turn over any profits they made to you.

Talk to a Houston Business Lawyer About Your Breach of Fiduciary Duty Claim

As a business owner, you probably have relationships with many individuals who may owe you fiduciary duties, including:

  • Employees,
  • Agents,
  • Corporate officers,
  • Insurance companies, and
  • Partners.

If one of these individuals has breached a fiduciary duty to you or your business, you need a capable business lawyer on your side.

The Curley Law Firm can help you determine whether you have a claim for breach of fiduciary duty and work to hold fiduciaries responsible for the damage they have caused you.

Adam Curley has years of experience with business litigation, and he wants to see your business succeed. Call the Curley Law Firm or fill out an online form to learn more about how Adam can help you.