Corporate Fiduciary Duty
The relationship between a corporation and its officers and directors is fiduciary by nature. Although not legally trustees, corporate officers and directors are held to a fiduciary standard that requires them to use the utmost good faith and loyalty to the corporation and its shareholders. The fiduciary duty may even extend to third parties.
Georgia law (O.C.G.A. §14-2-830) defines the standard of care that must be exercised by directors and officers as “the degree of care an ordinarily prudent person in a like position would exercise under similar circumstances.” The law also affords a “presumption that the process a director followed in arriving at decisions was done in good faith and that such director has exercised ordinary care.”
To rebut the presumption of the exercise of ordinary care and good faith it must be shown that the process used by a director or officer to make a decision constitutes “gross negligence by being a gross deviation of the standard of care of a director in a like position under similar circumstances.
Elements Required for a Breach of Corporate Fiduciary Duty
To prevail on a claim of breach of fiduciary duty, the plaintiff must prove three elements:
- Existence of a fiduciary duty. A fiduciary duty always exists between the directors and officers of a corporation; however, the existence of a fiduciary duty can be less clear when the business entity is not a traditional corporation and/or when analyzing the duties of an employee.
- Breach of the duty. Failing to act in good faith or gross negligence in the exercise of the standard of care will constitute a breach of the fiduciary duty.
- Damages. In the context of a fiduciary duty owed to a corporation, “damages” typically refer to economic loss; however, it can also be shown by damage to the business’s reputation or lost opportunities.
Our aim is to aggressively evaluate, advocate, and defend you and/or your business throughout litigation involving the breach of corporate fiduciary duty. Corporate fiduciary duty lawsuits typically entail complex and lengthy litigation which is why you should have an experienced corporate attorney by your side throughout the process.