Breach of Fiduciary Duty Attorney in Texas
Trust is the foundation of every business relationship. When someone in a position of trust—a business partner, corporate director, trustee, or manager—puts their interests ahead of their duty, the betrayal cuts deeper than mere contract violations. Breach of fiduciary duty strikes at the heart of business relationships, destroying trust while causing significant financial damage.
Mark Alexander has litigated fiduciary breach claims for over 20 years in Texas courts. These cases demand more than legal expertise—they require understanding complex business relationships, forensic accounting skills to trace misappropriated funds, and the ability to prove not just what happened, but why it violated the special duties that Texas law imposes on fiduciaries. Whether you’re a minority shareholder discovering corporate waste, a partner finding diverted opportunities, or a beneficiary whose trustee has self-dealt, we bring the experience and determination these cases require.
Understanding Fiduciary Duties in Texas
Fiduciary duty represents the highest standard of conduct Texas law imposes. Unlike arm’s-length commercial relationships where parties can act in self-interest, fiduciaries must place their beneficiaries’ interests first. This isn’t just good business practice—it’s a legal obligation enforceable through significant remedies including actual damages, disgorgement of profits, constructive trusts, and exemplary damages.
The Two Core Fiduciary Duties:
Duty of Loyalty: Fiduciaries must act in the best interests of beneficiaries, not themselves. This prohibits self-dealing, usurping opportunities, competing with the beneficiary, and receiving secret profits. The duty of loyalty is uncompromising—good faith or beneficiary benefit doesn’t excuse self-dealing.
Duty of Care: Fiduciaries must act with the competence and diligence of a reasonable person in similar circumstances. For corporate directors, Texas applies the business judgment rule, protecting decisions made in good faith with reasonable information. But this protection has limits—gross negligence, intentional misconduct, and knowing violations of law pierce the business judgment shield.
Additional duties flow from these core obligations: duties of disclosure, confidentiality, good faith and fair dealing, and accounting. The specific duties and their scope depend on the relationship type and governing documents.
Who Owes Fiduciary Duties?
Corporate Directors and Officers
Directors owe duties to the corporation and, derivatively, to shareholders. Texas law is clear: directors cannot use their position for personal gain at corporate expense. This includes:
- Taking corporate opportunities for themselves
- Engaging in interested transactions without proper approval
- Competing with the corporation
- Using confidential information for personal benefit
- Wasting corporate assets through gross mismanagement
Officers owe similar duties within their sphere of authority. The higher the position, the broader the fiduciary obligations. CEOs and CFOs face scrutiny for strategic decisions, while lower officers are judged on operational responsibilities.
Partners and LLC Managers
In partnerships, every partner is a fiduciary to the partnership and other partners. This creates a web of mutual obligations that, when broken, can destroy the business. Partnership duties include:
- Accounting for partnership benefits
- Refraining from competing
- Sharing material information
- Acting in good faith
- Avoiding conflicts of interest
Texas LLC law allows operating agreements to modify or eliminate some fiduciary duties, but core obligations often remain. The contractual freedom to limit duties makes careful drafting essential and interpretation complex.
Trustees and Executors
Trustees managing assets for beneficiaries face strict fiduciary standards under the Texas Trust Code. Duties include:
- Prudent investment and management
- Impartiality among beneficiaries
- Loyalty and no self-dealing
- Accounting and disclosure
- Protecting and preserving assets
Executors administering estates have similar obligations. Self-dealing, preferential treatment of certain beneficiaries, or negligent asset management can trigger liability.
Agents and Employees
Not every employee is a fiduciary, but key employees with discretionary authority often are. This includes:
- Corporate executives with strategic responsibilities
- Employees handling confidential information
- Sales representatives with customer relationships
- Financial managers with spending authority
The scope of duty depends on position, authority, and access to confidential information. Higher positions generally mean broader duties.
Attorneys and Other Professionals
Attorneys owe fiduciary duties to clients, including loyalty, confidentiality, and competence. When attorneys serve as directors, trustees, or business advisors, overlapping duties create complex obligations. Other professionals like accountants, financial advisors, and real estate agents may owe fiduciary or quasi-fiduciary duties depending on the relationship.
Common Breach of Fiduciary Duty Scenarios
Corporate Opportunity Doctrine
When directors or officers take business opportunities that rightfully belong to the corporation, they breach their duty of loyalty. Texas applies a multi-factor test considering:
- Was the opportunity in the corporation’s line of business?
- Did the corporation have interest or expectancy in the opportunity?
- Could the corporation financially pursue it?
