A breach of fiduciary duty happens when someone legally bound to act in your interest, such as a business partner, corporate officer, agent or trustee, puts their own interest first. In Texas, you must prove the duty existed, that it was breached, and that the breach injured you or benefited the fiduciary. Remedies go beyond ordinary damages: courts can order the fiduciary to give back profits and forfeit fees.
Who owes fiduciary duties in Texas?
- Formal fiduciaries, by law: partners to each other and the partnership, officers and directors to the corporation, agents to their principals, trustees, and attorneys to clients.
- Informal fiduciaries, by relationship: a relationship of trust and confidence can create duties, but Texas courts require that it existed before and apart from the business deal in dispute. Being friends or trusting someone is usually not enough.
Shareholders in a corporation generally do not owe each other fiduciary duties just because they are co-owners, though a controlling owner may in particular circumstances. LLC duties depend heavily on the company agreement, which in Texas can expand or restrict them.
What does a breach look like?
- Self-dealing: a partner leases property to the business at above-market rent, or awards contracts to their own company
- Taking a business opportunity that belonged to the company
- Diverting funds or paying themselves unapproved compensation
- Hiding material information from the people they owe a duty to
Who has to prove what?
When a fiduciary profits from a transaction with the person they owe a duty to, Texas law presumes the transaction is unfair. The fiduciary then bears the burden of proving it was fair, reasonable and fully disclosed. That burden shift is one of the most valuable tools in these cases.
What remedies are available?
- Actual damages for your losses
- Disgorgement of profits the fiduciary made from the breach, even without proof of your loss
- Fee forfeiture of compensation paid to an agent or attorney who breached
- Constructive trust over property obtained through the breach
- Exemplary damages for intentional breaches
Breach of fiduciary duty claims generally must be filed within four years.
From our case files
- $3.5 million jury verdict. In a shareholder oppression and breach of fiduciary duty case seeking money damages and real estate for the company, the jury found for our client for more than $3.5 million after a two-week trial. The case then settled for a seven-figure value (2011).
- Insiders stripped of their stakes. For the founder of a biomedical startup, we sued a CEO and co-founder who misled investors. The settlement stripped them of their shares and company positions (2006–2007).
- Turning the tables. When a wrongdoing LLC member sued first to pose as the victim, we realigned the case so our client stood as the true plaintiff, and the opposing claims were ultimately washed out (2021).
Client names are withheld for confidentiality. Every case turns on its own facts, and past results do not guarantee a similar outcome. See more representative results.
The Burk Law Firm handles fiduciary duty claims among partners, LLC members, shareholders and corporate officers. Call (512) 306-9828.
Related: What Can a Minority Owner Do When Frozen Out of a Texas Company? · How Do You Split Up With a Business Partner in Texas? · Fiduciary Duty Breaches in Austin, TX
This article is general information, not legal advice. Reading it does not create an attorney-client relationship.