Tex. Civ. Prac. & Rem. Code §§ 16.004(a)(5), 41.003; PJC 104.2
Breach of fiduciary duty in Texas — forfeiture without loss, and the anti-fracturing rule
A claim in Texas district and county courts · Last verified August 26, 2026
Breach of fiduciary duty is the claim at the centre of most closely held business disputes in Texas — partners, officers, agents, trustees, and lawyers. It carries a remedy no other claim has: fee forfeiture and disgorgement, available even when the plaintiff cannot prove a dollar of loss.
Texas balances that with a strict view of when the duty exists at all. Trusting someone does not create a fiduciary relationship, and courts routinely "fracture" a fiduciary claim back into the contract or malpractice claim underneath.
What the claim is
Someone who owed you a duty of loyalty put their own interests first — self-dealt, took an opportunity, hid a conflict, or profited from your business at your expense.
Where the right comes from
Common law. The Texas Supreme Court stated the elements in First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214 (Tex. 2017). The equitable remedies come from Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999), and ERI Consulting Engineers, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010).
What a plaintiff has to prove — PJC 104.2
- A fiduciary relationship existed between the plaintiff and the defendant.
- The defendant breached its fiduciary duty.
- The breach caused injury to the plaintiff or benefit to the defendant.
First United Pentecostal Church, 514 S.W.3d at 220. The third element is disjunctive, and that is the doorway to disgorgement: benefit to the fiduciary will do where injury to the beneficiary cannot be shown.
Formal and informal relationships
Formal fiduciary relationships exist as a matter of law: trustee and beneficiary, attorney and client, partners, principal and agent, executor and estate.
Informal or confidential relationships arise from a moral, social, domestic or personal relationship of trust and confidence. Texas requires that the trust have existed before and apart from the transaction being sued on. A long, friendly, profitable business relationship does not create one.
How long you have to file
Four years, under CPRC § 16.004(a)(5).
The discovery rule can apply, because fiduciary misconduct is often inherently undiscoverable — a beneficiary is entitled to rely on the fiduciary. The Texas Supreme Court has nonetheless called the rule a narrow exception applied only in exceptional cases (Marcus & Millichap Real Estate Investment Services of Nevada, Inc. v. Triex Texas Holdings, LLC, 646 S.W.3d 518 (Tex. 2022)).
What has to happen before you file
Nothing for the tort itself. Claims against attorneys, trustees or estate representatives may run alongside procedures in the Trust Code or Estates Code that carry their own requirements.
What the claim pays
Actual damages for the loss caused.
Disgorgement of profits. The fiduciary gives up what it gained from the breach.
Fee forfeiture. Burrow v. Arce holds that a client may recover fees paid to a disloyal attorney whether or not the breach caused damages, and ERI v. Swinnea extended the principle beyond attorneys. The court decides the amount, weighing the gravity of the breach, the adequacy of other remedies, and the public interest in deterring disloyalty.
Constructive trust over property traceable to the breach.
Exemplary damages on clear and convincing proof of fraud or malice, capped by CPRC § 41.008.
No attorney's fees for the tort itself. Fees may come through a companion contract claim, a declaratory judgment claim under CPRC § 37.009, or the Trust Code in a trustee case.
Who owes a fiduciary duty
Formal relationships, recognised as fiduciary as a matter of law:
- trustee and beneficiary
- attorney and client
- partners in a general partnership, to one another
- principal and agent
- executor or administrator and the estate
- guardian and ward
Informal or confidential relationships are decided case by case, and Texas sets the bar high. The relationship of trust and confidence must have existed before and apart from the transaction being sued on. A long, friendly and profitable business relationship is not enough on its own.
Not fiduciary by default: parties to an arm's length contract, a lender and its borrower, an employer and an employee outside the employee's own duty of loyalty, a majority shareholder as to a minority shareholder, and joint venturers whose agreement says otherwise.
Common defenses
- No fiduciary relationship. The transaction was arm's length; subjective trust is not enough.
- The anti-fracturing rule. The real claim is breach of contract or professional negligence, and the plaintiff has recast it as fiduciary breach to reach forfeiture and punitive damages. Courts apply this most aggressively to claims against attorneys.
- Full disclosure and consent. The beneficiary approved the transaction knowing the material facts.
- Ratification by accepting the benefits afterwards.
- The business judgment rule, for corporate directors.
- Limitations, subject to the discovery rule.
What people get wrong
Not every trusted relationship is fiduciary. Texas presumes business dealings are arm's length. Years of friendship and reliance do not, on their own, create a duty of loyalty.
You can recover without proving a loss. Fee forfeiture and disgorgement measure what the fiduciary gained, not what the beneficiary lost — which is why this claim is worth pleading even in a case with weak damages.
The anti-fracturing rule is real. A dissatisfied client who pleads that a lawyer's negligence was disloyalty will usually find the claim recharacterised as malpractice, with its own proof burdens.
Fees do not come with the tort. They come with whatever else you pleaded.
Where it came from
Texas equity has recognised the duty of loyalty since statehood, but the modern shape of the remedy dates to Burrow v. Arce in 1999. The court there took a fee forfeiture question out of the damages framework entirely, holding that forfeiture serves to protect relationships of trust by removing the incentive to violate them — so a client can recover fees from a disloyal lawyer without proving the disloyalty cost anything.
ERI v. Swinnea carried that into ordinary business fiduciary relationships in 2010, and Marcus & Millichap in 2022 tightened the discovery rule that had been letting older claims through.
Common questions
How long do I have to sue for breach of fiduciary duty?
Four years, often measured from discovery where the misconduct was concealed.
Can I recover if I did not lose money?
Yes. Fee forfeiture and disgorgement are available on proof that the fiduciary breached and benefited, without proof of actual damages.
Is my business partner a fiduciary?
A formal partner generally is. A co-owner in an LLC or a corporation may or may not be, depending on the entity documents and the role.
Can I recover attorney's fees?
Not for the tort itself. Fees can come from a companion contract claim, a declaratory judgment claim, or the Trust Code in a trustee case.
What is the anti-fracturing rule?
The rule that stops a plaintiff from repackaging a contract or malpractice claim as a fiduciary breach to reach better remedies.
Can I get punitive damages?
Yes, with clear and convincing proof of fraud or malice, subject to the statutory cap.