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Breach of Fiduciary Duty

Have you been harmed by someone you trusted? A business partner? A person with whom you had a close relationship of trust and confidence? What can you do? What does Texas law provide?

Under Texas law, the fiduciary duty is a legal relationship where one party, known as the fiduciary, owes certain duties to another party, known as the beneficiary. The fiduciary is obligated to act in the best interests of the beneficiary, exercising loyalty, good faith, and diligence in managing their affairs. If a fiduciary breaches these duties, the beneficiary may be entitled to certain remedies.

Summary of Duties Owed by Fiduciaries in Texas:

Duty of Loyalty: Fiduciaries have a duty to act solely in the best interests of the beneficiary and to avoid conflicts of interest. They must prioritize the beneficiary's interests above their own and disclose any potential conflicts.

Duty of Care: Fiduciaries are required to exercise reasonable care, skill, and diligence in managing the beneficiary's affairs. They should make informed decisions, keep themselves informed about relevant matters, and act prudently.

Duty of Disclosure: Fiduciaries must provide accurate and complete information to beneficiaries regarding all matters that may affect their interests. This duty includes disclosing any material facts and keeping beneficiaries reasonably informed about the administration of their affairs.

Duty to Account: Fiduciaries are responsible for maintaining accurate records and providing periodic accountings to beneficiaries. This duty ensures transparency and allows beneficiaries to assess the fiduciary's actions.

Remedies Available for Breach of Fiduciary Duty in Texas:

Damages: Beneficiaries may seek monetary compensation for any losses they suffered as a result of the fiduciary's breach. The damages awarded aim to restore the beneficiary to the position they would have been in had the breach not occurred.

Rescission: In certain cases, a beneficiary may seek to undo a transaction or agreement that was the result of a fiduciary's breach. Rescission restores the parties to their original positions before the transaction took place.

Injunction: A court may issue an injunction to prevent a fiduciary from continuing to engage in actions that breach their duties. This remedy aims to halt ongoing harm and protect the beneficiary's interests.

Removal: If a fiduciary's breach is severe or ongoing, a court may remove the fiduciary from their position. This remedy is typically used when the fiduciary's actions demonstrate a fundamental lack of trustworthiness or competence.

Disgorgement: Under Texas law, the equitable remedy of disgorgement is a legal remedy that allows a court to order the defendant to give up their ill-gotten gains or profits derived from wrongful conduct. Disgorgement is aimed at preventing unjust enrichment and restoring the status quo by requiring the defendant to surrender any profits obtained through their wrongful actions.

Disgorgement is typically applicable in cases where the defendant has engaged in fraudulent, unlawful, or unfair practices that result in financial gain. It is commonly used in cases involving securities fraud, breach of fiduciary duty, antitrust violations, and other similar types of misconduct.

Disgorgement serves as a means of preventing the defendant from benefiting from their wrongdoing and also provides restitution to the victims or affected parties. The disgorged funds are often distributed to those who suffered harm as a result of the defendant's actions.

It is important to note that the availability and specific application of disgorgement as an equitable remedy may vary depending on the specific circumstances of each case and the discretion of the court.

Constructive trust: Under Texas law, a constructive trust is an equitable remedy that can be imposed by a court to address certain unjust situations. It is typically used to prevent unjust enrichment or to remedy a breach of fiduciary duty. A constructive trust is not a trust in the traditional sense, but rather a legal fiction created by the court to prevent someone from benefiting from their wrongful conduct.

The primary purpose of a constructive trust is to restore the rightful owner to their property or assets. It operates as a remedy to ensure that the person who wrongfully obtained property or assets holds them as a trustee for the rightful owner. In other words, the court imposes a trust-like relationship on the wrongdoer, who becomes a trustee, holding the property or assets for the benefit of the rightful owner.

The relief provided by a constructive trust can vary depending on the specific circumstances of the case. It may involve the transfer of title or ownership of property or assets, the imposition of a lien or charge on property, or the awarding of monetary damages equivalent to the value of the property or assets wrongfully obtained.

A constructive trust is often applicable for breaches of fiduciary duties: When a person in a position of trust, such as a trustee, executor, or agent, breaches their fiduciary duty by wrongfully taking or benefiting from assets that should have been held for the benefit of another person.

It is important to note that the availability and application of a constructive trust may depend on the specific facts and circumstances of each case, as well as the discretion of the court. 

When it counts enough to be in court, you need a lawyer who is experienced, tenacious, dependable, and who will fight for you and your company.

The firm has more than 25 years of experience representing people and businesses in lawsuits. If you think you have a dispute with your business partners, or if someone claims you did not honor your promises, we may be able to help. Give us a call to schedule an appointment. The firm only represents clients based upon a signed, written agreement. In some circumstances, we offer a free, no obligation, initial, in-office consultation.

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