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Have you placed trust and confidence in another person to act in the best interest of you and your business? This reliance is the foundation of a fiduciary relationship. Whether it is a business partner, corporate officer, or certain agents, such as real estate agents, or a trustee, these individuals are legally obligated to act with a duty of loyalty, care, and good faith, requiring the fiduciary to act in the best interests of the other.

However, when that designated person acts for their own benefit rather than yours or your business, the consequences can be financially devastating.

A breach of fiduciary duty is not just a disagreement on strategy; it is a violation of the law. Fiduciaries are supposed to act solely in the best interests of those for whom they owe the duty, typically the individual or business that they are supposed to be working for. When they prioritize their own wallet over you or your business, a breach of fiduciary duty can occur.

Here is what that often looks like in practice:

• Self-Dealing: A partner or agent identifies a lucrative contract or real estate deal that would be perfect for the company. Instead of bringing it to the table, they quietly take the deal for themselves personally, cutting the business out of the profit. This is often called usurping a corporate opportunity. This could also extend to other scenarios, such as an executive or agent receiving a consulting fee or kickback from a vendor in exchange for getting the company to use their product or services. They are not choosing the vendor because they are the best for the job; they are choosing it because they are getting paid on the side.

• Misappropriation of Assets: A director or partner uses company funds or property for personal use. This could range from using the company credit card to pay for family vacations and home renovations to using company equipment and intellectual property to launch a competing side business. Essentially, treating company property as their own.

• Negligence: A corporate treasurer fails to oversee the accounts, allowing an employee to embezzle funds over several months. They did not steal the money themselves, but their failure to pay attention breached their duty of care.

Do You Have a Claim? To hold someone accountable, you generally need to prove four specific elements:

1. The Duty Existed: A fiduciary relationship existed either through a formal relationship (such as a partnership, agency, or corporate office) or because the law recognizes a special relationship of trust and confidence.
2. The Breach: They crossed the line (e.g., acting in their own interests instead of yours).
3. Damages: Their actions cost you money. For example, if your business lost $100,000 in potential revenue because a partner stole the client, that is the damage you could pursue.
4. Causation: Lastly, you must show that the breach is what caused the damages you suffered.

If you suspect a partner or someone else you trust is betraying or making decisions that secretly benefit them, you need to act fast. These cases often require a paper trail to prove the breach occurred.

Don't let a bad actor dismantle what you built. If you have questions about fiduciary obligations or need to review an agreement, please contact BMD Attorney Philip Kelly at prkelly@bmdpl.com or Orlando Office Managing Partner Robert Lee at rqlee@bmdpl.com.