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Fiduciary Duty Case Authority

We are going to address a number of the cases we have researched on the breach of fiduciary duty question relating to a design professional/client relationship. We have found a large number of cases, but we address only those cases we think most salient to the topic being discussed. There are certainly more cases than you will see discussed below on this subject, nonetheless, in our view, the following are the best of the cases on the topic.

You will see that the architect/client cases predominate in number over those involving engineers, [13] because, (a) architects are more likely to contract directly with a project owner than an engineer, (b) architects would appear to have a broader range of project duties than an engineer, i.e., observation activities, substantial reporting functions (as a result of observation duties), (c) a greater likelihood of being required to coordinate the work/services of various disciplines, (d) there are many types of professionalengineers, each of whom will have a highly specialized role with respect to any given project and (e) architects are generally far more involved in the design/observation/construction process than engineers.

Once again, note that some of the cases are unpublished which means they are of less utility for purposes of pleadings and other legal filings depending on your specific state law. In California, unpublished cases generally cannot be cited in legal papers.

Consider the following decisions:

(a) Palmer v. Brown [14]

The Court stated very clearly that an architect owed its client a fiduciary duty; however, the point appears to have been that such duty would exist because the architect, the owner's agent, was "conflicted" because he was also receiving payment from the project contractor without the owner's knowledge or consent.

(b) Car/son v. Sa/a Architects, lnc. [15]

Sala Architects was hired to design a single family home and the trial judge found a breach of a fiduciary duty. The appellate court did not agree that the architect was a fiduciary, as a matter of law, and it reversed on that point. The key question, upon remand, was whether or not, on a factual level, the defendant had improperly and incorrectly held out its employee as a licensed architect.

(c) E-Med, Inc. v. Mainstreet & Planners, Inc.[16]

The architect was sued for failure to properly advise the owner concerning the design of single-family detached residences, and for failure to investigate better housing options for the client. Among the theories advanced was breach of fiduciary duty, but the court upheld the jury verdict that no breach of fiduciary duty occurred for the architect's alleged failure to advise the plaintiff of alternative developmental options for the project. The decision does not rule out a fiduciary duty for an architect, but the jury verdict finding no breach was upheld on appeal.

(d) Their v. Kenyon [17]

Among the allegations against the architect were failures to advise the plaintiffs about project problems, and failures in representing the owners in their dealings with contractors. A motion to strike a breach of fiduciary duty theory was rejected by the court because the allegations included a contention that the architect had a financial relationship with a contractor, of which the client was not notified, and also because of the architect's superior knowledge and experience.

(e) Universal Contracting Corp. v. Aug [18]

The case did not involve a design professional, but certain language is of interest where the Court spoke of there being "negligent misrepresentation claims where a fiduciary or a fiduciary-like situation has existed between the information provider and the plaintiff, such as cases involving accountants, appraisers, architects and bankers." (Emphasis added.)

(f) Routh v. Prustch [19]

Here, the breach of fiduciary duty allegation against the architect was stricken because the court found no allegation of "fraud, self-dealing, or conflict of interest." The court characterized the architect's duty as a breach of contract/professional negligence one, "which the plaintiff is attempting to enlarge into a case involving fiduciary duties without the requisite loyalty and trust that such a relationship requires."

(g) Cinque v. Schieferstein [20]

Summary judgment was granted to the architect in a breach of fiduciary duty case for lack of proof of a fiduciary duty "separate from and extraneous to the party's contractually defined relationship...or even that there was a fiduciary relationship..."

(h) Winsted Land Development v. Design Collaborative Architects, P.C. [21]

Although the architect's duties were extensive, the trial court did not find the architect's superior knowledge sufficient to give rise to any fiduciary relationship; rather, there was only a business relationship, and not one that involved sufficient loyalty or trust "which characterizes a fiduciary relationship." While the court did find the design professional liable for malpractice, breach of contract, and negligent misrepresentation, no fiduciary duty was found. The court also observed that in Connecticut, breaches of fiduciary duty were most commonly found where "fraud, self­ dealing, or conflicts of interest were present..."

