Businesses, partnerships, and LLCs often find themselves in disputes where one party accuses another of a breach of fiduciary duty. But in Texas, fiduciary duties do not apply in every relationship—and they arise far less often than many people assume. At Slotter Law, PLLC, we routinely litigate these disputes and help clients understand when a fiduciary duty truly exists, when it does not, and what types of conduct may support (or defeat) a breach of fiduciary duty claim.
If you believe a business partner, manager, employee, or trusted advisor acted against your interests—or if you have been accused of breaching a fiduciary duty—this guide will help clarify your rights and obligations.
What Is a Fiduciary Duty?
A fiduciary duty is a legal obligation requiring one person (the fiduciary) to act with loyalty, honesty, and the highest level of good faith toward another person or entity (the beneficiary). Under Texas law, the fiduciary must:
- Put the beneficiary’s interests above their own
- Avoid conflicts of interest
- Fully disclose material information
- Deal fairly, honestly, and in good faith
Common examples include trustees, certain business partners, corporate directors, and agents acting on behalf of a principal.
But contrary to popular belief, not every close relationship or business partnership creates a fiduciary duty.
When Does a Fiduciary Duty Arise Under Texas Law?
Under Texas law, fiduciary duties arise in two distinct ways:
1. Formal (Legal) Fiduciary Relationships
These relationships automatically carry fiduciary obligations. Examples include:
- Trustee ↔ Beneficiary
- Attorney ↔ Client
- Partners in a general partnership
- Corporate directors and officers ↔ Corporation
- Agents ↔ Principals
In these relationships, fiduciary duties arise by operation of law, without needing a contract or special agreement.
2. Informal (Confidential) Fiduciary Relationships
Only recognized in rare circumstances
Texas courts recognize informal fiduciary duties only when there is a pre-existing, special relationship of trust and confidence that existed prior to and apart from the business transaction at issue. Examples may include long-term business partners or friends where one consistently relied on the other for guidance.
But Texas courts warn that these claims are very narrowly construed. The Texas Supreme Court has repeatedly emphasized that:
- A close friendship is not enough
- A longstanding business relationship is not enough
- An arms-length contract does not create a fiduciary duty
- Trusting someone or relying on their representations does not create a fiduciary relationship
In other words: just because someone trusted another person does not make the relationship fiduciary in nature.
This is one of the biggest misconceptions we see from clients before litigation begins.
Common Misconceptions About Fiduciary Duties in Business Disputes
At Slotter Law, PLLC, we frequently represent business owners dealing with partnership breakups, shareholder disputes, and corporate governance conflicts. In these cases, the term “fiduciary duty” is often thrown around loosely—but not always correctly.
Here are common misconceptions:
Misconception 1:
“My business partner and I own an LLC, so he owes me a fiduciary duty.”
Not always true in Texas.
Texas LLC law allows members to modify, limit, or eliminate fiduciary duties through the company agreement.
Misconception 2:
“My friend helped me start the business—we trusted each other, so he owed me a fiduciary duty.”
A close relationship is not enough unless there was a pre-existing, special relationship of trust that goes beyond normal business dealings.
Misconception 3:
“I relied on their representations, so they were a fiduciary.”
Reliance alone does not create a fiduciary duty; this is a contract or fraud issue—not fiduciary duty.
Misconception 4:
“They mishandled money, so that’s automatically a breach.”
Poor financial management does not equal a breach unless there was a fiduciary duty to begin with.
Examples of Conduct That Usually Do Not Constitute a Breach
In many disputes, the conduct alleged does not actually create fiduciary liability. Examples include:
- Ordinary business disagreements
- Conflicts that arise from contractual duties—not fiduciary ones
- Situations where parties acted at arm’s length
- Cases where the relationship existed solely because of a written contract
- Mistakes, negligence, or poor communication without deceptive intent
Texas courts are clear: fiduciary duties are not presumed and should not be lightly inferred.
Why Does It Matter if a Fiduciary Duty Exists?
Fiduciary duty claims are powerful because they allow for:
- Exemplary (punitive) damages
- Disgorgement of profits
- Equitable remedies (injunctions, constructive trusts, accountings)
For plaintiffs, this creates a strong litigation tool.
For defendants, it creates significant risk.
This is why determining whether the duty exists at all is often the threshold issue in business litigation.
Slotter Law, PLLC — Texas Fiduciary Duty Dispute Counsel
At Slotter Law, PLLC, we represent businesses, LLC members, partners, shareholders, founders, and executives across Texas in fiduciary duty disputes. Our firm is built for complex business litigation, and we understand the narrow, fact-specific nature of fiduciary duties under Texas law.
If you need guidance on whether a fiduciary duty existed—or what your rights and options are—our firm is ready to help.