Breach of Fiduciary Duty Demand Letter - Universal

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DEMAND LETTER — BREACH OF FIDUCIARY DUTY

[LAW FIRM NAME]
Attorneys at Law
[FIRM ADDRESS LINE 1]
[FIRM ADDRESS LINE 2]
[CITY, STATE ZIP]
Tel: [TELEPHONE]
Email: [EMAIL]

SENT VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND BY EMAIL TO: [RECIPIENT EMAIL]

[DATE]

[RECIPIENT NAME], in [his/her/their] capacity as [TRUSTEE / DIRECTOR / OFFICER / MANAGER / GENERAL PARTNER / AGENT UNDER POWER OF ATTORNEY]
[ENTITY OR TRUST NAME]
[ADDRESS LINE 1]
[CITY, STATE ZIP]

Re: DEMAND FOR REDRESS OF BREACH OF FIDUCIARY DUTY
Fiduciary Relationship: [TRUSTEE OF THE _______ TRUST / DIRECTOR OF _______, INC. / MANAGER OF _______ LLC / GENERAL PARTNER OF _______ LP / AGENT UNDER POWER OF ATTORNEY FOR _______]
Our Client / Beneficial Interest Holder: [CLIENT NAME], as [BENEFICIARY / SHAREHOLDER / MEMBER / LIMITED PARTNER / PRINCIPAL / SUCCESSOR-IN-INTEREST]
Governing Instrument: [NAME AND DATE OF TRUST / CHARTER / OPERATING AGREEMENT / PARTNERSHIP AGREEMENT / POA]
Approximate Damages / Disgorgeable Benefit: $[AMOUNT]
Response Deadline: [DATE — typically 21–30 days from delivery]

Dear [RECIPIENT NAME]:

This firm represents [CLIENT NAME] ("our Client") in connection with your breaches of fiduciary duty arising out of your service as [TRUSTEE / DIRECTOR / MANAGER / GENERAL PARTNER / AGENT-IN-FACT] of [ENTITY OR TRUST]. This letter constitutes a formal pre-suit demand for cessation of the conduct described below, a full accounting, restitution and disgorgement of benefits, removal where warranted, and the voiding of self-dealing transactions. It also serves as a litigation hold and preservation-of-evidence notice.

THIS IS A FORMAL DEMAND. ABSENT A SATISFACTORY RESPONSE BY THE DEADLINE STATED ABOVE, OUR CLIENT IS PREPARED TO FILE A [PETITION FOR INSTRUCTIONS, ACCOUNTING, SURCHARGE, AND REMOVAL / DERIVATIVE ACTION / DIRECT ACTION / POA ACCOUNTING PETITION] WITHOUT FURTHER NOTICE.

I. THE FIDUCIARY RELATIONSHIP

You owe our Client fiduciary duties of the highest order — duties of loyalty, care, good faith, candor, full disclosure, prudence, impartiality (where applicable), and obedience to the governing instrument. These duties are imposed by statute, the governing instrument, and the common law of the jurisdiction.

A. Trustee (if applicable)

You serve as Trustee of the [NAME OF TRUST], established by [SETTLOR NAME] under instrument dated [DATE]. Our Client is a [vested / contingent / income / remainder / qualified] beneficiary of the Trust. Your duties include those codified at Uniform Trust Code §§ 801–813 (and the corresponding sections of [STATE]'s adoption — see, e.g., [CITATION]), encompassing the duties of loyalty (UTC § 802), prudent administration (§ 804), impartiality (§ 803), control and protection of trust property (§ 809), recordkeeping (§ 810), and to inform and report (§ 813). The prudent-investor standard codified at [STATE PRUDENT INVESTOR ACT / N.Y. EPTL § 11-2.3 / Cal. Prob. Code § 16045 et seq.] applies to your investment decisions.

B. Corporate Director or Officer (if applicable)

You serve as [a director / an officer] of [CORPORATION NAME], a [STATE] corporation. Our Client is a record and beneficial holder of [NUMBER] shares of [CLASS] stock. You owe the corporation and its stockholders the fiduciary duties of care, loyalty, good faith, candor, and oversight. See, e.g., Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985); In re Caremark Int'l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996); Stone v. Ritter, 911 A.2d 362 (Del. 2006). [If change of control is at issue:] In the change-of-control context, you bear Revlon duties to maximize value, Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986), and any defensive measures are subject to enhanced scrutiny under Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985). Section 102(b)(7) exculpation, if any, in the corporation's charter does not insulate you from claims for breach of the duty of loyalty, bad faith, intentional misconduct, or knowing violations of law.

