Breach of Fiduciary Duty: A Maryland Cause of Action

Individuals owe a fiduciary duty to all beneficiaries or potential beneficiaries (individual, estate, or entity) throughout companies, businesses, nonprofits, corporations, and estates. Furthermore, this fiduciary duty is now fully enforceable in Court. In Maryland, Breach of Fiduciary Duty is a legal cause of action that is met when a plaintiff can establish (1) the existence of a fiduciary relationship; (2) breach of the duty owed by the fiduciary to the beneficiary; and (3) harm to the beneficiary.

Prior to 2020, in Maryland, there existed “no universal or omnibus tort for the redress of a breach of fiduciary duty by any and all fiduciaries.” (Dynacorp Ltd. v. Aramtel Ltd.). Instead, Maryland Courts imposed equitable relief when an individual breached a common law fiduciary duty owed to another party when that plaintiff was 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). This was true even though 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).

However, in 2020, the Maryland Court of Appeals adjusted the Court’s view of this cause of action by firmly stating: “We hold that under Kann and our jurisprudence that followed, a breach of fiduciary duty may be actionable as an independent cause of action.” (Plank vs. Cherneski). With this clear holding to establish an independent cause of action for breach of fiduciary duty, the Maryland high court clarified that: “[t]o establish a breach of fiduciary duty, a plaintiff must demonstrate: (1) the existence of a fiduciary relationship; (2) breach of the duty owed by the fiduciary to the beneficiary; and (3) harm to the beneficiary.” (Plank vs. Cherneski). If those three elements are properly pleaded by a plaintiff, a breach of fiduciary duty claim may proceed in court; however, “[t]he remedy for the breach is dependent upon the type of fiduciary relationship, and the historical remedies provided by law for the specific type of fiduciary relationship and specific breach in question, and may arise under a statute, common law, or contract.”(Plank vs. Cherneski).

By imposing and enforcing a fiduciary duty, Maryland Court can reduce the risk of abuse of a beneficiary by a fiduciary. Thus, due to the existence of enforceable 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. ‘

Overall, if an individual holding a fiduciary duty has acted improperly with regards to a beneficiary or their fiduciary duty, Maryland Courts provide method to seek redress from that party. This cause of action is often sought in a shareholder oppressions lawsuit.  Importantly nonetheless, the precise method and specific cause of action needed to seek that redress could come in different formats and specific elements must be plead. If you believe that an individual has breached their fiduciary duty towards your or an entity related to you, you should discuss the matter with a commercial litigation attorney to determine the proper method for a possible Maryland legal action. Additionally, if you are being sued for a breach of fiduciary duty, 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 commercial litigation attorneys at Longman & Van Grack’s Bethesda, Maryland; Rockville, Maryland; or Washington, DC offices