Breach of Fiduciary Duty

What is a breach of fiduciary duty?

A breach of fiduciary duty occurs when a person in a position of trust, such as a corporate officer or director, fails to act in the company’s or its shareholders’ best interest. A fiduciary duty is a legal obligation to work in the best interest of another party rather than in one’s self-interest. Breach of fiduciary duty can take many forms, including self-dealing, mismanagement, or failure to disclose material information. More specific examples of a breach of fiduciary duty include:

• Misappropriating company funds
• Using company resources for personal gain
• Failing to disclose conflicts of interest
• Failing to act in the best interest of the company or its shareholders
• Failing to disclose material information to shareholders

In Florida, a person who breaches a fiduciary duty can be held liable for any damages caused by the breach. Shareholders and other parties can also seek legal remedies such as an injunction, corporate governance changes, and monetary damages.

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What legal issues typically arise related to a breach of fiduciary duty?

In Florida, the following disputes are among the most common breaches of fiduciary duty:

• Shareholder derivative actions: Shareholders may bring a lawsuit against the company’s officers and directors for a breach of their fiduciary duties.
• Securities fraud: A breach of fiduciary duty may also give rise to securities fraud claims if the breach involves the failure to disclose material information to shareholders or other investors.
• RICO (“Racketeer Influenced and Corrupt Organizations”) claims: A breach of fiduciary duty may also give rise to RICO claims if the breach involves a pattern of illegal conduct.

What are relevant laws related to a breach of fiduciary duty in Florida?

The Florida Statutes define the roles and duties of certain positions in trust law and corporate law, including the following:

• Section 736.0801 governs a trustee’s duties in administering a trust.
• Section 709.2214 defines one with power of attorney as an agent and fiduciary and governs the corresponding duties.
• Section 607.0830, which governs the duties of a board of directors
• Section 607.0831, which governs the liability of directors of corporations

Common law principles (the decisions of Florida courts) also apply in Florida, which may establish a breach of fiduciary duty in situations not explicitly covered by the statutes.

What is required to prove a case of breach of fiduciary duty in Florida?

To prove a case of breach of fiduciary duty in Florida, the plaintiff must typically establish the following elements:

1. The existence of a fiduciary relationship— one party (the fiduciary) has a legal obligation to act in the best interest of another party (the beneficiary);
2. A breach of that duty—the fiduciary failed to fulfill their obligations under the fiduciary relationship or acted in a way that was not in the beneficiary’s best interest; and
3. Damage proximately caused by the breach—the plaintiff must show that they suffered harm due to the fiduciary’s breach.

In addition to these elements, the plaintiff may need to prove other facts specific to the type of fiduciary relationship. For example, in a case involving a breach of fiduciary duty by a corporate director or officer, the plaintiff may also be required to prove that the director or officer’s conduct was not in good faith or involved gross negligence.

When a set of facts is appropriate to meet the requirements of a breach of fiduciary duty, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies, such as:

• Injunction: A court may grant an injunction ordering the person who breached their fiduciary duty to cease their conduct and take specific actions to remedy the harm caused by the breach;
• Damages:  A court may award monetary damages to the company and shareholders for any harm caused by the breach of fiduciary duty;
• Resignation or removal of directors or officers: Shareholders or the court may call for the resignation or removal of the directors or officers who have breached their fiduciary duty; or
• Corporate governance changes: The court may order changes in the company’s governance structure or processes to prevent future breaches of fiduciary duty.

To see what actions may be available for your unique situation, please contact our office to set up your initial consultation.

What are common defenses to breach of fiduciary duty in Florida?

Some defenses to breach of fiduciary duty actions in Florida include:

1. Good faith and reasonable belief: The defendant may claim that they acted in good faith and had a reasonable belief that their actions were in the beneficiary’s best interest and that they did not breach their fiduciary duty;
2. Ratification: The defendant may argue that the beneficiary ratified their actions and that the beneficiary cannot claim a breach of fiduciary duty;
3. Statute of limitations: The defendant may argue that the claim is time-barred by the statute of limitations and the plaintiff’s claim is not timely;
4. Release or waiver: The defendant may argue that the plaintiff has released or waived the claim by taking some action or failing to take some action;
5. Lack of causation: The defendant may argue that the defendant’s actions did not cause the plaintiff’s damages.

One core strategy when defending against a breach of fiduciary duty claim is demonstrating the lack of a fiduciary relationship. If no fiduciary relationship existed, the defendant could not be held liable for a breach of fiduciary duty. It’s important to note that defenses will vary depending on the specific facts of the case and the type of fiduciary relationship at issue.

To see what defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Have more questions about a breach of fiduciary duty-related situation?

Crucially, this overview of breach of fiduciary duty does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.