Texas aiding and abetting breach of fiduciary duty

The district court affirmed the dismissal of the direct breach of fiduciary duty claims because, although the trustee alleged a conflict of interest, there were no allegations that Greenberg represented the company and the president in his individual capacity at the same time. The court affirmed the dismissal of the professional negligence claim because the trustee did not allege sufficient allegations of proximate cause. The court then turned to the aiding and abetting breach of fiduciary duty allegations.

Regarding the legal basis for an aiding and abetting claim, the court stated:. The trustee alleged that the president and the other board member created the Cancellation Agreement to allow them to compete with, and thereby destroy, the company. The district court disagreed:. For a great discussion of these forms of joint liability for breach of fiduciary duty, please see E. There was confusion as to whether a finding of conspiracy or aiding and abetting or knowing participation automatically imposes joint liability on all defendants for all damages.

Most of the cases seem to indicate that a separate damage finding is necessary for each defendant because the conspiracy may not proximately cause the same damages as the original bad act. Continental Imports, Inc. Bentley , SW. Belz , S. So, there should be a finding of causation and damages for each conspiracy defendant unless the evidence proves as a matter of law that all conspiracy defendants were involved from the very beginning as to all underlying torts.

The Texas Supreme Court has now decided that the statute of limitations for a conspiracy claim is the same as the underlying tort. Agar Corp. April 5, In Agar , the plaintiff asserted claims for tortious interference, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, fraud, fraud by non-disclosure, misappropriation of trade secrets, violations of the Texas Theft Liability Act, conversion, and civil conspiracy.

The defendant alleges that the conspiracy claim was barred by the two-year statute of limitation, and the court of appeals agreed with that argument. The Court noted that the statutes of limitations vary from claim to claim as determined by the Legislature. For claims not expressly identified by the Legislature, a residual limitations period of four years is provided.

The Court stated that the statutes of limitations do not mention civil conspiracy by name. The Court then addressed whether conspiracy was its own independent tort or whether it was merely a vicarious liability theory:. When used as a theory of vicarious liability, civil conspiracy is part of the factual situation that permits a remedy against co-conspirators. Without it, there would be no grounds for recovery against co-conspirators who did not commit the underlying unlawful act.

So it is not inconsistent to say civil conspiracy is a vicarious liability theory while also recognizing that it is a kind of cause of action. The Court held that civil conspiracy is not an independent tort. It also held that it does not have its own statute of limitations and is tied to the limitations of the tort underlying the conspiracy claim:. In fact, assigning civil conspiracy its own fixed limitations period conflicts with its nature as a derivative tort.

Civil conspiracy requires an underlying tort that has caused damages. The cause of action for the underlying tort typically accrues as soon as the tort causes those damages. A fixed limitations period of two years for civil conspiracy that differs from that of its underlying tort can produce bizarre consequences. These underlying claims are governed by separate two-, three- and four-year statutes of limitations respectively. The civil conspiracy claims are likewise governed respectively by those statutes.

A conspiracy claim based on an earlier underlying tort does not re-accrue when the co-conspirators agree to commit a second tort or make another overt act. The Court has moved away from a one-size-fits-all approach to conspiracy. A plaintiff must establish that a conspiracy defendant caused particular damages after it joined the conspiracy.

Further, a conspiracy defendant is only liable for damages associated with the underlying tort to which his conduct is tied. In other words, if a defendant conspired to defraud, but not tortiously interfere, then it will only be liable for the fraud damages and not the tortious interference damages. Each underlying tort may have a different limitations period and may accrue at different times, which may require different fact findings as to accrual or discovery if the discovery rule has been asserted.

What is not known is how this recent clarity on conspiracy claims applies to knowing-participation or aiding-and-abetting breach of fiduciary duty claims. Are they separate claims that have their own limitations period? If so, what are the limitations periods? Or, are they derivative claims that rely solely on the four-year limitations period of the underlying breach of fiduciary duty claim?

