Several causes of action may be pled in conjunction with a claim for breach of fiduciary duty, depending on the facts and circumstances surrounding the case. Attorneys should consider the following claims when filing a breach of fiduciary duty cause of action and determine which, if any, also apply to their clients: 1. Constructive Fraud Constructive Fraud occurs when a person or entity gains an unfair advantage over another through unjust means, usually by lying or omitting important details. Constructive fraud differs from actual fraud because the elements of constructive fraud do require intent, or actual…
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Breach of Fiduciary Duty vs. Constructive Fraud – Which Claim Do You Have?
Breach of Fiduciary Duty: A fiduciary is an individual or corporation to whom property or power is entrusted for the benefit of another. Fiduciaries must prudently care for any such assets, and may also have a number of additional duties, depending on the nature of their fiduciary relationship. These duties include, without limitation: a duty of good faith and fair dealing, a duty of loyalty, a duty of impartiality, a duty to delegate, a duty to inform, and a duty to maintain adequate records. To succeed on a breach of fiduciary duty claim, the plaintiff must prove…
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Rule 11 Sanctions Imposed for Improper Breach of Fiduciary Duties Claims Against Rank-and-File Employees
In September 2011, Southeast Air Charter, Inc. (“Southeast Air”) brought suit against three (3) employees (“Defendants”) alleging, among other things, breach of fiduciary duty and constructive fraud. The North Carolina Business Court (“NCBC”) determined all defendants were rank-and-file employees of Southeast Air and therefore could not be subject to the breach of fiduciary duty and constructive fraud claims. As such, Plaintiff and Plaintiff’s attorneys were subject to Rule 11 sanctions for bringing these claims without any factual basis. In determining the appropriate amount of sanctions and the allocation of attorneys’ fees incurred by Defendants, Judge James Gale, Chief Special Superior Court Judge of the NCBC,…
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Kissing Cousins: Breach of Fiduciary Duty and Constructive Fraud
Breach of fiduciary duty and constructive fraud are probably the most conflated causes of action in fiduciary litigation. If you can’t readily discern between them, you’re in good company—many practitioners allege them in tandem as a single claim for relief, and a number of opinions from our appellate courts treat them likewise. Breach of fiduciary duty and constructive fraud are nonetheless distinguishable in two important ways. To prevail on a claim for breach of fiduciary duty, the plaintiff must prove: (1) the existence of a fiduciary relationship, (2) a breach of the duty owed, and (3) damages proximately caused by the breach. See Green v. Freeman, 367 N.C. 136,…
