Legal jargon. It’s something attorneys use every day – often without thinking twice. But for the general public, it can be confusing and intimidating and overwhelming. That’s why it’s so important for us to try to avoid it when we’re talking to clients and prospective clients.
For example, lots of people may have heard the term “fiduciary duty,” or “breach of fiduciary duty. But they don’t really know what it is. In this article, the Los Angeles business attorneys from the Law Office of Parag L. Amin P.C., or LawPLA, answer the question: What is a breach of fiduciary duty in California?
Understanding a fiduciary relationship and fiduciary duty
Perhaps the best way to understand fiduciary duty – and a violation thereof – is to review the instructions California jurors get in this type of case. In these instructions a fiduciary duty is defined as a legal obligation assigned to certain persons while acting in a fiduciary capacity. In a business context, is usually assigned to an agent, stockbroker, real estate agent or broker, corporate officer, or partner.
The person who has this duty must act “act with the utmost good faith in the best interests” of his or her principal, client, corporation, or partner.
By citing legal authority, the jury instructions provide additional insight into fiduciary relationships and fiduciary duty.
For example in Wolf v. Superior Court, a 2003 case cited as primary authority, a California appeals court explained that a fiduciary relationship is “any relation existing between parties to atransaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party.” The court also explained that this type of relationship is created when one person freely expresses confidence in another person’s integrity. Once the person who gets this “vote of confidence,” accepts it, or “assumes to accept it,” he or she “can take no advantage from his actsrelating to the interest of the other party without the latter’s knowledge or consent…”
In Cleveland v. Johnson, a 2012 case also heard by a state court of appeals, the court explained that assignment of fiduciary duty is not possible unless someone knowingly undertakes to “act on behalf and for the benefit of another,” or enters into a relationship that “imposes that undertaking as a matter of law.”
In the same case, the court provided examples of categories in which fiduciary duties are imposed by law – namely a joint venture, a partnership, or an agency.
Examples of breach of fiduciary duty in Los Angeles
So to recap, a fiduciary duty is legally imposed on a person or entity acting as an agent or agency. The agent or agency must therefore act in the best interest of his, her or its principal.
Perhaps the best example of this is an employee-employer relationship. Once the employer hires someone, the employee becomes the “agent” and the employer is the “principal.” The employee therefore has a fiduciary duty to his or her employer. The employee can breach his or her fiduciary duty to his or her employer through:
- Wrongful disclosure of an employer’s trade secrets;
- Actions contrary to the employer’s directions;
- Wrongful use of or failure to account for employer funds;
- Actions that harm the employer’s bottom line; and
- Actions that damage the employer’s reputation.
As noted above, business partners also have fiduciary duties – not only to the to the company but also to each other. A partner may breach these legal obligations by:
- Mishandling for company funds or assets;
- Subjecting the partnership to liability through carelessness or deliberately harmful conduct;
- Engaging in criminal activity or other such conduct compromising the Company’s good will;
- Deliberately withholding important information from partners;
- Failing to make conflicts of interest known; or
- Engaging in any conduct legally classified as self-dealing.
Other professionals, such as attorneys, bankers and real estate agents can also breach their fiduciary duties by failing to act in their customers’ or clients’ best interests.
Proving breach of fiduciary duty in California
As Los Angeles breach of fiduciary duty lawyers we must prove the following to win this type of case.
First, we must be able to demonstrate that there was a fiduciary relationship. Then we must be able to prove that the party with fiduciary duty violated it. Next, our LA business attorneys must be able to prove that the violation caused the financial losses you incurred.
In any case, it is important that you contact our knowledgeable civil litigators as soon as possible. This is because the deadline for filing this sort of claim varies. You generally have four years after you incurred losses from the alleged violation to initiate a breach of fiduciary duty lawsuit in California. However, there may be some circumstances in which the statute of limitations is only three years.
You can reach the civil litigation team at the Law Office of Parag L. Amin P.C. (“LawPLA”) by filling out the form on our contact page or by calling our Downtown Los Angeles or West Los Angeles office.