Alleging that someone breached their fiduciary duty is a severe charge. Essentially, you are contending that someone violated the trust that you placed in them. The law takes fiduciary duties very seriously. Although it is not always easy to prove your case, the defendant can be personally responsible for damages if you are successful.
You have the legal right to file a lawsuit. Along the way, you can build a strong case showing that someone else acted wrongfully and caused you damage. You may be in for a lengthy process, but it is one that you must begin to have a chance at financial compensation. Such compensation should put your organization in the position it was previously in before the breach occurred.
Breach of fiduciary duty cases is very fact-intensive. To gather the evidence that you need to win your case, you should hire an experienced business attorney immediately. You do not want to risk other parties destroying or misplacing key evidence you will need to prove your claim.
If you believe a fiduciary to your company breached their duty of care, you should never wait to seek legal consultation. An attorney can review what happened and advise you whether there is a valid legal claim. If you cannot resolve the matter out of court, an experienced business litigation lawyer can pursue legal action in court.
The Two Types of Duties That Fiduciaries Owe
The two primary types of breaches of fiduciary duty cases are:
- The trustee breached their duty of loyalty by placing their interests ahead of the trust or beneficiary (this is known as breaching the duty of loyalty)
- The trustee breached their duty by not acting reasonably or failing to perform their due diligence before making a decision or taking action (this is known as breaching the duty of care)
Regardless of what type of breach of fiduciary duty you are trying to prove, you will have a similar burden of proof. The legal standard you must meet in these cases is the same as in any other civil case. You must prove your case by a preponderance of the evidence. This standard means that it is more likely than not that your facts are accurate. This standard is not as high as the beyond a reasonable doubt standard that a prosecutor must meet in a criminal case.
The Four Elements of a Breach of Fiduciary Duty Case
Fiduciary duty cases sound very similar to personal injury cases regarding the elements you will need to prove.
The four elements of a breach of fiduciary duty case are:
- Someone else owed you a fiduciary duty
- The person owing the fiduciary duty to you breached it
- You suffered damages from the breach
- The defendant’s actions were the proximate cause of your damages
The shorthand for these elements will be:
- Duty
- Breach
- Damages
- Causation
It Is Not Always Clear That Someone Acted as a Fiduciary
There is often a question of whether someone owed another a fiduciary duty.
There are some cases where there is an established fiduciary relationship. For example, if one has established a trust and appoints a trustee, the trustee owes fiduciary duties to the beneficiaries. An executor of a will owes duties to the beneficiaries of the will.
Other people may take on a fiduciary duty by virtue of their position. For example, in a closely-held company, the majority shareholder owes fiduciary duties to the minority shareholders. When a company appoints directors, they owe fiduciary duties to the shareholders.
Someone Can Act as a Fiduciary, Even When Without an Agreement
Although fiduciary duties may derive from a written agreement, they can also originate based on the specific facts of a situation. One of the common elements is that the fiduciary occupies a position of trust. They usually have greater power than they can exercise.
Often, the fiduciary either manages money or they influence the fate of someone else’s investments. However, even within those categories, it is not always clear the extent of the duty that someone like a stockbroker owes (those who act with discretion have a much higher duty than those who execute customer orders).
You may need to argue that someone is a fiduciary based on the nature of the relationship. Your attorney can use a written document or specific facts to show that you relied on the fiduciary and that they occupied a position of trust.
If the case involves someone like a financial advisor, you will not need to do much else to prove that they are a fiduciary. They became one when they agreed to act in that capacity. In other cases, you will need to show that there was a special relationship of trust, regardless of the official description of the relationship. Many people try to avoid being called fiduciary because they know it can cause them legal risks.
Proving an Actual Breach of Fiduciary Duty Is Difficult
The second element of the test is also very fact-intensive. In a personal injury case, proving a breach of duty is often the most contested part. Here, you must demonstrate what the fiduciary did that fell short of their duty.
If you are arguing that the fiduciary was careless, you will need to prove what they did or did not do. For example, if they caused you a significant loss by not doing due diligence on a transaction, you must prove what work they did. Then, you will compare it to what a reasonable person will have done.
You may have an easier time proving that the fiduciary engaged in a self-interested transaction. Certain presumptions apply in a self-dealing case.
If you can prove that the fiduciary profited from the transaction, the burden of proof then shifts to them to show:
- That transaction was in good faith;
- That transaction was fair and equitable to the plaintiff; and
- That transaction happened after fully disclosing all material information to the plaintiff.
