Proving breach of fiduciary duty (BoFD) claim

Breach of fiduciary duty: What does it take to prevail with such a claim?
        

To prevail on a breach of fiduciary duty claim, a plaintiff must first prove the existence of a fiduciary relationship between the plaintiff and the defendant.  See Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.—Houston [14th Dist.] 2008, pet. denied).  “[A] fiduciary duty arises out of agency law based upon a special relationship between the two parties.”  In re Bass, 113 S.W.3d 735, 743 (Tex. 2003) (orig. proceeding) (citing Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 200 (Tex. 2002)); see also Shands v. Tex. State Bank, 121 S.W.3d 75, 77 (Tex. App.—San Antonio 2003, pet. denied) (stating that an agency relationship creates a fiduciary relationship as a matter of law). 

Agency

An agent is a person who is authorized to act for another and is subject to the control of the other.  SITQ E.U., Inc. v. Reata Rests., Inc., 111 S.W.3d 638, 652 (Tex. App.—Fort Worth 2003, pet. denied) (noting that agency is generally a question of fact and that the trial court, as factfinder, was free to resolve any inconsistencies in the conflicting testimony to support its implied finding of agency).  “Texas law does not presume agency, and the party who alleges it has the burden of proving it.”  IRA Res. Inc. v. Griego, 221 S.W.3d 592, 597 (Tex. 2007); Tex. Cityview Care Ctr., L.P. v. Fryer, 227 S.W.3d 345, 352 (Tex. App.—Fort Worth 2007, pet. dism’d) (same).

SOURCE: Fort Worth Court of Appeals - 02-10-00045-CV - 7/21/11

At-will employment & claims of fraud, fraudulent inducement, and breach of fiduciary duty

NO DETRIMENTAL RELIANCE ON PROMISE OF FUTURE EMPLOYMENT IN THE EMPLOYMENT-AT-WILL CONTEXT Both common-law fraud and fraudulent inducement require proof of detrimental reliance. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex. 1997). In the employment context, courts have held that an employee cannot establish justifiable reliance on alleged promises of continued employment when the employment is at-will. See, e.g., Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 379, 381 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (holding promissory estoppel and fraud claims were barred because of at-will employment); Brown v. Swett & Crawford of Tex., Inc., 178 S.W.3d 373, 379-80 (Tex. App.—Houston [1st Dist.] 2005, no pet.) (holding status as at-will employee precluded claim for fraudulent inducement in wrongful termination lawsuit). As this court [14th CoA] stated in Collins v. Allied Pharmacy Management, Inc.: A promise to provide employment which is subject to termination at any time or for any reason does not provide any assurances about the employer’s future conduct, and does not provide a basis for detrimental reliance as a matter of law. 871 S.W.2d 929, 937 (Tex. App.—Houston [14th Dist.] 1994, no writ). We agree with the trial court that the same reasoning bars [ FORMER EMPLOYER-PLAINTIFF ] from claiming that it justifiably relied on promises or statements of intent by its at-will employee to remain employed. See Collins, 871 S.W.2d at 937-38 (“An employee may quit at any time, or may never start performance and suffer no liability. . . . [E]mployees are not indentured servants.”). BREACH OF FIDUCIARY DUTY The elements of a breach of fiduciary duty claim are (1) a fiduciary relationship between the plaintiff and defendant, (2) a breach by the defendant of his fiduciary duty to the plaintiff, and (3) an injury to the plaintiff or benefit to the defendant as a result of the defendant’s breach. Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.—Houston [14th Dist.] 2008, pet. denied). DETRIMENTAL RELIANCE NOT AN ELEMENT OF BoFD Unlike a fraud claim, a claim for breach of fiduciary duty does not require a plaintiff to establish reliance. See id. (listing elements of the claims). Consequently, the fact that at-will employment precludes [ PLAINTIFF ] from establishing justifiable reliance for purposes of its fraud claim on alleged statements by [ EMPLOYEE ] regarding future employment with [ DEFENDANT ] does not bar its breach of fiduciary duty claim. See Wilson, 305 S.W.3d at 74-75 (although similarity existed “in the abstract” between the elements of the two claims, claims had different elements and thus exception did not apply); see also Lundy, 260 S.W.3d at 506-07 (fraud and breach of fiduciary duty claims, although based on the same set of facts, were separate theories of liability for which plaintiff had to make an election of remedies). SOURCE: Houston Court of Appeals - 14-10-00513-CV - 6/28/11

Can informal relationship involving confidence and trust give rise to fiduciary duty?

