Breach of Fiduciary Duty

Breach of Fiduciary Duty § 7:1.5
of the fiduciary relationship, 71 for example, by using a “straw person”
to deal on behalf of the fiduciary; 72 (3) secretly acting for an adverse
party in a matter within the scope of the fiduciary relationship; 73
(4) competing as to a matter within the scope of the fiduciary relationship;
74 or (5) acting on behalf of a party whose interests conflict with
those of the person to whom the fiduciary duties are owed. 75 In sum,
many potential breaches of loyalty by accountants involve conflicts of
interest; for example, self-dealing by an accountant or receipt by an
accountant of a commission or a fee from a third party in return for
recommending an investment or service to the client.
An accountant who is a fiduciary may generally act on his own
account or for the account of another as to a matter within the scope of
the fiduciary relationship with the consent of the party to whom the
duty of loyalty is owed. 76 However, the accountant-fiduciary still has a
duty to deal fairly with the party. 77 For example, where the accountantfiduciary
enters into a transaction with a party to whom a fiduciary
duty is owed, he or she must disclose all relevant facts to the party and,
even then, may enter into a deal only on fair terms. 78 In addition, the
burden is on the accountant-fiduciary to prove both the fairness of the
transaction and the disclosure of all material facts. 79
An accountant who is an ERISA fiduciary may not:
(1) deal with the assets of the plan in his own interest or for his
own account,
(2) in his individual or in any other capacity act in any
transaction involving the plan on behalf of a party (or
represent a party) whose interests are adverse to the interests
of the plan or the interests of its participants or
beneficiaries, or
71. See id. § 389 (Acting as Adverse Party without Principal’s Consent);
RESTATEMENT OF RESTITUTION §§ 192 (Purchase by Fiduciary Individually
of Property Entrusted to Him as Fiduciary) and 193 (Sale of Fiduciary’s
Individual Property to Himself as Fiduciary) (1937).
72. RESTATEMENT (SECOND) OF AGENCY § 389 cmt. a (1958).
73. See, e.g., id. § 390.
74. RESTATEMENT (SECOND) OF AGENCY § 393 (1958); RESTATEMENT OF
RESTITUTION § 199 (1937).
75. See, e.g., RESTATEMENT (SECOND) OF AGENCY § 394 (Acting for One with
Conflicting Interests) (1958).
76. See id. §§ 390 (Acting as Adverse Party with Principal’s Consent) and 392
(Acting for Adverse Party with Principal’s Consent).
77. See id. § 390 cmt. c and § 392 cmt. a.
78. See RESTATEMENT (SECOND) OF CONTRACTS § 173 (When Abuse of a
Fiduciary Relation Makes a Contract Voidable) (1981); BOGERT, TRUSTS
§ 96 (Trustee’s Duty in Transactions with Beneficiary) (6th ed. West 1987).
79. Squyres v. Christian, 242 S.W.2d 786, 790–91 (Tex. Civ. App. 1951).
(Goldwasser & Arnold, Rel. #14, 10/11)
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