Legal Action when Fiduciary Duties are Breached
Victor Look, Esq. is a partner at Look Law. In this video he discusses what legal actions can be taken when fiduciary duties are breached.
- Mediation – The least expensive, but non-binding.
- Arbitration – Less expensive than litigation and binding.
- Litigation – The most expensive option, but sometimes unavoidable.
If we’re talking about a breach of fiduciary duties, for instance, if a stakeholder usurped the business opportunity for himself rather than direct that business opportunity towards the corporation, the corporation can go after all the profits that were made from— stemming from that action. Now, we can go about it in one of three ways or all of three ways. You can mediate, arbitrate, or litigate.
Mediation is probably the least expensive way to go about resolving this conflict but it doesn’t have a binding effect so there’s a drawback to it. Arbitration, on the other hand, is also not as expensive as litigation but it does have a binding effect. But in order for the parties to arbitrate, there has to be an arbitration clause in the agreement, in the membership agreement or the corporate agreement or they have to agree to arbitrate during the conflict.
And of course, the last and final resort would be litigation which can be expensive but there are instances where litigation just simply cannot be avoided. And in this case, if a corporation or a business entity had its business opportunities usurped, a stakeholder breaches fiduciary duties, it may warrant litigation.