Partners aren't just business associates—they're fiduciaries who owe each other duties of loyalty, care, and good faith. When a partner violates these duties through self-dealing, dishonesty, or disloyalty, they breach obligations fundamental to the partnership relationship. Breach of fiduciary duty claims can result in significant damages, disgorgement of profits, and other remedies.

Understanding fiduciary obligations helps partners recognize when lines have been crossed and pursue appropriate remedies against disloyal co-owners.

What Fiduciary Duties Partners Owe

The duty of loyalty is the core obligation. Partners must put partnership interests ahead of personal interests in matters affecting the business. Self-dealing—transactions where a partner benefits personally at the partnership's expense—violates the duty of loyalty.

The duty of care requires partners to act with reasonable diligence and competence. While partners aren't guarantors of business success, gross negligence or recklessness in managing partnership affairs can breach this duty.

The duty of good faith and fair dealing requires honest, straightforward conduct with partners. Hiding material information, engaging in fraud, or acting with deliberate intent to harm the partnership violates this obligation.

Common Fiduciary Breaches

Diverting business opportunities personally rather than presenting them to the partnership is a classic breach. If a customer approaches you with an opportunity suitable for the partnership business, you cannot take that opportunity for yourself without partnership consent.

Competing with the partnership while still a partner violates loyalty duties. Starting a competing business, soliciting partnership customers for a side venture, or preparing to compete while drawing partnership income all breach fiduciary obligations.

Misappropriating partnership assets—taking money, using partnership property for personal purposes, or failing to account for partnership funds—constitutes breach and often fraud.

Concealing material information from partners breaches the duty of disclosure. Partners are entitled to full information about partnership affairs; hiding profits, debts, or opportunities violates that right.

Proving Fiduciary Breach

To establish breach of fiduciary duty, you must show the partner owed you duties (usually straightforward in partnerships), the partner breached those duties through specific conduct, and you suffered damages as a result.

Evidence of breach often requires forensic examination of business records. Bank statements, accounting records, emails, contracts, and corporate documents may reveal hidden transactions, diverted funds, or concealed opportunities.

The wrongdoing partner's testimony, depositions of employees and third parties, and expert analysis of financial records help establish what happened and quantify damages.

Available Remedies

Successful breach of fiduciary duty claims can result in various remedies. Compensatory damages cover actual losses suffered—business lost, opportunities missed, assets stolen.

Disgorgement forces the wrongdoing partner to surrender profits obtained through breach. If a partner diverted a 00,000 opportunity personally, they may have to give up the entire profit regardless of actual damages to the partnership.

Constructive trust imposes trust obligations on property wrongfully obtained, effectively returning it to the partnership. Accounting requires the wrongdoing partner to account for all transactions and potentially pay over benefits improperly received.

In egregious cases, punitive damages may be available to punish intentional wrongdoing and deter similar conduct.

Defending Against Fiduciary Claims

Not every action that upsets partners constitutes breach. Business judgment, even if mistaken, isn't breach unless it crosses into gross negligence. Partners have rights to disagree without being liable for honest differences of opinion.

Consent and ratification can defeat fiduciary claims. If partners knew about and approved conduct now claimed as breach, they may be estopped from complaining. Partnership agreements can modify or limit certain fiduciary duties.

Statute of limitations defenses apply to stale claims. If you knew or should have known about the breach years ago but only now sue, your claims may be time-barred.

Prevention and Planning

Clear partnership agreements reduce fiduciary disputes. Specify what opportunities belong to the partnership versus what partners can pursue personally. Establish disclosure requirements and approval procedures for potential conflicts.

Regular financial reporting and partner meetings create accountability. Partners who must explain transactions and share information openly are less likely to breach duties—and breaches are more likely to be caught early if they occur.

Getting Legal Help

Breach of fiduciary duty claims involve complex legal standards and often require forensic financial analysis. A business litigation attorney helps evaluate potential claims, gather evidence, quantify damages, and pursue appropriate remedies. If you suspect a partner has breached fiduciary duties, early consultation helps preserve evidence and positions you for effective action. These claims can be substantial—don't let statutes of limitations expire while you hope the situation resolves itself.