Business Fraud and Fiduciary Duty Claims in Washington, DC

A fiduciary claim says someone who owed the company loyalty put themselves first; a fraud claim says someone lied or took money that was not theirs. In the District of Columbia a corporate director must act in good faith and in a manner they reasonably believe to be in the best interests of the corporation, and an LLC member owes a duty of loyalty that expressly includes holding as trustee any profit or benefit taken from a company opportunity. Most of these claims carry a three-year deadline — but trade libel carries only one.

Who owes a fiduciary duty in a D.C. company?

Directors, officers, and — in an LLC — members and managers. The standards are statutory rather than left to the case law alone. D.C. Code § 29–306.30 requires each director, when discharging their duties, to act in good faith and in a manner the director reasonably believes to be in the best interests of the corporation, with the care a person in a like position would reasonably believe appropriate under similar circumstances. It also requires a director to disclose to the board information known to them to be material that the others do not already have.

For LLCs the duty is spelled out even more concretely. Under § 29–804.09(b), the duty of loyalty of a member in a member-managed LLC includes accounting to the company and holding as trustee any property, profit or benefit derived from the conduct of the company’s affairs, from a use of the company’s property, or from the appropriation of a limited liability company opportunity — and refraining from dealing with the company on behalf of someone with an adverse interest.

Liability is not automatic. § 29–306.31 sets a standard of liability that the party asserting it must establish, including action not in good faith or a decision the director did not reasonably believe to be in the corporation’s best interests. That is why these cases turn on documents and contemporaneous records rather than on outcomes.

Which claim fits which facts?

The claims below overlap in practice and are often pleaded together, but they have different elements, different people entitled to bring them, and — most importantly — different deadlines.

Claim	Core question	Authority	Deadline
Breach of fiduciary duty (director)	Did they act in good faith and in the corporation’s interests?	§ 29–306.30, § 29–306.31	3 years (§ 12–301(8))
Breach of fiduciary duty (LLC member/manager)	Did they take a company benefit or opportunity for themselves?	§ 29–804.09	3 years (§ 12–301(8))
Derivative claim on the company’s behalf	Were you a shareholder at the time of the act complained of?	§ 29–305.51	3 years (§ 12–301(8))
Direct claim by an LLC member	Is your injury separate from the company’s?	§ 29–808.01(b)	3 years (§ 12–301(8))
Fraudulent transfer	Was the transfer made to hinder, delay or defraud a creditor — or without reasonably equivalent value?	§ 28–3104, § 28–3107	See § 28–3108
Trade libel / business defamation	Was a false statement of fact published about the business?	§ 12–301(4)	1 year
Injury to personal property	Was company property damaged or wrongly detained?	§ 12–301(2)–(3)	3 years

The one-year libel period is the trap. A false statement to a customer or a lender feels like a commercial injury and gets treated like one, but if the claim is pleaded as defamation the clock in § 12–301(4) is one year — see business defamation and trade libel.

Do I sue in my own name or the company’s?

It depends on whose injury it is. A derivative claim belongs to the company and is brought on its behalf; § 29–305.51 requires that the shareholder was a shareholder at the time of the act or omission complained of, or became one by operation of law, and that they fairly and adequately represent the interests of the corporation.

On the LLC side, § 29–808.01 lets a member bring a direct action in the Superior Court against another member, a manager or the company — but subsection (b) requires the member to plead and prove an actual or threatened injury that is not solely the result of an injury suffered by the company. Getting that characterisation wrong is a common reason a well-founded case is dismissed early.

Where the dispute is really about control or exit rather than compensation, the remedy set is different — see ownership and partner disputes and business dissolution.

What if the money has already been moved?

There is a statute for exactly that. Under § 28–3104(a), a transfer is fraudulent as to a creditor — whether the claim arose before or after the transfer — if the debtor made it with actual intent to hinder, delay, or defraud any creditor, or without receiving a reasonably equivalent value while the remaining assets were unreasonably small for the business, or while incurring debts beyond the ability to pay.

