Breaching fiduciary duty entails committing an action that breaks the trust in a fiduciary relationship. It is not technically a crime, but it is a civil liability and can result in a civil lawsuit. And while breach of fiduciary duty is not itself a crime in New Jersey, it does not mean that the person committing the breach cannot be held responsible for similar or related criminal activity, such as embezzlement. Continue reading to learn more about what constitutes a breach of fiduciary duty in New Jersey, how to win a breach of fiduciary duty case, possible penalties you may face for doing so, and how Atlantic City embezzlement attorney John J. Zarych can help you.

Understanding Breach of Fiduciary Duty in NJ

To understand what it means to breach fiduciary duty, it’s important to first understand what a fiduciary duty is. A fiduciary duty is the duty of trust that one fiduciary places in another. Fiduciary duties are extended to shareholders, officers, and directors of corporations and partners and members of LLCs. Essentially, fiduciary duty means that owners of businesses cannot use their position to benefit themselves to the detriment of other owners of the business.

Breach of fiduciary duty is itself a civil offense. However, the actions committed in a breach of fiduciary duty are often the same actions involved in criminal charges, such as embezzlement, theft, fraud, and other white collar crimes. New Jersey criminal defense attorneys from the Law Offices of John J. Zarych can help defend you against any charges you may face related to a breach of fiduciary duty.

Corporate fiduciaries have three types of duties that are entrusted to them. They are the duty of care, the duty of loyalty, and the duty of good faith. The duty of care requires that fiduciaries make decisions with due consideration. It also means that they must act with the best interest of the company in mind. The duty of loyalty requires that fiduciaries refrain from using their position or the knowledge they gain from their position for personal gain. Finally, the duty of good faith means that fiduciaries must use reasonable diligence when making business decisions, and that they are aligned with the standard of care.

Breaching a fiduciary duty means that a fiduciary has committed actions that betray the trust of other owners of the company. Breaches of fiduciary duty may include:

  • Misrepresenting or failing to disclose facts that are essential to a transaction
  • Mishandling assets from a trust or estate
  • Failing to provide asset protection
  • Distributing confidential information without permission
  • Failing to distribute funds in a timely manner
  • Withholding payment to beneficiaries
  • Executing affairs in conflict with the best interest of beneficiaries

Other ways that a fiduciary can breach their duty is by engaging in a conflict of interest, violating the ethics of the industry that the fiduciary’s company works in, being knowingly negligent, failing to meet deadlines, and failing to perform due diligence. The statute of limitations for filing a breach of fiduciary duty claim is three years, beginning when the plaintiff knew about the actions that constitute the claim. Related charges, such as theft, may have a different statute of limitations however; contact a skilled attorney if you need to mount a defense against theft charges in New Jersey.

It should be noted that breach of fiduciary duty is similar to, but different from, constructive fraud. Constructive fraud occurs when someone gains an advantage over another through unjust means. It differs from actual fraud in that it does not require intent, nor does it require knowledge of the lie. Constructive fraud differs from breach of fiduciary duty in that the defendant must have personally benefited in a constructive fraud case, whereas the defendant in a breach of fiduciary duty case does not necessarily have to personally benefit.

Proving a Breach of Fiduciary Duty Claim

Successfully claiming that a breach of fiduciary duty occurred requires proving three things to a judge: that a fiduciary relationship existed, that there was a breach in the fiduciary relationship, and that the breach caused financial damage.

In a breach of fiduciary duty complaint, the plaintiff must first prove that the defendant had a duty, based on their fiduciary relationship, to act in good faith for the best interests of the company, be transparent with relevant information, and show loyalty to the plaintiff. Then, the plaintiff must prove that the defendant breached their duty through behavior. Finally, the plaintiff must prove that they suffered from financial damage that was caused directly by the plaintiff’s breach of fiduciary duty.

Penalties for Breach of Fiduciary Duty in New Jersey

While a breach of fiduciary duty is not a crime, it is a civil liability that can result in the payment of damages. In a breach of fiduciary duty case, there are two types of damages that the person may have to pay: compensatory and punitive.

Compensatory damages are damages that compensate the victim for the losses they suffered directly as a result of the breach of fiduciary duty. Punitive damages, on the other hand, are meant to punish the party that violated the fiduciary duty. Punitive damages are meant to provide incentive against repeating the act for both the defendant themselves and society at large. Punitive damages are typically only awarded in breach of fiduciary duty cases that involve malice or fraud, meaning that sometimes a defense against fraud charges in New Jersey may be required as well.

It is also possible for people who have breached their fiduciary duty to suffer from professional consequences. Depending on the industry that the person committing the breach was involved in, they may, in addition to paying damages, lose professional licenses or accreditation. This is especially true for doctors, lawyers, and accountants.

New Jersey Attorney for Breach of Fiduciary Duty

If you are involved in a breach of fiduciary duty, get in touch with the Law Offices of John J. Zarych today to learn more about your options. If you are also facing criminal charges connected to a breach of fiduciary duty, Atlantic City criminal defense lawyers from the Law Offices of John J. Zarych may be able to assist you. During a free and confidential consultation, you will be able to discuss your case and the possible damages that may have to be paid as part of a lawsuit. Call (609) 616-4956 for more information.