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Understanding the Power and Gravity of the Fiduciary Duty

The highest duty under the law is the fiduciary duty.  Some people are surprised when they learn that they owe their partners fiduciary duties.  When fiduciary duties apply to a business or personal context, the fiduciary may not engage in self-dealing and must treat his or her partners or other beneficiaries with utmost good faith and fair dealing. These duties can make all the difference on how decisions are made, what opportunities may be pursued and how money is distributed. Fiduciary relationships can include: A) Attorneys to the clients; B) Partners to each other; C) Agents to their principals; D) Escrow agents to both parties to the contract; E) Insurance agents to their insurers under agency contracts; F) Corporate officers to the corporations they serve; G) Joint venturers to each other; H) Securities brokers to their customers; I) Condominium board members to unit owners; and J) Employees to their employers. Further, a fiduciary relationship can sometimes be based on an informal relationship arising from a moral, social, domestic, or purely personal relationship of trust and confidence. See Meyer v. Cathey, 167 S.W.3d 327, 331 (Tex. 2005). A fiduciary duty litigation attorney will try to assert a fiduciary relationship where there is a strong basis in fact and law. Why does it matter if a fiduciary relationship exists?  Because fiduciaries owe the following general duties:  a) duty of loyalty and utmost good faith; b) duty of candor; c) duty to refrain from self-dealing; d) duty to act with integrity of the strictest kind; e) duty of fair, honest dealing; and f) duty of full disclosure, among others.  As a litigation attorney, I often ask questions of potential clients to determine first if a fiduciary relationship exists and second if there have been any breaches of the duties owed by that fiduciary.  These duties can become an important part of the claims asserted in any lawsuit. These issues and duties are relevant not only in fiduciary duty lawsuits, but also partnership disputes, minority shareholder oppression lawsuits, breach of contract lawsuits, misappropriation of trade secrets, tortious interference with prospective or current business relationships.  Damages for breach of fiduciary duty cases can vary but could include, out-of-pocket losses, lost profits and in some cases exemplary damages.  Like trade secret misappropriation cases, a litigator can seek equitable relief from the court in the form of constructive trusts and injunctions (See TEX. PROP. CODE § 114.008 (a) (2)). The form you choose for your business and the relationships you form can make a difference in the types of claims you can bring and as a business litigator I often look to these relationships for potential causes of action.

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