The adjective fiduciary means to be held or given in trust. A trustee agrees to act in the best interests of a client or beneficiary. Shareholders have a fiduciary duty to act in the best interests of the other and the corporation. Partners can breach this duty by taking actions such as: To win a fiduciary duty claim, a person must ensure that they have received damages as a result of the breach and that they are able to prove the breach. As part of the duty of good faith, directors and officers of a corporation must promote the interests of the corporation and perform their duties without contravening the law. In re The Walt Disney Co. Derivative Litig., 906 A.2d 27 (Del. 2006). There are many types of fiduciary relationships, such as between employer and employee or between an accountant and a client. There are a number of common examples of fiduciary relationships: there is a fiduciary relationship between lawyers and clients; between shareholders and directors; between trading partners; and in many other business relationships. The first step in determining whether you should sue if you believe the duty has been breached is whether the relationship in question did create a fiduciary duty under the law.

In the U.S. legal system, a fiduciary duty describes a relationship between two parties that requires one party to act solely in the best interests of the other. The party designated as a trustee has a legal duty to a client and strict care must be taken to ensure that there is no conflict of interest between the trustee and the principal. A fiduciary duty exists when a relationship with a client requires a unique trust or reliability that the fiduciary is discreet when acting on behalf of that client. The trustee is required to act and has the authority to act on behalf and for the benefit of the client. Generally, it is claimed that the actions benefited the interests of the trustee or the interests of a third party rather than the interests of a client. In some cases, a breach is due to a client`s failure to provide important information to a client, resulting in misunderstandings, misinterpretations or misguided advice. Some relationships impose fiduciary duties. For example, lawyers have a fiduciary duty to their client, a client to their representative, a guardian to their wards, a priest to their parishioner, and a physician to their patient. Fiduciary duty is always imposed when trust is placed by one party in a contractual relationship so that that party can exercise and control influence of the other party.

The accusation of breach of the duty of loyalty can damage the reputation of a professional. A client may terminate a professional relationship because they do not trust a professional to handle the required fiduciary duty. The most common fiduciary duties are relationships between legal and financial professionals who agree to act on behalf of their clients. A lawyer and a client have a fiduciary relationship, as do a trustee and beneficiary, a board of directors and its shareholders, and a representative acting on behalf of a principal. A fiduciary is expected to conduct himself with the highest standards of integrity and transparency and is not personally advantageous in any way at the expense of the client. The plaintiff must prove that the breach of trust caused actual harm. Without damages, there is generally no basis for a breach of fiduciary duty. The more accurate, the better. For example, a trustee could be sued for selling a beneficiary`s property too cheaply. If the buyer is a relative of the trustee, this is clearly a conflict of interest, but a dollar amount on the beneficiary`s loss is required to prove a breach of fiduciary duty.

In a guardian/ward relationship, legal guardianship of a minor passes to a designated adult. The guardian, as guardian, has the task of ensuring that the minor child or ward is properly cared for, which may include deciding where the minor will go to school, arranging medical care and deciding on all other matters relating to the child`s daily well-being. Due diligence requires directors to “inform themselves of all material information reasonably available to them before making a business decision.” Smith v. Van Gorkem, 488 A.2d 858 (1985). The Supreme Court`s decision in Northwestern makes it clear that offering a broad menu of investments under a pension plan does not protect a plan sponsor from a breach of fiduciary claim if certain options available under the plan are reckless and are not removed from the menu in a timely manner. Plan trustees who have adopted best fiduciary practices should be able to rely on these processes to meet the precautionary standard articulated under Tibble. For example, plan trustees should use the services of an independent investment advisor to periodically review the choice of investment options available to plan members. As a best practice, investment option reviews should be conducted quarterly and governed by a written statement of investment policy. In addition, if there are reasons to maintain an investment option that underperforms its peers, plan trustees should ensure that the minutes of the meeting document the reasons why these investment options are retained in the pension plan. These best practices can minimize the risk of potential litigation.

Plan trustees who have not adopted prudent practices and processes should do so now in order to best position themselves against a possible breach of the trust application. For more information on fiduciary best practices, please contact Audra Ferguson-Allen, Gary Blachman, Rob Gauss, Lisa Harrison, Lindsay Knowles, Melissa Proffitt, Tara Sciscoe, Kathleen Sheil Scheidt, Chris Sears or the lawyer you regularly work with at Ice Miller Workplace Solutions. This publication is provided for general information purposes only and does not constitute legal advice. The reader should consult legal counsel to determine how the laws or decisions discussed in this document apply to their particular situation. A breach of fiduciary duty is serious and complex. Knowledge of specificities and examples is essential for a better understanding.