A fiduciary duty arises from a special relationship of trust and confidence. It requires the fiduciary to act in the best interests of another person.
The law formally imposes this duty for some interactions—like when it requires lawyers to put their clients’ interests before their own. In other cases, Texas courts recognize an informal fiduciary duty. This obligation stems from “a moral, social, domestic or purely personal relationship of trust and confidence,” such as the one between a parent and a child.
In any case, when the person entrusted to care for another fails to act for the person’s benefit, they are said to have breached their fiduciary duty. Such a breach can have serious financial consequences. If you have been let down in this way, consult with a lawyer to determine your options.
Proving Breach of Fiduciary Duty in Texas
To prove that a fiduciary breached their duty, you must provide evidence of the following elements:
- The existence of a fiduciary relationship,
- Breach of a fiduciary duty, and
- Injury to the plaintiff or benefit to the defendant that was caused by the breach.
Typically the last element involves monetary damages of some sort.
In addition to the attorney-client bond mentioned above, the following are examples of formal fiduciary relationships:
- Corporate officers and directors and the corporation,
- Trustee and beneficiary,
- Executor or administrator and beneficiaries,
- Business partners,
- Real estate broker and client, and
- Agent and principal.
Texas statutes or common law usually create these fiduciary obligations.
Each fiduciary relationship comes with a set of express duties. For example, directors owe the corporations they manage the duties of obedience, loyalty, and due care. They must exercise uncorrupted business judgment solely for the corporation’s benefit.
Informal fiduciary relationships may arise when one party obtains influence over another in a social or personal context. The bond must exist before whatever incident led to a lawsuit, though. For instance, a court might determine that a caregiver owed an informal fiduciary duty to a longtime dependent.
A breach occurs when the fiduciary betrays the trust given to them. Depending on the duties owed, doing such things as not dealing in good faith, not providing full disclosure, or not acting loyally could constitute a breach.
Causation and Damages
In Texas, a plaintiff must show that the breach caused them injury or benefited the defendant. This requires the plaintiff to demonstrate what actual damages they suffered. They also must support claims for noneconomic damages, like emotional distress.
If the defendant intentionally breached a duty, the plaintiff may also recover exemplary damages.
Finally, some cases might call for an equitable remedy, such as disgorgement of profits.
Breach of Fiduciary Duty Examples
There is a wide range of ways someone may fail to satisfy their formal or informal fiduciary obligations. Below are a few common examples of a breach of fiduciary duty in Texas.
Executors have a duty to act in the estate’s best interest and fulfill their obligations to creditors and beneficiaries. When an executor instead acts in their own self-interest or is careless with estate assets, beneficiaries may need to sue for breach of fiduciary duty.
Partners owe the company and each other a fiduciary duty. But partners can breach this duty by:
- Mismanaging funds or assets,
- Failing to disclose conflicts of interest or important information, or
- Acting negligently or wrongfully and exposing the partnership to liability.
When one partner harms the company or the other partner, that individual has failed to uphold his duty.
Real Estate Broker
Licensed real estate agents and brokers in Texas are fiduciaries for their clients. As a result, they must represent their client’s interests in real estate transactions. If they do otherwise, such as by trying to persuade a client to buy a defective house that the agent owns, they breach that duty.
How an Attorney Can Help
Breach of fiduciary duty claims can be challenging in that you first have to prove that the duty existed. These lawsuits can also be upsetting because, by their very nature, they involve a betrayal of trust.
But the lawyers at Robbins Estate Law have experience pursuing these types of claims in estate litigation, probate, and business law contexts. We fight for what is best for your family’s security and well-being. If you live in Austin, Cedar Park, or Round Rock and want to speak to an attorney about a breach of fiduciary duty issue, contact us today.