Many fiduciaries have a significant amount of power and control over their clients’ financial lives. When a fiduciary breaches their duties, it can have severe economic and personal consequences for the victims. If you are the victim of a breach of fiduciary duties, you probably want to hold the perpetrator accountable and recover compensation for the damage they have done. New York law provides a clear path to hold fiduciaries responsible for their illicit acts or omissions.
At the Law Offices of Andrew M. Lamkin P.C., we know how much power fiduciaries have when it comes to estate administration and residential real estate transactions. When fiduciaries commit harmful acts and breach their duties to their clients, we have the skill and experience to hold them accountable. When working with the Law Office of Andrew M. Lamkin, your case will receive the personalized attention of an experienced Long Island attorney with a proven track record of success. Contact us today to schedule a consultation.
Definition of Fiduciary Duty
Professionals who hold positions of trust and power have a responsibility to act in the best interests of their clients. These professionals are known as fiduciaries under New York law. Fiduciary duties are specific standards that govern the relationship between fiduciaries and their clients, otherwise known as principals. These duties create legally enforceable standards that allow principals to bring a fiduciary to court and recover damages for the harm they cause. Further, fiduciaries can face legal and professional consequences for any breaches of duty they commit.
People Who Owe a Fiduciary Duty
Professionals owe a fiduciary duty based on the relationships they have with their clients. In New York, two types of relationships give rise to fiduciary duties.
The first type of relationship is defined explicitly by New York state law or through a contract between the fiduciary and the client. For example, in the context of estate law, trustees and personal representatives of an estate are explicitly defined as fiduciaries by New York law.
The second type of relationship is inferred by the law based on the circumstances surrounding the relationship between two parties and the type of transactions being engaged in as part of the relationship. These relationships arise in New York when there is an element of special confidence and trust between the parties. This standard leaves much room for argument, and proving an informal fiduciary relationship exists is often tricky.
Common fiduciaries in New York include:
- Real estate agents,
- Financial advisors,
- Corporate officers,
- Personal representatives,
- Trustees, and
Any professional relationship built on a foundation of trust has the potential to be a fiduciary relationship. An experienced attorney from the Law Offices of Andrew M. Lamkin can help you determine if a fiduciary relationship exists in your case.
Proving Breach of Fiduciary Duty in New York
Determining that a fiduciary breached a duty toward you can be relatively straightforward. Proving the matter in court, on the other hand, can be quite difficult. First, plaintiffs must understand the elements they need to prove to succeed on their claim. Second, plaintiffs should know how the burden of proof works in breach of fiduciary cases.
What Plaintiffs Must Prove
Plaintiffs need to prove three elements to succeed on a breach of fiduciary duty claim. The three elements are:
- A fiduciary relationship existed between the plaintiff and the defendant;
- The defendant breached their fiduciary duty towards the plaintiff; and
- The breach resulted in economic harm to the plaintiff or an illegitimate financial benefit for the defendant.
The plaintiff must prove all three elements to recover damages from the defendant.
Burden of Proof
In most civil cases in New York, including breach of fiduciary duty claims, a plaintiff bears the burden of proving that the defendant should be held liable. Plaintiffs usually must show that it is more likely than not that all three elements of a breach of fiduciary duty have been met. If a judge or jury determines that the plaintiff did not prove just one element of a breach, the plaintiff will lose the case.
Business Judgment Rule
In cases where the fiduciary is a director or officer of a business, a plaintiff must also overcome the business judgment rule. The business judgment rule creates a presumption that the fiduciary acted in the company’s best interest and in good faith with adequate information. To overcome the business judgment rule, a plaintiff must show that the fiduciary did not act on an informed basis, acted in bad faith, or knew they were not working in the company’s best interest. This rule puts a significant burden on plaintiffs and is challenging to overcome.
How To Prove Breach of Fiduciary Duty
In most cases, proving the existence of a fiduciary relationship is relatively straightforward. A plaintiff can often point to the contract or law establishing the relationship. This element can become much more complicated when the relationship must be inferred.
Demonstrating a breach of fiduciary duty involves presenting evidence that the defendant did not live up to one of several duties, including duties of care, loyalty, and candor. Other explicit duties might also exist based on the dynamics of the relationship.
Proving economic harm involves showing the court the damage caused by the fiduciary’s breach. Types of potential damage include lost profits, monetary damages, unpaid benefits, unnecessary losses, and other economic damages. Plaintiffs can alternatively show that the defendant received an illicit gain from their breach.
Given the difficulties of proving a breach of fiduciary duty in court, working with an experienced attorney is critical.
Common Examples of a Breach of Fiduciary Duty
Fiduciary duties create a broad range of requirements that fiduciaries must live up to. Common examples of breaches include:
- Commingling assets,
- Negligent decision-making,
- Misuse of funds,
- Sharing trade secrets,
- Business malpractice,
- Failure to follow the principal’s instructions,
- Withholding relevant information,
- Failure to disclose conflicts of interest,
- Self-dealing, and
- Denying beneficiaries the ability to access trust records.
Other actions may also constitute a breach. An attorney can help you analyze your circumstances and determine whether a breach occurred.
Contact an Attorney
At the Law Offices of Andrew M. Lamkin, we are dedicated to helping individuals with issues relating to estate administration and elder law. If you are concerned that a fiduciary, such as a trustee or financial advisor, breached their duty to you, contact us today to schedule a consultation.