Most business owners do not arrive at a fiduciary duty claim through a single dramatic betrayal. They arrive through a slow accumulation of small wrong notes. A vendor contract goes to a company nobody has heard of, and it turns out your co-owner’s brother-in-law owns it. Distributions stop, but your partner’s compensation quietly climbs. A client you brought in gets serviced through a second entity your partner formed without telling you. You ask for the general ledger and you get a summary. You ask again and you get silence.

At that point the question stops being whether you are annoyed and starts being whether you have a claim. Maryland law draws a real line between a co-owner who exercises poor business judgment, which is generally not actionable, and a co-owner who uses a position of trust and control to enrich himself at the company’s expense, which frequently is. The distinction is not always obvious from the outside, and it is the reason these cases turn on documents rather than impressions.

This guide explains how breach of fiduciary duty claims work between business co-owners in Maryland. It covers what the duty is and who owes it, the elements you have to prove, what a breach looks like in practice, the direct versus derivative question that decides how the case gets filed, the records and evidence that make or break the claim, the remedies Maryland courts actually award, the defenses you should expect, and the drafting choices that prevent the whole problem. If your situation is broader than a single act of disloyalty, our overview of a business partner dispute in Maryland maps the wider landscape, and if the core problem is a voting stalemate rather than misconduct, see our guide to 50/50 LLC deadlock.

A fiduciary duty is the obligation that arises when one person holds power over another person’s property, money, or interests and is expected to exercise that power for the other person’s benefit rather than for personal gain. In the business context, that power usually comes from a management role, from control of the company’s finances, or from control of the company’s votes.

Two components of the duty do most of the work in co-owner disputes:

• The duty of loyalty. This is the obligation to put the company’s interests ahead of your own. It is the duty violated by self-dealing, by taking an opportunity that belonged to the company, by competing against the business while still an owner, and by diverting company funds or assets to personal use.
• The duty of care. This is the obligation to act with reasonable diligence and on an informed basis when managing the business. It is a lower-frequency claim in practice, because courts are reluctant to second-guess honest business decisions, and because in some entity forms the statutory standard is deliberately forgiving.

What makes Maryland distinctive is that the source of the duty differs sharply depending on the entity you chose at formation. For a corporation, the duty is statutory and the statute says it is the only source. For an LLC, the statute is silent and the duty comes from common law agency principles. For a general partnership, the statute lists the duties and then says those are the only ones. Three entities, three legal frameworks, and the same underlying conduct can produce three different analyses. That is why the first question in any fiduciary case is not what your partner did but what kind of company you own.

The Maryland Limited Liability Company Act does not address the fiduciary duties of members or managers. That silence was the source of years of uncertainty, and the Supreme Court of Maryland resolved it in Plank v. Cherneski, 469 Md. 548 (2020), holding that managing members of an LLC owe common law fiduciary duties to the LLC and to the other members based on the fiduciary relations governing the principles of agency.

The practical translation is straightforward. If you manage a Maryland LLC, you are an agent of the company and of your fellow members, and agency law imposes obligations of loyalty and care that exist whether or not anyone wrote them down. If you are a passive member with no management role, the analysis is different and considerably less settled, because the agency rationale in Plank rests on the managing member’s role rather than on ownership alone.

The operating agreement then does enormous work. Md. Code, Corps. and Ass’ns Section 4A-402 permits members to enter into an operating agreement to regulate or establish any aspect of the affairs of the company or the relations of its members, and it authorizes a court to enforce that agreement by injunction or by granting other relief the court determines to be fair and appropriate in the circumstances. Maryland courts have recognized that provisions in an operating agreement could alter existing duties or create duties that would not otherwise exist. Because the agreement in Plank was silent on the subject, the Court did not decide how far an operating agreement may go in limiting a managing member’s fiduciary duties. That open question is precisely why the drafting of your Maryland LLC operating agreement deserves more attention than the twenty-dollar template it usually receives.

