B. Breach of Fiduciary Duty

• Library: South Carolina Business Torts (SCBar) (2021 Ed.)

B. BREACH OF FIDUCIARY DUTY

A cause of action for breach of fiduciary duty is one that has roots as early as the nineteenth century in South Carolina,⁵⁷ though a more "modern" version of the claim began later, in the early twentieth century.⁵⁸

1. Elements and Present-Day Pleading and Proving

To establish a claim for breach of fiduciary duty, a plaintiffs must prove: (1) the existence of a fiduciary duty owed to the plaintiff by the defendant, (2) a breach of that duty, and (3) damages proximately resulting from the wrongful conduct of the defendant.⁵⁹

a. The Existence of a Fiduciary Duty

A determination of whether a fiduciary relationship exists is an equitable issue to be determined by the court.⁶⁰ Such a duty exists "when one imposes a special confidence in another, so that the latter, in equity and good conscience is bound to act in good faith and with due regard to the interests of the one imposing the confidence."⁶¹ A relationship must be more than casual to amount to a fiduciary relationship, and on such a claim, the evidence must show that the entrusted party actually accepted or induced the confidence placed in him.⁶²

"One standing in a fiduciary relationship with another is subject to liability to the other for harm resulting from a breach of duty imposed by the relation."⁶³ "A fiduciary relationship is founded on the trust and confidence reposed by one person in the integrity and fidelity of another."⁶⁴

"To establish the existence of a fiduciary relationship, the facts and circumstances must indicate the party reposing trust in another has some foundation for believing the one so entrusted will act not in his own behalf but in the interest of the party so reposing; the evidence must show the entrusted party actually accepted or induced the confidence placed in him."⁶⁵

Examples in which a fiduciary relationship have been found to exist include an attorney-client relationship,⁶⁶ a partnership relationship,⁶⁷ estate representative and estate beneficiaries,⁶⁸ and a realtor-client relationship.⁶⁹

b. A Breach of Fiduciary Duty

Importantly, it is the breach of the fiduciary duty that results in liability under this business tort. Put another way, the liability is dependent on the harm resulting from a breach of the duty imposed by the fiduciary relationship.⁷⁰ For example, in Moore v. Moore, the court held that a claim for breach of fiduciary duty was properly submitted to the jury because the plaintiff had provided sufficient evidence to support a finding of a fiduciary relationship because plaintiff had introduced evidence that the intention of the parties was to act as partners and that they had conducted themselves as partners.⁷¹

c. Damages Resulting from the Wrongful Conduct

In a breach of fiduciary duty cause of action, a plaintiff is entitled to resulting damages for the harm caused by the breach that are a proximate result of the wrongful conduct of the defendant.⁷² When damages are lost profits, "'Profits' have been defined as 'the net pecuniary gain from a transaction, the gross pecuniary gains diminished by the cost of obtaining them.'"⁷³ Punitive damages may only be awarded if there is an underlying finding of actual damages and if plaintiff proves by clear and convincing evidence that the defendant's misconduct was willful, wanton, or in reckless disregard of the plaintiff's rights.⁷⁴

d. Aiding and Abetting a Breach of Fiduciary Duty

South Carolina also recognizes a cause of action for aiding and abetting a breach.⁷⁵ The elements of this cause of action are as follows:

(1) A breach of fiduciary duty owed to the plaintiff;

(2) The defendant's knowing participation in the breach; and

(3) Damages.⁷⁶

In 2017, the South Carolina Supreme Court clarified liability for aiding and abetting a breach of fiduciary duty in Bennett v. Carter.⁷⁷ In this case, two sons who were co-trustees allegedly violated their fiduciary duties by unlawfully taking $5 million from the trusts for which they, along with others, were beneficiaries.⁷⁸ The mother, accounting firm, and lawyer involved found out and told the sons to tell the other beneficiaries but they themselves did not discuss this with the other beneficiaries.⁷⁹ The court found that the evidence was sufficient to state a claim against the mother, accounting firm, and lawyer, and stated, "The gravamen of the claim is the defendant's...