The end result is that jury instructions in cases involving these types of claims will be very complicated and involved. Causation, damages, and limitations may require multiple questions. A party should consider whether it would be wise to hire an attorney with appellate experience in this area to assist. This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks.

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The Texas Supreme Court first addressed whether the trial court correctly rendered judgment for the contract attorney on the breach-of-fiduciary-duty claim. The court held that the elements of a claim for breach of fiduciary duty are 1 the existence of a fiduciary duty, 2 breach of the duty, 3 causation, and 4 damages. Corbett-Wallace Corp. It did not do so. On the other hand, the church was not required to show causation and actual damages as to any equitable remedies it sought.

The contract attorney argued that the summary judgment should be affirmed because, although the client did plead equitable remedies in the trial court, that the client waived those claims by failing to raise them in its appellate briefing. The court then turned to the conspiracy claim.

The court held that an action for civil conspiracy has five elements: 1 a combination of two or more persons; 2 the persons seek to accomplish an object or course of action; 3 the persons reach a meeting of the minds on the object or course of action; 4 one or more unlawful, overt acts are taken in pursuance of the object or course of action; and 5 damages occur as a proximate result.

The court explained:. An actionable civil conspiracy requires specific intent to agree to accomplish something unlawful or to accomplish something lawful by unlawful means. This inherently requires a meeting of the minds on the object or course of action. Thus, an actionable civil conspiracy exists only as to those parties who are aware of the intended harm or proposed wrongful conduct at the outset of the combination or agreement.

In this case, the client argued that there were two possible conspiracies: an initial conspiracy to steal its money, and a subsequent conspiracy to cover up the theft. The actions of one member in a conspiracy might support a finding of liability as to all of the members. But even where a conspiracy is established, wrongful acts by one member of the conspiracy that occurred before the agreement creating the conspiracy do not simply carry forward, tack on to the conspiracy, and support liability for each member of the conspiracy as to the prior acts.

Rather, for conspirators to have individual liability as a result of the conspiracy, the actions agreed to by the conspirators must cause the damages claimed. The damage to the church had already been done when Parker and Lamb agreed to cover up the theft and try to replace the money. The court reviewed the aiding and abetting breach of fiduciary duty claim. The court first held that the client did not adequately raise that claim in the summary judgment proceedings and waived it.

In any event, assuming such a claim existed and assuming it was adequately raised, the court held that there was not sufficient evidence to support such a claim in this case:. Moreover, as noted above, although we have never expressly recognized a distinct aiding and abetting cause of action, the court of appeals determined that such a claim requires evidence that the defendant, with wrongful intent, substantially assisted and encouraged a tortfeasor in a wrongful act that harmed the plaintiff.

See Juhl , S. The court finally addressed a joint venture claim by the client. The court held that the elements of a joint venture are 1 an express or implied agreement to engage in a joint venture, 2 a community of interest in the venture, 3 an agreement to share profits and losses from the enterprise, and 4 a mutual right of control or management of the enterprise.

Interesting Note: The court held that it had previously expressly stated that Texas had not adopted an aiding and abetting claim at this time. The court cited to its previous opinion of Juhl v. Airington , S. That case dealt with whether a group of parties were responsible for a negligence claim and did not address a breach of fiduciary duty claim.

This case highlights a rather confusing area of law in Texas. The Texas Supreme Court has previously held that there is a claim for knowing participation in a breach of fiduciary duty in Texas. See Kinzbach Tool Co. The general elements for a knowing-participation claim are: 1 the existence of a fiduciary relationship; 2 the third party knew of the fiduciary relationship; and 3 the third party was aware it was participating in the breach of that fiduciary relationship.

Meadows v. Harford Life Ins. Depending on how the Texas Supreme Court rules in the future, there may be a recognized aiding-and-abetting breach-of-fiduciary-duty claim in Texas. The Texas Supreme Court has stated that it has not expressly adopted a claim for aiding and abetting outside the context of a fraud claim.

