Torts: Breach of Fiduciary Duty

Elements of Case

The common law tort of breach of fiduciary duty requires the plaintiff to plead and prove four basic elements: “(1) the existence of a fiduciary duty; (2) the breach of that duty; (3) injury; and (4) causation.” Baptist Phys. Lexington, Inc., 436 S.W.3d at 193.

Whether a fiduciary duty exists by virtue of the relationship between various actors is generally a question of law for the courts to decide as it essentially involves a policy determination. Mullins v. Commonwealth Life Ins. Co., 839 S.W.2d 245, 248 (Ky.1992).

A fiduciary duty is “the highest order of duty imposed by law.” Abbott v. Chesley, 413 S.W.3d 589, 600 (Ky. 2013)

A fiduciary duty is “the highest order of duty imposed by law.” In re Sallee v. Fort Knox Nat’l Bank, N.A., 286 F.3d 878, 891, 893 (6th Cir.2002), Henkin, Inc. v. Berea Bank and Trust Co., 566 S.W.2d 420 (Ky.App.1978). It is not to be lightly required. In an arms-length commercial transaction, where each party is assumed to be protecting its own interest, no such duty arises. Id. at 894.

If a fiduciary relationship does exist between the parties, the question of whether one party breached that duty is one of fact. See Priestley v. Priestley, 949 S.W.2d 594 (Ky.1997).

See, Conlon v. Haise, Court of  Appeals, To Be Published, 2014-CA-001581, Sept. 30, 2016.  Note that WestLaw has this not be be published, but the designation on the opinion says “To Be Published”)

“A fiduciary duty requires more than the generalized business obligation of good faith and fair dealing.” Ballard v. 1400 Willow Council of Co–Owners, Inc., 430 S.W.3d 229, 242 (Ky.2013). “A fiduciary duty is ‘the highest order of duty imposed by law.’ ” Abbott, 413 S.W.3d at 600 (quoting In re Sallee, 286 F.3d at 891). It goes “beyond the standard duty of reasonable care we ordinarily impose.” Associated Ins. Serv., Inc. v. Garcia, 307 S.W.3d 58, 63 (Ky.2010). “It exists where a special confidence is reposed in another who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence.” Lappas v. Barker, 375 S.W.2d 248, 251 (Ky.1963). If a fiduciary relationship exists, the fiduciary must place the other party’s interests ahead of his own. Ballard, 430 S.W.3d at 242. “The fiduciary cannot profit from the relationship without the knowledge and permission of the principal.” Id. at 241–42. When conflict is unavoidable the fiduciary must place the interests of the other above his own. Id.

Such onerous, self-sacrificing duties dictate that the fiduciary relationship “is not to be lightly required.” Snow Pallet, Inc. v. Monticello Banking Co., 367 S.W.3d 1, 5 (Ky.App.2012). Fiduciary relationships arise only when it can be determined that nature of the relationship between the parties is such that the fiduciary “has expressly undertaken to act for the plaintiff’s primary benefit.” Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544, 552 (Ky.2009). “The fact that one businessman trusts another, and relies upon his promise to perform a contract, does not rise to a confidential relationship. … Neither is the fact that the relationship has been a cordial one, of long duration, evidence of a confidential relationship.” Ballard, 430 S.W.3d at 242 (quoting In re Sallee, 286 F.3d at 891–92). “Although fiduciary relationships can be informal, a fiduciary duty does not arise from the universal business duty to deal fairly nor is it created by a unilateral decision to repose trust and confidence; it derives from the conduct or undertaking of the purported fiduciary.” Flegles, Inc., 289 S.W.3d at 552.3

2014-CA-001581