BREACH OF FIDUCIARY DUTY: INFORMAL VS. FORMAL FIDUCIARY RELATIONSHIPS Fiduciary duties may arise from certain formal relationships that are considered to be fiduciary as a matter of law or from informal, “confidential” relationships. Id. at 275. To recover on a claim for breach of fiduciary duty, one of the elements that must be established is the existence of a fiduciary or confidential relationship. Id. The existence of such a relationship is ordinarily a question of fact, but it becomes a question of law when there is no evidence on the issue. Id. Texas courts are reluctant to recognize informal fiduciary relationships. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997); Jones v. Thompson, ___ S.W.3d ___, ___, 2010 WL 3157145, at *8 (Tex.App.--El Paso Aug. 11, 2010, pet. denied). Accordingly, not every relationship that involves a high degree of trust and confidence will give rise to a fiduciary duty. Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005). Because subjective trust is insufficient to create a fiduciary relationship, the mere fact that one party trusts another does not transform a business arrangement into a fiduciary relationship. Id. at 331. The trust must be “justifiable.” Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1963). When “one person is accustomed to being guided by the judgment or advice of another or is justified in believing one will act in the best interest of another because of a family relationship, a confidential relationship may arise.” Trostle v. Trostle, 77 S.W.3d 908, 914 (Tex.App.--Amarillo 2002, no pet.). The existence of a confidential relationship depends on the “actualities” of the particular relationship. Thigpen, 363 S.W.2d at 253. The confidential relationship must exist prior to, and apart from, the transaction that forms the basis of the lawsuit. Meyer, 167 S.W.3d at 331; Hamblet v. Coveney, 714 S.W.2d 126, 129 (Tex.App.--Houston [1st Dist.] 1986, writ ref’d n.r.e.). One party’s lack of fluency in English does not create a confidential relationship. Salinas v. Beaudrie, 960 S.W.2d 314, 320 (Tex.App.--Corpus Christi 1997, no pet.). Nor do uncles and nephews necessarily have a confidential relationship. See Tex. Bank & Trust Co. v. Moore, 595 S.W.2d 502, 508 (Tex. 1980). And subjective trust will not suffice unless the trust was justified. See Meyer, 167 S.W.3d at 331. Compare Flanary v. Mills, 150 S.W.3d 785, 794 (Tex.App.--Austin 2004, pet. denied)(evidence sufficient where parties had uncle/nephew relationship, but they were more like brothers, one party worked for the other and had always “looked up” to him, and they had previously been business partners), and Dominguez v. Brackey Enters., Inc., 756 S.W.2d 788, 791 (Tex.App.--El Paso 1988, writ denied)(evidence sufficient where parties had a longstanding business and personal association and one party was accustomed to being guided by the other’s advice in legal and accounting matters), and Hamblet, 714 S.W.2d at 129 (evidence sufficient where two parties had aunt/niece relationship, they and their families had a close relationship spanning years, and one party counseled the other for years), with Thigpen, 363 S.W.2d at 249, 252-53 (evidence insufficient where parties were close friends who saw each other frequently and one party personally guaranteed a loan for the others and gave them business advice), and Trostle, 77 S.W.3d at 914 (evidence insufficient where parties had stepmother/stepson relationship, but they were not particularly close). SOURCE: El Paso Court of Appeals - 08-09-00084-CV - 4/29/11

Breach of fiduciary duty based on informal vs formal relationship

   

BREACH OF FIDUCIARY DUTY: FORMAL AND INFORMAL RELATIONSHIPS GIVING RISE TO DUTY

To recover on a breach of fiduciary duty claim, the plaintiff must first establish the existence of a duty, that is, the existence of a fiduciary relationship. See Meyer v. Cathey, 167 S.W.3d 327, 330–31 (Tex. 2005) (discussing interchangeably whether fiduciary relationship exists and whether fiduciary duty existed); Priddy v. Rawson, 282 S.W.3d 588, 599 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (identifying first element of fiduciary duty claim as existence of fiduciary relationship and second element as breach of duty created by that relationship).

