Posted on April 26, 2024 in Commercial Litigation

When two or more parties have a business relationship, they must trust each other with responsibilities tied to their mutual benefit. This trust is not just foundational; it is also legally binding under what is known as fiduciary duty.

Breaches of fiduciary duty can lead to operational disruption, as well as substantial financial losses. A business that has been harmed due to this type of breach will need to understand its options for addressing the issue through business litigation or other means. An experienced business law attorney can help business owners or other parties navigate these complex legal waters, ensuring that breaches are addressed properly.

Understanding Fiduciary Duty

Fiduciary duty represents a legal obligation of one party (the fiduciary) to act in the best interest of another (the principal). This duty may apply in many business relationships, including between business partners, between company directors and shareholders, and in relationships involving trusts and estates. The key elements of fiduciary duty include:

  • Loyalty and good faith: The fiduciary must act without personal economic conflict and prioritize the principal’s interests.
  • Care: Actions must be taken with the prudence and diligence that a reasonably careful person would use in similar circumstances.
  • Full disclosure: The fiduciary must fully disclose any important information related to the relationship.

Identifying a Breach of Fiduciary Duty

Breaches may occur when fiduciary obligations are not met. Common examples of breaches of fiduciary duty in a business context include:

  • Self-dealing: This generally involves engaging in activities that benefit the fiduciary at the expense of the principal.
  • Misuse of inside information: A fiduciary may use confidential information for personal gain or the gain of others.
  • Negligence: A fiduciary may fail to act with the diligence and care expected, leading to losses for the principal.

Legal Recourse Through Business Litigation

When a breach of fiduciary duty occurs, the aggrieved party can take legal action to seek remedy. Business litigation is often necessary to address and resolve such breaches effectively. Remedies that may be available through litigation include:

  • Financial compensation: Victims of breaches of fiduciary duty may be able to recover losses that occurred due to the breach. This compensation might include both the actual losses incurred and any profits the fiduciary gained from the breach.
  • Injunctive relief: Courts may impose orders preventing the fiduciary from continuing their detrimental actions. For instance, a court might prevent a fiduciary from making further investment decisions if he or she has been misusing funds.
  • Rescission of contracts: If a breach involved entering into contracts that harmed the principal, those contracts might be rescinded or declared void.
  • Removal of the fiduciary: In cases of severe breaches, litigation can lead to the removal of the fiduciary from the position, protecting the principal from further harm.

If you suspect that there has been a breach of fiduciary duty within your business or in dealings with other parties, you may need to determine your best options for addressing the losses you have experienced and preventing activity that could cause further harm.

The Milwaukee, WI commercial litigation lawyers at Gimbel, Reilly, Guerin & Brown, LLP can provide you with guidance and legal representation. We will work to protect your business interests and help you resolve these matters effectively. Contact us today at 414-271-1440 to set up a consultation.