- Was the opportunity presented because of the fiduciary’s position?
Even if the corporation couldn’t currently pursue an opportunity, fiduciaries must often present it to the board for consideration before taking it personally.
Self-Dealing Transactions
Fiduciaries who engage in transactions with their beneficiaries face strict scrutiny. Examples include:
- Directors causing corporations to buy their personal property
- Trustees selling trust assets to themselves
- Partners making loans to the partnership at excessive rates
- Managers hiring their own companies as vendors
Self-dealing isn’t automatically prohibited, but it requires full disclosure, fair terms, and often independent approval. The burden shifts to the fiduciary to prove entire fairness.
Usurping Partnership Opportunities
Partners who secretly pursue opportunities that should benefit the partnership breach their duties. This includes:
- Acquiring properties the partnership was considering
- Starting competing businesses using partnership resources
- Diverting customers to personal ventures
- Negotiating personal deals with partnership suppliers
Texas partnership law requires partners to present opportunities to the partnership first, even if pursuit seems unlikely.
Waste of Corporate Assets
Directors and officers who squander corporate resources through gross mismanagement may breach their duty of care. Examples include:
- Excessive executive compensation without justification
- Continuing obviously failing strategies despite clear warnings
- Failing to implement basic controls leading to theft or loss
- Making gifts of corporate assets without consideration
While business judgment protects many decisions, gross negligence or intentional misconduct creates liability.
Minority Shareholder Oppression
Majority shareholders and directors owe duties to minority shareholders, particularly in closely-held corporations. Oppressive conduct includes:
- Freezing out minorities from management
- Refusing to declare dividends while taking excessive salaries
- Diluting minority ownership unfairly
- Forcing disadvantageous buyouts
Texas recognizes shareholder oppression as grounds for court intervention, including forced buyouts or dissolution.
Proving Breach of Fiduciary Duty
Elements of a Breach Claim
To establish these claims in Texas, plaintiffs must prove:
- Existence of fiduciary relationship: Formal or informal relationship creating special trust
- Breach of duty: Violation of loyalty, care, or other fiduciary obligations
- Causation: The breach caused the alleged harm
- Damages: Actual injury resulted from the breach
Each element requires specific evidence. Relationship existence may require proving formal positions or informal trust relationships. Breach often demands showing conflicts of interest or gross negligence. Causation can be complex when multiple factors contribute to losses. Damages require expert testimony on valuations and lost opportunities.
Discovery in Fiduciary Litigation
These cases are discovery-intensive. Key evidence includes:
- Emails and communications showing intent and knowledge
- Financial records tracing funds and transactions
- Board minutes and corporate records
- Contracts and agreements defining duties
- Expert analysis of transactions and valuations
Texas discovery rules allow broad inquiry into fiduciary conduct. Forensic accountants often trace complex transactions, while valuation experts opine on fairness and damages.
Burden-Shifting and Presumptions
Once plaintiffs establish self-dealing or interested transactions, the burden often shifts to fiduciaries to prove fairness. This “entire fairness” test examines:
- Fair dealing: How the transaction was initiated, negotiated, and approved
- Fair price: Whether consideration was adequate
Fiduciaries must show both procedural and substantive fairness. Independent committee approval or shareholder ratification may shift the burden back to plaintiffs.
Remedies for Breach of Fiduciary Duty
Actual Damages
Compensation for losses directly caused by the breach. This includes:
- Money improperly taken or diverted
- Lost value from wasted assets
- Opportunities lost due to competition
- Costs of remedying the breach
Calculating damages often requires expert testimony on valuations, lost profits, and market conditions.
Disgorgement of Profits
Fiduciaries must return ill-gotten gains even if beneficiaries suffered no loss. This includes:
- Profits from usurped opportunities
- Secret commissions or kickbacks
- Benefits from self-dealing transactions
- Gains from using confidential information
Disgorgement prevents fiduciaries from profiting from their wrongs regardless of beneficiary harm.
Constructive Trust
Courts can impose constructive trusts on property acquired through breach, making the fiduciary a trustee for the beneficiary. This powerful remedy:
- Traces assets through transformations
- Reaches property in third-party hands
- Takes priority over other creditors
- Captures appreciation in value
Constructive trusts are particularly valuable when fiduciaries have used trust assets to acquire valuable property.
Exemplary Damages
For malicious, fraudulent, or grossly negligent breaches, Texas allows exemplary damages to punish and deter. Requirements include:
- Clear and convincing evidence of malice or gross negligence
- Proportionality to actual damages
- Consideration of defendant’s wealth
Exemplary damages can significantly exceed actual damages, making them powerful deterrents.
