Understanding A Breach Of Fiduciary Duty In California
What is a fiduciary duty? Company directors and officers have a fiduciary duty to act with loyalty and care towards the business they are in. All decisions and actions should benefit the company as a whole. When those in positions of authority put personal gain above the company’s interest or do not act in the best interest of the company and its shareholders, it is called a breach of fiduciary duty.
What happens if a fiduciary duty is breached? This can lead to financial losses, missed business opportunities, serious business reputation problems, professional malpractice, contract disputes and costly business litigation.
How Is A Fiduciary Duty Breached? Here Are Examples.
At McMurray Henriks, LLP, our experienced breach of fiduciary duty attorneys can assist in resolving a full range of these types of issues, including:
- Conflict of interest: A company director makes a decision that benefits their own side business instead of the company
- Misuse of company funds: An officer uses company money for personal expenses or investments
- Failure to disclose information: A board member hides critical information about a potential business deal from other members
- Self-dealing: A partner sells company assets to a relative at a below-market price without proper authorization
- Negligence: A financial advisor provides poor investment advice that results in significant losses for the client
- Insider trading: An executive uses confidential company information to buy or sell stocks for personal gain
- Breach of confidentiality: A partner in the company shares privileged trade secrets or client information with a competitor
To prevent breaches, businesses should establish clear policies and regular training. Employees should know their responsibilities and the importance of acting in the company’s best interests. Regular audits can also help identify potential issues before they become serious.
Filing A Lawsuit For Breach Of Fiduciary Duty
What now? One of the most timely resolutions is to file a lawsuit. The court may order the person who breached the duty to pay for monetary losses, lost business prospects and damage to the company’s image. The court might also require the person to return any profits they gained from the breach. In some cases, the court can remove the person from their position. This means they can no longer serve as a director, officer, or partner in the company. The court can also ban them from holding similar positions in the future.
Professional malpractice claims may arise if the breach involves a professional service, like accounting or legal advice. This can lead to additional penalties and damage to the person’s professional reputation.
Proving Breach Of Fiduciary Duty In California
Our lawyers can assist you with the complex process of how to prove breach of fiduciary duty in California. The first step in proving a breach of fiduciary duty is to provide proof that a fiduciary relationship existed. Company directors, officers, or partners have such duties and must act in a company’s best interests.
The next step is gathering evidence like emails, contracts and witness statements to show that the person acted with a conflict of interest, failed to disclose vital information or made decisions that harmed the business for personal gain. The court requires proof of a clear link between the person’s breach and associated business losses.
Calculating the financial figure or other harm resulting from the breach can be time-consuming, yet essential. Legal support is crucial throughout this process. Our legal team will help gather evidence, build your case, and represent you in court.
Contact McMurray Henriks, LLP
Our attorneys at McMurray Henriks, LLP, understand the complexities of fiduciary duties and can guide you through seeking a solution. Our aim is to help protect your business and its stakeholders. We also represent those who are facing a breach of fiduciary lawsuit. Call 323-931-6200, in Los Angeles or send us an email for a consultation.