Breach of Fiduciary Duty Allegations in Commercial Litigation Cases

Summary

These breach of fiduciary duty allegations can be used in a complaint when asserting a breach of fiduciary duty claim in a commercial litigation case. This clause includes practical guidance, drafting notes, and alternate and optional clauses. Certain transactions will involve fiduciary relationships, pursuant to which a party places trust and confidence in another party to act on its behalf and in its best interests. Fiduciary relationships may exist in commercial transactions between, among other relationships, employers and employees, partners and joint venturers, members of limited liability companies, trustees and beneficiaries, and various corporate relationships (including directors and officers to the company's owners and majority shareholders to minority owners in closely held corporations). To establish a breach of fiduciary duty cause of action, a plaintiff must prove: (1) the existence of a fiduciary relationship between the plaintiff and defendant, (2) a breach of that duty by the defendant, and (3) a resulting injury to the plaintiff (or benefit to the defendant) proximately caused by the defendant's breach. See Bethys Bioscience, Inc. v. Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., 2010 U.S. Dist. LEXIS 55010, at *10 (N.D. Cal. 2010); Plotkin v. Joekel, 304 S.W.3d 455, 479 (Tex. Ct. App. 2009). The defendant's breach of a fiduciary duty may entail, among other obligations, a breach of a duty of care, loyalty, confidentiality, notification, and/or accounting. After establishing the existence of a fiduciary relationship and breach thereof by the defendant, a plaintiff must demonstrate resulting damages. For example, the breach may have resulted in the plaintiff losing business, profits, an advantageous business opportunity, or other things of value. Potential defenses that may be asserted to deflect liability include the business judgment rule; approval of the fiduciary's actions by the plaintiff or a majority of company's shareholders, members, or partners; the subject actions upon which the alleged breach is based was beyond the scope of the defendant's fiduciary duties; the plaintiff/principal's failure to conduct reasonable due diligence; the statute of limitations or laches; estoppel, ratification, or waiver. For further guidance on breach of fiduciary duty, see Breach of Fiduciary Duty Claims; Commercial Torts Fundamentals, Commercial Litigation Causes of Action, and Fiduciary Duties Resource Kit.