In terms of business litigation, a breach of fiduciary duty can happen when someone has an obligation to act in the best interests of a company or corporation and fails to do so.
For instance, a board member may have a fiduciary duty to the shareholders of a company. An executive may have a fiduciary duty to the company itself. These individuals are expected to make decisions that are in the best interests of the business, putting the company ahead of their own personal interests.
A breach occurs when they fail to do so, perhaps prioritizing their own best interests over those of the company.
Why could this lead to litigation?
Litigation sometimes occurs because the company can suffer financial harm as a result of these actions.
For example, say that a financial officer at a business makes a decision that benefits them personally, but that also costs the company money or harms its reputation. Because of this action, the stock value drops and shareholders also lose money. Those who suffered damages may pursue litigation in order to seek compensation for those losses, which they claim never should have occurred if that duty was properly upheld.
That is why establishing the relationship between the two parties is so important. Not everyone has a fiduciary duty to act in the best interests of another party, and only someone who does can be held liable for failing to meet that obligation.
These cases can become very complex and often contentious. It is important for those involved to understand their legal options, which is why it can help to work with an experienced law firm.
