VLF Video Educational Series – Fiduciary Duty


Charles Vethan: Hi, I’m Charles Vethan. Welcome to the Vethan Law Firm P.C.’s Video Educational Series. Today’s topic is fiduciary duty.

Joseph Colvin: Whether the client has been sued or is looking to initiate litigation. Oftentimes the first question they asked us is what is fiduciary duty, after we bring up that terminology in a conversation. At its heart a fiduciary duty is a relationship of confidence and trust that the law and common sense instills in a person based on a special obligation they have to another person.

Charles: Joseph when you are talking about fiduciary duty, not every relationship in a company has a fiduciary duty. Typically, we see a fiduciary duty with directors, officers with the company, senior management. And you may have some employees who owe the company a fiduciary duty, if they are entrusted as you stated, with the secrets of the company or if they are in a position that can direct company operations.

Joseph: Charles as you recall there is a series of cases where even a familiar relationship in an informal situation, the law could impose a fiduciary duty. I think behooves us to give some examples right now.

Charles: The whole concept of being a fiduciary is one of trust and confidence. Typically, in an informal situation, you’ll see a fiduciary relationship between individuals who place a great amount of trust in each other, for example, lawyers and clients, doctors and patients and priests, parishioners. This concept has also expanded to a business or company setting.

Joseph: You’ll see that primarily in officers and directors of corporations. The reason the law imposes a fiduciary relationship is because company’s while they are recognized as persons under the law can’t defend themselves like a normal human person. They need representatives in the world to act for them.

Charles: What are people looking at if they believe that there has been a breach of fiduciary duty at the company or the partnership that they are involved with, what are some factors that would typically indicate that they have  a claim?

Joseph: Some of the factors involve self-dealing for example. What you might see as a majority shareholder taking a loan from the company on behalf of himself.  You might also see a situation, where a key sales employee takes a kickback from a vendor. While the contract might be up for a market value, he is choosing that vendor because he is receiving a special benefit.

Charles: On all these claims, it seems to me that there is a undertone if you will that the person who is reaching their fiduciary duty is feathering his or her own next at the expense of the company or the business.

Joseph: Yes, this comes up in shareholder disputes and partnership disputes. It’s very important to know who has the ability to bring a claim in court, whereas normally if you get by a car, it’s your right to sue. If a company has been potentially abused by a majority shareholder or an officer or director, sometimes the minority shareholder may not have the right to sue. That’s why the law gives  you a special standing of derivative proceeding.

Charles: In a derivative proceeding Joseph, we are talking about a lawsuit that a minority shareholder or partner brings against the abuser on behalf of the business.

Joseph: Exactly.

Charles: Well, if you need more information on Fiduciary duty, please visit our website at www.vethanlaw.com.

I wanted to personally thank you and your staff again for doing such a great job. VLF has been simply amazing. Their professionalism, negotiating skills, and knowledge of the law have simply been a lifesaver for my business. The overall settlement was so much more than we ever expected and hoped for. Simply put, they saved my company. I cannot say enough about your firm and its staff. Thanks to you, my company will continue to grow and be profitable. Thank you, thank you, thank you!

Scott Stephens President, Custom Shop Guitars of Texas, LLC Vethan Law Firm, P.C. April 10, 2016

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