Your lawyer can explain how burden shifting will work in your case.
You May Need to Gather Evidence That Only the Defendant Has
Breach of fiduciary duty cases can be complex. The proof you need for your case is often in the defendant’s hands. You will need some way to obtain the evidence in your case.
If you file a lawsuit against the fiduciary, you can obtain this evidence during the court case. In every court case, there is a phase that is called discovery. You have several ways to get proof that you can use to prove your case.
Here are the ways that your lawyer can obtain evidence to prove your breach of fiduciary duty case:
- Interrogatories - Your attorney can send the other party a set of questions they need to answer. These questions can relate to the facts of your case. The inquiries can also relate to the case that the defendant plans on presenting on their behalf.
- Requests for admissions - Your lawyer will send a set of facts (and allegations) and ask them to admit or deny them.
- Requests for documents - You can ask the defendant for relevant documents to your case. These include emails, corporate records, spreadsheets, or other documentary evidence.
- Depositions - Your lawyer can ask the other party and their potential witnesses questions under oath for up to seven hours. Presumably, the witnesses are on the record if they try to give inconsistent testimony at trial. Deposition responses can also give your lawyer openings for various lines of questions at trial.
You May Prove Your Case With Documents and Communications
The requests for documents are a crucial part of your case. Often, your attorney proves your claims through documentation. The fiduciary should have left a paper trail that can help them prove that they used reasonable care.
If your case involves a questionable transaction, the fiduciary must prove the above-mentioned factors. If the fiduciary does not have documentation that shows what care they used or that a transaction was in good faith, it can be helpful to your case.
There are countless cases where a lawyer has obtained a “smoking gun” email in a discovery that has put their client in a solid position to win their cases. Even if there is no definitive source of proof, you may have the evidence to prove your case by a preponderance of the evidence.
Obtaining evidence in discovery is not always accessible. The defendant may resist your request and throw up all sorts of roadblocks through their attorney. Not only do your discovery requests need to be well-crafted, but they must also be reasonable. If the other party refuses to cooperate, you may need to go to the judge and file a motion to compel.
Your Success in Discovery Can Set the Stage for Compensation
The evidence you gather in discovery (or your inability to collect it) can make or break your case. Many cases will settle shortly after discovery and in advance of trial. Once you have succeeded in getting your hands on helpful evidence, the defendant begins to get a sense of their legal risks. They may become more motivated to settle the case, knowing that things can be far worse for them if the case goes to a jury.
In addition to showing that the fiduciary breached their duty, you will need evidence proving causation. The fiduciary’s lawyer may argue that you will have suffered damages anyway, regardless of what the fiduciary did or did not do. You will need to tie the fiduciary’s actions directly to your loss to be in a position to recover damages.
You Also Need to Prove Your Damages in a Fiduciary Duty Case
Proving a breach of fiduciary duty is only part of your case. The other major challenge you will face is proving the scope and extent of your financial damages. The fiduciary must compensate you for what you have lost. You are legally entitled to compensatory damages in your case.
Compensatory damages will always include your direct monetary losses from the fiduciary’s misconduct. They may also include other consequential damages. For example, you may have missed out on making profits from a transaction because of what the fiduciary did.
In addition, you can have suffered other damages, such as emotional distress. The fiduciary will need to restore you to the position you should have been in had it not been for their conduct.
In addition, you can hold the fiduciary liable for punitive damages based on the severity of their conduct. Courts only award punitive damages when the defendant acted intentionally or recklessly. However, you may argue that the fiduciary deserves punishment for what they did.
You can only collect damages that you can prove. Like fault, you have the burden of proof to demonstrate your damages. The court will not award you money if you cannot show your damages. Proving damages requires presenting your own evidence, and you cannot rely on what your lawyer may have gathered in discovery. An experienced business litigation attorney can quantify and prove your damages to the court.
You Should Always Hire a Lawyer for a Breach of Fiduciary Duty Case
Breach of fiduciary duty cases is far from easy. However, you can win when the facts and the law favor you. The first thing you need to do is connect to the business litigation law firm in Chicago to build your case. You can do little on your own to prove your case. You may suspect that someone wronged you, but you can do little to articulate it without the help of a lawyer.
Any breach of fiduciary duty case is all about what you can prove. In the eyes of the court, if you do not have the necessary evidence, the breach did not happen.