For a Maryland corporation, the standard of conduct for directors is codified at Md. Code, Corps. and Ass’ns Section 2-405.1. Subsection (c) requires a director to act in good faith, in a manner the director reasonably believes to be in the best interests of the corporation, and with the care that an ordinarily prudent person in a like position would use under similar circumstances.

Two other subsections change the litigation landscape:

• Subsection (g) provides that an act of a director is presumed to be in accordance with the standard of conduct in subsection (c). This is Maryland’s codified expression of the business judgment rule, and it is a presumption the plaintiff has to overcome.
• Subsection (i) provides that the section is the sole source of duties of a director to the corporation or the stockholders of the corporation, and that it applies to any act of a director, including acts as a member of a board committee.

That sole source language is not decorative. It is the reason Maryland corporate decisions frequently diverge from Delaware decisions on comparable facts, because Delaware’s standards of directorial conduct are judge-made while Maryland’s are statutory. If your dispute concerns a Maryland corporation and someone is citing Delaware authority to you as though it controls, that is a point worth pressing.

For a general partnership, the Maryland Revised Uniform Partnership Act supplies the answer directly. Section 9A-404 states that the only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care, and then defines both narrowly.

The duty of loyalty is limited to three obligations: to account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity; to refrain from dealing with the partnership as or on behalf of a party having an interest adverse to the partnership; and to refrain from competing with the partnership in the conduct of the partnership business before dissolution.

The duty of care is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. Separately, a partner must discharge duties and exercise rights consistently with the obligation of good faith and fair dealing, and the statute makes clear that a partner does not violate a duty merely because the partner’s conduct furthers the partner’s own interest. If your business is an unwritten general partnership, our guide to business partnership agreements in Maryland and Pennsylvania explains what those default rules leave uncovered.

For twenty-three years after Kann v. Kann, 344 Md. 689 (1997), Maryland courts gave conflicting answers to a basic question: can you sue someone for breach of fiduciary duty standing alone, or must the claim ride along with some other tort? Federal and state courts applying Maryland law reached different conclusions, and litigants selected whichever statement helped them.

Plank v. Cherneski ended that. The Supreme Court of Maryland held that a breach of fiduciary duty may be actionable as an independent cause of action, and set out the elements:

1. The existence of a fiduciary relationship. You must establish that the defendant occupied a fiduciary position toward you or toward the company, whether by statute, by contract, or under common law.
2. Breach of the duty owed by the fiduciary to the beneficiary. You must identify the specific conduct that violated the specific duty, not merely conduct you disagree with.
3. Harm to the beneficiary. You must show injury, and you must show that the injury belongs to the party bringing the claim.

The Court added an important qualifier that gets overlooked. Recognizing the cause of action does not mean every breach sounds in tort with an automatic right to a jury trial and money damages. The remedy depends on the type of fiduciary relationship at issue and on the remedies historically provided by statute, common law, or contract for that particular relationship. In other words, the claim exists; what you can recover on it is a separate question that has to be analyzed on its own.

It is also worth noting how Plank ended on its facts. The minority members won on their contract claims, but the trial court found insufficient evidence of a fiduciary breach, and that outcome survived appeal. A recognized cause of action is not a likely verdict. These cases are won on proof.

Fiduciary claims between co-owners tend to fall into a small number of recognizable shapes. If your situation matches one of these, it is worth a conversation with counsel before you confront your partner.