C. LLC Manager or Member (if applicable)

You serve as [Manager / Managing Member] of [LLC NAME], a [STATE] limited liability company. Our Client is a member holding a [____%] membership interest. Your fiduciary duties of loyalty and care are governed by [RULLCA § 409 / Cal. Corp. Code § 17704.09 / Del. LLC Act § 18-1101 / STATE STATUTE], the LLC's operating agreement dated [DATE], and applicable common law. The operating agreement [does / does not] modify or eliminate fiduciary duties to the extent permitted by [STATE] law.

D. General Partner (if applicable)

You serve as the General Partner of [PARTNERSHIP NAME], a [STATE] [general / limited] partnership. Our Client is a [partner / limited partner] holding a [____%] interest. Your duties of loyalty and care are governed by [RUPA § 404 / ULPA § 408 / STATE STATUTE], the partnership agreement dated [DATE], and applicable common law.

E. Agent Under Power of Attorney (if applicable)

You serve as agent-in-fact under the Durable Power of Attorney executed by [PRINCIPAL NAME] on [DATE]. Our Client is [the Principal / a successor-in-interest / a person identified in the POA / an heir]. Your duties as agent are governed by the Uniform Power of Attorney Act §§ 114–117 (as adopted at [STATE CITATION]) and include the duty to act loyally for the principal's benefit, avoid conflicts of interest, act with care and competence, keep records, cooperate with persons having authority to make health-care decisions, and to preserve the Principal's estate plan to the extent actually known.

II. SPECIFIC BREACHES

Despite these duties, you have engaged in the following acts and omissions, each of which constitutes a breach of fiduciary duty actionable under the authorities cited above:

A. Self-Dealing and Undisclosed Conflicts of Interest

☐ On or about [DATE], you caused [TRUST / ENTITY] to enter into [TRANSACTION] with [COUNTERPARTY], an entity in which you (or a close family member / affiliate) hold a [DESCRIBE INTEREST]. The transaction was not disclosed, was not approved by disinterested fiduciaries or beneficiaries/stockholders/members, and was not entirely fair as to price or process.

☐ You [borrowed from / lent to / leased from / purchased from / sold to / pledged] [TRUST / ENTITY] assets on terms more favorable to you than to [TRUST / ENTITY], generating personal benefit of approximately $[AMOUNT].

☐ You diverted a corporate / partnership / LLC opportunity properly belonging to [ENTITY] to yourself or an affiliate, in violation of [UTC § 802 / RUPA § 404(b)(1) / Cal. Corp. Code § 17704.09(b) / Broz v. Cellular Information Systems, 673 A.2d 148 (Del. 1996)].

B. Failure of Care, Prudence, and Oversight

☐ You failed to maintain reasonable information and reporting systems regarding [SUBJECT], in breach of your Caremark oversight obligations and the duty of prudent administration.

☐ You concentrated [TRUST / ENTITY] assets in [DESCRIBE — e.g., a single speculative position; an illiquid investment; an affiliated business], without diversification analysis, due diligence, or any written investment policy, in breach of the prudent-investor standard.

☐ You authorized the transaction described in [DATE / SECTION] above with grossly inadequate information, without informed deliberation, and without expert advice — conduct that, under Smith v. Van Gorkom, exposes you to personal liability notwithstanding any exculpation provision.

C. Failure to Disclose, Account, and Report

☐ You have failed to provide our Client with annual accountings, quarterly reports, K-1 statements, or other required information despite written requests dated [DATE], [DATE], in breach of [UTC § 813 / state corporate-records statute / operating agreement § ___ / UPOAA § 114(h)].

☐ You have refused to permit inspection of books and records to which our Client is statutorily entitled. See, e.g., DGCL § 220; RULLCA § 410; RUPA § 403; [STATE TRUST INFORMATION STATUTE].

D. Misappropriation, Commingling, and Misuse

☐ You commingled [TRUST / ENTITY] funds with your personal accounts at [BANK], between [DATE] and [DATE].

