How Do I Defend a Claim of Breach of Fiduciary Duty?
Fiduciaries, such as trustees, owe two main duties to their clients: a duty of loyalty and a duty of care. The duty of loyalty requires that fiduciaries act solely in the interest of their clients, rather than in their own interest. Thus fiduciaries must not derive any direct or indirect profit from their position, and must avoid potential conflicts of interest. The duty of care requires that fiduciaries perform their functions with a high level of competence and thoroughness, in accordance with industry standards.
The elements of a cause of action for breach of fiduciary duty are:
(1) Plaintiff and Defendant share a relationship whereby:
(a) Plaintiff reposes trust and confidence in Defendant, and
(b) Defendant undertakes such trust and assumes a duty to advise, counsel and/or
(2) Defendant breaches its duties to Plaintiff; and
(3) Plaintiff suffers damages.
The elements of a claim for breach of fiduciary duty are not fixed as the claim may arise from virtually any case where one party accepts the trust and assumes the duty to protect a weaker party.
Affirmative defenses to a claim for breach of fiduciary duty can include, but are not limited to:
(1) The passing of the statute of limitations for filing the claim.
(2) Lack of fiduciary relationship (for example, when the parties did not enter a fiduciary relationship, but rather conducted business in an arm’s length transaction there is no duty to protect the other party or disclose facts which the other party could have discovered by its own diligence.)
(3) Lack of standing
(4) Approval (for example, if the alleged actions followed full disclosure to and the consent of the Plaintiff)
(5) Business judgment rule (ex. that the corporate fiduciary's actions were motivated by a bona fide interest in the well being of the corporation where shareholders are the ones owed the fiduciary duty)