When a business relationship is established, there is usually a special trust, level of confidence and reliance between the parties of this relationship. And, when Louisiana companies enter an agreement that creates a fiduciary duty, the obligation that is established by that agreement is relied on. Because of that, when a party fails to uphold their fiduciary duty or breaches that duty, this can greatly harm the business relationship that has been formed.
What is a breach of fiduciary duty? In order to gain a better understanding of this breach of duty, it is essential to fully understand what a fiduciary duty entails. With regards to a business relationship, this is the obligation to act in the best interests of another party. For example, in a corporation, a board member has the fiduciary duty to the shareholders.
Moreover, this duty exists when there is knowledge and reliance on this duty. Lastly, when this relationship is established and relied on, a fiduciary is held to a high standard to act in the best interest of the other party or client.
Failing to uphold a fiduciary duty or acting in any manner that is adverse or contrary to the interests to the other party is considered a breach of fiduciary duty. According to 29 U.S. Code Section 1109, when fiduciaries breach their duties, they are personally liable. A breach could mean that the fiduciary has to restore their plans, responsibilities, obligations and duties to the other party and restoring any losses caused by the breach. Additionally, the fiduciary could be removed required to make any equitable or remedial relief to the other party.
When a business relationship is created, much reliance is generated between the parties. If one party fails to meet their obligations, this could greatly harm the other party. When this and other business law issues occur, it is important that parties to the breach understand what steps they could take to resolve the matter and make themselves whole again.
Source: Law.cornell.edu, “29 U.S. Code § 1109 – Liability for breach of fiduciary duty,” accessed Feb. 15, 2016