MIAMI BUSINESS LITIGATION: FIDUCIARY DUTY RELATIONSHIPS

A fiduciary relationship exists “where confidence is reposed as a result of the position of superiority and influence held by the fiduciary” under Florida law. Argonaut Development Group, Inc. v. SWH Funding Corp., 150 F. Supp. 2d 1357 (S.D. Fla. 2001). The relationship is generally founded on trust. Capital Bank v. MVB, Inc., 644 So. 2d 515 (Fla. 3d DCA 1994) (“[W]e find that a fiduciary relationship existed between the bank and Battaglia. First, Assalone expressly invited Battaglia’s reliance by urging Battaglia to trust him and by reassuring Battaglia that he was part of the Capital.”). Abusing or misusing that relationship can give rise to a claim for breach of fiduciary duty. To establish a claim for breach of fiduciary duty, the plaintiff must prove the following elements: (1) the existence of a fiduciary duty, (2) a breach of that duty, and (3) damages proximately caused by the breach. Crusselle v. Mong, 59 So. 3d 1178 (Fla. 5th DCA 2011). Proving the first element can be difficult because it is not always clear whether a fiduciary relationship exists. And even when a fiduciary relationship can be established, it is still difficult to prove a breach of that particular fiduciary duty. The Miami business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

This issue arose in Orlinsky v. Patraka, 971 So. 2d 796 (Fla. 3d DCA 2007). Two business partners had an oral agreement to receive equal shares, salaries, and benefits, in every business they operated together. The partners founded and owned a number of companies. The partners initially held equal shares in those companies and always receiving identical compensation and benefits from those companies. One of the businesses fell on hard times and a bank lender foreclosed on the business’s assets. The partners repurchased the company from the bank with the help of several additional investors. After some time, one partner came to own 69% of the company. The company then terminated the minority partner who sued the majority partner for breach of fiduciary duty. The minority partner claimed the it had a fiduciary relationship with the majority partner under three different theories. The first theory was that the majority partner owed a general fiduciary duty to the minority partner. The second was that the majority partner owed a fiduciary duty to the minority partner as the minority’s partner’s agent. And the third basis for a fiduciary relationship was the majority partner’s status as a majority owner of the company.

The court rejected the first two theories outright. A general fiduciary relationship requires the plaintiff to allege some degree of dependency on one side and some degree of undertaking on the other side to advise, counsel, and protect the weaker party. The minority partner could not establish the dependency facts because he was not a passive beneficiary in the company. The minority partner was the president of the company and an experienced businessman. The agency fiduciary duty claim was rejected because no evidence demonstrated a fiduciary relationship could be created simply because the majority partner acquired more than 50% of the company and committed the company to taking certain acts as a result.

The court did determine the minority partner established a fiduciary relationship based on the majority partner’s status as a majority shareholder in the company. However, the minority was ultimately unsuccessful on his claim because he could not prove the majority shareholder breached any duty under that particular relationship.

Orlinsky is emblematic of the problems that may arise in a breach of fiduciary duty lawsuit. Litigants should be aware of nature of their relationships, how the relationship arose, what the level interactions between the relationship participants entails, and the degree of trust between the parties.  Litigants should also remember they may not have a claim for breach of a fiduciary duty just because they were negatively impacted by another in the relationship.  

The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.