Last month, the Court of Appeals of Maryland had the opportunity to decide a case called Plank v. Cherneski. One of the issues before the Court in Plank was whether or not the legal cause of action known as “breach of fiduciary duty” is an independent cause of action in Maryland. In other words, does Maryland law permit a plaintiff to sue a defendant for breaching a fiduciary duty without first alleging and proving some other tort such as negligence, fraud, etc.? A fiduciary duty exists when one person owes a duty of loyalty to another person or entity to act in that person’s or entity’s best interest, not their own. This duty commonly exists as part of the employer-employee relationship, however it can also exist under other circumstances such as when a person acts as the trustee of a trust or as the personal representative of an estate.
The Court of Appeals ultimately held that breach of fiduciary duty is an independent cause of action in Maryland. In order for a plaintiff to succeed on such a claim they must prove, by a preponderance of the evidence (a “more likely than not” standard), that (1) the defendant owed a fiduciary duty to the plaintiff, (2) the defendant breached that duty, and (3) the plaintiff suffered damages as a result of this breach.
Prior to this decision there was a level of disagreement within the Maryland legal community regarding breach of fiduciary duty and whether or not such a claim could be brought on its own. This disagreement can be traced to a lack of clarity regarding breach of fiduciary duty stemming from a 1997 Court of Appeals case, Kann v. Kann. This lack of clarity led to the commonly accepted practice in Maryland where plaintiffs plead breach of fiduciary duty through the commission of fraud, negligence, or some other recognized independent tort by the defendant. This practice necessarily required a plaintiff to meet two burdens of proof. First, the plaintiff would have to prove that a defendant had committed fraud or negligence. Then the plaintiff would have to prove the existence of a fiduciary duty and that the fraud or negligence represented a breach of that duty. If a plaintiff could not meet the first burden of proof, they would essentially not have a chance to meet the second. Due to the Plank holding, this is no longer the case.
What does this mean for employers and those to whom a fiduciary duty is owed? The Plank decision reduces the burden of proof that plaintiffs bear in fiduciary litigation and simplifies the steps they must take in order to succeed on a claim for breach of fiduciary duty. This is due to the fact that a plaintiff no longer needs to prove negligence, fraud, or some similar tort as a prerequisite to proving a breach of fiduciary duty. Instead, now a plaintiff must only show that a fiduciary duty was owed, that this duty was breached, and that this breach caused damages. A party owed a fiduciary duty by another may now more effectively protect their interests and assets should that fiduciary duty be breached and may more easily recover damages for any loss suffered by a breach.
In sum, the Court of Appeals’ holding in Plank v. Cherneski is a benefit to employers and any person or entity owed a fiduciary duty. It clarifies Maryland law on the subject and allows a fiduciary duty to be more easily and effectively enforced if it is ever breached.