Corporate directors and officers in Florida hold positions of significant trust. Their decisions impact shareholders, employees, and the broader marketplace. To maintain ethical and legal standards, Florida law imposes strict fiduciary duties on corporate board members. When these duties are breached, serious legal consequences can follow.

This article provides a primer on corporate fiduciary duties and board breaches under Florida law. If you have questions about breaches of fiduciary duties by corporate directors and officers, please contact Bernhard Law Firm at www.bernhardlawfirm.com, 786-871-3349, abernhard@bernhardlawfirm.com.

What Is a Fiduciary Duty?

A fiduciary duty arises when one party is obligated to act in the best interests of another. In the corporate context, directors and officers owe fiduciary duties to the corporation and its shareholders. In re Bank United Fin. Corp., 442 B.R. 49, 55 (Bankr. S.D. Fla. 2007).

Under Florida law, these duties generally fall into three categories:

1. Duty of Care – Board members must act with the care that an ordinarily prudent person would exercise under similar circumstances.
2. Duty of Loyalty – Directors must act in good faith and in the best interests of the corporation, avoiding conflicts of interest and self-dealing.
3. Duty of Good Faith – Although sometimes considered part of the duty of loyalty, this duty emphasizes honesty, fairness, and lawful conduct.

Florida Statutory Framework

Florida codifies many of these principles in the Florida Business Corporation Act (FBCA), primarily under Fla. Stat. § 607.0830. This statute outlines the standard of conduct for directors, including:

• Acting in good faith;
• Exercising reasonable care;
• Acting in a manner the director reasonably believes to be in the best interests of the corporation.

Florida courts often refer to this statutory framework in evaluating whether a breach has occurred.

The Business Judgment Rule

A crucial defense for directors in breach of fiduciary duty claims is the business judgment rule. Under this rule, courts generally will not second-guess a board’s business decisions if they were made:

• In good faith,
• With due care, and
• In the honest belief that the action taken was in the company’s best interest.

However, the rule does not protect directors who act fraudulently, in bad faith, or with gross negligence.

Common Examples of Breach

Directors may be found to have breached their fiduciary duties in Florida in situations such as:

• Engaging in self-dealing or insider transactions without disclosure;
• Failing to act in the face of known problems (e.g., ignoring red flags about financial misstatements);
• Misusing corporate assets for personal gain;
• Approving transactions that disproportionately benefit certain shareholders or directors without proper process.

Remedies for Breach

If a breach of fiduciary duty is established, Florida courts may impose several remedies, including:

• Monetary damages for losses suffered by the corporation or shareholders;
• Disgorgement of profits gained through the breach;
• Injunctive relief to prevent further misconduct;
• Removal of the director or officer in severe cases.

Importantly, Florida law allows both direct and derivative actions:

• Direct actions can be brought by shareholders individually if their personal rights are harmed.
• Derivative actions are brought on behalf of the corporation, typically after first making a demand on the board.

Conclusion

Breach of fiduciary duty claims in Florida are complex and fact-intensive. While the law provides directors with leeway to make difficult business decisions, that protection ends when decisions are made negligently, dishonestly, or for personal benefit. Corporate boards and their counsel should ensure decisions are well-documented, properly vetted, and aligned with the best interests of the corporation to minimize liability risk.

This article provides a primer on corporate fiduciary duties and board breaches under Florida law. If you have questions about breaches of fiduciary duties by corporate directors and officers, please contact Bernhard Law Firm at www.bernhardlawfirm.com, 786-871-3349, abernhard@bernhardlawfirm.com.