A fiduciary is a person or organization with a legal relationship with a beneficiary, where the fiduciary must act in the beneficiary’s best interest. This often includes the fiduciary managing their beneficiary’s money or estate. Texas law imposes stringent obligations on fiduciaries, and they are required to act in their beneficiary’s best interest and have the highest level of responsibility and ethics.

Some examples of fiduciary relationships include lawyers and clients, executors and beneficiaries, and corporate board members and shareholders. Each of these has a different set of specific requirements, but all must operate on the same level of honesty, loyalty, and ethics.

What Constitutes a Breach of Fiduciary Duty?

There are no set criteria for breaches of fiduciary duty. Instead, each situation must be evaluated on its own merits. Common violations include a guardian failing to meet the obligations of their position, a lawyer failing to zealously represent their client, or a company’s board lying to shareholders about profits.

To claim a breach of fiduciary duty, a plaintiff must plead the existence of a fiduciary duty, breach of that duty, causation, and damages. In other words, there was a fiduciary duty that was not fulfilled, and that breach caused any damages.

What Are the Defenses to a Breach of Duty?

The penalties for breach of fiduciary duty are quite strict, so a proper defense is vital if you have been accused of such a breach. Some of the most common defenses are:

  • Proving you did not breach your duty.
  • Showing the duty had already ended at the time the plaintiff claims you had violated it.
  • Demonstrating that the allegations against you were the result of a personal grudge and not an actual breach.
  • Establishing that if there was a breach, it did not harm the plaintiff or benefit you.

Defenses that are not valid include claiming that you either did not mean to breach fiduciary duty or did not fully understand your duties. In both these cases, you are still liable for the breach. 

What Are Potential Damages for Breach of Fiduciary Duty?

If a plaintiff successfully proves a breach of fiduciary duty, they are entitled to damages. Most often, these damages are equal to the amount of financial loss the breach of fiduciary duty caused. For example, if a guardian, through mismanagement, loses their ward $15,000, that ward will be awarded that amount of money by the court if they successfully sue the guardian. In instances where malice or fraud is involved in a breach of fiduciary trust, a court may impose punitive damages or damages equal to more than the loss incurred.

If you are unsure of your duties as a fiduciary, want to determine if your fiduciary has breached their duty, or have any other questions, call us now at 281-771-0560.