Maryland Recognizes Breach Of Fiduciary Duty As An Independent Cause Of Action

• Published date: 28 July 2020
• Law Firm: Duane Morris LLP
• Author: Mr Robert Hopkins and Carla N. Murphy

The Court of Appeals of Maryland recently released its opinion in William H. Plank, II, et al. v. James P. Cherneski, et al.,?A.3d?(2020) unequivocally holding that "[t]his Court recognizes an independent cause of action for breach of fiduciary duty."¹ This opinion establishes a resolution to an inconsistency that has troubled Maryland courts for more than 23 years.

The issue arose in the appeal of a minority shareholders' lawsuit against the managing member and LLC for numerous causes of action, including an independent count for breach of fiduciary duty. The appeal, originally before the Court of Special Appeals, was decided by Maryland's high court as a certified question of law. In issuing its ruling, the Court of Appeals recognized that the question of whether or not Maryland recognizes an independent cause of action is conflicted with contradictory holdings from Maryland's appellate and federal courts. The source of the confusion was the holding in the seminal case Kann v. Kann,² a 1997 Maryland Court of Appeals opinion.

In Kann, the Court held:

There is no universal or omnibus tort for the redress of breach of fiduciary duty by any and all fiduciaries. This does not mean that there is no claim or cause of action available for breach of fiduciary duty. Our holding means that identifying a breach of fiduciary duty will be the beginning of the analysis, and not its conclusion.³

Maryland...