Ethics in Brief

Ethics in Brief is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association.


Distinguishing Between Negligence and a Breach of Fiduciary Duty

Lawyers are fiduciaries. They owe duties to their clients, including a duty of competence. But not all duties that lawyers owe are fiduciary duties. For example, standing alone, a single act of simple negligence in the provision of legal services does not mean that a lawyer has breached a fiduciary duty.

A couple of months ago, the Second Appellate District addressed this issue in Broadway Victoria, LLC v. Norminton, Wiita & Fuster (2017) 10 Cal.App.5th 1185. There a client alleged that its lawyers failed to advise it of two significant things: a potential malpractice claim against predecessor counsel and the potential opportunity to obtain clarification from a bankruptcy court on an assignment that it had approved. This latter “failure to advise” was significant because standing was one of the primary points of contention in a state court lawsuit and one of the issues was whether ancillary claims had been transferred as part of the assignment. Further, resolving the issue before the bankruptcy court would likely have been less expensive and more expeditious than the state court option.

The Second District noted that such allegations could potentially be sufficient to show professional negligence, but would not support a claim for breach of fiduciary duty. “Beyond mere allegations of professional negligence, a cause of action for breach of fiduciary duty requires some further violation of the obligation of trust, confidence, and/or loyalty to the client.” So, a claim of breach of fiduciary duty arising from the same facts and damages as one for malpractice is duplicative and should be dismissed.

Similarly, standing alone, the mere fact that a lawyer pursued and was paid for a losing strategy does not support a breach of fiduciary duty claim. Here, the client theorized that, to generate greater fees by continuing to litigate a standing issue in state court, the lawyers did not inform the client of a potentially faster and cheaper option of seeking bankruptcy court clarification of whether an assignment the bankruptcy court had approved included the right to bring the action. The Second Appellate District concluded, “It would be entirely speculative” to infer that the lawyers intended their client harm from the nondisclosure of one option and the receipt of fees for pursuing another that proved unsuccessful.

The takeaway is a reminder that breach of fiduciary duty is a concept which, although it comprises legal malpractice, is separate and distinct from traditional professional negligence. The Broadway Victoria opinion reinforces this concept by embracing the premise that the Second District quoted in Pierce v. Lyman (1991) 1 Cal.App.4th 1093 more than a quarter of a century ago. “The basic fiduciary obligations are twofold: undivided loyalty and confidentiality.” (Id. at p. 1102.)  

-- David Majchrzak 

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**