• Undisclosed self-dealing. The company buys goods, services, rent, or equipment from an entity your co-owner owns or controls, at terms nobody negotiated at arm’s length, without disclosure or approval.
• Diversion of company funds. Personal expenses run through the business, family members appear on payroll without performing work, or company accounts fund purchases that never touch the business.
• Taking a company opportunity. A deal, client, lease, or acquisition that came to the business gets routed to a separate entity your co-owner formed. Under Section 9A-404, appropriating a partnership opportunity is expressly within a partner’s duty to account.
• Secret competition. Your co-owner sets up or invests in a competing venture while still an owner and while still holding the company’s customer list, pricing, and pipeline. This overlaps with restrictive covenant analysis, which our post on non-compete enforceability in Maryland addresses in detail.
• Compensation used to exclude a minority owner from profits. The controlling owners stop making distributions while increasing their own salaries, bonuses, or other compensation, allowing corporate profits to flow to them while the minority stockholder receives nothing. In Eastland Food Corp. v. Mekhaya, the Supreme Court of Maryland held that allegations of this kind could support a stockholder-oppression claim where they substantially defeated the minority stockholder’s objectively reasonable expectation of receiving a proportional share of distributable profits. Although the Appellate Court had described compensation used to distribute profits as a “de facto dividend,” the Supreme Court stated that the phrase was unnecessary and discouraged its use.
• Freeze-out and information blackout. The minority owner is removed from management, cut off from the books, excluded from meetings, and left holding an interest that produces nothing.
• Misuse of control in a transaction. A sale, redemption, or restructuring gets steered to benefit the controlling owner at the expense of the others. If you are on either side of a transaction like this, our guide on selling a business in Maryland covers the process issues that often become evidence later.

Before a Maryland court reaches the merits of a fiduciary claim, it asks a structural question: does this claim belong to you, or to the company?

• A direct claim is yours personally. It is available where you suffered the harm directly, or where a duty was owed directly to you, even if the same conduct also violated a duty owed to the entity. Recovery goes to you.
• A derivative claim belongs to the entity. You bring it on the company’s behalf, and any recovery ordinarily goes to the company. Your benefit is indirect, through your ownership interest.

This is not a formality. It determines who must be named, what procedural prerequisites apply, who receives any money, and in many cases whether the claim survives a motion to dismiss at all.

Eastland Food Corp. v. Mekhaya, 486 Md. 1 (2023), is the case to understand. A minority stockholder in a family corporation alleged that after he was terminated, the majority took the company’s profits through excessive compensation and diverted corporate funds to personal use while paying him nothing. He pleaded three counts: stockholder oppression, breach of fiduciary duty, and unjust enrichment.

The Supreme Court of Maryland split the difference in a way every Maryland business owner should notice. It held that he stated a claim for stockholder oppression, because he alleged facts supporting the reasonableness of his expectation that his stock ownership carried continued employment, managerial involvement, and a proportional share of distributable profits. But it held that the proposed amended complaint did not state a cause of action for breach of fiduciary duty, determining that he could not bring a direct claim for compensatory damages as opposed to a derivative claim. The unjust enrichment count failed for related reasons.

If your claim is derivative, you generally cannot simply file it. Because the claim belongs to the company, the company’s decision-makers get the first opportunity to decide whether to pursue it. That means a pre-suit demand on the board.

The governing case is Werbowsky v. Collomb, 362 Md. 581 (2001), where the Court rejected both the Delaware futility framework and the model act’s universal demand rule, and instead recognized a very limited exception. Demand is excused only where the allegations or evidence clearly demonstrate, in a very particular manner, either that a demand or delay awaiting a response to a demand would cause irreparable harm to the corporation, or that a majority of the directors are so personally and directly conflicted or committed to the decision in dispute that they cannot reasonably be expected to respond to a demand in good faith and within the ambit of the business judgment rule.

Maryland courts have applied that standard strictly. Participation by directors in the challenged conduct is not by itself enough to excuse demand, and generalized or speculative allegations of conflict will not do it.

The Supreme Court of Maryland returned to the question in Nathanson v. Tortoise Capital Advisors, L.L.C., No. 51, September Term 2025, decided July 14, 2026. Shareholders of two Maryland closed-end funds sued the funds’ investment adviser and directors derivatively without making a demand, arguing futility. The circuit court dismissed, the Appellate Court of Maryland affirmed on the ground that the allegations showed at most that a demand was unlikely to succeed rather than that it was futile, and the Supreme Court of Maryland affirmed as well while clarifying two points:

• Futility turns on whether the shareholders clearly and particularly allege that a majority of the board could not consider a litigation demand in accordance with the standard of conduct imposed by Section 2-405.1(c). It hinges on the board’s capacity to consider a demand, not on the likelihood that the board would refuse it.
• The Werbowsky phrase describing directors who are conflicted or committed to the decision in dispute states a single inquiry, not two distinct routes to excusal.

