In business, what is a breach of fiduciary duty?

On Behalf of | Jan 13, 2022 | Business Litigation |

In California, certain business relationships create a duty of fiduciary care, usually when one party entrusts the other with access or control over the first party’s property. To prevent abuse of this trust, the second party owes a legal duty of care to the first party to act in the first party’s best interests. This duty applies to professionals like accountants, brokers, financial advisers, business partners, and so on.

Any alleged failure by a fiduciary to act in their client’s best interest can be grounds for a lawsuit for breach of that duty. Depending on the nature of the parties’ relationship and the severity of the alleged breach, millions of dollars could be at stake. Common allegations include embezzlement, sharing trade secrets, and profiting at the plaintiff’s expense.

Conservatorship allegedly gone wrong

A conservatorship can also create a fiduciary duty — and lead to serious litigation. That is what happened between two Southern California men after one of them, a longtime stunt man and stunt coordinator in films, suffered a brain injury and other severe bodily damage in a 2007 car accident. He later made his friend, a successful movie producer, the conservator of his estate to manage the large settlement he was awarded out of the crash. The stuntman says he trusted the producer completely and considered him his “brother.”

The conservatorship lasted about two years. Four years later, the stuntman says, he discovered that his friend had defrauded and deceived him. In a lawsuit, he alleges that the conservator took advantage of the effects of his brain injury to buy a house for the stuntman but put the title in his own name. He also accuses his former conservator of negotiating lower prices on hospital bills without his knowledge and pocketing the difference. Finally, the suit alleges that after the conservatorship ended, the conservator repeatedly asked the plaintiff for a total of $400,000 in loans but never repaid them. The defendant contends that the money was an investment in his production company, not loans.

Highly complex litigation

Breach of fiduciary duty litigation can be quite complex. It often involves close analysis of bank statements, financial reports, phone logs and tax returns, as well as many other records and documents. Although many cases settle, some who have been wronged need to take their claims to trial.

Archives

Categories

FindLaw Network