What If a Business Partner Has Breached Their Fiduciary Duty?

A breach of fiduciary duty is a serious type of misconduct that goes beyond a contract violation. Each owner of a business is legally obligated to act in the company’s best interests. If they don’t, they can be held civilly liable. Of course, accusing a partner or fellow shareholder of violating their legal responsibility is a highly serious matter, and even if you are certain that a breach occurred, proving your case and formulating an appropriate remedy requires skillful legal guidance. 

Some common breaches of fiduciary duty include the following:

• Self-dealing — Acting for one’s personal benefit rather than doing what is best for the company. This might occur when a fiduciary learns of a potential business opportunity and acts on it individually rather than proposing it to their fellow owners.
• Misappropriation of funds — Partners and shareholders cannot use business assets for their own needs. 
• Misuse of confidential information — It is unlawful to take advantage of material, nonpublic information learned as part of one’s fiduciary role to engage in financial transactions for personal benefit. This includes sharing tips with friends and family members. 
• Conflicts of interest — Failing to disclose a potential conflict of interest could trigger liability for a company owner, director or officer. 

It is even possible to sue someone for breach of fiduciary duty based on negligence or incompetence if they failed to act in the company’s best interests.

To make a case against a partner or fellow shareholder, you must show that a fiduciary duty existed and that they breached that duty, resulting in compensable harm.  

Determining the proper remedy can be challenging. Some damages are easier to quantify than others – for example, if assets were stolen or a partner diverted clients to a spouse’s business. Reputational harm, such as an instance where someone with fiduciary responsibilities sold a trade secret to someone who used it to create an inferior product, can be more difficult to quantify in dollars.

Unwinding fiduciary breaches can be a complex process, so It is critical to speak with an experienced business attorney as soon as you suspect something is wrong. Depending on the circumstances, an injunction might be warranted to prevent additional harm while the legal merits are resolved. 

The Law Offices of Donald W. Hudspeth P.C. in Phoenix represents plaintiffs and defendants in Arizona breach of fiduciary duty cases, working diligently in pursuit of the best possible outcome for our clients. To schedule a consultation, please call 866-696-2033 or contact us online.