Under Colorado law, there are four elements to a claim or cause of action for breach of fiduciary duty. The four elements are:
- The defendant was acting as a fiduciary of the plaintiff;
- The defendant breached a fiduciary duty to the plaintiff;
- The plaintiff suffered damages as a result of the breach; and
- The defendant’s breach of fiduciary duty caused the plaintiff’s damages.
SGS Acquisition Co. Ltd. v. Linsley, 2018 WL 4698614, at *6 (D. Colo. Sept. 30, 2018).
(1) Fiduciary Duty
The “fiduciary duty” element requires that the defendant owe a special duty to the plaintiff. Examples include the duty that a trustee owes to the beneficiaries of a trust, the duty owed by officers and directors of a corporation to the shareholders of such corporation, and the duty owed by a majority shareholder in their dealings with minority shareholders.
(2) Breach
The “breach” element goes to whether the person owing the fiduciary duty breached such duty. This is typically a fact-intensive question for the jury and is likely the most contentious issue at trial.
(3) Damages
Once a duty is established and breach can be shown, a plaintiff must show that the breach caused him or her damages.
(4) Causation
The plaintiff must show that the damages he or she suffered were actually caused (1) by the defendant and (2) because of their breach of fiduciary duty. “The element of causation is satisfied when the plaintiff proves that the defendant’s conduct was a substantial contributing cause of the injury.”Aller v. Law Office of Carole C. Schriefer, P.C., 140 P.3d 23, 26 (Colo. App. 2005)
How Does the Law DefineFiduciary Duty?
Black’s law dictionary (the dictionary used by attorneys), defines a fiduciary duty as:
A duty of utmost good faith, trust, confidence, and candor owed by a fiduciary (such as an agent or a trustee) to the beneficiary (such as the agent’s principal or the beneficiaries of the trust); a duty of utmost good faith, trust, confidence, and candor owed by a fiduciary (such as a lawyer or corporate officer) to the beneficiary (such as a lawyer’s client or a shareholder); a duty to act with the highest degree of honesty and loyalty toward another person and in the best interests of the other person (such as the duty that one partner owes to another).
What is a Fiduciary?
“A fiduciary is a person having a duty, created by his or her undertaking, to act primarily for the benefit of another in matters connected with the undertaking.”Winkler v. Rocky Mountain Conference of United Methodist Church, 923 P.2d 152, 157 (Colo. App. 1995),as modified on denial of reh’g(Jan. 18, 1996).
What Duties Does a Fiduciary Owe?
“A fiduciary’s obligations include a duty of loyalty, a duty to exercise reasonable care and skill, and a duty to deal impartially with beneficiaries.”Id. (emphasis added). Fiduciariesalso owe a duty of “utmost good faith.”See, e.g.,Rupert v. Clayton Brokerage Co. of St. Louis, Inc., 737 P.2d 1106, 1109 (Colo. 1987). Under certain circ*mstances, fiduciaries owe special duties depending on the industry they are in or on the particular transaction involved. For example, scenarios involving majority and minority shareholders, real estate transactions, professionals, trustees, and other sorts of fiduciary relationships.
What Constitutes a Breach of Fiduciary Duty?
To constitute a breach of fiduciary duty, every one of the four elements must be proven by a preponderance of the evidence (more likely than not) and then the plaintiff must prove the amount of their damages.
FAQs
To prevail in a breach of fiduciary duty claim, you should prove the following elements: Duty – The Trustee has a duty of good faith and fair dealing, a duty of full disclosure. Breach – Breaches come in the form of the following: self-dealing, misappropriation of Trust funds, neglect of responsibilities, and others.
What elements must be able to prove in order to prevail in a claim for breach of fiduciary duty? ›
To prevail in a breach of fiduciary duty claim, you should prove the following elements: Duty – The Trustee has a duty of good faith and fair dealing, a duty of full disclosure. Breach – Breaches come in the form of the following: self-dealing, misappropriation of Trust funds, neglect of responsibilities, and others.