For LLCs, the Maryland LLC Act supplies its own derivative framework. Section 4A-801 permits a proper plaintiff to bring a derivative action to enforce a right of the company to recover a judgment in its favor, to the same extent that a stockholder may bring a derivative suit under Maryland corporation law, and permits the action where members with authority to bring it have refused or where an effort to cause them to bring it is not likely to succeed. Section 4A-803 requires the complaint to set forth with particularity the attempts, if any, to secure initiation of the action by the company, or the reasons for not making the effort.

Fiduciary cases are documentary cases. The suspicion usually comes first and the proof comes from the company’s own books. Maryland gives owners statutory tools to get those books, and using them properly is often the difference between a claim you can plead with particularity and a claim that gets dismissed as speculation.

If you are an LLC member, Section 4A-406 permits you, on reasonable written demand and for any purpose reasonably related to your membership interest, to inspect and copy true and full information regarding the state of the business and financial condition of the company; the articles of organization and operating agreement and all amendments; a current list of the names and last known business, residence, or mailing addresses of all members; and other information regarding the affairs of the company as is just and reasonable for such a purpose. You may also inspect and copy the company’s federal, state, or local income tax returns. The demand must be in writing and must state its purpose, and the articles of organization or operating agreement may impose reasonable standards governing matters such as what information will be furnished, when and where it will be furnished, and who will bear the expense. In addition, unless the requesting member signs a confidentiality or nondisclosure agreement reasonably acceptable to the company, the company may withhold certain information for a reasonable period, including trade secrets, information it reasonably and in good faith believes could damage the company or is not in the company’s best interest to disclose, and information that it is legally or contractually required to keep confidential.

If you are a stockholder, the corporate statutes work in two tiers. Section 2-512 gives any stockholder or holder of a voting trust certificate the right, on written request, to inspect and copy items such as the bylaws, minutes of the proceedings of stockholders, annual statements of affairs, and voting trust agreements deposited with the corporation, and requires the corporation to have the requested documents available at its principal office within seven days. Section 2-513 goes further for larger holders: one or more persons who together are, and for at least six months have been, holders of at least 5 percent of the outstanding shares of a class or series may inspect and copy the corporation’s books of account and its stock ledger, request a statement of the corporation’s affairs, and in certain circumstances request a stockholder list.

Once you have access, the work is reconstructive. In a typical co-owner case, the documents that matter most are:

• General ledger and full transaction detail, not summaries or management reports
• Bank and credit card statements for every company account, with supporting checks and wires
• Payroll registers and compensation history for all owners and family members
• Vendor lists and contracts, with entity ownership traced through state filings
• Tax returns and, for pass-through entities, the Schedules K-1 issued to each owner
• Board and member minutes, written consents, and any conflict disclosures or approvals
• Emails, texts, and messaging records showing what was disclosed, when, and to whom
• Customer and pipeline records that show where work was routed

A forensic accountant is frequently worth the cost, because the quantification of a diversion, a disguised distribution, or a diverted opportunity is usually an expert exercise. State records also matter more than people expect. A search of Maryland Business Express and the Maryland Department of Assessments and Taxation will often reveal the second entity your co-owner formed, the date it was created, and who its resident agent is.

Because Plank ties the remedy to the nature of the fiduciary relationship and to the remedies historically available for that relationship, the relief in a Maryland fiduciary case is not one-size-fits-all. The realistic menu includes:

