Are you searching for attorneys representing shareholders in breach of fiduciary duty cases when they have suffered a violation of trust due to majority stake holders? What can the experienced California shareholder dispute attorneys at the Watkins Firm do to protect the interests of a shareholder or investor?
Key Takeaways About Experienced Attorneys Representing Shareholders in Breach of Fiduciary Duty Cases:
- There are several ways in which majority shareholders attempt to take advantage of their position against the interests of minority shareholders.
- Typically, instances of breach of fiduciary duty involve tactics that deny a minority interest their fair share of the profits, but there are many ways a “fiduciary” can violate their legal obligations under the law.
- Unfair business practices is closely related to the breach of fiduciary duty in these cases, and legal and financial stakes in these cases can be quite high.
A valid breach of fiduciary duty claim does not arise simply because a business decision turns out poorly or because partners disagree. Courts look for something more specific: the misuse of entrusted power in a way that harms those to whom duties are owed.
A valid breach of fiduciary claim generally usually requires the following:
The Watkins Firm has almost 40 years of experience representing shareholders in breach of fiduciary cases. A legally recognized fiduciary relationship – The individual must occupy a role that carries fiduciary obligations, such as a corporate officer or director, a managing member of an LLC, a controlling shareholder, a partner, a trustee, or an agent. Ordinary business counterparties in arm’s-length transactions do not owe fiduciary duties.
Actual authority or control – The alleged violator of a fiduciary duty is required to have discretionary power over company assets, finances, decision making, or governance that affects others’ interests. Roles that are purely ministerial or advisory usually do not create fiduciary exposure.
Conduct that violates core fiduciary duties – Courts look for actions that breach duties of loyalty, care, or good faith. Some of the most common examples in California include:
- Self-dealing or personal enrichment at the expense of the company or other owners
- Diverting corporate opportunities
- Concealing or withholding material information
- Using control to disadvantage minority owners
- Acting in a manner that is unfair or disloyal rather than merely mistakes
Actual harm or damage that is real, measurable, and compensable – Any alleged injury must be genuine, provable injury, not just a matter of disagreement or dissatisfaction. This may include financial loss, loss of ownership value, dilution of interests, lost business opportunities, or damage to the business or entity itself.
A causal connection between the conduct and the harm – The plaintiff must show that the fiduciary’s misconduct directly caused the damage claimed. If the harm had occurred regardless of the conduct, fiduciary liability is unlikely to attach.
Evidence of unfairness or abuse of trust – Particularly in states like California, courts often apply fairness-based standards. Technically permissible conduct may still support a claim if it is inherently unfair to minority owners or the entity.
Common Examples of a Breach of Fiduciary Duty
Representing shareholders in breach of fiduciary duty cases requires extensive skill and experience. Draw on the Watkins Firm almost four decades of experience protecting shareholders against breach of fiduciary duty by the majority interest in their company. Breach of fiduciary duty is unfortunately quite common. While these cases are more often found in closely held corporations, they can absolutely occur in a large company or through the actions of a Board of Directors. These shareholder disputes often result in business litigation as the minority shareholders must file a lawsuit to protect their interests.
Typically, instances of breach of duty involve tactics that deny a minority interest their fair share of the profits. The underlying relationships can become tenuous, and other harassing forms of behavior begin to take place. Examples of breach of fiduciary duty include, but are not limited to:
- Failure to give dividends to minority shareholders
- Self-dealing
- Commingling or embezzlement
- Firing a minority shareholder as an employee
- Unfair business practices
- Majority shareholders voting pay raises and other compensation that is too high or that dilutes rightful profits
- Physically locking minority shareholders out of the premises
- Refuse to let minority shareholders inspect the books
Another common breach of fiduciary duty tactic is known as the “Squeeze Out” or “Freeze Out.” In essence, the majority owner(s) approve a merger with a new corporation (which they own), and the shares of the existing company are bought out as part of the transaction. This attempts to force the minority shareholders to take a cash payment which is far less than the value of their shares as compensation for forcing them out of the “new” company. Representing shareholders in breach of fiduciary duty cases may involve a need for the Watkins Firm to bring an action on your behalf that can either put a stop to their plans, or force fair value compensation to protect your interests and investment.