There are two categories of fiduciary relationships. Meyer, 167 S.W.3d at 330–31; Priddy, 282 S.W.3d at 599. The first is a formal fiduciary relationship, such as attorney-client, principal-agent, and trustee-beneficiary relationships, as well as partners in a partnership. Chapman Children’s Trust v. Porter & Hedges, L.L.P., 32 S.W.3d 429, 439 (Tex. App.—Houston [14th Dist.] 2000, pet. denied). The second is an informal fiduciary relationship, “where one person trusts in and relies on another, whether the relation is a moral, social, domestic, or purely personal one.” Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 176 (Tex. 1997). This second category is also known as a “confidential relationship.” Chapman Children’s Trust, 32 S.W.3d at 439.

Kelly’s live petition asserted a claim for breach of a partnership agreement. This claim was not submitted to the jury, however. Accordingly, it has been waived. See Tex. R. Civ. P. 279 (providing “[u]pon appeal all independent grounds of recovery or of defense not conclusively established under the evidence and no element of which is submitted or requested are waived”). For purposes of this appeal, then, there was no partnership agreement between the parties and, by extension, no formal fiduciary relationship based on any such partnership.

A fiduciary relationship is an extraordinary one and will not be lightly created. Hoggett v. Brown, 971 S.W.2d 472, 488 (Tex. App.—Houston [14th Dist.] 1997, pet. denied). “It is well settled that ‘not every relationship involving a high degree of trust and confidence rises to the stature of a fiduciary relationship.’” Meyer, 167 S.W.3d at 330 (quoting Schlumberger, 959 S.W.2d at 176–77). “A person is justified in placing confidence in the belief that another party will act in his or her best interest only where he or she is accustomed to being guided by the judgment or advice of the other party, and there exists a long association in a business relationship, as well as personal friendship.” Hoggett, 971 S.W.2d at 488.

Additionally, courts remain cautious to create informal fiduciary relationships in business arrangements.

The fact that one businessman trusts another, and relies upon his promise to perform a contract, does not rise to a confidential relationship. Every contract includes an element of confidence and trust that each party will faithfully perform his obligation under the contract. Neither is the fact that the relationship has been a cordial one, of long duration, evidence of a confidential relationship.Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594–95 (Tex. 1992), superseded by statute on other grounds as noted in Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 225–26 (Tex. 2002).

Courts review a variety of facts for determining whether an informal fiduciary relationship exists. The overarching consideration, however, is the nature of the relationship between the parties. See Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962) (holding “[t]he existence of the fiduciary relationship is to be determined from the actualities of the relationship between the persons involved”).

In reviewing the relationship between the parties, one factor we consider is whether the party claiming to be owed a fiduciary relationship justifiably placed special confidence in the other party to act in his best interest. See Trostle v. Trostle, 77 S.W.3d 908, 915 (Tex. App.—Amarillo 2002, no pet.) (holding, to establish fiduciary relationship, evidence must demonstrate plaintiff actually relied on purported fiduciary “for moral, financial, or personal support or guidance”); Lee v. Hasson, 286 S.W.3d 1, 14–15 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (same). An informal fiduciary relationship requires proof that, because of a close or special relationship, the plaintiff “is in fact accustomed to be guided by the judgment or advice” of the other. Thigpen, 363 S.W.2d at 253.

