Many categories of people have a fiduciary duty to other individuals. Some examples include:
- Attorneys to clients
- Executors to heirs
- CEOs to shareholders
- Employers to employees
- Accountants to clients
- Guardians to wards
This duty isn’t particularly unique. It just means that one party has a responsibility to act in the best interests of another. Usually, “best interests” describe financial concerns, but not in all circumstances. Regardless, when the responsible party fails to act in the best interests of the party they’re serving, it’s considered to be a breach of fiduciary duty.
What is a breach of fiduciary duty?
It’s difficult to define a breach of fiduciary duty because it’s different for every fiduciary relationship. For example, if an attorney lies to a client, that would almost always be considered a breach of fiduciary duty. However, if a guardian lies to their ward, that might be acceptable — if the lie was in the best interests of the ward.
Determining if a breach has occurred is complicated by the fact that breaches of fiduciary duty don’t have to be acts of fraud.
A fiduciary can simply make a decision that goes against the best interests of the party they have a duty to, even if that decision is legal. As a result, a court is likely to determine a breach of fiduciary duty has happened.
What to Do If Your Business Has Breached Fiduciary Duty
If an employee of your business has breached the fiduciary duty your business has to another party, you want to correct the situation as quickly as possible. In the best case scenario, you can reverse the action and restore the situation to its original state. That will protect you against most litigation but isn’t likely to be enough to restore trust.
Restoring trust is more complicated. It may require that you retrain or fire the offending employee. If the employee acted in good faith, it may require that you rewrite procedures so that similar incidents don’t happen in the future.
Blaming one person may seem like a viable solution, but even if they acted with malice, you’ll probably have to take responsibility and make amends to regain the trust of the injured party.
What to Do If Another Party Has Breached Their Fiduciary Duty to You
The most important thing you can do is correct the problem. While it’s tempting to assign blame, that won’t resolve the situation. You want to work with the other party to correct the situation as quickly and painlessly as possible.
Once the situation has been corrected, you need to decide whether to maintain the fiduciary relationship. If trust has been irrevocably lost, end the relationship immediately. If it hasn’t, insist that the other party create procedures to ensure that a similar incident doesn’t happen in the future.
If the fiduciary refuses to take responsibility for the breach or to correct the situation, it’s time to speak with a lawyer who specializes in breach of fiduciary duty.
There’s a reasonable chance that you can’t end the fiduciary relationship easily, and you don’t want to continue to give the fiduciary power when they’ve proven that they aren’t responsible enough to wield it.
Going to Court
If you go to court, you will need a few things:
- Records of decisions made by the fiduciary
- Proof of a fiduciary relationship
- Documents of communication between the parties
- A good business attorney
If you are in or near Providence, RI, a reputable business attorney is easy to find. The business law attorney at the Law Offices of William M. Kolb, LLC is experienced with breach of fiduciary duty cases. Reach out today to speak with a skilled attorney from our team.