Breach of Fiduciary Duty

Breach of Fiduciary Duty § 7:1.1
Second, a major advantage of a fiduciary duty claim over a breach of
contract claim is that the duties of an accountant who is a fiduciary
extend beyond the obligations expressly assumed by the accountant as
part of the contract with the client.
Contract law generally assumes that parties bargain at arms
length . . . and that the resulting bargain governs their relationship.
Fiduciary relationships . . . usually begin with a contract. But
in the eyes of the law fiduciary relationships are never arms length.
With respect to such agreements, the law jettisons the general
presumptions and standards of the law of contract and applies
instead the stricter fiduciary standard. 6
Third, in many fiduciary duty cases the accountant, as a fiduciary,
will have the burden of proving that he or she has acted appropriately.
For example, where the accountant-fiduciary enters into a business
transaction with the client, the accountant has the burden of proving
that he or she disclosed all material facts and that the transaction was
fair. 7 Since the accountant bears the burden of proof on these issues, he
or she is at risk where the evidence on the questions is inadequate to
reach a conclusion.
Fourth, an advantage of a breach of fiduciary duty claim over a
negligence claim or a breach of contract claim is that in many breach
of fiduciary duty cases the plaintiff is not limited to compensatory
damages. The client may recover any profit of the accountant-fiduciary
regardless of whether the breach of fiduciary duty caused the client any
injury or whether the contractual expectations of the client were met. 8
In addition, punitive damages may be available.
Fifth, in many states a breach of fiduciary duty claim will enjoy a
longer statute of limitations than other available claims. See Table 9-1
herein for a schedule of the duration of the various statutes of
limitations in each state.
Finally, since a fiduciary has a duty to disclose all relevant facts
relating to matters within the scope of the fiduciary relationship, a
failure to disclose may toll the statute of limitations. For example, in
one case 9 an accountant- fiduciary engaged in self-dealing in violation
of his fiduciary duties. The court held that the failure of the accountant
to reveal material facts tolled the statute of limitations until the
6. Id. at 241–42.
7. See infra text accompanying notes 76–79, 110.
8. See Anderson & Steele, supra note 5, at 255–56; DeMott, Beyond Metaphor:
An Analysis of Fiduciary Obligation, 1988 DUKE L.J. 879, 900–01.
9. Russell v. Campbell, 725 S.W.2d 739 (Tex. Ct. App. 1987), writ of error
refused.
(Goldwasser & Arnold, Rel. #14, 10/11)
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