Employee Alleges Breach of Fiduciary Duty Over Security Breach

Originally published by Cris Feldman.

When a breach of fiduciary duty occurs, it can be devastating for those involved. This is because fiduciary and beneficiary relationships require a great amount of trust in order to be successful. Recently, an Estee Lauder employee filed a lawsuit against the company after the security of her 401(k) account was breached. The employee accused the business of breaching its fiduciary duty to her after they failed to report the security breach.

After an apparent breach on her 401(k) account, plaintiff Naomi Berman filed a lawsuit against Estee Lauder, the 401(k) plan sponsor, the company’s record keeper, and the plan trustee/custodian for violating their fiduciary duties. Berman alleges those involved failed to protect her account against unauthorized distributions, and as a result, her 401(k) plan was drained of $99,000. She also accused the defendants of failing to notify her or to seek authorization for the distributions from her account.

The lawsuit states the “defendants, and each of them breached their fiduciary duties of loyalty and prudence by causing or allowing the Lauder plan to make unauthorized distributions of plan assets.” Berman also accused Estee Lauder and those involved of “failing to establish distribution processes to safeguard the Lauder plan assets against unauthorized withdrawals” and “failing to identify and halt suspicious distribution requests.”

In addition to these claims, Berman also alleges Estee Lauder’s benefits committee failed to respond to her written request for plan documents even after Berman “made at least 23 calls” to the customer service center. The customer service center completed its investigation and told her no money was recovered and her plan account “would not be made whole for the losses.”

Often described as an obligation of loyalty and good faith of the highest order to a person or entity, a fiduciary duty is synonymous with the highest degree of loyalty and care. To further simplify, the fiduciary, or the person with the duty will owe the beneficiary or the person to whom the duty is owed, the highest degree of care and devotion. This means the fiduciary must act with the best interests of the beneficiary in mind at all times, refraining from taking any action that could potentially harm the beneficiary or the beneficiary’s interests. These relationships are often seen between doctors and patients, parents and their children, CEOs and their respective shareholders, and attorneys and their clients.

What is a Breach of Fiduciary Duty?

A fiduciary’s actions must be free of any conflicts of interest and self-dealing; and, as a fiduciary, one cannot use the relationship with the beneficiary to their own personal advantage. These relationships should be taken incredibly seriously as sensitive information is often involved between the fiduciary and beneficiary.

When a fiduciary fails to perform his or her obligations to the beneficiary, a breach of fiduciary duty has occurred. Oftentimes, this is caused by a fiduciary acting in their own self-interest rather than in the best interests of the beneficiary. Breaching fiduciaries can be held responsible for the damages of their actions.

Houston Breach of Fiduciary Duty Attorneys

Breaching a fiduciary duty can have serious consequences. Fiduciaries are expected to always act in the utmost good faith with perfect candor, openness, and honesty – and, of course, without deception. Any time a fiduciary has obtained profit through self-dealing or by causing a loss to another party, he or she may be held accountable. Unfortunately, however, determining whether a breach has occurred can often be fairly complex. Contact the experienced attorneys at Feldman & Feldman today to see how we can help you when you believe a fiduciary duty has been breached.

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