Business partnerships run on trust. You’re relying on someone else to make good decisions, handle money responsibly, and put the partnership first. When a partner violates that trust by prioritizing personal gain over the business, it doesn’t just sting emotionally. It can cause serious financial damage. These violations are called breaches of fiduciary duty, and Maryland law takes them seriously.
What Is A Fiduciary Duty In A Partnership
A fiduciary duty is a legal obligation that requires business partners to act in good faith and prioritize the partnership’s best interests. This isn’t like a typical business relationship where everyone’s looking out for themselves. Partners owe each other the highest standard of loyalty and care that the law recognizes. What does that mean practically? Partners must avoid conflicts of interest, disclose material information that affects the business, and avoid secretly profiting at the partnership’s expense. You can’t use your position to benefit yourself while harming your partner or the business you’ve built together. The duty exists whether or not it’s spelled out in your partnership agreement. It’s built into the legal structure of partnerships themselves.
Common Types Of Fiduciary Breaches
Partners can violate their duties in ways that range from subtle to blatant. Recognizing these violations early matters because the longer they continue, the more damage they cause. Self-dealing happens when a partner enters transactions that benefit themselves rather than the partnership. Maybe they’re selling partnership property to themselves at prices well below market value. Or they’re awarding contracts to their own side companies without telling anyone. Either way, they’re putting personal profit ahead of partnership interests. Usurping opportunities is another common breach. Your partner learns about a lucrative deal through partnership connections or resources, then pursues it individually instead of bringing it to the partnership. That opportunity belonged to the business, not to them personally.
Misappropriation of assets covers using partnership funds or property for personal use. This ranges from charging personal expenses to the business credit card, all the way to significant financial diversions that threaten the company’s survival. Failure to disclose material information also constitutes a breach. Partners need to be transparent about financial matters, conflicts of interest, and anything else that could affect important decisions. Hiding information that your partner needs to know violates the trust at the heart of the relationship.
Proving A Breach In Maryland Courts
To win a fiduciary duty claim, you’ll need to establish several elements. First, you must show that a fiduciary relationship existed. For formal partnerships, this part’s usually straightforward. Next comes proving that your partner actually breached their duty through specific actions or failures to act. This is where documentation becomes your best friend. Emails, financial records, contracts, witness testimony, all of it can support your claim and show exactly what happened.
You also need to prove that the breach caused real damages to you or the partnership. Maryland courts won’t award damages for technical violations that didn’t result in measurable harm. You have to show actual losses. Eric Siegel Law represents partners facing fiduciary breaches and business disputes throughout Maryland.
Available Legal Remedies
Maryland law provides several ways to make things right when a partner breaches their fiduciary duties. Courts can order monetary damages equal to the losses the breach caused. That’s the baseline, but there’s more. Disgorgement of profits is a powerful remedy that requires the breaching partner to return any profits they made through their violation. Even if those profits exceed what the partnership actually lost, they have to give them back.
In serious cases, courts may dissolve the partnership entirely or remove the breaching partner from management positions. Sometimes the relationship is too damaged to continue. Injunctions can also stop ongoing harmful conduct while your case moves through the courts. An Ellicott City business litigation lawyer can help you figure out which remedies apply to your situation and build the strongest possible case for recovery.
Partnership Agreements And Fiduciary Duties
Partnership agreements can clarify expectations and provide extra protections beyond what the law automatically gives you. A well-drafted agreement might spell out what constitutes acceptable partner conduct, outline how decisions get made, and establish procedures for resolving disputes before they end up in court. Here’s something important, though. Partnership agreements generally can’t eliminate fiduciary duties. Maryland courts will still hold partners to basic standards of loyalty and good faith, even if an agreement tries to waive these protections. The law won’t let partners contract away fundamental fairness. Some agreements include buy-sell provisions that address what happens when a partner breaches their duties. These clauses can make the separation process smoother and keep litigation costs down when relationships fall apart.
Taking Action To Protect Your Interests
If you suspect your business partner has violated their fiduciary duties, don’t wait. Timing matters in these cases. Start by documenting everything related to the suspected breach. Financial irregularities, undisclosed conflicts, communications that suggest bad faith—save it all. You’ll need this evidence later. Should you try to resolve things through negotiation first? Sometimes, yes. Disputes occasionally stem from misunderstandings rather than intentional wrongdoing, and a direct conversation can clear things up. But don’t let this delay necessary legal action if the breach is clear and ongoing. Some situations can’t be fixed with a conversation.
Fiduciary duty claims involve technical legal standards. They often require forensic accounting to prove damages and trace money trails. This isn’t something you want to handle alone. Working with professionals who understand Maryland partnership law can make the difference between recovering your losses and watching your business investment disappear. An experienced Ellicott City business litigation lawyer can evaluate your case, protect your rights, and pursue the remedies you deserve. Contact our firm to discuss your partnership concerns and explore your legal options.