• Compensatory damages. The measurable loss caused by the breach, whether to you directly or to the company on a derivative claim.
• Disgorgement and an accounting. Recovery of the profit or benefit the disloyal party obtained through the breach. For partnerships this is written into the statute, which requires a partner to account to the partnership and hold as trustee any property, profit, or benefit improperly derived.
• Constructive trust. An equitable remedy that converts the holder of legal title into a trustee for the party who in good conscience should have the benefit of the property. As the Court explained in Wimmer v. Wimmer, 287 Md. 663 (1980), it applies where property was acquired by fraud, misrepresentation, or other improper method, or where circumstances make it inequitable for the holder to retain it, and its purpose is to prevent unjust enrichment. In a business case it is the tool for chasing a diverted asset into whatever it became.
• Injunctive relief. Orders stopping ongoing diversion, freezing accounts, requiring access to records, or restraining a competing venture while the case proceeds.
• Equitable relief short of dissolution. Discussed in the next section.
• Dissolution. Available for a corporation under Section 3-413 and for an LLC under Section 4A-903, where it is not reasonably practicable to carry on the business in conformity with the articles of organization or the operating agreement. Courts treat it as a last resort. Our guide to closing a business in Maryland explains what winding up actually involves.

Clients often assume that proving disloyalty opens the door to punishment and fee recovery. In Maryland, both are hard.

Punitive damages require actual malice, meaning conduct characterized by evil motive, intent to injure, ill will, or fraud, proven by clear and convincing evidence. That standard comes from Owens-Illinois, Inc. v. Zenobia, 325 Md. 420 (1992). Two additional points from Bontempo v. Lare, 444 Md. 344 (2015), matter here. First, the Court noted that it has repeatedly held that punitive damages are not available as an equitable remedy. Second, a breach of fiduciary duty is not the same thing as fraud; a director can breach fiduciary duties without committing fraud. In Bontempo, the majority owner’s use of corporate funds for personal expenses was oppressive and a breach of duty, but because the transactions were recorded in the company’s books to which the plaintiff had access, the courts found no fraud and awarded no punitive damages.

Attorney’s fees are governed by the American Rule, under which each party ordinarily bears its own fees. Maryland recognizes limited exceptions, including where the parties have contracted for fee-shifting, where a statute allows recovery, where the defendant’s wrongful conduct forced the plaintiff into litigation with a third party, and where a common fund is created. The common fund exception has real application in derivative litigation, where a successful plaintiff creates a recovery that benefits the entity and the other owners. But the reliable path to fee recovery in a co-owner dispute is a fee-shifting clause negotiated into the operating agreement or shareholders’ agreement long before anyone is angry.

Minority owners of Maryland corporations have a statutory route that does not depend on characterizing the injury as the company’s. Under Section 3-413(b)(2), any stockholder entitled to vote in the election of directors may petition a court of equity to dissolve the corporation on the ground that the acts of the directors or those in control of the corporation are illegal, oppressive, or fraudulent. Note that this ground carries no 25 percent ownership threshold; that threshold applies to the deadlock grounds in subsection (a). The oppression ground does not apply to corporations with a class of equity securities registered under the federal Securities Exchange Act of 1934.

Bontempo v. Lare established the measure of oppression: the reasonable expectations of the minority stockholder at the time the stockholder acquired the interest. It also confirmed two things that shape strategy. A court may consider equitable remedies less drastic than dissolution, taking into account the interests of others associated with the corporation, and the choice of relief is reviewed for abuse of discretion. But employment-related relief, such as reinstatement or pay-related damages, is unlikely to be appropriate unless the oppressive conduct involved a breach of a written or oral employment agreement, because Maryland’s at-will presumption otherwise permits termination.

Eastland Food Corp. v. Mekhaya then confirmed how broadly those expectations can be framed at the pleading stage. The plaintiff’s allegations that stock ownership carried continued employment, managerial involvement, and a proportional share of distributable profits were sufficient to state an oppression claim, even though the same facts could not support a direct fiduciary duty claim for damages.

Experienced defense counsel in a Maryland fiduciary case will reach for a predictable set of arguments. Knowing them in advance changes how you build the file.