Pro-Tip: “Generally, a fiduciary duty is when one party has an advantage of power, knowledge, or resources over another party. And they’re doing business with each other. That’s basically where we get fiduciary duty. And then the laws have been built on that concept for hundreds of years. So you can imagine that today’s fiduciary duty lawsuits are much different than they were 50 years ago. We’ve come a long way. The laws have changed.
A fiduciary is supposed to act openly, honestly, and fairly. They’re supposed to put the beneficiary’s interest above their own, and they’re supposed to never self-deal, they’re supposed to act in good faith. Basically, not take money or take an action that is not in the interests of your fiduciary client that they don’t know you’re taking.
For example, you’re a shareholder and you find out your buddy down the street owns the same amount of shares as you, but he got twice the dividends as you did. Corporations and their board of directors and their officers have an obligation to treat like shareholders in a like, and similar manner. Unfortunately, quite often that just doesn’t happen. Sometimes other things that happen with corporations, such as insider trading, it happens on the large market, big caps. They go to jail, things like that, but it also happens on the small market.
We see this every year, several times a year, a shareholder client comes in, (they call themselves partners), but it’s a corporation. And they say, ‘my company decided to go bankrupt. Then I found out that the principles opened up a new company over in England and they made $10 million, and we lost everything.’ Basically, these bad actors were hoping that you didn’t find out on those situations. Again, the sooner we find out the quicker we can get what we call temporary protective orders and asset seizures and levies with a judge to stop them from stealing or taking other actions in breach of a fiduciary duty.” – Dan Watkins, Founding Partner
Representing Shareholders in Breach of Fiduciary Duty Cases Against Majority Interests in California
Are you searching for an attorney with extensive experience and a proven track record representing shareholders in breach of fiduciary duty cases by the majority interest? If you are a minority shareholder and you believe you may be a victim of shareholder oppression or are being denied your rights as a corporate shareholder we invite you to review our Podcast Episode 17 – Violation or Breach of Fiduciary Duty, as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today. We will review your position in the company, all that has happened and apply our decades of experience and expertise to develop options and strategies that will help you to accomplish your goals.
Meet Daniel Watkins:
Daniel W. Watkins is a true people person who sincerely listens. He cares deeply about what others are going through. Dan enjoys digging into the facts and finding creative solutions to problems. He contributes his insights candidly and constructively.
Dan’s interest in people make him deeply invested in every relationship and his exuberant personality makes him a true litigator. Dan fights for his clients with a fierce and calculated commitment.
Dan has practiced in the areas of business, medical practices and healthcare business, high tech/science, real estate and employment defense law since 1987. He is a trusted litigation strategist and true trial attorney with over 50 jury and bench trials to his credit. Dan has successfully represented both large companies and individuals and achieved substantial victories in well-publicized trials throughout California and the U.S.
He is experienced in business and corporate formation and administration, as well as all forms of alternative dispute resolution, including binding arbitration and mediation.
THE ROAD TO BECOMING A BUSINESS LAWYER AND LITIGATOR
Dan has almost 40 years of experience working with, for and against some of the largest insurance companies in the country. He has successfully tried and litigated cases in the areas of Healthcare Compliance, Commercial Litigation, Unfair Business Practices, Fraud, Breach of Contract, Battery, Premises Liability, Product Defect, Medical Malpractice, Discrimination, Sexual Harassment, Construction Defect, as well as Unfair Competition, Defamation, and Trade Secrets.
In December 2003, Dan commenced litigation against Health South Surgery Centers-West, Inc and its’ subsidiaries, exposing the company’s extensive mismanagement and misconduct of its’ surgery centers. Dan has also been asked by some of California’s largest municipalities and corporations to conduct legally required investigations into matters involving alleged employment discrimination and harassment.
