Defending Claims for Breach of Fiduciary Duty in Maryland
Edited by Timothy G. Ventura
Federal and state courts in Maryland do not recognize a standalone cause of action for breach of fiduciary duty in cases involving a claim solely for monetary damages. In Wasserman v. Kay, 197 Md. App. 586, 14 A. 3d 1193 (2009), the Maryland Court of Special Appeals considered a claim for breach of fiduciary duty brought by the partners of five real estate investment general partnerships and members in two real estate investment LLCs against the managing member of one of the LLCs and the de facto managing member or partner of the other investment vehicles. The complaint alleged that beginning in 2003, the defendant unilaterally and unlawfully took money from the investment vehicles and invested the money without authorization in his own investment company, which he, in turn, invested with Bernard Madoff. The money was lost when Madoff’s Ponzi scheme collapsed in 2008.
In evaluating the breach of fiduciary duty claim, the Court of Special Appeals noted the plaintiffs “adequately allege that Mr. Kay owed them fiduciary duties, but whether the breach of those duties constitute a separate cause of action at law for monetary damages is another question.” Wasserman, 197 Md. App. at 630 (emphasis in original). The Wasserman court then analyzed a leading case on breach of fiduciary duty rendered by the Court of Appeals of Maryland, Kann v. Kann, 344 Md. 689 (1997), where the Court of Appeals held:
There is no universal or omnibus tort for the redress of breach of fiduciary duty by any and all fiduciaries. This does not mean that there is no claim or cause of action available for breach of fiduciary duty. Our holding means that identifying a breach of fiduciary duty will be the beginning of the analysis, and not its conclusion. Counsel are required to identify the particular fiduciary relationship involved, identify how it was breached, consider the remedies available, and select those remedies appropriate to the client’s problem. Whether the cause or causes of actions selected carry the right to a jury trial will have to be determined by an historical analysis.
Wasserman, 197 Md. App. at 630-31 (quoting Kann).
The Wasserman court then analyzed several cases decided following Kann, including Int’l Bhd. of Teamsters v. Willis Corroon Corp., 369 Md. 724, 727 n.1 (2002), where the Court of Appeals considered a complaint by a labor organization against its insurance broker for negligence and breach of fiduciary duty as a complaint for negligence alone. The court reasoned that “although the breach of a fiduciary duty may give rise to one or more causes of action, in tort or in contract, Maryland does not recognize a separate tort action for breach of fiduciary duty.” Wasserman, 197 Md. App. at 631 (quoting Willis Corroon). The Wasserman court also analyzed a subsequent federal court decision, G.M. Pusey & Assocs. Inc. v. Britt/Paulk Ins. Agency, Inc., 2008 U.S. Dist. LEXIS 37525, at *18-20 (D. Md. May 6, 2008), where the court held that the plaintiff, the wife of a deceased insurance specialist, had no claim of breach of fiduciary duty against an insurance agency for which the insurance specialist worked because “Maryland does not recognize an independent cause of action for breach of fiduciary duty,” and the plaintiff had alternative remedies, including a “breach of contract claim, in which a breach of fiduciary duty may be a part.” Wasserman, 197 Md. App. at 631 (quoting Britt/Paulk).
In applying the reasoning adopted in Kann, Willis Corroon Corp. and Britt/Paulk, the Wasserman court ultimately concluded:
Kann and its progeny do not obliterate the possibility of a separate cause of action for breach of fiduciary duty in an action seeking equitable relief. In a claim for monetary damages at law, however, an alleged breach of fiduciary duty may give rise to a cause of action, but it does not, standing alone, constitute a cause of action. Here, the allegations in the count are relevant to other causes of action alleged (e.g. fraud, tortious interference, breach of contract, and negligence), but they do not ‘constitute a stand alone non-duplicative cause of action.’
Wasserman, 197 Md. App. at 631-632 (emphasis supplied).
Subsequent decisions by the federal district court in Maryland as well have followed Kann and its progeny and have likewise concluded that a plaintiff may not pursue a stand alone claim for breach of fiduciary duty as a matter of law. See, e.g., Fid. & Guar. Life Ins. Co. v. Sharma, 2019 U.S. Dist. LEXIS 54727, at *20 (D. Md. Mar. 29, 2019) (“Under Kann, a plaintiff may not pursue a standalone claim for breach of fiduciary duty; rather, the breach must constitute an element of another cause of action … [s]tated another way, a breach of fiduciary duty may be ‘relevant to other causes of action,’ but it cannot ‘constitute a standalone non-duplicative cause of action.’”) (other citations omitted); Adobe Sys. v. Gardiner, 300 F.Supp. 3d 718, 726 (D. Md. 2018) (“In the aftermath of Kann, Maryland courts have limited independent causes of action for breach of fiduciary duty to those seeking equitable relief … and any claim for compensatory damages will have to be supported by a successful breach of contract action.”) (quoting Allstate Ins. Co. v. Warns, 2012 U.S. Dist. LEXIS 26174, at *7 (D. Md. Feb. 29, 2012)); and Miller v. Strudwick, 2018 U.S. Dist. LEXIS 167317 at *19 (D. Md. Sept. 28, 2018), (“Maryland does not recognize a separate tort action for breach of fiduciary duty … Instead, the breach of a fiduciary duty may give rise to one or more causes of action, in tort or in contract.”) (quoting Willis Corroon)).
In view of the foregoing, a plaintiff in Maryland can assert a claim for breach of fiduciary duty against an insurance agent or broker if the plaintiff is seeking solely equitable relief. As well, a plaintiff in Maryland can claim that the insurance agent or broker breached a fiduciary duty in order to support a recognized cause of action (including, for example, negligence, breach of contract or fraud). A Maryland plaintiff, however, cannot assert a standalone claim for breach of fiduciary duty against an insurance agent or broker if the plaintiff is only seeking damages. Accordingly, if an agent or broker is sued for breach of fiduciary duty, and the plaintiff is seeking monetary damages only, the agent or broker should consider challenging the legal sufficiency of the claim by way of Federal Rule of Civil Procedure 12(b)(6) or Maryland Rule 2-322(b)(2), as applicable, for the failure to state a claim upon which relief may be granted.
The material in this law alert has been prepared for our readers by Marshall Dennehey Warner Coleman & Goggin. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note tgventura@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2020 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved.