Fiduciary Litigation

Fiduciary duties refer to the legal obligations that arise when one person or entity has a duty to act in the best interests of another. The person who owes the duty is called the fiduciary, and the person to whom the duty is owed is called the beneficiary.

Fiduciary duties can arise in a wide range of contexts, including in business relationships, such as between a company's directors and shareholders, or in personal relationships, such as between a trustee and a beneficiary of a trust. Attorneys are fiduciaries to their clients, partners, whether in business or in marriage, owe each other fiduciary duties, and agents, even employees, owe fiduciary duties to their principals. Fiduciary duties can also arise from informal purely personal relationships involving a high degree of trust and confidence. The fiduciary duties owed in each situation will depend on the specific context and the relationship between the parties, and sometimes the agreements between them.

The primary duties a fiduciary owes to a beneficiary are the duties of loyalty, care, obedience, and disclosure. The duty of loyalty requires the fiduciary to put the interests of the beneficiary ahead of their own and to avoid conflicts of interest. The duty of care requires the fiduciary to act with reasonable skill, care, and diligence in carrying out their duties. The duty of obedience requires the fiduciary to follow the beneficiary's instructions within the bounds of the law. The duty of disclosure requires fiduciaries to act with complete candor, disclosing all material facts known to them that might affect the beneficiary’s rights.

Fiduciary duties are enforceable through legal action, and courts will closely scrutinize the actions of fiduciaries, particularly with respect to breaches of the duty of loyalty, to ensure the fiduciary fulfilled its obligations to the beneficiary. Common ways fiduciary duties are breached include:

• A company officer, director, owner, or employee stealing an opportunity from the company, such as a new customer, line of business, or technology
• A partner diverting revenues from the partnership or stealing or wasting partnership assets, such as by overpaying themselves
• A fiduciary putting their own interests ahead of the interests of their beneficiary when making decisions

The duty of loyalty prohibits a fiduciary from engaging in self-dealing. Fiduciary self-dealing occurs when a fiduciary, who has a legal obligation to act in the best interests of their beneficiary, takes advantage of their position to further their own interests at the expense of the beneficiary. This can include situations where a fiduciary engages in a transaction with the beneficiary in which they have a personal financial interest. 

Self-dealing can result in serious legal consequences for the fiduciary. In many cases, self-dealing is considered a form of fraud or breach of trust that can result in the fiduciary being held liable for any damages or losses suffered by the beneficiary as a result of the self-dealing, as well as possibly exemplary damages. Indeed, the law often imposes a constructive trust on the beneficiary’s assets and requires fiduciaries to disgorge all their ill-gotten gains.

Pursuing and defending claims for breached fiduciary duties can be complex, frequently requiring transactions to be traced and uncovered through accounting, banking, and many other records. 

Attorney Shawn A. Johnson has extensive experience representing plaintiffs and defendants in fiduciary litigation, frequently helping his clients investigate or respond to investigations of allegations of improper fiduciary conduct and, when necessary, litigating the fiduciary claims. Mr. Johnson draws on his accounting and technology background to obtain efficient and meaningful results for his clients—both for injured beneficiaries and defendant fiduciaries. 

If you suspect your fiduciary is not acting in your best interest, or if you have been accused of engaging in improper conduct, contact Mr. Johnson today for a confidential consultation.