April 9th, 2018
A “fiduciary” is from the Latin fiducia meaning “trust”, a person (or a business like a bank, trust company or a stock brokerage) who has the power and obligation to act for another ( often called a beneficiary) under circumstances which require total trust, good faith and honesty. Typically, a fiduciary has greater knowledge and expertise about the matter being handeled. A fiduciary is held to a standard of conduct and trust above that of a stranger or casual business person. He/she/it must avoid “self-dealing” or “conflicts of interest” in which the potential benefit to the fiduciary is in conflict with what is best for the person who trusts him/her/it. Basically, one person has an obligation to act for another’s benefit.
Courts have neither defined the particular circumstances of fiduciary relationships nor set any limitations on circumstances from which such an alliance may arise. In order to prove a breach of fiduciary duty claim the plaintiff is required to show 1) a fiduciary relationship doe, in fact, exist , 2) the relationship was breached, 3) damages were proximately caused by the breach. Typically, breach of fiduciary claims focus on either how the trust assets were managed, and/or how the trust was administered.
A fiduciary relationship exists whenever the relationship with the client involves a special trust, confidence and reliance on the fiduciary to exercise his/her/its discretion or expertise in acting for the client. A relationship of trust and confidence exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing the confidence.
Fiduciary requirements of a trustee and executor that could provide grounds for a breach of fiduciary claim include:
- Misappropriation or theft of trust assets
- Conflicts of interest or self-dealing acts
- Disloyalty to beneficiaries
- Colluding with certain beneficiaries to the detriment of others
- Failure to account to the beneficiaries or to keep them informed
- Allowing a co-trustee to commit a breach
Comingling outside funds with trust assets
Hopefully, this brief review of what creates a fiduciary relationship and various fiduciary duties and responsibilities will be of assistance in your practice in analyzing and establishing if a fiduciary relationship has been established in your clients’ situation and whether a breach occurred resulting in actionable damages.
I have enjoyed working with you and your firm providing expert witness services concerning fiduciary liability litigation on trusts, estates and investment management matters in the past and look forward to doing so in the future. Over the past 10 years I have worked with nearly 100 law firms in 22 states providing fiduciary litigation consulting and expert witness services for both plaintiff beneficiaries and defendant trustees and have testified in both state and federal courts. If I can be of any assistance please call me at: 704-618-8062, or email me at: [email protected] Thanks!
John A. Rodgers, III