Breach of Fiduciary Duty in Florida

In life and business, trust is paramount. Unfortunately, breaches of trust occur. In personal matters, the recourse might be limited to forgiving the person or holding a grudge. However, in the business realm, legal actions can be taken against those who violate their duties.

At Capital Partners Law, we understand the complexities of fiduciary duties and the consequences of breaching them. This article outlines what constitutes a breach of fiduciary duty in Florida and explores the legal recourse available to affected businesses.

The Legal Definition of a Fiduciary in Florida

A fiduciary is an individual or entity authorized and obligated to act on behalf of another party in situations involving trust, particularly regarding finances or property. The person or entity for whom the fiduciary acts (the “beneficiary”) must have complete trust and confidence in the fiduciary’s actions.

In Florida, a fiduciary relationship exists between:

  • broker/client
  • trustee/beneficiary
  • guardian/ward
  • partners to other partners
  • corporate directors to shareholders
  • general partners to limited partners
  • managing members of limited liability companies to other members
  • a fiduciary duty may also be implied if one party relies on another to act on its behalf and in its best interest

Fiduciary Duties

A fiduciary has several legal responsibilities, including:

  • Duty of Care: Exercise due diligence in making decisions or taking actions affecting the beneficiary. In other words, a fiduciary must conduct a comprehensive assessment of all practically available material relevant to the matter, prior to making a decision or taking action on the beneficiary’s behalf. A fiduciary must also use reasonable caution when making decisions or taking any action on behalf of a beneficiary, whether it be an individual or a business.
  • Duty of Loyalty: Prioritize the beneficiary’s interests above all else, including personal interests. A fiduciary must also disclose any personal conflict(s) of interest that become apparent.  
  • Duty of Good Faith: Act in the beneficiary’s best interests, especially in matters involving confidentiality and conflict of interest.
  • Duty of Confidentiality: Protect all information related to the beneficiary and refrain from using it for personal gain.
  • Duty of Prudence: Exercise utmost care, caution, and skill in decisions and actions.
  • Duty to Disclose: Reveal all information that could impact the beneficiary or the fiduciary’s capacity to act as such.

Fiduciary Relationships in Florida Businesses

Fiduciary relationships are common in partnerships and corporations. Business partners owe fiduciary duties to each other and the partnership, while corporate directors owe such duties to the corporation and its shareholders.

Fiduciary Duties in a Partnership

According to Fla. Stat. § 620.8404, partners must fulfill duties of loyalty and care, which include:

  • Accounting for any property, profit, or benefit derived from the partnership.
  • Avoiding conflicts of interest and competition with the partnership.
  • Refraining from gross negligence, reckless conduct, intentional misconduct, or knowing violations of the law.

Fiduciary Duties in a Corporation

Directors of Florida corporations must act in good faith and in the best interest of the corporation, exercising the care that a sensible person would find appropriate (Fla. Stat. § 607.0830).

Because directors oversee the management of the business and affairs of the corporation, their actions play a pivotal role in the success or failure of an organization. Every director must therefore work for the benefit of all shareholders, even if nominated by a particular group of shareholders.

Fiduciary Relationships and Small Businesses in Florida

Small businesses may also engage in fiduciary relationships with external advisors, such as lawyers and accountants. When this happens, the roles may differ depending on the circumstances.

For example, a small business may hire a lawyer or CPA for regular or occasional assistance with relevant business needs. If so, the small business becomes the beneficiary, and the business attorney or CPA takes on the role of a fiduciary.

On the other hand, the owner of an independent accounting firm or small law practice may hire a financial advisor. In that case, the law firm or accounting firm is no longer the fiduciary, but becomes the beneficiary, while the financial advisor becomes the fiduciary.

In either case, it is important that all parties understand the relationship and act accordingly.

Legal Recourse for Breach of Fiduciary Duty

When a fiduciary fails to fulfill their duties, such action (or inaction) may constitute a “breach of fiduciary duty.” Affected businesses or individuals in Florida may pursue legal action for breach of fiduciary duty, typically through litigation in state or federal court.

Depending on the circumstances, the aggrieved party may seek punitive damages, as well as compensation for financial losses. Punitive damages are payments that the fiduciary must make in addition to compensating the business for financial losses. Courts typically award punitive damages in an effort to dissuade fiduciaries from committing future violations, however, such awards usually involve extreme circumstances, such as malice or fraud.

To succeed in a breach of fiduciary duty claim, the plaintiff must prove:

  • A fiduciary relationship existed.
  • The fiduciary breached their duty.
  • The breach caused financial losses to the plaintiff.

To learn more or speak with a knowledgeable Florida Business Attorney, contact Capital Partners Law today:

This article is provided by Capital Partners Law for informational purposes only. It is not intended as legal advice and does not form the basis for an attorney-client relationship. If you need legal advice, please contact Capital Partners Law or another licensed attorney.