Breach of Fiduciary Duty Claims Among Owners

A breach of fiduciary duty occurs when someone who owes fiduciary duties to a company — such as an owner, director, or officer — fails to honor those duties, typically by putting personal interests ahead of the company's. Fiduciary duties generally include the duty of loyalty and the duty of care. A breach might involve self-dealing, diverting a business opportunity, or other conduct that harms the company for personal gain. These claims are serious and can lead to significant remedies. Understanding the duties is essential whether you're pursuing or defending a claim. This is general information, not advice on a specific dispute.

The duty of loyalty requires those who owe fiduciary duties to act in the best interests of the company rather than their own. It means not using one's position to gain personal advantage at the company's expense. Common violations include self-dealing, taking opportunities that belong to the company, and conflicts of interest that aren't properly handled. The duty of loyalty is a core fiduciary obligation owed by directors, officers, and often controlling owners. Honoring it is fundamental to proper conduct in a company, and breaching it can give rise to liability.

Self-dealing is when a person in a position of trust uses that position for personal benefit at the company's expense. Examples include entering into transactions between the company and oneself on unfair terms, diverting business opportunities to oneself, arranging improper payments, or making hidden side deals. Self-dealing is a classic breach of the duty of loyalty. It harms the company and the other owners by enriching the wrongdoer improperly. When self-dealing is suspected, examining the company's records and transactions is often how it's uncovered.

A derivative claim is a lawsuit brought by an owner on behalf of the company itself, rather than for the owner's personal benefit, to address a wrong done to the company. It's used when those in control of the company won't pursue the claim — for example, because they're the ones who committed the wrong. Derivative claims are an important mechanism allowing a minority owner to hold wrongdoers accountable for harm to the company. Any recovery generally goes to the company. The procedures for bringing a derivative claim are specific and vary by jurisdiction.

Remedies for a breach of fiduciary duty can include recovering the improper gains the wrongdoer obtained, damages for the harm caused to the company, and other relief depending on the circumstances. In some cases, transactions tainted by the breach can be undone, or the wrongdoer can be required to account for profits. The available remedies depend on the nature of the breach and the harm involved. These remedies aim to make the company whole and strip the wrongdoer of improper benefits. An attorney can explain the remedies likely available in a specific situation.

Defending against a breach of fiduciary duty claim involves showing that you acted properly — in the company's interest, in good faith, and consistent with your duties. Documentation of decisions, demonstrating that transactions were fair and properly disclosed, and showing the absence of self-dealing all support a defense. Because these claims are serious and fact-intensive, a strong, well-documented defense matters. The specifics depend on the conduct alleged and the applicable law. If you're accused of breaching a fiduciary duty, prompt legal guidance helps you mount an effective defense.

We start with a free legal-strategy call to understand the situation, whether you're pursuing a claim or defending against one. For owners seeking accountability, we assess potential breaches, pursue records, and bring claims, including derivative claims where appropriate. For those accused, we build a sound defense based on the facts and your conduct. We pursue resolution efficiently, through negotiation or litigation as needed. The goal is accountability for wrongdoers or a strong defense for the accused. The first step is simply a conversation, with no obligation, and a specific dispute gets individual review.