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What’s the statute of limitations on a breach of fiduciary duty claim?

Business, Litigation

From Berman Fink Van Horn

Under Georgia law, certain relationships give rise to fiduciary duties on the part of individuals.  An individual with a fiduciary duty must exercise loyalty and utmost good faith towards the person to whom the duty is owed.  Certain employees and officers can owe fiduciary duties.  Georgia courts have held that employees vested with the authority to bind the employer owe a fiduciary duty to the employer.

When conflicts arise in business between employers and employees or business partners, claims for breach of fiduciary duty can be asserted on a variety of bases such as trade secret theft, employee disloyalty, or misuse of company funds.

As with any other claim, one primary consideration in bringing a breach of fiduciary duty claim is whether the statute of limitations has run on the claim.  This is especially true in business disputes where the conduct may have occurred over a period of several years.

So what is the statute of limitations for a breach of fiduciary duty claim in Georgia?  The answer, as it is with most legal issues, is: it depends.

Georgia has no specific statute of limitations for breach of fiduciary duty claims.  Instead, Georgia courts “examine the injury alleged and the conduct giving rise to the claim to determine the appropriate statute of limitation.”  Godwin v. Mizpah Farms, LLLP, 330 Ga. App. 31, 38, 766 S.E.2d 497, 504 (2014).  In other words, the statute of limitations for a breach of fiduciary duty claim varies depending on the nature of the injury and conduct giving rise to the breach of fiduciary duty.

Thus, for example, a six-year statute of limitation applies to a breach of fiduciary duty claim based on a breach of a written agreement.  In Niloy & Rohan, LLC v. Sechler, 335 Ga. App. 507, 512, 782 S.E.2d 293, 298 (2016), a six-year statute of limitations was applied to a breach of fiduciary duty arising out of an operating agreement where the defendant paid himself profit distributions where no such profits existed.  In contrast, in Kothari v. Patel, 262 Ga. App. 168, 174, 585 S.E.2d 97, 102 (2003), the Court of Appeals affirmed the trial court’s application of a four-year statute of limitations for a breach of fiduciary duty claim based on allegations of fraud.

More complex are situations where the breach of fiduciary duty claim arises out of a business relationship based on a written agreement and the conduct giving rise to the breach of fiduciary duty claim could be based in tort or contract.  In Godwin, the court held that the six-year statute of limitation applied where the breach of fiduciary duty claim was based on an allegations that limited partners diverted income owed from the partnership and overstepped duties as limited partners, all in violation of an LLLP agreement.  Godwin, 330 Ga. App. at 38-39.  On the other hand, in Hendry v. Wells, 286 Ga. App. 774, 779, 650 S.E.2d 338, 343 (2007), the court applied a four-year statute of limitations, finding that the breach of fiduciary duty claim was based on allegations of fraud, even though the claim arose out of a dispute over a partnership agreement’s distribution structure.

Because a breach of fiduciary duty claim can arise in a variety of situations, determining the appropriate statute of limitations can be difficult.  It is best to seek legal counsel immediately upon discovering cause to bring a breach of fiduciary duty claim, especially given the complexities in determining the applicable statute of limitations.