Question

Can I sue a business partner for breach of fiduciary duty in Colorado?

Henry M. Baskerville - Business Litigation - Super Lawyers

Answered by: Henry M. Baskerville

Fortis Law Partners LLC
Denver, CO
Phone: 303-565-8066
Fax: 303-295-9701

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Answer

Yes, you may sue a business partner or company board member if that person breached the legal obligation to act in the best interests of the company – what is known as fiduciary duty. A fiduciary relationship must exist via a contract or under stipulations of Colorado business law statutes. 

What constitutes a breach of fiduciary duty? 

There is a distinction between making a bad business decision and breaching fiduciary responsibility. Any owner is protected by what is known as the business judgment rule. If a decision that is made in the best interest of the business turns out to be a disaster, the decision-maker cannot be held liable for breach of fiduciary duty. 

In business, a breach of fiduciary duty occurs when a party’s action is contrary to the interests of the company, when a party acts out of self-interest, or when a party fails to disclose pertinent information, such as a conflict of interest. Examples include misuse or misappropriation of funds, abuse of power, and misrepresenting a matter that impacts the business. 

It is important to note that after discovery of alleged wrongful conduct in Colorado, a party has three years to file a breach of fiduciary duty lawsuit. 

How do you prove breach of fiduciary duty? 

In addition to showing that a relationship involving fiduciary responsibility exists, it must also be shown that damage was caused to the company or its shareholders, and that the breach is directly responsible for that damage. 

How is a breach of fiduciary duty claim resolved? 

If you are successful in showing that a breach of duty occurred, you can recover the actual damages and may be able to recover punitive damages. Punitive damages are awarded infrequently. It must be proven the breach was committed out of malice or fraud. 

Work with an experienced business litigation attorney 

A legal dispute between business partners can be a death sentence for a company. Parties are forced to focus on legal issues rather than run the company, and legal fees can drain the company’s resources. In addition, business partners who are in a legal dispute may result in a toxic work environment for the other employees. 

For these and other reasons, it is wise to resolve breach of fiduciary duty claims and other legal disputes between business partners efficiently while remaining committed to the best possible solution. A buyout agreement or other solution often is reached in lieu of proceeding to trial. 

Whether you wish to pursue a breach of fiduciary duty claim against a business partner or you have been named in such a lawsuit, it is important to work with an experienced Colorado business litigation lawyer who will protect your interests and work toward the best possible outcome. 

Disclaimer: The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.

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