Breach of Fiduciary Duty

Breach of Fiduciary Duty § 7:2.1
fiduciary duty owed to the party; and (3) the breach of duty entitles the
party to a remedy.
§ 7:2.1 Existence of a Fiduciary Relationship
An accountant is not automatically a fiduciary. 101 Therefore, a party
alleging that an accountant is a fiduciary bears the burden of proving the
existence of a fiduciary relationship. 102 To meet this burden a client
must show that he or she justifiably placed confidence in the accountant
to act in the best interests of the client. Evidence that the client relied
upon personal financial or investment advice from the accountant or
that the client entrusted his or her assets or management of a portion of
his or her business to the accountant is generally necessary.
To establish the existence of a fiduciary relationship, the client may
testify as to the services rendered to him or her by the accountant, and
as to the trust he or she placed in the accountant. 103 The plaintiff ’s
case may be bolstered by testimony indicating the reasons for his or
her reliance on the accountant, for example, the plaintiff ’s lack of
education, the expertise of the accountant in the matter, or the
existence of a long-term relationship or a close personal friendship
between the parties. 104 The testimony of the accountant may be used
to establish the nature of his or her practice; for example, that he or
she gives financial and investment advice to clients, and to establish
the nature of the services rendered to the plaintiff. 105 An admission by
the accountant that his or her clients rely upon him or her for
financial, tax, or investment advice is very helpful to the plaintiff in
establishing the existence of a fiduciary relationship.
An accountant who is alleged to be a fiduciary will want to show
that the plaintiff did not rely upon or place confidence in the
accountant with regard to the matter in question or, alternatively,
that such reliance was unjustified. For example, this might be established
by showing (1) that the plaintiff was not a client of the
101. Stainton v. Tarantino, 637 F. Supp. 1051, 1066 (E.D. Pa. 1986).
102. Id.
103. See, e.g., Dominguez v. Brackey Enters., 756 S.W.2d 788, 791 (Tex. Ct.
App. 1988) (client testified as to his trust in accountant and fact that he
did not take action without accountant’s approval), writ of error denied.
104. See, e.g., Dominguez, 756 S.W.2d at 791 (evidence existed of both business
relationship and social relationship), writ of error denied; Russell v.
Campbell, 725 S.W.2d 739, 748 (Tex. Ct. App. 1987) (preoccupation
with other businesses, lack of education, and expertise of accountant),
writ of error refused.
105. See, e.g., Dominguez, 756 S.W.2d at 790 (accountant testified that his
duties as a certified public accountant included, among other things,
advice on investments to avoid or defer taxes and advice to clients on
how to operate their businesses), writ of error denied.
(Goldwasser & Arnold, Rel. #14, 10/11)
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