• The business judgment presumption. For a corporation, Section 2-405.1(g) presumes the director acted in accordance with the statutory standard. Expect the defense to characterize every challenged decision as an informed, good faith judgment call.
• No duty was owed. In an LLC, expect an argument that the defendant was not a managing member and therefore not an agent, or that the operating agreement defined the relationship differently. In a partnership, expect an argument that the conduct falls outside the three loyalty obligations and the narrow care standard in Section 9A-404.
• The claim is derivative, not direct. After Eastland, this is often the first motion filed, and it is frequently successful where the complaint alleges harm to the company and then asks for a personal recovery.
• No demand was made. If the claim is derivative, expect a Werbowsky motion, now framed through the capacity-focused analysis reaffirmed in Nathanson.
• Disclosure, consent, or ratification. A conflicted transaction that was disclosed and approved, or that appeared plainly in books you could access, is much harder to attack. Bontempo illustrates the point on the fraud and punitive damages side.
• The conduct furthered a legitimate interest. The partnership statute expressly provides that a partner does not violate a duty merely because the partner’s conduct furthers the partner’s own interest, and that a partner may lend money to and transact business with the partnership.
• Limitations or laches. Discussed below, and often the most dangerous defense of all.
• Unclean hands and counterclaims. If you responded to your suspicions with self-help, expect that conduct to become the defendant’s counterclaim.

Maryland’s general civil limitations period is three years from the date the cause of action accrues, under Md. Code, Cts. and Jud. Proc. Section 5-101. Maryland’s discovery rule means a cause of action generally accrues when the claimant knew or reasonably should have known of the wrong, a principle traced to Poffenberger v. Risser, 290 Md. 631 (1981).

In fiduciary cases this rule cuts in both directions. It helps you when the misconduct was genuinely concealed, because the clock may not start when the transaction occurred. It hurts you when the information was sitting in records you had the right to inspect, because a defendant will argue that a reasonably diligent owner would have discovered the problem years earlier. That argument is more persuasive after Bontempo, where the fact that the questionable transactions were recorded in the company’s books and were accessible to the plaintiff defeated the fraud theory.

For claims that are purely equitable in nature, courts may apply laches rather than the statute directly, frequently measuring the delay against the analogous limitations period and asking whether the delay prejudiced the other side.

Beyond the legal deadline, delay causes practical damage that no rule fixes. Records get overwritten, the diverted money gets spent, employees who saw what happened move on, memories fade, and the company’s value erodes while the dispute festers. The strongest fiduciary cases are the ones where the owner acted on the first documented irregularity rather than the twentieth.

• Confronting before collecting. Once your co-owner knows you are looking, access tends to disappear. Secure records first.
• Responding with self-help. Changing the locks, freezing accounts, taking unilateral distributions, or diverting incoming payments will generate fiduciary claims against you and will color everything a judge later hears.
• Pleading a company injury as a personal claim. Eastland shows how a good factual record can lose on the wrong theory.
• Skipping the demand. Maryland’s futility exception is very limited, and Nathanson underscores that it depends on the board’s capacity to consider a demand, not on your prediction that the board would say no.
• Treating poor performance as disloyalty. Without a personal benefit, a conflict, or concealment, you are usually arguing about business judgment, which Maryland’s statutes are built to protect.
• Counting on punitive damages to fund the case. Actual malice, proven by clear and convincing evidence, is a high bar, and punitive damages are not available as an equitable remedy.
• Assuming the loser pays your fees. Under the American Rule, that happens only through a contract, a statute, or a recognized exception.
• Ignoring what the governing document says. Operating agreements can alter or create duties, define approval procedures for conflicted transactions, restrict records access through reasonable standards, and shift fees. Read it before you form a view about your rights.
• Waiting. The three-year period under Section 5-101 can bar a claim that once looked strong, and every month of delay makes proof harder.

Nearly every fiduciary dispute this firm sees traces back to a governing document that did not anticipate conflict. These provisions are inexpensive to draft at formation and close to impossible to add once two owners have stopped trusting each other.