☐ You used [TRUST / ENTITY] credit, collateral, or assets to secure personal obligations, including [DESCRIBE].

☐ You caused [TRUST / ENTITY] to pay personal expenses of yourself or family members, including [DESCRIBE], in the approximate aggregate amount of $[AMOUNT].

E. Other Breaches

☐ [SPECIFY ADDITIONAL BREACHES — e.g., favoritism among beneficiaries; bad-faith refusal to make required distributions; entrenchment conduct; coercive change-of-control resistance; gifting Principal's property to self contrary to UPOAA § 201].

III. DEMAND FOR REMEDIES

On behalf of our Client, we hereby demand each of the following remedies, to be effected within the response deadline stated above:

1. Immediate Cessation. Cease all conduct described in Section II, including any further self-dealing transactions, asset transfers, distributions to yourself, or commitments of [TRUST / ENTITY] credit.

2. Full Accounting. Provide a complete, verified accounting of [TRUST / ENTITY], from [START DATE] through the date of response, including all receipts, disbursements, distributions, fees, asset valuations, related-party transactions, and reconciliations to bank and brokerage statements. The accounting shall comply with [UTC § 813 / state statutory accounting requirements / governing-instrument standards / UPOAA § 114(h)].

3. Restitution and Surcharge. Restore to [TRUST / ENTITY] all losses caused by your breaches, together with lost profits and consequential damages, plus interest at the applicable statutory rate from the date of each breach. See UTC § 1002.

4. Disgorgement. Disgorge to [TRUST / ENTITY] the full amount of any benefit, profit, salary, fee, commission, or other value you (or any affiliate) received in connection with the conduct described above — without offset, deduction, or apportionment, irrespective of whether [TRUST / ENTITY] suffered a corresponding net loss. See UTC § 1003; Restatement (Third) of Trusts § 100.

5. Voiding of Self-Dealing Transactions. Rescind, unwind, or void the transactions identified in Section II.A, with full restoration of the status quo ante.

6. Removal and Replacement. Resign your fiduciary office voluntarily, or our Client will petition the court for your removal under [UTC § 706 / DGCL § 225 or corporate-governance authority / RULLCA § 407 / RUPA § 601(5) / UPOAA § 116]. Pending replacement, consent to the appointment of a special fiduciary or receiver to take custody of [TRUST / ENTITY] assets.

7. Bond. Post a bond or other security in an amount sufficient to secure [TRUST / ENTITY] against further losses pending resolution of these claims.

8. Attorneys' Fees and Costs. Pay our Client's reasonable attorneys' fees and costs incurred in remedying your breaches, to the extent recoverable under the governing instrument, statute, or the common-fund / common-benefit doctrine.

IV. BOOKS AND RECORDS / INFORMATION DEMAND

Pursuant to [DGCL § 220 / RULLCA § 410 / RUPA § 403 / UTC § 813 / UPOAA § 114(h) / STATE STATUTE], our Client demands inspection and copying of the following documents within [10 / 21] days:

☐ All governing instruments and amendments (trust, charter, bylaws, operating agreement, partnership agreement, POA, board resolutions, written consents).

☐ All books of account, ledgers, journals, bank statements, brokerage statements, and tax returns of [TRUST / ENTITY] for the period [START] to present.

☐ All minutes and records of fiduciary meetings and actions; all committee minutes; all communications with auditors, attorneys, and advisors regarding the matters in Section II.

☐ All documents evidencing or relating to the related-party transactions identified above, including engagement letters, valuations, fairness opinions, and conflict-of-interest disclosures.

☐ All insurance policies (D&O, fiduciary liability, errors and omissions, fidelity bonds) that may respond to the claims herein.

The stated purpose is proper: to investigate suspected mismanagement and breaches of fiduciary duty, to value our Client's interest, and to communicate with other [beneficiaries / stockholders / members / partners]. See, e.g., AmerisourceBergen Corp. v. Lebanon County Employees' Retirement Fund, 243 A.3d 417 (Del. 2020).

