Firm-Wide

Firm-Wide blog

Fiduciary Duty, Part 1: The Highest Duty of Care

By Burg Simpson
July 16, 2012
2 min read

Nowadays the news is full of references to breach of fiduciary duty. JP Morgan Chase loses $2 billion of its shareholders’ money, and is sued for breach of fiduciary duty. A former coach at Penn State, Jerry Sandusky, is accused of molesting children and former students, and he, the university, and others are being sued for breach of fiduciary duty. And who hasn’t read the story of a trustee, employee or a company’s officer or director running off with funds they were supposed to protect being sued for breach of fiduciary duty?

But what is a fiduciary duty? Why does it exist? And how do you know if you have been a victim of a fiduciary duty breach for which you are entitled to recover? This series of articles attempts to answer those questions.

The Fiduciary Duty is the Highest Duty of Care Recognized Under American Law

A fiduciary duty exists when a person places special trust and confidence in another person and relies upon that person as his fiduciary; and the fiduciary knowingly accepts that trust and confidence and acts on behalf of the client by exercising his discretion and expertise.

Put simply, a fiduciary is obligated to carry out his duties as a ‘prudent person’ would, and — most importantly — to put the interest of his client above his own. If the fiduciary instead uses the relationship for his own benefit, he can be held liable for breach of fiduciary duty. The most common fiduciary relationship is between a trustee and a beneficiary. However, fiduciary duties can arise from any special trust relationship.

To prevail on a claim for breach of the fiduciary duty, a claimant must show that the defendant occupied a position of trust, and that the defendant breached that duty for his own benefit.

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