Breach of Fiduciary Duty Penalties

The penalties for breach of fiduciary duty is usually the verified damages sustained by the plaintiff, in addition to any punitive damages if the breach involved deception or animosity.

If a party fails to satisfy their legal responsibilities, it’s a breach of their fiduciary duty and may result in a lawsuit in a civil court. Some considerations the court will use to establish if the duty was breached may include:

Determining whether the 2 parties were in fact in a fiduciary relationship when the impairments occurred.
If the failure of the errant party was included in the scope of the two parties’ relationship.

Examples of a breach of fiduciary duty might include:

One party that fails to disclose material information, such as a conflict-of-interest.
Behaving in a way that’s contrary to the client’s best interests.
Carrying out an action to advance their own self-interest instead of the client’s self-interest.
A particular example to better clarify a breach would be if a CEO makes a deal to buy his friend’s troubled company. While this is a nice way to help his friend out, it might be deemed a breach of fiduciary duty when the CEO’s company has a decrease in their share value. When this happens, the shareholders can file a lawsuit to help regain some of their losses. They would sue the CEO for a claim for breach of fiduciary duty.

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Damages for Breach of Fiduciary Duty

Determining the damages that are owed in breach of fiduciary duty cases can be difficult. There are 3 primary things that courts will consider.

Compensatory Damages

If the party that sustained damages chooses to file a lawsuit, then compensatory damages are one of the typical results. These are payments to help rectify for the losses the victim sustained because of the breach. An instance of compensatory damages may be when shareholders file a lawsuit following the administrator of the company making a bad business decision that incites a big loss. In order to win the case, the shareholders are required to demonstrate how the to administer breached their fiduciary duty and the totals they lost because of the breach.

Punitive Damages

Rather than the offending party simply having to repay what they lost the other party; punitive damages are a way of disciplining the guilty party. This discourages them from behaving this way in the future and also sends a message to other company directors that such behavior is inexcusable. Typically, punitive damages are only paid when animosity or deception is involved and the misconduct is truly out of line with societal norms.

Professional Consequences

While the results above will hurt an individual financially, professional consequences will impact the individual’s career, too. For instance, when an attorney perpetrates a breach of fiduciary duty, they might run into a legal malpractice lawsuit. If the accusations are quite serious, the attorney could even be disbarred and prohibited from practicing law. An individual may lose professional accreditation, depriving them of working in their chosen field for the remainder of their life.

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