Tag Archive for: fiduciary duty

Lazar v. Bishop: Breach of Fiduciary Duty Claims Against Realtor Were Assignable by Buyer 

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Summary

In Lazar v. Bishop, the California Court of Appeal resolved a pivotal question: whether a breach of fiduciary duty claim against a real estate broker could be assigned to another party. The court ruled that such claims are assignable when they pertain to property or pecuniary interests rather than highly personal or confidential relationships.

Laura Lazar, acting as the assignee of her late father Daniel Gottlieb’s rights, brought a lawsuit against real estate brokers Lynette Bishop, Shen Shulz, Sotheby’s International Realty, Inc., and Shen Realty, Inc., alleging breach of fiduciary duty during the sale of her father’s Malibu property. The court reversed a trial court’s grant of summary judgment, ruling that Lazar had standing to pursue the claim and remanding the case for further proceedings.

Background

In 2016, Daniel Gottlieb hired Lynette Bishop, a Sotheby’s International Realty agent, to sell his Malibu home, originally listed at $4.2 million. Over time, Bishop convinced Gottlieb to lower the price, eventually selling the home for $3.15 million to buyers represented by Shen Shulz, another Sotheby’s agent, creating an undisclosed dual agency situation. Gottlieb later assigned his claims to his daughter, Laura Lazar, before his death.

Lazar filed a lawsuit in 2019, alleging that Bishop breached fiduciary duties by:

  • Failing to disclose the dual agency arrangement before the sale was finalized.
  • Sharing Gottlieb’s willingness to accept lower offers with the buyers’ agent.
  • Failing to market the property effectively, resulting in a sale price nearly $2 million below the home’s purported value.

Lazar sought over $2.2 million in damages, including lost sale proceeds, commissions paid to the brokers, and costs incurred preparing the property for sale.

Key Court Findings

The California Court of Appeal addressed whether a breach of fiduciary duty claim against a real estate broker could be assigned and ruled that such claims are assignable when they involve property or financial interests. The decision clarified the distinction between personal, non-assignable claims and those tied to transactional relationships.

Assignability of Claims

  • The appellate court ruled that breach of fiduciary duty claims tied to property and pecuniary interests are assignable under California Civil Code §954.
  • The court emphasized that the fiduciary relationship between a real estate broker and a client is transactional and distinct from the deeply personal and confidential attorney-client relationship.

Policy Concerns Dismissed

The trial court had denied Lazar standing, citing concerns about encouraging commercialized litigation and burdening the real estate profession. The appellate court rejected these concerns, noting that the case involved monetary losses tied to property, not personal injuries or emotional harm.

Constructive Fraud and Fiduciary Breach

The court determined that Bishop’s actions, including failing to disclose the dual agency and improperly influencing Gottlieb’s pricing decisions, constituted constructive fraud, a breach of her fiduciary duty requiring full transparency and loyalty.

Timeliness of Appeal

Despite technical delays in filing, Lazar’s notice of appeal was deemed timely due to prompt corrective actions by her counsel.

Key Takeaways

  • Real Estate Fiduciary Claims Are Assignable: The ruling affirms that claims seeking monetary damages for breaches of fiduciary duty in real estate transactions can be assigned, as they are tied to property rights rather than personal relationships.
  • Importance of Transparency: Real estate brokers must disclose dual agency arrangements and act solely in their client’s interest to avoid liability.
  • Transactional Nature of Real Estate: The court’s decision underscores that real estate services are fundamentally tied to property and do not share the personal and confidential aspects of attorney-client relationships.

Citation

Lazar v. Bishop (2024) B321752, California Court of Appeal, Second Appellate District

What Constitutes a Breach of Fiduciary Duty in California?

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Fiduciary relationships work to ensure the highest degree of loyalty and care from one party to another. Breach of fiduciary duty can do more than violate this trust relationship – it may result in irrecoverable costs in a variety of forms.

What is a Fiduciary Relationship?

A fiduciary relationship has been defined within the California Civil Jury Instructions published in 2017 as “any relation existing between parties to a transaction wherein one of the parties is duty bound to act with the utmost good faith for the benefit of the other party.”