Pacific Mut. Life Ins. Sungard Consulting , S. Notwithstanding, Texas courts have found such an action to exist. See Hendricks v. Thornton , S. Hefner , F. One court identified the elements for aiding and abetting as the defendant must act with unlawful intent and give substantial assistance and encouragement to a wrongdoer in a tortious act.

West Fork Advisors , S. There is not any particularly compelling guidance on whether these claims knowing participation and aiding and abetting are the same or different or whether they are recognized in Texas or not.

And if they do exist and are different, what differences are there regarding the elements of each claim? Shah , business partners were involved in litigation regarding the purchase and sale of real property for the operation of a hospital. One set of defendants challenged this holding because they did not owe fiduciary duties.

The court of appeals held:. Fiduciary duties arise in two types of relationships. A confidential relationship—which may arise from a moral, social, domestic, or purely personal relationship of trust and confidence—may give rise to an informal fiduciary duty.

The court noted that the plaintiffs neither alleged nor offered evidence of such a preexisting confidential relationship with any member of the appealing defendants. The court of appeals noted that there was a difference between a breach-of-fiduciary-duty claim and an aiding-and-abetting breach-of-fiduciary duty claim:.

The court of appeals reversed and remanded the case for a new trial because the trial court in a bench trial failed to adequately present findings of fact and conclusions of law that linked its damages findings to valid causes of action. In OrchestrateHR, Inc. September 1, The former employer also sued other defendants for aiding and abetting the former employee in that breach of fiduciary duty.

The opinion does not discuss the underlying facts and evidence in any detail. The defendants filed a motion for summary judgment, arguing that Texas does not recognize an aiding-and-abetting breach-of-fiduciary-duty claim. In Wooters v. Civil conspiracy is a combination by two or more persons to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful means.

The essential elements of a civil conspiracy are 1 two or more persons; 2 an object to be accomplished; 3 a meeting of the minds on the object or course of action; 4 one or more unlawful, overt acts; and 5 damages as the proximate result…. Proof of a joint intent to engage in the conduct that resulted in the injury, without more, does not establish a cause of action for civil conspiracy. Civil conspiracy instead requires the specific intent to agree to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful means.

An employee has a duty to act primarily for the benefit of his employer in matters connected with his employment. An employee also may use his general skills and knowledge obtained through employment to compete with the former employer.

The court then analyzed the evidence and found that there was no evidence that Wooters conspired to breach fiduciary duties. Thus, we consider whether a reasonable jury could find that Wooters, a non-employee, agreed with Kutach and Pennington that they would breach the fiduciary duty they owed to Unitech and knowingly participated in that breach to his benefit in connection with the steps that they took toward realizing Infinity Subsea as a competing company.

The latter does not denote conspiracy to participate in tortious conduct. Interest Note : These cases highlight a rather confusing area of law in Texas. There is a claim for knowing participation in Texas. See Kinzbach Tool Co. Corbett-Wallace Corp. The general elements for a knowing-participation claim are: 1 the existence of a fiduciary relationship; 2 the third party knew of the fiduciary relationship; and 3 the third party was aware it was participating in the breach of that fiduciary relationship.

Meadows v. Harford Life Ins. There may be a recognized aiding-and-abetting breach-of-fiduciary-duty claim in Texas. The Texas Supreme Court has stated that it has not expressly adopted a claim for aiding and abetting outside the context of a fraud claim. Pacific Mut. Life Ins.

Sungard Consulting , S. Notwithstanding, Texas courts have found such an action to exist. See Hendricks v. Thornton , S. Hefner , F. One court identified the elements for aiding and abetting as the defendant must act with unlawful intent and give substantial assistance and encouragement to a wrongdoer in a tortious act. West Fork Advisors , S. As noted above in the Wooters case, there is also a recognized civil conspiracy claim in Texas.

But there is not any particularly compelling guidance on whether these claims are the same or different.