Home Business Litigation What is Fiduciary Duty and What Can be Done When There is a Breach of It?

What is Fiduciary Duty and What Can be Done When There is a Breach of It?

muccilegal October 15, 2020

A fiduciary is an individual, business or organization that has a legal duty towards another individual, business or organization. The party to which the fiduciary owes a duty is called the beneficiary and the specific duty owed is called the fiduciary duty.

The word ‘fiduciary’ has been derived from Latin origins. In Latin, for instance, the word ‘fidere’ is the verb ‘to trust,’ and ‘fiducia’ means the noun ‘trust.’ A commonly used term, which has links to ‘fiduciary,’ is ‘bona fide,’ which means ‘can be trusted’ or ‘legally authenticated.’

Fiduciaries and fiduciary duties are commonplace in Massachusetts as they are elsewhere in the United States and indeed, in many other parts of the world where the rule of law operates. Some examples of what might be classified as a fiduciary are explored further below. Note that when a fiduciary betrays the trust of the beneficiary for which s/he/ it has a duty, then this might be considered a breach of fiduciary duty which could lead to a number of consequences including, but not necessarily, a claim for financial damages by the beneficiary.

Examples of fiduciary/ beneficiary relationships

The following are just a few examples of existing fiduciary / beneficiary relationships.

Guardian / minor

If the natural guardian (typically a parent, but this could be another family member) is deemed incapable of caring for a minor, the family court may appoint a guardian of the minor to make sure that his or her daily welfare is looked after, that the minor attends school, accesses suitable medical care etc. The guardian who is appointed is therefore considered the fiduciary in this relationship and has fiduciary care of the minor, who is the beneficiary.

Trustee/ beneficiary

In estate arrangements, a trustee is often appointed who is expected to make decisions in the best interests of the beneficiary. The trustee therefore has a fiduciary duty towards the estate beneficiary, even though the trustee may have legal ownership of the estate and any assets associated with it, together with the power to make any decisions about how the estate is handled.

Attorney / client

An attorney has a fiduciary duty to his /her client. This duty is one of the most stringent in the U.S. The U.S. Supreme Court has stated that an attorney must preserve the highest level of trust between him/her and the client. Attorneys can be held accountable for a breach of their fiduciary duty to their client.

Stockholders/ businesses

Controlling stockholders who have a controlling interest over a business’s financial activities may be considered fiduciaries in relation to the business’s shareholders and may be accountable if there is a breach of their fiduciary duty.

Legal consequences of a breach of fiduciary duty


Fiduciaries are typically expected to have the trust of their clients / beneficiaries and act in their best interests. A breach of fiduciary duty occurs when the fiduciary is found not to have acted in the best interests of the beneficiary or even have acted in their own interests or another third party altogether,

A breach of fiduciary duty may also be considered to have occurred if important information which should have been imparted to the beneficiary was withheld or not provided. Lack of information may lead to poor decisions being made or a potential conflict of interest.

How a claim against a breach of fiduciary duty may be made

If a beneficiary believes that they have suffered from a breach of fiduciary duty, they may have a case for filing a claim for damages in the civil court. To establish that a breach of duty has occurred, the following four elements generally must be established:

  • A fiduciary duty existed;
  • A breach of that duty took place;
  • The breach of duty resulted in damages;
  • Proof that there was a direct association between the breach and the damages incurred.

A fiduciary duty existed

The plaintiff (i.e. the beneficiary of the existing fiduciary relationship) must establish that a legally binding fiduciary relationship existed between the defendant, i.e. the fiduciary and the plaintiff, i.e. the beneficiary.

A breach of that duty took place

The plaintiff must be able to establish conclusively that a breach of fiduciary duty took place. Obviously that depends on the exact nature of the relationship. It could vary from a trustee benefitting from asset management to the detriment of the beneficiary to the release of confidential information by an attorney about a client without the client’s consent. Whatever the nature of the breach, proof that it has occurred must be held by the plaintiff.

The breach of duty resulted in damages

Unless the breach of fiduciary duty has had negative consequences for the beneficiary, a claim will not have any validity. For example, there could be evidence that the breach has caused you significant financial loss,

Proof that there was a direct association between the breach and the damages incurredfiduciary-duty-proof-massachusetts

There must be evidence of a direct connection between the breach of fiduciary duty and the damagescaused, i.e. not just the fact that damages have occurred.


Lawsuits may result in significant consequences after a confirmed breach of fiduciary duty

As has been described above, there is a large variety of different fiduciary relationships. A breach of fiduciary duty may not necessarily end up in court but could have other consequences such as a loss of professional reputation. More serious breaches may result in a lawsuit against the fiduciary. Consequences could include damages awarded, legal fees including attorney’s fees, the loss of a professional license and / or industry discrediting.

If you have experienced a breach of fiduciary duty and are considering legal action to recover damages you should contact an experienced Massachusetts business lawyer before you take the plunge. In Winchester MA, contact the Law Offices of Richard Mucci at 781-729-3999.

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