February 8, 2023
At the Dean’s introductory remarks on the first day of my law school orientation, he stressed that lawyers were “fiduciaries.” I thought that I had heard that term before, but I was not exactly sure what it meant. Years later, and thanks to a spoonful of sugar, I now realize where I first heard the term and have a better idea of what it means.
When I was watching the 1964 version of Disney’s Mary Poppins with my children, the term pops up in the song where the senior Mr. Dawes wants Michael to give him his tuppence to invest in the bank. The song concludes:
Prudently, cautiously, trustingly invested in the . . .
To be specific
In the Dawes , Tomes, Mousely, Grubbs Fidelity Fiduciary Bank.
Ironically, the line “Prudently, cautiously, trustingly” is a pretty good summary of the duties of a fiduciary. In short, a fiduciary has a duty of loyalty, good faith and competence to the beneficiaries of the fiduciary's duties.
No doubt such fiduciaries include, trustees, lawyers, and other professionals. However, the concept is far more elastic and harder to define than that "Supercalifragilisticexpialidocious." Section 1.01 of the Restatement (Third) of Agency provides:
Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act.
Comment b to Section 8.01 of the Restatement (Third) of Agency further provides:
Although an agent's interests are often concurrent with those of the principal, the general fiduciary principle requires that the agent subordinate the agent's interests to those of the principal and place the principal's interests first as to matters connected with the agency relationship.
In 1997, the Maryland’s highest court, then known as the Court of Appeals, held in Kann v. Kann, that there was no general, independent cause of action for breach of fiduciary duty. But, Kann also said that there might be an action in specific instances not defined by the Court. For twenty-three years, there were conflicting decisions by both Maryland courts and federal courts interpreting Maryland law as to what type of action, if any, a principal could bring for breach of fiduciary duty.
In 2020, the Court of Appeals of Maryland resolved the confusion regarding actions for breach of fiduciary duty in Plank v. Cherneski, a case I argued before the Court. The Court held that there is an independent cause of action for breach of fiduciary duty and confirmed that the managing member of an LLC had a fiduciary duty to the other members of the LLC.
The full contours of the independent cause of action Plank recognized have not yet been fully developed in case law. But, Plank provides both a potential tool for persons who have been harmed by fiduciaries and a caution for those who act as fiduciaries.
If you are a fiduciary, take heed to appreciate the gravity of your relationship and ensure the tuppence you accept is treated “prudently, cautiously, trustingly.”
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