Equitable Relief
Courts can order various equitable remedies:
- Injunctions preventing further breaches
- Removal of directors or trustees
- Appointment of receivers
- Corporate dissolution in extreme cases
- Accounting and disgorgement orders
Equitable relief addresses ongoing relationships and prevents future harm.
Attorney’s Fees
Successful plaintiffs may recover attorney’s fees through:
- Trust litigation under the Texas Trust Code
- Statutory claims like the Texas Theft Liability Act
- Contract provisions in governing documents
- Equitable exceptions for trustee misconduct
Fee recovery makes pursuing valid claims economically feasible.
Defending Against Breach Claims
Business Judgment Rule
Directors’ decisions receive protection if made:
- In good faith
- With reasonable information
- Without conflicts of interest
- Within reasonable business judgment
The rule protects honest mistakes and poor outcomes from hindsight challenges. But it doesn’t shield loyalty breaches, bad faith, or gross negligence.
Ratification and Waiver
Beneficiary approval can cure breaches if:
- Full disclosure was made
- Approval was informed and voluntary
- Ratification was by disinterested parties
- Terms were fair
Ratification doesn’t cure waste or illegal acts, and interested party approval may not suffice.
Statutes of Limitations
Texas generally provides four years to sue for breach of fiduciary duty. But limitations periods vary:
- Discovery rule may extend time
- Fraudulent concealment tolls limitations
- Trust disputes have different periods
- Continuing violations may extend time
Early consultation ensures claims aren’t time-barred.
Exculpation and Indemnification
Corporate documents may limit liability for certain breaches:
- Certificates can eliminate duty of care liability
- Operating agreements may modify duties
- Indemnification provisions protect against costs
But loyalty breaches, intentional misconduct, and bad faith generally can’t be eliminated.
Industry-Specific Considerations
Family Businesses
Family enterprises mix personal and business relationships, complicating fiduciary duties. Informal operations, oral agreements, and emotional dynamics create unique challenges. Courts consider family business realities while enforcing fundamental duties.
Oil and Gas Ventures
Joint operating agreements, working interests, and complex ownership structures create overlapping duties. Operators owe duties to non-operators, while all parties must respect correlative rights. Industry customs influence duty scope.
Real Estate Partnerships
Development deals involve multiple parties with varying duties—general partners, limited partners, managers, and lenders. Waterfall distributions, promote interests, and preferred returns create complex duty analyses.
Technology Startups
Founder disputes, venture capital dynamics, and rapid pivots stress fiduciary relationships. Vesting schedules, board control, and exit strategies require careful navigation of competing duties.
Taking Action on Breach of Fiduciary Duty
Whether you suspect a fiduciary has betrayed your trust or face accusations of breach yourself, these cases require immediate attention. Evidence disappears, limitations periods run, and ongoing breaches compound damages. Mark Alexander brings two decades of experience handling complex fiduciary litigation, understanding both the legal requirements and business realities these cases involve.
For those whose trust has been violated, we work to recover what was taken and prevent further breaches. For fiduciaries facing claims, we provide strong defense grounded in business judgment protection and legal requirements. Either way, these cases demand experienced counsel who understands the intricate duties Texas law imposes.
Breach of Fiduciary Duty FAQ’s
Defending Your Rights Against Fiduciary Breaches
Whether you suspect a fiduciary has betrayed your trust or face accusations of breach yourself, these cases require immediate attention. Evidence disappears, limitations periods run, and ongoing breaches compound damages. Mark Alexander brings two decades of experience handling complex fiduciary litigation, understanding both the legal requirements and business realities these cases involve.
For those whose trust has been violated, we work to recover what was taken and prevent further breaches. For fiduciaries facing claims, we provide strong defense grounded in business judgment protection and legal requirements. Either way, these cases demand experienced counsel who understands the intricate duties Texas law imposes.
Contact Mark A. Alexander, P.C.
The Gild
8150 North Central Expressway, 10th Floor
Dallas, Texas 75206
Phone: (972) 544-6968
Fax: (972) 421-1500
Email: mark@markalexanderlaw.com
Web: commerciallitigationtexas.com
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Serving businesses throughout Texas including Dallas, Houston, Austin, San Antonio, Fort Worth, Plano, Arlington, and all surrounding areas.
The information provided on this page is for educational purposes only and should not be construed as legal advice. No attorney-client relationship is formed by reading this information. Each business dispute is unique and requires individual analysis by qualified legal counsel.