In essence, the fiduciary duty of a party to their beneficiary exists when the beneficiary places their complete confidence in the fiduciary’s integrity. The fiduciary is not allowed to work against the beneficiary’s interests or take advantage of them without consent or knowledge.

These are a few typical examples of individuals and organizations owing fiduciary duty:

  • Banks to their borrowers
  • Attorneys to their clients
  • Controlling shareholders to minority shareholders
  • Business partners
  • Insurer to insured
  • Corporations to their stockholders
  • Pension fund trustee to pensioner beneficiary
  • Joint venturers
  • Stockbroker to client
  • Spouse to spouse
  • Trustee to trust beneficiary
  • Trade unions to union members

Forms of Breach of Fiduciary Duty in California

A person agreeing to act as a fiduciary essentially promises to act in the best interests of the other party. Hence, a breach of fiduciary duty takes place when the fiduciary acts in a self-interested or self-serving manner. Typically, breaches of fiduciary duty take place due to deception or negligence on the fiduciary’s behalf.

These are a few common examples of a breach of fiduciary duty:

  • Acting in a manner beneficial to a competitor
  • Sharing an employer’s secrets
  • Mishandling for company funds or assets
  • Deliberately withholding important information from partners
  • Engaging in any conduct legally classified as self-dealing
  • Using the trust’s property for the fiduciary’s own benefit

Consequences of a Breach of Fiduciary Duty

It’s important to understand that a breach of fiduciary duty is not a criminal act in itself. But it can be tied to one. For instance, insider trading is not just a breach of fiduciary duty, but it is also a crime depending on the significance of the wrongdoing.

The fiduciary won’t just have to deal with the damages associated with their breach, but also the consequences of a criminal act in certain cases. This may include penalties and jail time. In California, a plaintiff can demand compensatory damages along with punitive damages.

Punitive damages are awarded in more exceptional cases. They are not meant to compensate the plaintiff, but to punish the defendant and send a message to society that this particular breach of fiduciary duty is unacceptable and will not be tolerated.

The difficulty lies in quantifying damages and actually proving that a breach exists. This is where a qualified civil litigation attorney can prove to be useful.

Elements of a Breach of Fiduciary Duty Claim

There are four primary elements that need to be demonstrated to successfully prove a breach of fiduciary duty. Plaintiffs can recover damages caused by a defendant by providing substantial evidence supporting the specific components.

Plaintiffs should be prepared to show that:

  • Fiduciary relationship existed and the principal was owed a duty by the fiduciary.
  • Fiduciary acted in a manner that breached or contradicted their expected duties.
  • Fiduciary’s actions caused the principal to suffer damages.
  • Damages incurred on the principal were a direct result of a breach of fiduciary duty.

According to California’s Code of Civil Procedure section 343, you have four years to file a breach of fiduciary duty claim. But this is not a universal statute of limitations.

Your claim may have grounds for constructive fraud, in which case the statute of limitations will be reduced to three years. This makes it crucial to contact an attorney to discuss your options and file a claim in a timely manner.

It’s important to set realistic expectations regarding the next steps whether you are a defendant or a plaintiff in a breach of fiduciary duty claim. A reputable business attorney in California will be able to explain the fine nuances of the way the law applies to your particular case. This includes reviewing arbitration agreements, options for litigation, and the possibility of settling out of court.

There may be multiple parties involved in your claim, which could make it complex. Filing a claim can be costly and may last for months. For this reason, it is in your best interests to act swiftly if you believe you were harmed by a breach of fiduciary duty.

Our Seasoned Civil Litigation Lawyers are Ready to Fight for You

The attorneys at Peterson, Martin & Reynolds have helped numerous clients attain fair compensation to cover the losses suffered through a breach of fiduciary duty. Our lawyers have extensive legal knowledge and experience successfully litigating fiduciary breach cases across a wide array of circumstances.

Schedule your comprehensive case review with our lawyers today. Call us at (415) 849-2564 or contact us online.