See No Fiduciary, Hear No Fiduciary: A Lawyer’s Knowledge Within Aiding and Abetting Fiduciary Breach Claims

By Brinkley Rowe

Abstract

Fiduciary liability for attorney conduct generally extends only to direct clients of legal services.  Over the last few decades, however, the lawyer’s role has expanded.  Following this trend, fiduciary liability also has expanded to allow third-party claims in certain limited circumstances.  One example is the attorney aiding and abetting a client’s fiduciary breach claim.

One of the key requirements for liability under this claim is the attorney’s knowledge of his client’s fiduciary relationship with the third party alleging the breach.  Within those jurisdictions that have accepted the claim, there are two approaches to the knowledge element.  The first is the constructive knowledge standard that permits liability if the attorney knew or reasonably should have known of the fiduciary relationship.  The second approach is the actual knowledge standard that requires overt and obvious evidence of fiduciary knowledge.  In addition to these standards, a third approach ignores the knowledge element entirely:  the qualified immunity standard that protects attorneys against third-party liability as long as the conduct falls within an attorney-client relationship.  This Note argues for the rejection of constructive knowledge and adoption of either the qualified immunity or actual knowledge standard for numerous doctrinal and policy reasons while maintaining the claim’s original policy goals.