Establishing A Breach Of Fiduciary Duty In A Commercial Case

My firm just finished a trial in the Kings Supreme Court that lasted several months concerning a commercial dispute over real estate.  One of the issues we briefed in our post-trial memorandum of law deals with the question of whether the other party was a fiduciary to our firm’s client.  Here is an excerpt from my brief on the applicable legal standards:

In order to establish a breach of fiduciary duty, a plaintiff must prove the existence of a fiduciary relationship, misconduct by the defendant, and damages that were directly caused by the defendant’s misconduct. Kurtzman v. Bergstol, 40 A.D.3d 588, 590, 835 N.Y.S.2d 644 (2d Dept. 2007). “A fiduciary relationship is grounded in a higher level of trust than normally present in the marketplace between those involved in arms-length business transactions.” EBC I, Inc. v. Goldman Sachs & Co., 5 N.Y.3d 11, 19,799 N.Y.S.2d 170, 832 N.E.2d 26 (2005). “A fiduciary relationship exists between two persons when oneof them is under a duty to act for or to give advice for the benefit of another upon matters within the scopeof that relation.” AG Capital Funding Partners, L.P. v. State Street Bank and Trust Co., 11 N.Y.3d 146,158, 866 N.Y.S.2d 578, 896 N.E.2d 61 (2008); Marmelstein v. Kehillat New Hempstead, 11 N.Y.3d 15,21, 862 N.Y.S.2d 311, 892 N.E.2d 375; EBC I, Inc. v. Goldman Sachs & Co., supra. A fiduciaryrelationship may exist where one party reposes confidence in another and reasonably relies on the other’ssuperior expertise or knowledge, Sergeants Benevolent Association Annuity Fund v. Renck, 19 A.D.3d107, 110, 796 N.Y.S.2d 77 (1st Dept. 2005); WIT Holding Corp. v. Klein, 282 A.D.2d 527, 724 N.Y.S.2d66 (2d Dept. 2001). A fiduciary relationship arises between two persons when one of them is under a dutyto act for or to give advice for the benefit of another upon matters within the scope of the relation.Pergament v. Roach, 41 A.D.3d 569, 571, 838 N.Y.S.2d 591 (2d Dept. 2007). Whether a fiduciaryrelationship exists between parties is necessarily fact specific, AG Capital Funding Partners, L.P. v. StateStreet Bank and Trust Co., supra; Talansky v. Schulman, 2 A.D.3d 355, 770 N.Y.S.2d 48 (1st Dept. 2003)(whether party to a business transaction possessed superior expertise and knowledge giving rise to afiduciary duty raises a triable issue of fact); Murray Schwartz Enterprises Employee Pension Plan Trust v.Four Corners Productions, Inc., 293 A.D.2d 388, 741 N.Y.S.2d 35 (1st Dept. 2002) (fiduciary relationship based on loan agreement; not merely creditor-debtor relationship). The measure of damages for breach of fiduciary duty is the amount of loss sustained, “including lost opportunities for profit by reason of the faithless fiduciary’s conduct.” 105 East Second Street Associates v. Bobrow, 175 A.D.2d 746, 747, 573N.Y.S.2d 503 (1st Dept. 1991).  The fiduciary should be directed to account for all losses and profits received. Brigham v. McCabe, 27 A.D.2d 100, 105 (3d Dept. 1966).


If you have any legal questions or need help with fiduciary duties, please contact Attorney Scott Lanin at (212) 764-7250 x 201 or use the contact form in the right sidebar.

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