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What are the elements of a fiduciary breach claim?

On Behalf of | Feb 20, 2021 | Business Litigation |

You create a fiduciary relationship when you entrust another person or entity to use his, her or its discretion or experience to act in your best interests, and when that person or entity knowingly accepts that responsibility. Per U.S. law, once you establish a fiduciary relationship, the fiduciary has a legal obligation to you as the principal to ensure that no conflict of interest arises. 

The fiduciary has a further duty to inform you of if and when a conflict of interest arises, as a conflict can result in a breach of trust. A breach of trust, in the case of a fiduciary relationship, is grounds for a legal claim. If the claim is successful, the fiduciary may be subject to monetary penalties, loss of licensure, industry dis-creditation, damaged reputation and more. Because a lot is at stake for the fiduciary, the courts require claimants to establish the existence of four key elements. FindLaw details the four elements of a breach of fiduciary claim. 

1. Duty

The first and most obvious element in a breach of fiduciary claim is duty. While many professionals have a legal and ethical responsibility to conduct business in an honest manner, this is not the same as conducting business solely in the best interests of a single client. To establish this element, you must show that the defendant accepted such a high level of responsibility, preferably in writing. 

2. Breach

If you can establish duty, the courts ask that you show the person or entity then breached said duty. A fiduciary breach can occur in a number of ways. Examples may include but are not limited to an accountant failing to file a tax return; a former employee establishing a competing business in the same region and using your proprietary information; a former employer taking a job with a competitor; and a comptroller writing checks against your company’s bank account to deposit into his or her own. 

3. Damages

The breach must result in actual damages, and not just loss of trust. Without an actual dollar amount, you do not have a fiduciary breach claim. 

4. Causation

Finally, you must prove that the damages you incurred were a direct result of the breach of fiduciary duty. Depending on the damages and circumstances surrounding the breach, causation may be obvious, or it may require substantial evidence.