SOURCE: Houston Court of Appeals – NO. 01-09-00685-CV – 5/19/11

Breach of Fiduciary Duty: The Damages Element

Establishing Breach of Fiduciary Duty

Generally, to recover for the breach of a fiduciary duty, a plaintiff must show: 1) the existence of a fiduciary duty, 2) a breach of the duty, 3) causation, and 4) damages. See Abetter Trucking Co. v. Arizpe, 113 S.W.3d 503, 508 (Tex. App.-Houston [1st Dist.] 2003, no pet.). When, however, the plaintiff seeks fee restitution or benefit disgorgement, he need not prove actual damages. Burrow v. Arce, 997 S.W.2d 229, 240 (Tex. 1999); Alavi v. MCI Worldcom Network Services, Inc., 2007 WL 274565, at *3 (Tex. App.-Beaumont, Feb. 1, 2007, pet. denied). Because Richard's claim for breach of fiduciary duty sought damages as his remedy, he was required to prove them. See Alavi, 2007 WL 274565, at *3; Lee v. Lee, 47 S.W.3d 767, 780-81 (Tex. App.-Houston [14th Dist.] 2001, pet. denied); Longaker v. Evans, 32 S.W.3d 725, 733 n.2 (Tex. App.-San Antonio 2000, pet. withdrawn).

ABSENCE OF EVIDENCE ON DAMAGES PROVED FATAL TO CLAIM

Cynthia's no-evidence motion asserted there was no evidence that: 1) she owed a fiduciary duty to Richard, or 2) that damages resulted from the alleged breach. Richard's response contended that a DTA creates a fiduciary relationship by its "very nature," that such beneficiaries typically are unaware of delinquencies until foreclosure proceedings have begun, that beneficiaries often (as in his case) do not have adequate funds to bring the note current, and that the unavoidable foreclosure results in a "major hit" on the beneficiary's credit. Richard further argued that he did not have to prove damages to recover on his breach of fiduciary claim. On appeal, Richard maintains this Court should determine whether a DTA creates a fiduciary duty. We need not reach the issue concerning whether Cynthia owed Richard a duty. Even if we assumed that Cynthia owed Richard a fiduciary duty, which she disputes, Richard is required to have presented evidence raising a genuine fact issue on his damages. See Grant, 73 S.W.3d 215. Because Richard failed to present any evidence proving that he had been damaged, the trial court did not err in granting summary judgment to Cynthia on Richard's breach-of-fiduciary-duty claim. We overrule issue two. Having overruled both of Richard's issues, we affirm the trial court's judgment.

SOURCE: 07-08-08833 CV (7/16/09)

The Discovery Rule as a limitations tolling tool for breach of fiduciary duty claim in Texas

  
SOL FOR BREACH OF FIDUCIARY DUTY & DISCOVERY RULE

The statute of limitations for a claim for breach of fiduciary duty is four years from the day the cause of action accrued. Tex. Civ. Prac. & Rem. Code Ann. § 16.004(a)(5) (Vernon 2002). The discovery rule defers the accrual of a cause of action until the plaintiff knows, or by exercising reasonable diligence, should know of the facts giving rise to the claim. Barker v. Eckman, 213 S.W.3d 306, 311-12 (Tex. 2006).
 
WHEN CAN THE DISCOVERY RULE BE INVOKED? 
 
For the discovery rule to apply, the injury must be inherently undiscoverable and objectively verifiable. Id. at 312; Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006). Injuries that arise from a breach of fiduciary duty are generally considered inherently undiscoverable. S.V. v. R.V., 933 S.W.2d 1, 8 (Tex. 1996); Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996). However, once the fiduciary's misconduct becomes apparent, the claimant cannot ignore it, regardless of the fiduciary nature of the relationship. S.V., 933 S.W.2d at 8; see also Computer Assocs., 918 S.W.2d at 456.
 
SOURCE: 09-08-00398-CV (7/16/09) (Beaumont Court of Appeals)
 

Elements of breach of fiduciary duty (BoFD)

 
BREACH OF FIDUCIARY DUTY ELEMENTS OF CLAIM UNDER TEXAS LAW

The elements of a breach of fiduciary duty claim are: (1) a fiduciary relationship must exist between the plaintiff and defendant; (2) the defendant must have breached this duty; and (3) the breach must result in injury to the plaintiff or benefit to the defendant. Jones v. Blume, 196 S.W.3d 440, 447 (Tex. App.—Dallas 2006, pet. denied).
 
SOURCE: Hill v. Hoelke (Tex. App.- Houston [1st Dist.] Mar. 12, 2009)(Taft) (investment dispute, breach of fiduciary duty, breach of contract, fraud, and promissory estoppel)