Breach of Fiduciary Duty in Maryland
[Information in this article has been superseded by a Court of Appeals case. Learn more about the change in our new article]
In many contexts throughout businesses, nonprofits, legal matters, and estates, individuals are charged with a fiduciary duty that is owed to a beneficiary (individual, estate, or entity). The existence of a fiduciary duty is, in part, a legal creation (1) to encourage specialization within a specific field where fiduciary responsibility is necessary and (2) to encourage people to enter into fiduciary relationships knowing that such a duty exist. By imposing and enforcing a fiduciary duty, legal systems can reduce the risk of abuse of a beneficiary by a fiduciary. Thus, due to the existence of fiduciary duties, potential beneficiaries can have the confidence to engage in a fiduciary relationship. As a result, upon wrongful actions, these individuals are sometimes accused of violating that fiduciary duty. In a lawsuit, the beneficiary often will sue under a cause of action called: Breach of Fiduciary Duty. In general terms, It is the cause of action or occurrence where an individual charged with holding certain specific fiduciary responsibilities has committed an action that a reasonable specialist would not have done and has caused harm upon the beneficiary. While some states have a distinct cause of action at law called “breach of fiduciary duty,” Maryland does not. Thus, the process for a beneficiary to seek a claim at law for breach of fiduciary duty in Maryland can be complicated.
In Maryland, Breach of Fiduciary Duty is a claim that is either interpreted by courts as a negligence action or deemed a cause of action in equity (not an action at law). In interpreting an independent breach of fiduciary duty, Maryland Courts have vacillated as to how to evaluate such stand-alone claims. The Maryland Court of Special Appeals stated, in 2011, that “an alleged breach of fiduciary duty . . . does not, standing alone, constitute a cause of action.” (Wasserman v. Kay). A year later, the Court followed up with the statement, stating that: “No Maryland appellate court has described the elements of breach of fiduciary duty because there is no universal or omnibus tort for the redress of a breach of fiduciary duty by any and all fiduciaries.” (Dynacorp Ltd. v. Aramtel Ltd.). Often these Breach of Fiduciary Duty causes of action is part of shareholder oppression lawsuits.
However, Maryland Courts have also allowed it claims to be considered by the court in certain circumstances. First, if the breach of the fiduciary duty, described by the plaintiff in a lawsuit, amounts to negligence or gross negligence, then those negligence-based independent causes of action can be asserted against the defendants accused of breaching their fiduciary duty. This negligence-based interpretation exists because negligence requires a “duty” which was breached by the defendants, and facts surrounding a breach of a fiduciary duty would suffice for that purpose. Additionally, some Maryland courts have stated that while an action for fiduciary duty is not an action at law (and therefore such a fiduciary duty claim does not merit a jury trial or monetary damages), equitable relief for breach of fiduciary duty can exist when a plaintiff is able to specifically and distinctly identify a “particular fiduciary relationship involved, identify how it was breached, consider the remedies available, and select those remedies appropriate to the client’s problem.” (Kann v. Kann) (“In a claim for monetary damages at law, however, an alleged fiduciary duty . . . does not, standing alone, constitute a cause of action”).
Overall, if a fiduciary has acted improperly with regards to a beneficiary or their fiduciary duty, there is likely a method to seek redress from that fiduciary in Maryland courts. However, the precise method and specific cause of action needed to seek that redress could come in different formats. If you believe that an individual has breached their fiduciary duty, you should discuss the matter with a commercial litigation attorney to determine the proper method for a lawsuit. Additionally, if you are being sued for it, a commercial litigation attorney can assist you with preparing a proper defense.
Adam Van Grack and the other litigation attorneys at Longman & Van Grack have represented many parties related to fiduciary duty, negligence, gross negligence, probate litigation, all types of commercial litigation disputes in Maryland, Virginia, and Washington, DC. Call (301) 291-5027 to speak with Mr. Van Grack or one of our other financial litigation attorneys at Longman & Van Grack’s Bethesda, Maryland; Rockville, Maryland; Virginia; or Washington, DC offices.