(i) Getzschman, A.I.A v. Miller Chemical Co., lnc. [22]

The Nebraska Supreme Court ruled that the cross-suit against the architect for breach of fiduciary duty was unfounded because the relationship was governed by the architectural services contract which incorporated the architect's professional standard of care. The owner's breach of fiduciary duty claim apparently related to the architect's failure to design a structure within the owner's budget.

j) Strauss Veal Feeds, Inc. v. Mead & Hunt, lnc. [23]

The architect was under contract to provide design and coordination services for a veal feed processing facility. Plaintiff alleged the architect had a duty to investigate and warn the client of potential waste disposal problems given the architect's alleged status as fiduciary; however, the Court found that the architect's duties were based upon its contract with the owner. In that regard, the court found the architect had a duty to "exercise professional skill and reasonable care in preparing plans and specifications according to its contract." This was so even though the architect "professed to be a specialist in designs for the dairy industry..."

(k) Holy Cross Parish v. Huether [24]

The court found that a fraud suit was properly pled against the architect, given that there was fiduciary relationship between the architect and the client, and because the architect allegedly failed to disclose defects "that he knew or should have known as a result of his general supervision of the construction site." The allegations related to inadequate construction administration, and misrepresentations about certain site conditions.

(I) Vike/1 Investors Pacific, Inc. v. Kip Hampden, Ltd. [25]

Soils engineer's contractual duties for owner were not of the type that the court believed could be "fiduciary"; there was little "substantive law" discussion of fiduciary duty, just an expressed belief that the contract between the parties did not evince anything of a fiduciary character. The court did note the lack of direct contact with the owner, and the owner's retention of a number of other project engineers.

(m) Adams v. Whitman [26]

The engineer's contract with the owner for design of a septic system and supervision of installation did not cause the court to find viable the allegations of fiduciary duty against the engineer. The only "fiduciary duty" the court found was one between a principal of defendant and his company, but the client could not use that duty to establish one between the engineer and itself.

(n) Abdella v. Foth & Van Dyke And Associates, lnc. [27]

Lack of privity of contract between the engineer and the project owner defeated the notion of any possible fiduciary duty; defendant was held to owe no duty whatsoever to plaintiff.

(o) Illinois Power Co., v. Duke Engineering & SeNices, Inc. [28]

In pure dictum on the fiduciary duty point, the judge determined that because of his view that Illinois law did not recognize that an engineer owed a fiduciary duty to its client (unlike other professionals, i.e., doctors, lawyers, and real estate brokers), it was proper for an engineer to contractually limit its liability to a client.

The above cases, taken together, may be best summarized as follows:

  1. There is no bright line rule as to whether or not a design professional does, or does not, owe a fiduciary duty to a client The specific facts alleged by the plaintiff are critical;
  2. The more skilled or specialized the design professional is, and the more extensive its duties are, the more likely that a fiduciary relationship exists between design professional and client;
  3. If a design professional, clearly determined to be the "agent" of the client, is also "managing" the contractor in some fashion, the greater the probability of a fiduciary duty in the event of the design professional's failure to fully report to the client;
  4. If it can be alleged and shown the design professional harmed the client because of a conflict of interest type of situation, the greater the chance a breach of fiduciary duty may be pled/found;
  5. If a "fraud" claim is alleged, the greater the prospect that a breach of fiduciary theory may survive;
  6. If the design professional under contract has allegedly committed design malpractice, the less chance the client may successfully advance a breach of fiduciary duty claim in its lawsuit; and,
  7. Contract terms are crucial in a number of the decided cases, with the courts finding that the contracts' terms and conditions may definitely establish the parties' legal relationship.
  8. Courts appear to not accept the idea that an engineer is a fiduciary, although we cannot rule out the possibility that in an extreme case a fiduciary relationship might not exist.