Home Business Litigation Breaches of Fiduciary Duty in Massachusetts – What’s Involved?

Breaches of Fiduciary Duty in Massachusetts – What’s Involved?

muccilegal May 27, 2024

If you have a fiduciary duty to others or you believe you have suffered from a breach of fiduciary duties you need to know the legal implications. In most cases, you will find that a Massachusetts attorney with an understanding of fiduciary duty rights can help you with any consequences of a breach of fiduciary duty, whether you have been accused of a breach or you have been affected by a breach of fiduciary duty yourself.

Understanding fiduciary duty

A fiduciary duty results from a fiduciary relationship which has been established between two or more parties. One of the parties has a fiduciary duty to uphold when that party acts on behalf of or provides advice to the other party or parties. This fiduciary relationship may have arisen as a result of an agency or contractual relationship established between the parties for one party to work for the benefit of the other(s). It may also have been established under common law. The party with a fiduciary duty is expected to act loyally and in utmost good faith in their relationship with the other party (parties).

There are several ways in which a fiduciary duty may have been established. These are listed below.many ways that fiduciary duties are involved

  • Shareholders of a corporation have a fiduciary duty to each other. Breaches of fiduciary duty between shareholders occur relatively commonly. One common example of a shareholder breach of fiduciary duty is when the interests of minority shareholders have been ignored by majority shareholders who have acted in their own best interests.
  • Business owners have a fiduciary duty to each other to the extent that they are expected to be loyal to each other and not seek to make a gain at other business owners’ expense. This fiduciary duty may extend to the relationship between different businesses and a breach of the duty is a relatively common reason for business litigation.
  • Guardians are individuals who have been appointed to look after the interests of others who are vulnerable, such as minors, elders and physically or mentally disabled people. This means they have a fiduciary duty to act in the best interests of the individuals they are looking after and not profit from the relationship themselves.
  • Trustees who have been appointed to act on behalf of the beneficiaries of a trust have a fiduciary duty to the beneficiaries.
  • Powers of Attorney have a fiduciary duty to the person for whom (the principal) they have been entrusted to act on behalf of. Financial and health decisions often have to be made on behalf of the principal, so a breach of their fiduciary duty may mean that decisions have not been made appropriately.
  • Employers and employees may both have a fiduciary duty to each other. Employers may be expected to act in good faith in their dealings with their employees and employees may have a duty to be loyal and not compete with their employer.
  • Public officials who have been elected to lead a government entity have a fiduciary duty to act in the best interests of their constituents.

Proof of a breach of fiduciary duty

If you believe that you have suffered from a breach of fiduciary duty which another party had owed to you, you may be considering filing a lawsuit to rectify any negative financial consequences. It is advisable to take legal advice from an attorney with knowledge of litigation for a breach of fiduciary duties in Massachusetts before filing the lawsuit in court.

Criteria exist before any claim for financial redress would be considered by the court. Unless all these criteria are met, it is unlikely that your claim will succeed.

  • A fiduciary duty must be shown to exist between the plaintiff and the defendant. It is not enough to show that the defendant had some sort of fiduciary duty. Massachusetts law does not limit fiduciary duty rights to those solely involving contracts or other limitations.
  • Plaintiff must show that a clear breach of fiduciary duty has occurred. The breach must relate to the fiduciary relationship between the plaintiff and defendant.
  • The plaintiff must prove that the breach of fiduciary duty caused some form of harm and that this harm could be redressed under state law.
  • Damages must be shown to have arisen directly as a result of the breach of fiduciary duty.

The litigation process after a breach of fiduciary duty

The plaintiff, i.e. the party who alleges that a breach of fiduciary duty has caused them harm can file a complaint in court. The court where the complaint is filed depends on the circumstances of the breach. This is where legal help from a business litigation attorney can be of assistance.

The complaint must set out the details of the alleged breach of fiduciary duty, with documentary evidence to establish that the criteria for a breach to be shown submitted.

Once a lawsuit has been filed, there will be an exchange between the two parties, usually involving representing attorneys. The early part of the process will involve discovery, in which information from both sides in the dispute are shared.

Like other litigation, there will be an attempt to settle the dispute before having to go to trial, which reduces the potential cost of the legal action and hastens the possibility of a resolution acceptable to both parties. If a settlement is not reached, then the case will go to trial and the court will decide the result of the litigation.

If a fiduciary breach his or her obligations, an individual may file a complaint in court which sets forth the facts of the case and alleges a breach of fiduciary duty. In which court the action must be filed depends on the facts of the case, including where the alleged breach took place and the number of expected damages should the lawsuit succeed.

Once the lawsuit is started, the parties will exchange information relevant to the lawsuit through a process called discovery. Before trial, the parties may participate in settlement negotiations or may attempt to arbitrate or mediate their dispute rather than take the case to trial. If no agreement can be reached, the parties will go to trial to argue their cases.

Remedies available for a breach of fiduciary duty

The main object of a fiduciary duty claim is to return the situation to the point it should have been if a breach had not occurred. If the plaintiff succeeds in proving that a breach of fiduciary duty has indeed occurred then the main remedies may include any of the following:

  • Financial damages – if the plaintiff has suffered financial loss as a result of the breach of duty, then the loss should be made good as part of the remedies sought.
  • Property transfer – if the defendant has wrongfully obtained property which did not belong to the defendant, then this property will have to be returned to the plaintiff.
  • Injunctive relief – this is an injunction imposed by the court which requires the defendant to stop performing an action or requires the defendant to perform an action which reverses any effects of the breach of duty.

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