What legal actions can be taken against a partner's misconduct in a business?

Full question:

I own a rental property company and a construction company. My partners were my boyfriend and, until recently, his brother. The brother recently quit the business. Many of his recent actions have been questionable, however I believe he sees his actions as simply lying to his brother and I. Actions include the following:1) He purchased a truck that needed to be restored. He told us that he was fixing it for a friend who was going to pay him $7500 for it that in turn would be business income. It turns out that he actually bought the truck himself, spent business time working on it, and now has kept it, refusing to sell it. In addition, he had been in an accident with his other vehicle which is titled in the business name and also insured by the business. He used an insurance check he received for this accident to make the repairs on this new vehicle without us knowing.2) He started a business behind our backs. While he was supposed to be working on a large construction project for the business, he was instead working on the before-mentioned truck and also was working on starting his own business. He paid himself out for work on the project when he was not onsite. During this time he also paid an additional worker to work on the project in his absence.3) Wrote out at least one payroll check to himself and another worker, and then did not pay the other worker.4) After quitting the business several weeks ago, he is still living in business property. He indicated that he would be moving, but he has not yet moved, and has not stated when he will be moving. We are losing rent and paying out additional heat/water expenses due to the fact that he has not vacated the property.5) Promised the full amount of his tax return to the business as is an expectation of the partnership. He claims he has not received the taxes, however he did tell us that even if he did receive them, he would not turn them over.Can you please tell me from the things I've mentioned where these actions stand from a legal perspective? He is refusing to communicated and discuss the issue with us at this time.Thanks much for your assistance!

• Category: Fiduciary Duty
• Date: 04/07/2025
• State: Wisconsin

Answer:

If a partner breaches their fiduciary duty, various legal remedies may be available. Common actions include filing for an accounting, claiming breach of fiduciary duty, or pursuing theft, conversion, or fraud charges. In a business, officers owe duties of care, loyalty, and disclosure to the company and its members. Each party is expected to act in the best interest of the company and avoid conflicts of interest.

The court will determine whether a breach occurred based on the facts and circumstances. Factors considered may include whether the fiduciary benefited personally at the company's expense or failed to disclose detrimental information. For instance, did they divert funds for personal use? Were there undisclosed financial risks or misconduct?

To establish a breach of fiduciary duty, the following elements must be proven: (1) A relationship where the plaintiff trusts the defendant, and the defendant assumes a duty to protect the plaintiff; (2) A breach of that duty by the defendant; and (3) Damages suffered by the plaintiff.

Defenses against a breach of fiduciary duty claim may include: (1) Expiration of the statute of limitations; (2) Lack of a fiduciary relationship; (3) Lack of standing; (4) Approval of actions after full disclosure; and (5) Business judgment rule, which protects actions motivated by a genuine interest in the company's well-being.