What is a breach of fiduciary duties claim? ›
What are the ramifications for a fiduciary acting in breach of duty? Any action taken in breach of a fiduciary duty can be set aside even if there has been no resulting loss. A proprietary remedy enabling the claimant to assert rights against property in the in the defendant's possession may also available.
What is the standard of proof for breach of fiduciary duty? ›
For a discussion of disgorgement of attorney fees, see the Comment below. Elements. A plaintiff alleging a breach of a fiduciary duty “must prove (1) existence of a duty owed, (2) breach of that duty, (3) resulting injury, and (4) that the claimed breach proximately caused the injury.” Micro Enhancement Int'l, Inc. v.
What types of actions constitute a violation of fiduciary duties? ›
In the event the fiduciary did act to benefit himself or herself at the expense of the beneficiary, was purposefully dishonest in their business practices, or did not otherwise live up to the duties of loyalty and disclosure, legal consequences can then result.
What are the 4 elements required in a breach of contract claim? ›
These types of lawsuits are common in business litigation. There are four elements of a breach of contract claim: a valid contract, performance, breach, and damages.
Is breach of fiduciary duty hard to prove? ›
Proving an Actual Breach of Fiduciary Duty Is Difficult
The second element of the test is also very fact-intensive. In a personal injury case, proving a breach of duty is often the most contested part.
How do you defend breach of fiduciary duty? ›
In particular, just some possible defense arguments can include that:
- The perceived breach of fiduciary duties never, in fact, occurred.
- The plaintiff relinquished certain rights when entering into the relationship with the fiduciary.
- The case should be dismissed because the statute of limitations has expired.
These damages can be financial losses, emotional distress, or other measurable harm. In all cases, an attorney must establish proof of a fiduciary's breach of duty through evidence. This may include documentation, witness testimony, or other forms of evidence.
Can punitive damages be awarded for breach of fiduciary duty? ›
In California, remedies for breach of fiduciary duty encompass monetary damages, attorney fees, and court costs. Additionally, if the fiduciary acted with malice, oppression, or fraud, punitive damages may be awarded to further penalize and deter such conduct.
Proving Damages After a Breach of Fiduciary Duty
Beyond proving the existence of damages, plaintiffs must also show that the fiduciary's breach caused the injuries. Typically, damages are limited to what is necessary to compensate the victim for their losses.
How do you prove fiduciary duty? ›
The standard for proving a breach of fiduciary duty varies from jurisdiction to jurisdiction. Typically, a claim for breach of fiduciary duty includes four elements: 1) the existence of a fiduciary duty; 2) a breach of that duty (through an act or omission); 3) damages; and 4) causation.
How is a fiduciary held accountable? ›
An attorney, as a fiduciary, must act with fairness, loyalty, care, and within the law on behalf of the client. Attorneys can be sued for breaches of their fiduciary duties by clients. They are accountable to the court in which a client is represented when a breach occurs.
What is fiduciary malfeasance? ›
Malfeasance occurs when a director or officer engages in a wrongful or illegal act. One of the most well-known examples is the case of Enron, whose corporate executives knowingly deceived and defrauded employees and the public investment marketplace.
What are the 5 fiduciary duties? ›
Specifically, fiduciary duties may include the duties of care, confidentiality, loyalty, obedience, and accounting. 5.
What 3 elements need to exist for there to be a breach of contract? ›
The three elements that comprise a breach of contract are: 1) the existence of a contract; 2) a breach of one or more of the terms of the contract; and 3) plaintiff has suffered damages as a proximate result of the breach.
What 3 elements must a claimant prove to be successful in a negligence claim? ›
Tests are whether:
- the damage which occurs is foreseeable;
- there is a sufficiently proximate relationship between the parties; and.
- it is fair, just and reasonable in all the circ*mstances to impose a duty of care.
4 Elements of a Breach of Contract Claim (and more)
- The existence of a contract;
- Performance by the plaintiff or some justification for nonperformance;
- Failure to perform the contract by the defendant; and,
- Resulting damages to the plaintiff.
