Disloyal Business Partner? How To Handle A Breach Of Fiduciary Duty

General partners or any partners involved in the management of the business typically have a fiduciary duty to the partnership.

KAPIN PLLC commercial litigation New York CityWhat is fiduciary duty and how can a partner handle a breach of fiduciary duty?

Fiduciary duty is the relationship between two or more parties. One party is the fiduciary and they owe a duty to the principle. Commonly, in a general partnership all the partners owe a fiduciary duty to each other. Fiduciary are bound to acting in good faith to their principles. If an attorney, for example, is a fiduciary, their client, would be the principle. Fiduciaries typically hold money in good faith for the business. They owe a duty of loyalty and care. What this means is that the partners have faith and trust in each other that they will place the business interests before their own personal interests.

What happens when a partner breaches the fiduciary duty?

The duties partners owe each other should be outlined in partnership agreements or operational agreements. Consult with a commercial litigation attorney to find out more about a particular partner’s rights.

If a partner breaches the fiduciary duty and breaks the trust of the partnership, it’s usually because they’ve failed to uphold their end of their obligations and financial loss was the result.

What are a few examples of breaches of fiduciary duty?

  • Concealing profits for personal gain
  • Committing insider trading
  • Negligent management
  • Taking business away from the company for personal benefit
  • Misrepresenting information and causing financial loss

How can a business partner file a claim for breach of fiduciary duty?

To successfully file a claim and win, a party must prove that a fiduciary duty existed, that the fiduciary owed you a duty and that they breached that duty, and as a result of the breach, financial loss occurred and that you are owed a remedy. Partners not only may be able to obtain damages, but they also may be able to remove the partner that breached their duty of care.

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