CHAPTER 8 - 8-3 BREACH OF FIDUCIARY DUTY

• Jurisdiction: United States

8-3 Breach of Fiduciary Duty

8-3:1 Fiduciary Duty Versus Duty in a Negligence Claim

Like negligence, breach of fiduciary duty is a tort.⁹³ Regarding fiduciary duty in general, the Supreme Court has held that:

A fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other. In the seminal cases in which this court has recognized the existence of a fiduciary relationship, the fiduciary was either in a dominant position, thereby creating a relationship of dependency, or was under a specific duty to act for the benefit of another. . . .
In the cases in which this court has, as a matter of law, refused to recognize a fiduciary relationship, the parties were either dealing at arm's length, thereby lacking a relationship of dominance and dependence, or the parties were not engaged in a relationship of special trust and confidence.⁹⁴

The relationship between an attorney and a client is "highly fiduciary in its nature."⁹⁵ A fiduciary relationship gives rise to a duty of loyalty and honesty whereas an attorney-client relationship per se gives rise to a duty of care.⁹⁶ The duty of loyalty also encompasses the duty of confidentiality.⁹⁷

The distinction between professional negligence and breach of a fiduciary duty has been stated in Beverly Hills Concepts v. Schatz & Schatz, Ribicoff & Kotkin as follows:

Professional negligence alone . . . does not give rise automatically to a claim for breach of fiduciary duty. Although an attorney-client relationship imposes a fiduciary duty on the attorney . . . not every instance of professional negligence results in a breach of that fiduciary duty. A fiduciary confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other . . . Professional negligence implicates the duty of care while breach of fiduciary duty implicates a duty of loyalty and honesty.⁹⁸

Negligence alone is not sufficient to give rise to a breach of fiduciary duty. "Although the attorney-client relationship imposes fiduciary obligations, negligent conduct alone does not implicate a breach of those obligations."⁹⁹ Several Superior Court cases following the Beverly Hills Concepts precedent have applied this principle and have required that a cause of action against an attorney for breach of fiduciary duty requires allegations which implicate his or her honesty, loyalty, or morality, and are not merely allegations of professional negligence.

Although declining to confine its limits, the Supreme Court in Murphy v. Wakelee stated that "the application of . . . traditional principles of fiduciary duty" has historically been confined to cases involving "fraud, self-dealing or conflict of interest."¹⁰⁰ "For this reason, 'it is only when the confidential relationship is shown together with suspicious...