Under New York law, a breach of fiduciary duty occurs when a partner, shareholder, officer, or director fails to uphold the legal responsibilities owed to others in the business. For business owners, these duties are the foundation of trust. Violations can lead to significant financial harm and litigation.
This article outlines fiduciary duties, common ways they are breached, and the remedies available when disputes arise in New York courts.
What Is a Fiduciary Duty?
A fiduciary duty is the highest standard of care recognized in business law. It requires a person in a position of trust, such as a partner, officer, or director, to act in the best interests of the business and its stakeholders, rather than pursuing personal gain at the company’s expense.
In New York, the most common fiduciary duties are:
- Duty of Loyalty – Avoiding conflicts of interest and putting the business’s interests above personal interests.
- Duty of Care – Making informed, prudent decisions and exercising reasonable diligence in managing the business.
Common Examples of Breach of Fiduciary Duty
- Self-Dealing
A fiduciary diverts business opportunities or assets to themselves without consent. An example is a director awarding contracts to their own company at inflated prices. - Usurping Corporate Opportunities
Taking a business opportunity for personal benefit that rightfully belongs to the company. - Misuse of Confidential Information
Using sensitive company data to compete against the business. - Misappropriation of Funds or Assets
Improperly withdrawing money from business accounts or using company property for personal purposes. - Failure to Disclose Conflicts of Interest
Not informing partners or shareholders about a personal interest that conflicts with company decisions. - Gross Negligence in Management
Failing to make informed decisions, ignoring financial red flags, or neglecting corporate governance responsibilities.
Legal Remedies for Breach of Fiduciary Duty
If a fiduciary duty is breached, New York law provides several remedies, including:
- Monetary Damages: Compensation for losses caused by the breach.
- Disgorgement of Profits: Requiring the wrongdoer to surrender profits they gained through the breach.
- Injunctions: Court orders preventing further harmful actions.
- Removal of the Fiduciary: In some cases, courts can remove directors, officers, or managers who have violated their duties.
Why Breach of Fiduciary Duty Matters
Fiduciary breaches often overlap with other business disputes, including partnership disputes, shareholder derivative actions, and contract litigation. They can erode trust, stall growth, and even threaten a company’s survival.
Frequently Asked Questions (FAQs)
Who can bring a breach of fiduciary duty claim in New York?
Shareholders, partners, or the company itself may bring a claim, depending on the circumstances.
What is the statute of limitations for breach of fiduciary duty in New York?
Generally, six years, but it can be shorter if the case is based on fraud.
Can fiduciary duty claims be settled outside of court?
Yes. Many disputes are resolved through negotiation, mediation, or arbitration before reaching trial.
Call to Action
If you suspect a partner, shareholder, or officer has violated their fiduciary duties, it’s important to act quickly to protect your rights and the business.
📞 Call (917) 970-1212 or 📧 email info@alismelaw.com to schedule a consultation today.