Breach of Fiduciary Duty
A fiduciary duty, quite simply, is the obligation to place someone else’s interests completely above one’s own interests. Usually, the fiduciary carries out this duty by faithfully and diligently managing or handling another person’s affairs.
Anyone appointed as a personal representative on an estate, for example, is subject to a fiduciary duty in favor of the estate’s beneficiaries. Similarly, anyone who serves as the trustee of an irrevocable trust has a fiduciary duty to the beneficiaries. Directors of a corporation owe a fiduciary duty to the corporation and its shareholders. Business partners owe fiduciary duties to each other. Similarly, the manager or managing member of a Limited Liability Company (LLC) owes a fiduciary duty to the members.
The duty of the fiduciary is to be careful, faithful, and diligent. If a fiduciary is managing money or investments for beneficiaries, it is required to invest under the “prudent investor rule.” The fiduciary must also place the interests of beneficiaries of the estate or trust above their own personal or financial interests. This is often called the duty of loyalty.
A fiduciary is a position of great responsibility, and therefore there is great potential legal liability. The temptation to abuse a position of trust and confidence for one’s own benefit is a great one. Lawsuits over the alleged breach of a fiduciary duty are common in the business and estates and trust areas of law. When a fiduciary is negligent or reckless, the fiduciary can be removed and/or required to pay damages and attorneys’ fees. When a fiduciary purposefully acts against the interests of a beneficiary (such as out of greed or self-interest), courts may also aware punitive damages. In Florida, if a fiduciary is found to have selfishly profited at the expense of beneficiaries, the fiduciary can be required to disgorge all of the benefits of its wrongdoing.