Breach of Fiduciary Duty as a Cause of Action in California

Breach of fiduciary duty as a cause of action in California applies when a person or entity that owes fiduciary obligations fails to carry them out and causes damage. In the trustee context addressed in LaMonte v. Sanwa Bank California, the plaintiff must establish three elements: the existence of a fiduciary relationship, a breach of that duty, and damage caused by the breach. The absence of any one element defeats the claim.

Existence of a Fiduciary Relationship in a California Fiduciary Duty Claim

The first element requires the plaintiff to establish that a fiduciary relationship existed. A fiduciary relationship is one in which one party is required to act for the benefit of another with a high degree of loyalty and care.

In the trust setting, the trustee owes fiduciary duties to the beneficiary. The beneficiary must first show that this relationship existed and that the trustee was responsible for performing duties arising from it.

This element provides the foundation for breach of fiduciary duty as a cause of action in California. Without a fiduciary relationship, there is no fiduciary duty for the defendant to violate. The plaintiff must therefore identify the relationship and explain why the defendant owed duties to the plaintiff.

Breach of Fiduciary Duty by the Trustee

The second element requires the plaintiff to show that the fiduciary duty was breached. A breach occurs when the trustee fails to perform an obligation required by the fiduciary relationship.

The plaintiff should identify the particular duty at issue and explain how the trustee failed to carry it out. The focus is not simply on whether the plaintiff disagrees with a decision. The plaintiff must show that the trustee failed to perform a fiduciary obligation.

Under the rule described in LaMonte v. Sanwa Bank California, the beneficiary initially bears the burden of proving the fiduciary duty and the trustee’s failure to perform it. Once that showing is made, the burden shifts to the trustee to justify the challenged actions.

This element is central to a California breach of fiduciary duty claim because liability depends on a failure to meet an existing fiduciary obligation.

Damage Caused by the Breach of Fiduciary Duty

The third element requires damage that was proximately caused by the breach. In ordinary terms, the plaintiff must show both an actual loss and a sufficient connection between that loss and the trustee’s failure to perform the fiduciary duty.

It is not enough to prove that a fiduciary relationship existed and that a duty was breached. The plaintiff must also establish that the breach caused damage. Depending on the circumstances, evidence may include financial records, trust documents, account statements, correspondence, or other materials showing the effect of the trustee’s conduct.

This element matters because breach of fiduciary duty as a cause of action in California requires a link between wrongful conduct and actual harm. Damage that is unrelated to the breach does not satisfy the stated test.

Conclusion

Breach of fiduciary duty as a cause of action in California requires proof of three elements: a fiduciary relationship, a breach of the duty arising from that relationship, and damage proximately caused by the breach. In the trustee context, the beneficiary initially must prove the duty and the trustee’s failure to perform it, after which the trustee bears the burden of justifying the conduct. Because the absence of any one element is fatal to the claim, each part of the test must be established.

Find the Law

“In order to plead a cause of action for breach of fiduciary duty against a trustee, the plaintiff must show the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach; the absence of any one of these elements is fatal to the cause of action. (Id. at p. 1101.) The beneficiary of the trust has the initial burden of proving the existence of a fiduciary duty and the trustee’s failure to perform it; the burden then shifts to the trustee to justify its actions. (Van de Kamp v. Bank of America (1988) 204 Cal. App. 3d 819, 853 [251 Cal. Rptr. 530].)” LaMonte v. Sanwa Bank California, 45 Cal.App.4th 509, 517  (1996)