Also known as: breaches of fiduciary obligation · breach of fiduciary obligations · breach of fiduciary duty · fiduciary breach
Written by attorneys · grounded in primary & secondary sources — see below
A violation by a fiduciary of duties of loyalty or care owed to a principal or beneficiary. The breach occurs when the fiduciary acts for personal gain, appropriates opportunities, or fails to disclose conflicts without informed consent from those owed the duty.
Marjorie formed Blue Therapeutics and caused it to license a compound from a venture she secretly controlled on favorable terms. She disclosed the conflict only to one lead investor while other contemplated initial shareholders received no information. The corporation recovered the secret profit because full disclosure and ratification never reached all persons contemplated in the original financing scheme.
An investment banker learned material nonpublic information about a pending merger while advising the target. The banker tipped the information to a friend who traded on it and shared profits. The banker breached fiduciary obligations to the client corporation by disclosing confidential information for personal benefit.
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A bank served as indenture trustee and knew the issuer was diverting funds in violation of covenants. The bank did not disclose the diversion to bondholders. The bank avoided secondary liability for the issuer's breach because no private right of action existed for aiding and abetting the primary fiduciary violation.
Disney directors approved a lavish severance package for an executive after minimal deliberation and without reviewing comparable arrangements. Shareholders sued alleging the directors breached fiduciary duties by failing to exercise due care. The court examined whether the process reflected a good-faith effort to advance corporate interests.
A corporation used treasury funds to finance political advertisements opposing a candidate. A shareholder sued derivatively claiming the expenditure breached fiduciary duties under federal election law. The Court held no private damages action existed because Congress entrusted enforcement to state corporate law rather than creating a federal remedy.
A company issued a prospectus containing misleading statements. Offerees who never purchased the securities sued under Rule 10b-5 alleging the fraud induced them to forgo buying. The Court denied standing because only actual purchasers or sellers may bring claims for breach of fiduciary obligations arising from securities fraud.
A promoter must make full disclosure of any self-dealing transaction to all persons contemplated as part of the original financing scheme and obtain their approval. Disclosure to only some initial investors is insufficient.
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Yes. In a member-managed LLC the statute imposes duties of loyalty and care on each member regardless of operating-agreement silence. The duties require accounting for company opportunities and refraining from self-dealing.
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Steering occurs when the agent diverts prospects or opportunities to an entity in which the agent holds an undisclosed interest. The conduct breaches the duty to act solely for the principal's benefit in matters connected to the agency.
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…By “corporate democracy,” presumably the Court means the rights of shareholders to vote and to bring derivative suits for breach of fiduciary duty. In practice, however, many corporate lawyers will tell you that “these rights are so limited as to be almost nonexistent,” given the internal authority wielded by boards and managers and…