Virginia Fiduciary Duty Litigation: Understanding Your Rights and Responsibilities

 Posted on May 13, 2025 in Business

At Fox & Moghul, we specialize in fiduciary duty litigation, representing clients in business disputes, shareholder derivative actions, corporate governance matters, and cases of corporate misconduct. Whether you are a business owner, investor, or corporate executive, understanding fiduciary duties is critical to protecting your legal and financial interests.

This blog breaks down fiduciary relationships, key legal obligations, common breaches, and defenses under Virginia law, while keeping all case law citations intact to ensure accuracy.

What Is a Fiduciary Relationship?

A fiduciary relationship is based on trust, confidence, and reliance between parties. Virginia courts define it as follows:

"A fiduciary relationship is one founded upon trust or confidence reposed by one person in the integrity and fidelity of another. It is said that the relationship exists in all cases in which influence has been acquired and abused, in which confidence has been reposed and betrayed."

Hoyle v. Diamond, 947 F.2d 595 (2013).

Under Virginia law, corporate directors, officers, and LLC managers owe fiduciary duties to the company and its shareholders. These duties include loyalty, care, and good faith under the Virginia Stock Corporation Act (Va. Code § 13.1-673 et seq.) and the Virginia Non-Stock Corporation Act (Va. Code § 13.1-853 et seq.).

As opposed to the law in Delaware, fiduciary duties are not imposed between shareholders or between the board and minority shareholders in Virginia (Adelman v. Conotti Corp., 215 Va. 782, 213 S.E.2d 774, 779 (1975)).

Elements of a Fiduciary Duty Claim in Virginia

To prove breach of fiduciary duty, a plaintiff must establish:

✔️ The existence of a fiduciary duty

✔️ A breach of that duty

✔️ Damages resulting from the breach

Key Case Law:

• RTC v. Everhart, 37 F.3d 151, 155 (4th Cir. 1994) – Breach of fiduciary duty claims in Virginia are subject to a two-year statute of limitations under Va. Code § 8.01-248.
• FDIC v. Cocke, 7 F.3d 396, 401-02 (4th Cir. 1993) – Fiduciary duty claims can be sub-classified into Duty of Care and Duty of Loyalty.

Duties Owed by Directors and Officers in Virginia

Duty of Care

The Duty of Care requires directors and officers to act with diligence, prudence, and informed judgment. Virginia law mandates:

"A Director shall discharge his duties as a Director, including his duties as a member of a committee, in accordance with his good faith business judgment of the best interests of the Corporation."

Va. Code § 13.1-690.A.

Directors must:

✔️ Remain aware of significant corporate developments

✔️ Devote time and attention to board decisions

✔️ Use reasonable diligence to make informed decisions

✔️ Ensure financial transparency and compliance with corporate policies

Key Case Law:

• Kessler v. Commonwealth Doctor’s Hospital, 212 Va. 497, 185 S.E.2d 43 (1971) – A director can be held liable even if they received no personal benefit from a breach.
• Marshall v. F & M Savings Bank of Alexandria, 85 Va. 676, 8 S.E. 586 (1889) – Ignorance of corporate affairs is not a defense; directors must actively oversee management decisions.
• Hanson Trust PLC v. ML SCM Acquisition, Inc., 781 F.2d 264 (2nd Cir. 1986) – Directors must gather and consider all material information before making decisions.

Duty of Loyalty

The Duty of Loyalty ensures that directors and officers act in the best interests of the corporation rather than for personal gain.

Key Case Law:

• Adelman v. Conotti Corporation, 215 Va. 782, 21 S.E.2d 774 (1975) – Directors must act in good faith and avoid self-dealing.
• Rowland v. Kable, 174 Va. 343, 6 S.E.2d 633, 642 (1940) – A director cannot personally profit from corporate opportunities.
• Giannotti v. Hamway, 239 Va. 14, 387 S.E.2d 725 (1990) – Officers must prioritize corporate interests over personal benefits.

Common Breaches of the Duty of Loyalty

• Failure to Disclose Material Information – Firebaugh v. Hanback, 247 Va. 519, 443 S.E.2d 134 (1994)
• Usurping Business Opportunities – Trayer v. Bristol Parking, Inc., 198 Va. 595, 95 S.E.2d 224 (1956)
• Making Secret Profits – H-B Ltd. Partnership v. Wimmer, 220 Va. 176, 257 S.E.2d 770 (1979)
• Engaging in Conflicts of Interest – Glass v. Glass, 228 Va. 39, 321 S.E.2d 69, 74 (1984)
• Using Confidential Information for Personal Gain – Feddeman & Co., C.P.A., P.C. v. Langan Associates, P.C., 260 Va. 35, 530 S.E.2d 668 (2000)

Conflicts of Interest and the Fairness Test

Virginia law scrutinizes transactions involving a conflict of interest under Va. Code § 13.1-691.

"A conflict of interests transaction is a transaction with the corporation in which a director of the corporation has a direct or indirect personal interest."

Directors must disclose conflicts, and the transaction must be fair to the corporation (Willard v. Moneta Bldg. Supply, 258 Va. 140, 515 S.E.2d 277 (1999)).

Virginia’s Business Judgment Rule

Virginia law provides broad protections for directors under the Business Judgment Rule, which states:

✔️ Directors are presumed to act in good faith

✔️ Courts will not second-guess business decisions unless fraud or misconduct is proven

Key Case Law:

• Willard v. Moneta Bldg. Supply, Inc., 258 Va. 140, 515 S.E.2d 277 (1999) – Directors are protected unless their decisions are fraudulent or reckless.

Statutory Limits on Director Liability

Virginia law limits director liability under Va. Code § 13.1-692.1, capping personal liability to $100,000 or the director’s last year's salary.

Why Choose Fox & Moghul for Fiduciary Duty Litigation?

At Fox & Moghul, we represent corporate stakeholders, business owners, and investors in breach of fiduciary duty cases, including:

• Shareholder Derivative Actions
• Corporate Governance Disputes
• Executive Malfeasance and Fraud Claims
• Director and Officer Liability Defense
• Business Partner Disputes

Protect Your Business Interests Today

If you suspect a breach of fiduciary duty or are facing litigation, our experienced business lawyers can help.

Call: 703-652-5506