The remedies in § 28–3107(a) are the reason this claim matters: avoidance of the transfer to the extent needed to satisfy the claim; attachment against the transferred asset; an injunction against further disposition; and — significantly — appointment of a receiver to take charge of the asset transferred.

That last remedy is the bridge to the firm’s receivership practice — see court-appointed receiverships and fraud, embezzlement and civil recovery.

What this group covers

• Breach of Fiduciary Duty — directors, officers, partners and LLC members who put themselves first
• Fraud & Embezzlement — Civil Recovery — getting the money back, including from where it was moved
• Tortious Interference — a third party who wrecked a contract or a business relationship
• Business Defamation & Trade Libel — false statements about the business — and the one-year clock
• Professional Malpractice — claims against advisers whose failures cost the company money

Quick answers

Frequently asked questions

What duty does a director owe a D.C. corporation?

Under D.C. Code § 29–306.30 a director must act in good faith and in a manner the director reasonably believes to be in the best interests of the corporation, with the care a person in a like position would reasonably believe appropriate. They must also disclose material information known to them but not to the rest of the board.

Can an LLC member sue another member directly?

Yes, under D.C. Code § 29–808.01 a member may bring a direct action against another member, a manager or the company. But § 29–808.01(b) requires them to plead and prove an actual or threatened injury that is not solely the result of an injury to the company itself.

Who can bring a derivative claim?

D.C. Code § 29–305.51 requires that the shareholder was a shareholder at the time of the act or omission complained of — or became one through transfer by operation of law from someone who was — and that they fairly and adequately represent the corporation’s interests.

A partner moved the money to another account. Can it be recovered?

Potentially. D.C. Code § 28–3104 makes a transfer fraudulent as to a creditor where it was made with actual intent to hinder, delay or defraud, or without reasonably equivalent value in the circumstances described. Section 28–3107 allows avoidance, attachment, an injunction, and appointment of a receiver over the transferred asset.

How long do I have to sue for breach of fiduciary duty in D.C.?

Three years is the general period, under the catch-all in D.C. Code § 12–301(8) for actions with no specially prescribed limitation. If the same conduct also involves a false statement about the business, the defamation count carries only one year under § 12–301(4), so the deadlines in a single case can differ.

Why does one set of facts produce two different claims with two different claimants?

Because the duty and the debt run to different people. The fiduciary claim belongs to the entity, under D.C. Code § 29–804.09(b) for an LLC member, while a claim to unwind the transfer belongs to the creditor under § 28–3104(a) — so the same diversion supports separate actions brought by separate parties.

How does a company recover the value rather than prove a loss?

By treating the recipient as a trustee. D.C. Code § 29–804.09(b)(1) requires an LLC member to account to the company and hold as trustee any property, profit or benefit derived from the company’s activities or property, or from an appropriated opportunity — which shifts the exercise from quantifying harm to identifying what must be handed back.

Who pays the legal costs of a successful derivative claim?

The recovery can. Under D.C. Code § 29–808.06(a) any proceeds of an LLC derivative action belong to the company rather than the plaintiff, and § 29–808.06(b) lets the Superior Court award a plaintiff who succeeds in whole or in part reasonable expenses, including attorney’s fees and costs, out of that recovery.

Where the firm is

Sources and legal authorities

• D.C. Code § 29–306.30 — Standards of conduct for directors
• D.C. Code § 29–306.31 — Standards of liability for directors
• D.C. Code § 29–804.09 — Standards of conduct for LLC members and managers
• D.C. Code § 29–305.51 — Derivative proceedings: standing
• D.C. Code § 29–808.01 — Direct action by an LLC member
• D.C. Code § 28–3104 — Transfers fraudulent as to present and future creditors
• D.C. Code § 28–3107 — Remedies of creditors
• D.C. Code § 12–301 — Limitation of time for bringing actions

General information about District of Columbia and federal law, not legal advice. Which rule applies depends on the entity, the agreement and the facts. Past results do not guarantee future outcomes.

Part of Business Litigation.