Breach of Fiduciary Duty Litigation in California and Florida

A fiduciary is someone the law requires to put another person's interests ahead of his own. Business partners, LLC managers, corporate directors, trustees, agents who handle other people's money, and the boards of condominium and homeowners associations all owe fiduciary duties. When a fiduciary uses control for personal gain, hides information, or runs the enterprise with gross carelessness, the people who depended on that trust can sue. Reiser Law, P.C. litigates breach of fiduciary duty claims in California and Florida state and federal courts and in arbitration, from offices in Walnut Creek and Miami.

Who owes fiduciary duties

In California, partners owe the partnership and one another duties of loyalty and care. Cal. Corp. Code § 16404(a). Members of a member-managed LLC owe the company and the other members the same two duties. Cal. Corp. Code § 17704.09(a). Corporate directors must act in good faith, in a manner they believe to be in the best interests of the corporation and its shareholders, and with the care an ordinarily prudent person would use in a like position. Cal. Corp. Code § 309(a).

Florida law is similar. Managers of a manager-managed LLC and members of a member-managed LLC owe fiduciary duties of loyalty and care to the company and its members. Fla. Stat. § 605.04091(1). Partners owe duties of loyalty and care. Fla. Stat. § 620.8404(1). Directors must act in good faith and in a manner they reasonably believe to be in the best interests of the corporation. Fla. Stat. § 607.0830(1).

Florida also writes the duty into its community association statutes. The officers and directors of a condominium association have a fiduciary relationship to the unit owners, Fla. Stat. § 718.111(1)(a), and the officers and directors of a homeowners association have a fiduciary relationship to its members, Fla. Stat. § 720.303(1).

The claims we see most

Most fiduciary cases follow a few patterns. A controlling partner or manager pays himself first, steers business to a company he owns, or takes an opportunity that belonged to the enterprise. A majority owner freezes out a minority owner by cutting off information, distributions or a role in the business. A manager of shared property, such as a resort club or an association, changes the product or spends owners' money in ways that benefit the manager at the owners' expense. Or an investment manager diverts or loses money entrusted to him.

Claims against those who helped

The fiduciary is often not the only defendant worth pursuing. Courts in California and Florida recognize claims for aiding and abetting a breach of fiduciary duty against a person who knew of the breach and gave substantial assistance to it. Banks, accountants and other professionals who enabled a scheme can be liable on that theory, and they are often the parties able to pay a judgment. We cover those claims in more depth on our investor fraud and Ponzi recovery page and in our article on bank liability in Ponzi schemes.

Remedies

Depending on the facts, a court can award compensatory damages, order the fiduciary to disgorge profits, impose a constructive trust over diverted property, require an accounting, or enter an injunction. Punitive damages may be available where the breach involved fraud or malice. Deadlines vary with the state, the relationship and the theory, and some run from when the plaintiff discovered the breach, so the time to evaluate a claim is soon after the problem surfaces.

Our experience

Fiduciary duty claims run through much of our work. We have represented purchasers of more than 300 luxury fractional interests in claims that the companies running their destination club breached fiduciary duties by folding the club into a larger, less expensive points program. We were hired by the owners' association of a luxury fractional property to sue the developer's successors for breach of fiduciary duty and fraud after they used unsold inventory to launch a competing points product. We represent partners, LLC members and minority shareholders in ownership disputes, founders in startup disputes, and homeowners in disputes with association boards in California and Florida. We also defend partners, managers and directors accused of breaching their duties. See our representative cases.

Questions clients ask

Can I sue my business partner for breach of fiduciary duty?

Yes, in both California and Florida. Partners owe each other duties of loyalty and care by statute, and the partnership or LLC agreement may add to them. Our article on suing a business partner in California walks through the options.

Does my condo or HOA board owe me a fiduciary duty?

In Florida, yes, by statute: association officers and directors have a fiduciary relationship to the owners and members. Fla. Stat. §§ 718.111(1)(a), 720.303(1). In California, the answer depends on the role and the claim, and the Davis-Stirling Act supplies many of the owner's rights directly.

Can I sue the bank or accountant that helped?

Often, if you can show the bank or accountant knew of the wrongdoing and substantially assisted it. Those claims turn on evidence of knowledge, which is why early investigation matters.

Talk to us

For California matters, call (925) 256-0400 or email Michael J. Reiser at michael@reiserlaw.com. For Florida matters, call (305) 726-2003 or email Matthew W. Reiser at matthew@reiserlaw.com; Spanish speakers can write to Isabella Martinez at isabella@reiserlaw.com. You can also use our contact page.

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