• A conflicted transaction procedure. Define what counts as a related-party transaction, require written disclosure, and specify who must approve it and by what vote. Most self-dealing claims are really claims about undisclosed transactions, and a working disclosure procedure removes the ambiguity.
• Express duty provisions. Because Maryland’s LLC Act is silent and Plank left the outer limits open, say what the duties are rather than leaving them to litigation. Clarity protects both the manager and the passive members.
• Information and reporting rights. Specify what financial reporting each owner receives, how often, and in what format, so nobody has to file a records demand to see the general ledger.
• Distribution policy. Tie distributions to a formula or a defined process so that compensation cannot quietly become the only channel through which profits leave the company.
• Compensation approval. Require owner compensation to be set by a defined vote rather than by whoever signs the checks.
• Non-compete and opportunity provisions. Define what opportunities belong to the company and what outside activity is permitted, with the scope drafted to be enforceable under Maryland law.
• A buy-sell mechanism with a valuation method. The most common resolution of a fiduciary dispute is a separation. Deciding the price mechanism in advance removes the single most contested issue.
• Mandatory mediation and a fee-shifting clause. One keeps most disputes out of court; the other changes the economics of the ones that get there.

If your company is operating on a template or on nothing at all, this is the work our corporate governance and contract drafting practices exist to do, and it is far cheaper than the litigation it prevents.

A fiduciary duty is the obligation to put the company’s interests ahead of your own when you hold a position of trust and control within it. In Plank v. Cherneski, 469 Md. 548 (2020), the Supreme Court of Maryland held that breach of fiduciary duty may be actionable as an independent cause of action, and that a plaintiff must show the existence of a fiduciary relationship, breach of the duty owed by the fiduciary to the beneficiary, and harm to the beneficiary. The remedy depends on the type of fiduciary relationship at issue and the remedies historically provided by statute, common law, or contract for that relationship. In practice, the claim arises when a co-owner diverts company funds or opportunities, competes secretly, engages in undisclosed self-dealing, or uses control of the business for personal benefit at the expense of the company and the other owners.

The Maryland Limited Liability Company Act does not address fiduciary duties, so the answer comes from common law. In Plank v. Cherneski, the Supreme Court of Maryland confirmed that managing members of an LLC owe common law fiduciary duties to the LLC and to the other members based on principles of agency. The operating agreement matters a great deal here, because Maryland law permits members to regulate or establish any aspect of the affairs of the company or the relations of its members through that agreement, and Maryland courts have recognized that operating agreement provisions could alter existing duties or create duties that would not otherwise exist. Because the operating agreement in Plank contained no such provisions, the Court did not decide how far an operating agreement may go in limiting a managing member’s fiduciary duties.

For a Maryland corporation, the standard of conduct is statutory. Under Md. Code, Corps. and Ass’ns Section 2-405.1(c), a director must act in good faith, in a manner the director reasonably believes to be in the best interests of the corporation, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Subsection (g) provides that an act of a director is presumed to be in accordance with that standard, which is Maryland’s codified expression of the business judgment rule. Subsection (i) states that the section is the sole source of duties of a director to the corporation or the stockholders of the corporation. That statutory language is why Maryland corporate cases often look different from Delaware cases addressing similar facts.

A direct claim belongs to you personally because you suffered a distinct injury or because a duty was owed directly to you. A derivative claim belongs to the company, and you bring it on the company’s behalf, which means any recovery ordinarily goes to the company rather than into your pocket. The distinction is not a technicality. In Eastland Food Corp. v. Mekhaya, 486 Md. 1 (2023), the Supreme Court of Maryland allowed a minority stockholder’s oppression claim to proceed but held that his breach of fiduciary duty and unjust enrichment counts failed because he could not bring them as direct claims for compensatory damages rather than derivative claims. Getting this wrong at the pleading stage can end a case that had good facts behind it.

In nearly every case, yes. Under Werbowsky v. Collomb, 362 Md. 581 (2001), Maryland requires a pre-suit demand and recognizes only a very limited futility exception, available where the allegations or evidence clearly demonstrate, in a very particular manner, either that a demand or delay awaiting a response would cause irreparable harm to the corporation, or that a majority of the directors are so personally and directly conflicted or committed to the decision in dispute that they cannot reasonably be expected to respond to a demand in good faith and within the ambit of the business judgment rule. In Nathanson v. Tortoise Capital Advisors, L.L.C., No. 51, September Term 2025, decided July 14, 2026, the Supreme Court of Maryland clarified that futility turns on the board’s capacity to consider a demand rather than on the likelihood that the board would refuse it, and that the conflicted or committed language describes a single inquiry rather than two separate routes.

