Fiduciary Litigation

A fiduciary duty is the highest duty under the law. A fiduciary relationship exists when one person has the duty to look out for the best interests of another person. It is sometimes said that the other person — the beneficiary — reposes special trust and confidence in the fiduciary. Because of that trust and confidence, the beneficiary is vulnerable to the fiduciary. Thus, when a fiduciary acts wrongfully, the law provides the beneficiary with a cause of action to recover what the fiduciary took from the beneficiary; this action is known as Fiduciary Litigation.

Fiduciary Duties

There are many types of fiduciary relationships and therefore many specific fiduciary duties. For example, the fiduciary duty owed by a lawyer to his client concerns the attorney-client relationship, while a condominium board member’s fiduciary duties regard condominium issues. But all fiduciary duties include three key components governing how fiduciaries must act toward their beneficiaries:

  • A fiduciary must act with the utmost good faith and with scrupulous honesty toward his beneficiary.
  • A fiduciary must place the beneficiary’s interests above his own.
  • A fiduciary’s actions must be fair and equitable to the beneficiary.

Fiduciary Relationships by Law

Some fiduciary relationships are recognized by the law. Other fiduciary relationships can arise from how people actually treat each other, regardless whether the law says there is a fiduciary relationship. Informal fiduciary relationships are a subject for another day. In this section, fiduciary relationships that exist as a matter of law are listed. The following owe fiduciary duties:

  • Agents to their principals.
  • Attorneys to their clients.
  • Brokers to their customers.
  • Class representatives in class-action suits to the other members of the class.
  • Condominium board officers and members to unit owners.
  • Employees to their employers.
  • Executors to the beneficiaries of estates.
  • Holders of executive rights in mineral estates to non-executive interest holders.
  • Holders of powers of attorney to those for whom they act.
  • Officers of a corporation to the corporation.
  • Tax collectors (such as stores) to the State of Texas for taxes they collect.
  • Trustees to the beneficiaries of trusts.

Reciprocal Fiduciary Duties

The fiduciary relationships listed above are one-way relationships: They impose a fiduciary duty on a person with respect to his beneficiary. But some fiduciary relationships are two-way. In other words, the parties owe fiduciary duties to each other. In these relationships, each person is both a fiduciary and a beneficiary:

  • Business partners.
  • Joint venturers.
  • Spouses.

Non-Fiduciary Relationships

Some relationships that one might think would be fiduciary in nature are not, as a matter of law. Absent facts creating an informal fiduciary relationship, there are no fiduciary duties owed by the following:

  • Bailors to bailees.
  • Banks to borrowers.
  • Obligations imposed by a joint operating agreement.
  • Prospective partners who do not become partners.
  • Shareholders to each other in closely held corporations.

Remedies for Breach

As in other civil litigation, a fiduciary can be sued for damages when he breaks the law. But remedies against fiduciaries can be more extensive than mere damages. The principle underlying litigation against a fiduciary is that a fiduciary should not profit by his wrongdoing. Therefore, the courts have sometimes awarded a wronged beneficiary the greater of the value of whatever the fiduciary wrongfully appropriated or the current, appreciated value after the fiduciary successfully invested it.

Dallas Law Firm Johnston Tobey Baruch specializes in Fiduciary Litigation bringing decades of experience to help our clients who find themselves in this difficult situation.  If you find yourself in a fiduciary relationship and have not been treated justly, give us a call; we can help.


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