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Introduction

The litigation world for design professionals [1] is an exceedingly difficult one in this ongoing recessionary period. While there is no surprise about lawsuits founded upon professional malpractice, or the breach of a professional services agreement being filed against design professionals, there is reason to be concerned when a design professional is also sued for the breach of a fiduciary duty.

A "fiduciary duty" is, in legal terms, the highest duty of trust and confidence that one person [2] may owe to another. In one often cited New York Court of Appeals case, [3] Justice Cardozo, the famous jurist who was elevated from the High Court of New York State to the United States Supreme Court described the basic fiduciary rules in a partnership lawsuit context as follows:

Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio [i.e., a careful observance] of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the 'disintegrating erosion' of particular exceptions. Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court.

Common examples of fiduciary relationships include, among others, those of lawyer and client, [4] accountant and client, [5] husband and wife (in a community property state) [6] and trustee and beneficiary. [7] All of these relationships require the stronger, and generally more expert, party to behave in stellar fashion vis-a-vis the weaker, and
usually less skilled, one.

The opposite of a fiduciary relationship is one where the parties are said to be dealing at "arms length." [8] For example, a typical debtor/creditor relationship, [9] or certain contractual dealings between a manufacturer of goods and their vendor [10] are all non­ fiduciary in scope. Generally, the transactional setting where each party to the bargain
is demonstrably (and understandably) looking out for its own interests will not be a fiduciary one. [11]

In general, it is not typical that one would think of a design professional's relationship with its client as a "fiduciary" one, but as we explain below, such a relationship has been found to exist by some courts, although a key inquiry is how and when such a relationship may be regarded as "fiduciary." It appears to be fact specific as to the design professional's relationship with its client, per the reviewed case law.

In the next part of our discussion, we review a number of cases, both published and unpublished, [12] that address this significant problem for design professionals who are charged by a claimant with a fiduciary duty and violation of that duty.