The law sets a higher standard of care for fiduciaries in their business dealings with you. A fiduciary is someone with whom you have a special relationship of trust. Fiduciary relationships may include:
Trustees and beneficiaries
Directors and Officers to a corporation
Attorneys and clients
Principals and agents
Partners and joint venturers
Pension plan or health plan advisors or administrators
A Fiduciary is held to the highest standard of good faith and candor. A fiduciary must refrain from self-dealing and must act with the strictest integrity. A business agreement or contract in and of itself does not create a fiduciary relationship. Before fiduciary obligations can be imposed in a business transaction. The fiduciary relationship must have existed before and apart from the business relationship.
Shareholders in a corporation do not generally owe one another fiduciary obligations. However corporate officers and directors owe a fiduciary obligation to the corporation. These cases usually involve a shareholder or minority partner who loses money as a result of the bad judgments or the self-dealing of an officer, director, or general partner. General partners can be liable as fiduciaries but, generally speaking, limited partners are not.
Officers, directors, partners, and members of business organizations have a fiduciary duty under the law to act in the best interest of the owners of the business and, in many cases, the employees of the business. A fiduciary duty is the highest duty recognized in law. It requires the utmost care and trust regarding the management of money and business affairs between parties.
A fiduciary who breaches this high standard of care may be the result of simple negligence or something more sinister, such as the misappropriation of funds or operating in conflict with the business purpose of the company.
Much of this litigation also involves Trustees who fail to follow the terms and restrictions of the Trust agreement or who use trust assets for their own personal enrichment or gain.
Corporate fiduciary litigation involves many different aspects but typically they involve 401k plans, pension plans, and employers’ self-funded health plans. Officers and directors may face personal liability concerning these plans for misrepresentation, failing to disclose information, failure to properly monitor investment managers or investments, and failing to take reasonable steps to avoid losses by the plans.
Partners and joint venturers also owe a fiduciary duty. When you saddle up to be someone’s partner you undertake a heavy responsibility. If you are a general partner you owe certain fiduciary duties to your partners. Unfortunately partnerships, like marriage, often end in divorce. Oftentimes one partner wants to move on or several partners want to remove a partner. There are certain situations where a partnership has simply reached a logical conclusion or a partner has died.
When partnerships have ended, or are about to end, there is usually a disentanglement process. In these situations, you need someone who understands business and litigation. What are you fighting over? What is the financial condition of the company? What are the assets, liabilities, intangibles? What are your rights? Where can you gain the greatest leverage?
As a business owner and lawyer, I understand the practical effects of legal agreements on ongoing businesses. If you are involved in a partnership dispute, contact Hoch Law Firm.
Unfortunately, very often people abuse or take advantage of positions of trust. It is just as important (maybe even more so) to periodically check on people who hold positions of trust over your money. I have seen lifelong friendships end over a breach of fiduciary duty.
Contact Hoch Law Firm for help with a breach of fiduciary duty cases in Dallas-Fort Worth.