How to Defend Your Business Against Allegations of Breach of Fiduciary Duty

Legal Support to Protect Your Florida Business

Allegations of a breach of fiduciary duty can have serious consequences for a business in Florida, especially when leveled against its directors, officers, or partners. These claims often carry financial implications, reputational damage, loss of stakeholder trust, and internal disruption. Because fiduciary duties involve a legal obligation to act in the best interests of another party—usually the business itself—claims of misconduct are often taken very seriously by courts and regulators alike. Understanding how these duties function under Florida law, who can bring a claim, and how to defend against allegations is essential for business owners and executives navigating a dispute.

What Is a Fiduciary Duty Under Florida Law?

Fiduciary duty refers to a legal relationship in which one party is obligated to act in the best interest of another with loyalty, integrity, and good faith. In the business context, fiduciary duties are primarily owned by officers, directors, and partners to the business entity and its stakeholders. Florida law recognizes several types of fiduciary duties depending on the business structure, including duties of care, loyalty, and full disclosure.

Under Fla. Stat. § 607.0830, corporate directors must act:

• In good faith
• With the care an ordinarily prudent person in a like position would exercise
• In a manner they reasonably believe to be in the best interests of the corporation

Similarly, for partnerships, Fla. Stat. § 620.8404 mandates that a partner:

• Hold any partnership property as a trustee for the partnership
• Refrain from competing with the partnership
• Account for any benefits derived from partnership operations

These statutory duties are foundational to corporate governance and provide mechanisms to hold individuals accountable if they misuse their position or act in bad faith. Violations can lead to legal action and personal liability, even if the harm caused was unintentional but negligent.

Who Can Bring a Claim for Breach of Fiduciary Duty?

Fiduciary duty claims may be brought by a variety of individuals or entities with an interest in the business. Understanding who has standing to initiate these legal actions is crucial for businesses anticipating or facing litigation. Claims can arise internally or externally and may reflect a broader governance issue within the company.

Four primary types of plaintiffs include:

• Business partners: In closely held partnerships or LLCs, one partner may bring a claim against another for acting in their own interest or harming the business, especially when financial records are mismanaged or business opportunities are diverted.
• Shareholders: In corporations, especially those with minority shareholders, breach of fiduciary duty claims may be raised when decisions are made that unfairly benefit majority owners or insiders, particularly in merger or acquisition scenarios.
• Clients or customers in select contexts: While rare in most commercial businesses, fiduciary duties may exist in industries like finance, law, or real estate, where professionals are entrusted with decision-making on behalf of clients.
• The company itself through derivative actions: If the company has suffered harm due to a fiduciary’s misconduct, shareholders can bring a derivative lawsuit on behalf of the company to recover damages and remove the offending party.

These claims can be complex and contentious, particularly when they involve multiple layers of corporate structure or overlapping duties.

Common Scenarios Leading to Allegations

Even well-intentioned business leaders can find themselves facing fiduciary duty allegations if they fail to manage conflicts of interest, act without transparency, or allow governance lapses. Certain behaviors tend to raise red flags and often serve as the basis for claims filed by stakeholders or regulatory bodies.

Five common triggers for fiduciary duty claims include:

• Self-dealing: When a fiduciary benefits personally from a corporate transaction—such as awarding contracts to a personal business—without disclosing the conflict or securing approval from disinterested parties.
• Conflicts of interest: Occur when a fiduciary has personal or financial interests that conflict with their duties to the business. Failure to disclose and resolve these conflicts can result in claims of breach.
• Misuse of company funds: Using business assets for personal expenses or diverting corporate funds for unauthorized purposes undermines fiduciary integrity and is a common basis for litigation.
• Failure to disclose material information: Withholding significant facts from the board, shareholders, or partners—especially during key decisions—can result in claims that the fiduciary failed to act transparently and in the business’s best interest.
• Negligent oversight: When a director or officer fails to supervise subordinates or monitor financial statements, they may be accused of breaching their duty of care, especially if the inaction leads to regulatory violations or losses.

Because fiduciary duties are grounded in trust and responsibility, even perceived lapses can escalate into full-scale disputes if not addressed promptly and professionally.

