What Does it Mean to Have Fiduciary Duty?
Many different business transactions must be undertaken by a neutral third
party or by someone who is not the party involved but instead is acting
on their behalf. In order to make sure this third party acts in the best
interest of the party they are representing, they are granted what is
legally known as “fiduciary duty.” In essence, fiduciary duty
is a relationship between two parties that makes one legally obligated
to act in the best interests of the other. While there are ways to ensure
that someone entrusted with fiduciary duty acts in the best interest of
their principal, it’s still crucial that a fiduciary be someone
who has no conflicts of interest with any transaction they may be required
to partake in. They also should not be able to profit off any of these
transactions, unless explicit consent is granted at the start of the relationship.
There are three primary types of fiduciary relationships that could apply
to businesses: trustee/beneficiary, attorney/client, and principal/agent.
Let’s look at each of these in more detail.
These are primarily used in estate planning law, but can lean into the
business law world as well depending on the nature of a trust. In this
instance, an individual named in a trust is named the fiduciary and given
the role of trustee. At this point, they take legal ownership of property
included in the trust and are given the power to handle the assets in
the name of the trust. However, as a trustee, they are required to make
decisions regarding that property in the best interest of the trust itself,
including ceasing to distribute property from the trust should its beneficiary
break its terms. In many cases, business assets or control over a business
can be placed into a trust and then held by a trustee on behalf of a beneficiary.
In order for an attorney to properly represent their client and provide
them with the best possible counsel and representation, they must have
the full confidence and trust of their clients. For this reason, the Supreme
Court has ruled that an attorney is not required to testify against their
client and is not required to expose any information that might incriminate
them. In return, attorneys must also act in the best interests of their
clients, being completely loyal to their cause. Any attorney who fails
to do this or guides a client wrongfully in order to gain has broken their
fiduciary duty and could face serious charges in court for their conduct.
The principal/agent relationship is the most generic type of fiduciary
relationship, and the most common in business litigation law. Anyone or
anything with legal capacity to act on their own may act as a principal,
and the agent may be anyone of their choosing that does not have a conflict
of interest. One common example in business is when a group of shareholders
for a corporation act as principals when selecting management, who then
act as agents on behalf of the company. Obviously, in this instance, you’ll
want to make sure the management does not have any conflicts of interest,
such as investment banking on the success of a competitor.
If you would like to learn more about fiduciary duty and how it can apply
to your business, speak with a Dallas business litigation attorney from
Lyons & Simmons, LLP today. We know the business world can be complex, and that means it’s
important to have an ally who can help you navigate through any issues
you might face. We strive to protect your best interests and your future
through careful strategy, decisive action, and aggressive representation
should your issue ever need to escalate further.
Why Call Lyons & Simmons, LLP for Your Case?
- Award-winning, top-rated trial lawyers
- Efficient, precise, and experienced legal team
- Committed to securing positive outcomes in tough cases
- Handled multi-million and billion-dollar cases
- Seasoned litigators ready to help you
The breach of fiduciary duty lawyers at Lyons & Simmons, LLP have handled
large, complex cases, as well as other business tort and
business litigation cases for plaintiffs and defendants in a wide range of circumstances.
Call us for an evaluation of your business tort case involving breach
of fiduciary duties.
You need a legal team you can trust to have your best interests in mind.
Call our firm today to set up a free consultation: (844) 297-8898.