Breach of Fiduciary Duty Attorneys in Saratoga, CA
Holding partners, officers, and directors accountable throughout Silicon Valley & the Bay Area.
Request a Free Consultation →Understanding Fiduciary Duty in California Business Relationships
A fiduciary duty is a legal obligation to act in another party's best interests, not your own.
In California, partners, corporate officers and directors, managers and certain members of LLCs, and certain agents can owe fiduciary duties, including the duty of loyalty and the duty of care, to the business and to each other. Whether a particular person owes those duties is not automatic. It depends on the type of entity, what the operating agreement or bylaws say, and what role that person actually played. That threshold question is often the first thing contested in these cases, and it is the first thing we evaluate.
A breach occurs when someone in a position of trust puts their own interests ahead of the business.
Common breaches include:
- Self-dealing.
- Usurping a corporate opportunity.
- Competing with the business.
- Misusing confidential information.
- Misappropriating company funds.
These breaches often surface during a partnership dispute, buyout, or dissolution.
Because fiduciary breaches often involve hidden conduct, early investigation and evidence preservation are critical.
California law allows the wronged party to seek damages, an accounting of profits, and, in egregious cases, punitive damages.
What Our Fiduciary Duty Attorneys Do
The Usual Obstacle Is Not the Law, It's the Records
Most people who call us about a partner or officer suspect a problem and cannot prove it, because the person they suspect controls the books. That is a normal starting position and not a reason to assume you have no case. Owners have established rights to demand an accounting and to inspect company records, and in our experience how someone responds to a properly framed written demand is often more revealing than the records themselves. A complete and prompt response sometimes ends the concern. A late one, a partial one, or none at all becomes evidence.
Breach of Fiduciary Duty FAQs
Partners, managers and certain members of LLCs, corporate officers and directors, and certain agents may owe fiduciary duties depending on the entity structure, governing documents, and their role in the business. Majority shareholders in closely held corporations can also owe fiduciary duties to minority shareholders.
The duty of loyalty requires acting in the business's best interest rather than a fiduciary's personal interest, prohibiting self-dealing and competing ventures. The duty of care requires acting with the same care an ordinarily prudent person would exercise in similar circumstances, including making informed decisions.
Common examples include diverting a business opportunity to a competing venture, using company funds for personal expenses, competing directly with the business while still a partner or officer, withholding material information from co-owners, and self-dealing transactions that benefit the fiduciary at the business's expense.
California allows recovery of the actual losses caused by the breach, disgorgement of any profits the fiduciary improperly obtained, and in cases involving fraud, oppression, or malice, punitive damages. An accounting may also be ordered to trace where company funds went.
Start with a written demand for an accounting and access to the books, sent through counsel. How they respond, fully, partially, or not at all, is often as telling as what the records eventually show. Do not confront them informally first, since that can prompt records to disappear before you have a chance to secure them.
Breach-of-fiduciary-duty claims are often subject to a four-year limitations period in California, but a different period may apply depending on the nature of the alleged misconduct, including claims sounding in fraud. Because fiduciary breaches are often concealed, the discovery rule may also affect when the period begins.
Yes. Certain fiduciary breach claims, particularly against corporate officers or directors, may need to be brought as a derivative action on behalf of the company, rather than a direct claim by an individual shareholder. We evaluate which type of claim fits your situation.
Fiduciary breach cases are fact-intensive and often require forensic review of financial records and business communications. An experienced business litigation attorney can investigate the conduct, quantify your damages, and pursue the claim through negotiation or litigation.
Often yes, if they are still a partner, officer, or manager while doing it. Competing with the business you owe a duty to, or diverting an opportunity that belonged to it, is a classic breach of the duty of loyalty. What matters is whether the competing venture started before or after they left, and whether it used your company's opportunities, clients, or information to get going.
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Results depend on the specific facts and law of each matter. Prior results do not guarantee or predict a similar outcome in any other case.