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Breach of Fiduciary Duty: Unlawful Self-Dealing

A fiduciary duty is a legal obligation that requires one party to act solely in the best interests of another party. The breach of this duty can occur in a number of ways, from the failure to disclose information to negligence. Self-dealing is another common example of the breach of fiduciary duty. Self-dealing occurs when a party, with a fiduciary duty, takes advantage of their privileged position and makes a transaction that produces personal benefits. If believe that your business interests have been damaged by another party’s self-dealing, please contact an experienced West Palm Beach business litigation lawyer for legal help.

The Elements of Self-Dealing

Corporate officers, directors and other managing partners are afforded considerable latitude under the business judgement rule. Essentially, this rule prevents courts from second guessing business decisions. Even if a business decision turns out poorly, courts will be reluctant to hold anyone liable, unless there was bad faith. Florida courts will generally only look to see if directors acted in good faith, used ordinary care and had a reasonable belief that they were acting in the best interests of the company. However, when allegations of self-dealing arise, the normal protections of the business judgment rule fall aside. This is because self-dealing is a breach of the fiduciary duty of loyalty. In cases of alleged self-dealing the burden of proof will actually shift onto the accused party to show that a business decision, in which they personally benefited, was also clearly in the best interests of the company. This is very challenging, and it will generally require proving the following:

  • The self-dealing transaction was reasonable;
  • The business gained a clear benefit;
  • The self-dealing director gained no disproportionate benefit;
  • Full disclosures of the personal interests were made prior to the transaction; and
  • There was broad support for the self-dealing transaction among the disinterested parties within the company.

Damages for Breach of Fiduciary Duty

If you have been the victim of a breach of fiduciary duty, you need to take immediate legal action. In Florida, the statute of limitations for this type of case varies. You may have up to four years to bring a claim, but in other cases you will only have as little as six months. There are many remedies available depending on the specific facts of your case, including:

  • Compensatory damages: Victims are entitled to recovery for the full extent of their financial damages.
  • Injunctive relief: This remedy may be available instead of, or in addition to, receiving financial compensation. Injunctive relief is essentially a court order that puts a stop to a certain action.
  • Punitive damages: Finally, in a select number of self-dealing cases, the victims may be entitled to seek punitive damages. This is generally only available when the breach of fiduciary duty has risen to the level of gross negligence.

Need Legal Advice?

The breach of a fiduciary duty can do substantial harm your business. If your interests have been damaged by a breach of fiduciary duty, such as self-dealing, the experienced business litigation lawyers at Pike & Lustig, LLP are ready to help. Please contact our West Palm Beach office today to schedule your free initial legal consultation. Our Firm serves businesses throughout Florida, including in Fort Lauderdale and Coral Gables.

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