V. PRESERVATION OF EVIDENCE / LITIGATION HOLD

You are hereby notified that litigation is reasonably foreseeable. You are obligated to preserve all documents, communications, electronically stored information ("ESI"), and tangible things that may be relevant to the claims described in this letter, including but not limited to:

• Emails, text messages, instant messages, and chat logs (Slack, Teams, Signal, WhatsApp, etc.) between you and any counterparty, affiliate, family member, advisor, broker, or co-fiduciary regarding [TRUST / ENTITY];
• Cloud storage, drafts, calendars, voicemails, and metadata;
• Bank, brokerage, accounting, and tax records of [TRUST / ENTITY] and of you personally to the extent reflecting [TRUST / ENTITY] transactions;
• Any device, account, or repository on which the foregoing resides.

You must suspend any auto-deletion, retention-policy purge, device-wipe, or destruction practices that could result in loss of relevant material. Spoliation will be pursued aggressively, including motions for adverse-inference instructions, monetary sanctions, and default under [FRCP 37(e) / state analog].

VI. THREAT OF JUDICIAL PROCEEDINGS

If you do not satisfy this demand by [RESPONSE DEADLINE], our Client is prepared to file, without further notice:

☐ A Petition in Probate Court under [STATE TRUST CODE CITATION] for accounting, surcharge, removal of trustee, appointment of a successor, and damages.

☐ A Stockholder Derivative Action (subject to the demand requirements of [STATE] law and the test articulated in United Food & Comm. Workers v. Zuckerberg, 262 A.3d 1034 (Del. 2021)), and/or a Direct Action for breach of fiduciary duty.

☐ A Books-and-Records Action under [DGCL § 220 / state analog] to compel inspection if access is denied.

☐ A Member/Partner Action under [STATE LLC ACT / RUPA] for accounting, dissolution, judicial expulsion, and damages.

☐ A POA Accounting Petition under [UPOAA § 116 / state probate code] to compel accounting, void transactions, and seek damages.

Our Client will seek the full measure of available relief, including compensatory damages, equitable disgorgement, surcharge, punitive damages where authorized, fee-shifting, pre- and post-judgment interest, and equitable removal.

VII. RESERVATION OF RIGHTS

Nothing in this letter is, or shall be construed as, a waiver of any right, claim, defense, or remedy of our Client, all of which are expressly reserved. This letter is not a complete recitation of facts or claims, and our Client reserves the right to amend, supplement, or expand its claims at any time, including assertion of claims for aiding and abetting breach of fiduciary duty, fraud, conversion, civil conspiracy, unjust enrichment, RICO (where applicable), and statutory remedies.

This letter is sent for settlement purposes within the meaning of [Fed. R. Evid. 408 / applicable state analog] only as to settlement discussions; nothing herein constitutes an admission by our Client.

VIII. RESPONSE

Please direct your written response to the undersigned by [DATE]. We strongly encourage you to retain independent counsel before responding. Substantive engagement now — including consent to an immediate accounting, agreement to suspend further transactions, and a meaningful settlement proposal — will avoid the cost, publicity, and personal exposure of judicial proceedings.

Govern yourself accordingly.

Sincerely,

[ATTORNEY NAME]
[BAR NUMBER]
[LAW FIRM NAME]

cc: [CO-FIDUCIARY / CO-TRUSTEE]
[REGISTERED AGENT]
[D&O / FIDUCIARY INSURANCE CARRIER]
[CLIENT]

SOURCES AND REFERENCES

• Uniform Trust Code §§ 801–817, 1001–1010 (Uniform Law Commission)
• Uniform Power of Attorney Act §§ 114–117 (Uniform Law Commission)
• Restatement (Third) of Trusts §§ 78, 100, 205
• DGCL §§ 102(b)(7), 141, 220
• RULLCA § 409; RUPA § 404
• Caremark, 698 A.2d 959 (Del. Ch. 1996); Stone v. Ritter, 911 A.2d 362 (Del. 2006)
• Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985)
• Revlon, 506 A.2d 173 (Del. 1986); Unocal, 493 A.2d 946 (Del. 1985)
• United Food & Comm. Workers v. Zuckerberg, 262 A.3d 1034 (Del. 2021)
• Kahn v. M&F Worldwide, 88 A.3d 635 (Del. 2014); Corwin v. KKR, 125 A.3d 304 (Del. 2015)
• AmerisourceBergen Corp. v. Lebanon County Emps.' Ret. Fund, 243 A.3d 417 (Del. 2020)

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