Defensive Strategies for Businesses and Individuals

Facing a fiduciary duty claim does not automatically mean a business or executive has done something wrong. Many claims arise from misunderstandings, internal power struggles, or disputed interpretations of duty. Building a strong legal defense begins with preparation and the establishment of clear procedures.

Key strategies to defend against breach of fiduciary duty claims include:

• Documentation and recordkeeping: Maintaining thorough records of board meetings, financial decisions, conflict disclosures, and corporate resolutions is essential to show that decisions were made in good faith and with proper oversight.
• Independent audits and review boards: Bringing in outside auditors or forming independent governance committees can provide objective support for contested decisions and demonstrate a commitment to ethical standards.
• Use of indemnification provisions and insurance: Many companies have indemnification clauses in their bylaws or operating agreements, which shield officers and directors from personal liability when acting in good faith. Directors and officers (D&O) insurance is another important tool that can cover legal expenses and settlements.
• Engaging experienced legal counsel: Retaining a lawyer who understands the sophisticated legal issues of fiduciary law in Florida ensures that responses are strategically framed and legally sound.
• Demonstrating procedural compliance: If actions were taken in accordance with Florida corporate statutes, company bylaws, or operating agreements, this can serve as a strong defense against claims of impropriety.

Early and comprehensive defense planning can reduce the risk of liability and help preserve the company’s public image.

The Litigation Process

If a fiduciary duty claim advances to formal litigation, businesses and individuals must be prepared for a structured legal process that includes multiple stages of review and evidence gathering. Understanding the steps involved can help reduce stress, clarify expectations, and identify key moments for resolution.

Typical stages in fiduciary duty litigation include:

• Filing a motion to dismiss: After the claim is filed, the defendant may move to dismiss the case if it lacks legal merit. Moving to dismiss is often the first opportunity to challenge the sufficiency of the plaintiff’s allegations.
• Discovery and depositions: If the case proceeds, both sides engage in discovery—exchanging relevant documents, emails, and financial records. Depositions allow attorneys to question parties and witnesses under oath.
• Expert witness analysis: Many fiduciary duty cases require expert opinions to determine whether the accused party’s actions met the necessary legal standards. Financial analysts, governance experts, and auditors may be involved.
• Summary judgment or trial: If undisputed facts point to a clear outcome, the court may issue a summary judgment in favor of one party. Otherwise, the case proceeds to trial, where evidence is presented, and a judge or jury renders a verdict.
• Appeals and post-trial motions: If the outcome is unfavorable, either party may seek to appeal the decision or request a new trial based on legal errors or newly discovered evidence.

Fiduciary duty litigation can be time-consuming and resource-intensive, but strong preparation and early dispute resolution efforts can mitigate many of the risks.

Proactive Measures to Prevent Future Claims

The best way to defend against fiduciary duty claims is to avoid them altogether through sound governance, transparency, and proactive risk management. Florida businesses that institutionalize strong ethical practices and compliance programs can substantially lower their exposure to costly legal battles.

Effective prevention strategies include:

• Clear operational policies: Written guidelines for financial oversight, board approval processes, and conflict resolution provide clarity and ensure that all stakeholders understand their obligations.
• Ethics training and compliance monitoring: Regular training for directors, officers, and managers reinforces legal obligations and ethical standards. Ongoing monitoring helps identify risks early and respond swiftly.
• Transparent governance procedures: Businesses should document decision-making processes, establish independent committees for major transactions, and encourage open communication with stakeholders to promote trust and accountability.
• Annual legal audits: Periodic review of corporate governance practices by outside counsel helps ensure compliance with evolving laws and best practices.
• Leadership succession planning: Preparing for executive transitions through structured plans and oversight prevents disruptions that can lead to disputes.

When governance is treated as an ongoing process, not just a legal formality, businesses are better equipped to identify warning signs, protect their leaders, and build sustainable operations.

Protect Your Business with Bloodworth Law, PLLC

If your business is facing a fiduciary duty claim or you want to build stronger internal protections, the experienced team at Bloodworth Law, PLLC is here to help.

Call 407-449-8958 today to schedule a consultation and take the next step toward safeguarding your business from internal legal threats.