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Types of damages in a breach of fiduciary duty claim

On Behalf of | Jul 3, 2023 | Business Law

When a fiduciary relationship exists in a business, the business owner trusts the other party, generally an employee or other professional, to act in good faith and in the best interests of the business. So, if a fiduciary breaches their duties and acts in self-interest, it can stymie business relationships and cause the aggrieved party to suffer significant financial and business losses.

The party harmed by the breach of fiduciary duty might pursue a lawsuit against the breaching party for damages suffered due to the breach. Damages sought in a breach of fiduciary duty lawsuit can include financial damages, equitable damages and exemplary damages.

Financial damages in a breach of fiduciary duty lawsuit

There are a variety of financial damages a litigant can pursue in a breach of fiduciary duty lawsuit. For example, the breach likely caused lost profits, and these can often be pursued. If the value of items received is more than what was originally paid, the harmed party might also have incurred out-of-pocket losses that can be sought as damages.

Equitable damages in a breach of fiduciary duty lawsuit

Not all damages simply boil down to financial compensation for losses incurred. Sometimes a party wants out of a contract due to the breach of fiduciary duty. If so, they might seek to have the contract rescinded. The harmed party might also seek an injunction to stop the breaching party from engaging in certain behaviors.

Exemplary damages in a breach of fiduciary duty lawsuit

In addition, exemplary damages — also referred to as punitive damages — can be sought in some cases of breach of fiduciary duty. Exemplary damages go above and beyond the monetary losses incurred by the breach. The intention of exemplary damages is to punish the breaching party.

It is important to note that in some states, exemplary damages are statutorily capped. Texas is one of these states. Still, even Texas allows parties to seek damages above the statutory limits if they can show certain factors such as misappropriation or forgery played a role in the losses suffered by breach of fiduciary duty.

Damages can compensate when a party breaches their fiduciary duty

The various damages potentially available in a breach of fiduciary duty lawsuit can be financial, equitable or exemplary in nature. All these remedies are meant to make the harmed party whole again following the breach.