What Is a Breach of Fiduciary Duty?
Company money, opportunities and decision-making authority can become the center of a fiduciary dispute. The starting point is the person’s role and the duty attached to it, followed by the specific transaction, alleged injury and available evidence.
RV Litigation Group PC represents California businesses and owners in disputes involving company directors, officers, partners, managers and other business fiduciaries. We evaluate both asserted breaches and defenses without treating every poor business result as disloyalty.
The Legal Framework
Identify the duty before alleging its breach
Corporate directors, partners and LLC managers are governed by different rules. Corporations Code section 309 addresses corporate director conduct. Partnership duties are addressed in section 16404, and LLC duties in section 17704.09. An LLC’s management structure matters: a member of a manager-managed LLC does not owe every management duty merely by holding an interest.
A bad outcome is not itself misconduct
For partners, section 16404’s duty of care addresses grossly negligent or reckless conduct, intentional misconduct or knowing violations of law; it is not an ordinary-negligence rule. LLC statutes also specify the applicable care standard. Loyalty issues may concern diverted opportunities, undisclosed conflicts or misuse of assets. Authorization, disclosure and statutory limits on modifying duties require review of the actual documents and facts.
Separate company injury from owner injury
A claim concerning lost company assets may belong to the entity and require a derivative action. A direct claim requires analysis of the claimant’s own rights and injury. Damages, accounting, restitution or equitable relief must have a supported basis. Punitive damages require the additional statutory showing; a fiduciary label does not establish them or automatically shift every burden of proof.
Testing the Alleged Conflict or Misuse
What the claimant must connect
A fiduciary-duty claim requires a qualifying duty, conduct that breached it and a basis for the requested relief. Ordinary confidence in a commercial counterparty does not automatically create a fiduciary relationship. Counsel examines the person’s actual role, the entity’s structure, the governing agreement and the transaction. A duty owed by a manager cannot simply be attributed to every passive investor.
Disclosure, consent and agreement limits
For a California LLC, modifying fiduciary duties requires attention to the written operating agreement, informed consent and mandatory statutory limits. The owners cannot freely eliminate loyalty obligations or unreasonably reduce the duty of care merely by signing a broad waiver. A properly disclosed and authorized transaction may present a different case from a concealed diversion. The disclosure must be evaluated for what it actually revealed and who had authority to approve.
Defending the particular allegation
Lack of personal gain may matter to an alleged diversion, but does not defeat every fiduciary-duty claim. A care claim can concern harmful conduct without personal benefit. Conversely, a related-party transaction is not automatically proof of recoverable loss. Pricing, services actually supplied, alternatives, approvals and causation are relevant. The remedy may involve an accounting or restoration of funds, but it must match a supported legal theory and the correct claimant.
Facts & Records to Prepare
- The entity documents and records identifying each person’s role during the disputed period.
- Approvals, disclosures, meeting minutes and communications about the challenged transaction.
- Bank records, ledgers, contracts and evidence showing where the money or opportunity went.
- Records supporting the alleged loss and any demand made on the company or decision-makers.
How We Approach the Matter
Trace the transaction
Counsel can reconstruct the authorization, disclosure and financial sequence, then identify what is missing. Separate an unsupported suspicion from an evidentiary gap that a targeted records demand or discovery can address.
Match the procedure to the claimant
The entity, an owner and a director may have different standing, access rights and conflicts. We evaluate the proper plaintiff or responding party, necessary preliminary steps and any need for separate counsel.
Evaluate relief and a business resolution
A negotiated accounting, repayment arrangement or ownership exit may be considered alongside litigation. An urgent application requires evidence of threatened harm. The strategy should account for ongoing operations and the practical cost of obtaining and enforcing relief.
Fictional California Examples
These fictional examples illustrate questions counsel may evaluate. They are not firm cases or results. A county is a factual setting, not a statement about venue, local rules or a firm office.
Irvine, Orange County — payments to a manager’s company
Members question an LLC manager’s payments to an affiliated supplier. The manager says the relationship was disclosed and the prices were competitive. Counsel would examine the operating agreement, actual disclosures, approvals, invoices and work delivered, then distinguish any company claim from an owner’s separate rights.
Los Angeles, Los Angeles County — a disputed opportunity
A company alleges that a director directed a potential customer project to another venture. Review would focus on the director’s role, how the opportunity arose, company resources used, any informed authorization and the actual resulting loss.
Frequently Asked Questions
No. The entity type, management structure, role, agreement and applicable law determine the duties. Ownership percentage alone does not answer that question.
Not by itself. The transaction, disclosure, approval process and applicable statutory rules must be examined. A conflict can be significant without automatically resolving liability.
A loss to the entity may require a derivative proceeding. Personal and company claims should be distinguished before suit is filed.
No. They require a separate legal and evidentiary basis, including the applicable heightened proof and any entity-liability requirements.
