Proving Fiduciary Duty Breaches in Illinois State and Federal Courts

Understanding Fiduciary Duty

In the business world, directors, officers, and controlling shareholders have certain obligations to act in the best interests of the company and its shareholders. When these individuals fail to fulfill their duties, a breach of fiduciary duty claim may arise, potentially holding them liable for damages caused to the company. At Lubin Austermuehle, we provide expert legal services for various business disputes, including breaches of fiduciary duty.

Defining Fiduciary Duty

A fiduciary duty involves the obligation of one party to act in the best interests of another. This duty is often seen in business settings, where board members owe fiduciary duties to shareholders and the corporation. Breaches of these duties can lead to significant legal consequences.

In Illinois, fiduciary duties include the duty of care and the duty of loyalty. The duty of care requires directors and officers to make decisions in good faith with reasonable diligence, while the duty of loyalty mandates that they act without personal conflicts and keep company information confidential.

Establishing a Breach of Fiduciary Duty

A breach of fiduciary duty can occur in various situations, such as when an employee discloses trade secrets, acts on behalf of a competitor, or mismanages company assets. To establish a breach of fiduciary duty in Illinois, three elements must be proven:

Existence of a Fiduciary Duty: There must be a fiduciary relationship where one party places trust and confidence in another.

Breach of Duty: The plaintiff must show that the defendant acted contrary to their fiduciary obligation. Causation of Injury: The plaintiff must demonstrate that the breach caused them harm. Failure to establish these elements can result in dismissal of the case under the business judgment rule, which protects decisions made in good faith. However, if it can be shown that a reasonable person would not have acted similarly, the case may proceed.

The Business Judgment Rule

The business judgment rule is a defense used in breach of fiduciary duty claims. It assumes that corporate decisions made by officers and directors were done in good faith and in the company’s best interests. To overcome this rule, a plaintiff must show evidence of fraud, corruption, conflicts of interest, bad faith, or failure to investigate properly.

Remedies for Breach of Fiduciary Duty

A breach of fiduciary duty can lead to significant financial and reputational damage. Legal remedies may include compensation for monetary losses, punitive damages in cases of fraud, and equitable relief such as disgorgement of profits, forfeiture of fees, or injunctions to stop harmful conduct. Courts may also order contract reformation or the imposition of a constructive trust.

Contact an Experienced Illinois Business Attorney

Breach of fiduciary duty claims are complex and require experienced legal guidance. Located in Oak Brook, Chicago and Highland Park, Lubin Austermuehle offers top-notch legal representation for a wide range of business disputes, including breaches of fiduciary duty. For a free consultation, contact us online or at (630) 333-0333 and learn how we can help protect your business interests.