Breach of Fiduciary Duty
Fiduciary is a fancy legal word. It simply means a person who stands in a position of trust or confidence to another. A fiduciary cannot profit at the expense of the other person. A fiduciary relationship can be created by statute, such as in the case of partners or incorporators, or it may arise because of the course of dealing and relationship between the parties.
There are many ways in which a fiduciary duty may be created.
Attorneys have a fiduciary duty to their clients. This is especially true where the attorney is in possession of money belonging to the client. The attorney has a fiduciary duty to properly handle and account for those funds. Failure to do so would be a breach of his fiduciary duty. Likewise, stockbrokers and financial advisors have fiduciary duties to their clients. Luring investors into inappropriate investments or churning an account to generate commissions could be a breach of that fiduciary duty. Sometimes insurance agents can be fiduciaries for their customers. Such a relationship could arise where the agent, whose knowledge of insurance products is vastly greater than the customer, knows that the customer is relying on the agent’s superior knowledge.
There are many statutes in Alabama that define a fiduciary.
These include the Uniform Fiduciary Act which specifically defines a fiduciary as “a trustee under any trust, expressed, implied, resulting from, or constructive, executor, administrator, guardian, conservator, curator, re-agent, an officer of a corporation” and so on. Corporate officers and directors occupy a fiduciary relationship to the corporation and its stockholders. For example, when it was discovered that Wells Fargo employees had created unauthorized bank and credit card accounts some of the shareholders filed what is called a shareholder derivative case against the officers and directors of the company. The Court held that the plaintiffs had alleged a sufficient violation of the directors’ duties to survive a motion to dismiss. Directors of corporations have a fiduciary duty to reasonably ensure that management is complying with the law.