For an LLC, Md. Code, Corps. and Ass’ns Section 4A-406 permits a member, on reasonable written demand and for any purpose reasonably related to the member’s membership interest, to inspect and copy true and full information regarding the state of the business and financial condition of the company, the articles of organization and operating agreement and amendments, a current list of members, and other information that is just and reasonable for such a purpose, as well as the company’s tax returns. The demand must be in writing and must state its purpose, and inspection rights may be subject to reasonable standards set out in the articles or the operating agreement. Unless the requesting member signs a confidentiality or nondisclosure agreement reasonably acceptable to the company, the company may withhold certain trade-secret, potentially damaging, or legally or contractually protected information for a reasonable period. For a corporation, Section 2-512 gives any stockholder access to items such as the bylaws, minutes of stockholder proceedings, annual statements of affairs, and voting trust agreements, while Section 2-513 gives holders of at least 5 percent of the outstanding stock of a class or series, for at least 6 months, the right to inspect the books of account and the stock ledger.

The available relief depends on the fiduciary relationship, the entity, and how the claim is framed. Common remedies include compensatory damages, disgorgement of profits the disloyal party obtained through the breach, an accounting, a constructive trust over specific property or proceeds, injunctive relief to stop ongoing conduct, and removal from a management role where the governing documents or the court’s equitable powers allow it. For a Maryland corporation, Section 3-413 permits any stockholder entitled to vote in the election of directors to petition a court of equity to dissolve the corporation on the ground that the acts of the directors or those in control are illegal, oppressive, or fraudulent, and Bontempo v. Lare, 444 Md. 344 (2015), confirms that courts may consider equitable remedies less drastic than dissolution. For an LLC, Section 4A-903 permits dissolution when it is not reasonably practicable to carry on the business in conformity with the articles of organization or the operating agreement.

Both are difficult. Maryland requires proof of actual malice, meaning conduct characterized by evil motive, intent to injure, ill will, or fraud, established by clear and convincing evidence, before punitive damages may be awarded. That standard comes from Owens-Illinois, Inc. v. Zenobia, 325 Md. 420 (1992). In Bontempo v. Lare, the Supreme Court of Maryland noted that it has repeatedly held that punitive damages are not available as an equitable remedy, and Maryland courts have recognized that a director can breach fiduciary duties without committing fraud. As for fees, Maryland follows the American Rule, so each side ordinarily pays its own attorney’s fees unless a contract provides otherwise, a statute allows recovery, the defendant’s wrongful conduct forced the plaintiff into litigation with a third party, or a common fund is created. A fee-shifting clause in your operating agreement or shareholders’ agreement is often the single most valuable provision in the document once a dispute begins.

Maryland’s general civil limitations period is three years from the date the cause of action accrues, under Md. Code, Cts. and Jud. Proc. Section 5-101. Under Maryland’s discovery rule, a cause of action generally accrues when the claimant knew or reasonably should have known of the wrong, which matters in fiduciary cases because the conduct is often concealed. For claims that are purely equitable in nature, courts may apply laches rather than the statute directly, frequently measured against the analogous limitations period. Because accrual is fact-specific and delay erodes both evidence and leverage, the practical answer is to consult a Maryland business litigation attorney as soon as you suspect a problem rather than waiting to be certain.

In almost all cases, yes. These disputes sit at the intersection of the Maryland LLC Act, the Maryland General Corporation Law or the Maryland Revised Uniform Partnership Act, common law fiduciary principles, contract law, and equitable remedies, and the early procedural decisions often decide the outcome. Whether a claim is direct or derivative, whether a pre-suit demand is required, what records to demand and when, and whether to seek injunctive relief are all choices made in the first weeks. Acting alone also carries risk on the other side of the ledger, because self-help measures such as locking a co-owner out, freezing accounts, or making unilateral distributions can generate fiduciary claims against you. An experienced Maryland business attorney can evaluate the governing documents, preserve evidence, and choose the forum and the theory before positions harden.