Opinion ID: 776749
Heading Depth: 3
Heading Rank: 2

Heading: Pursuit of Direct Claims for Breach of Fiduciary Duty

Text: 36 We also do not see a basis in Maryland law for the defendants' argument, premised on Scudder, that claims for alleged breaches of fiduciary duty by directors and officers only support derivative actions and may not be pursued directly. See Scudder, 964 F.Supp. at 792. It is not clear that this was essential to the decision in Scudder, inasmuch as it appears to have been stated as an observation rather than as a rule of law. Id. at 791 ([C]laims of breach of duty by directors and other fiduciaries of a corporation generally are regarded as derivative rather than direct....). But in any event, the defendants have asserted that under Maryland law, directors and officers cannot be sued directly by shareholders for alleged breaches of fiduciary duty. We disagree. 37 Maryland case law appears to be silent on the narrow question whether shareholders may bring fiduciary duty claims directly against officers and directors. Although neither the district court nor the defendants cite a case from a Maryland court that holds that such lawsuits are prohibited, the plaintiffs similarly fail to cite a case in which such a suit was allowed. 38 But Maryland courts have clearly established the proposition that directors and officers owe fiduciary duties to both the corporation and the shareholders. See Toner v. Baltimore Envelope Co., 304 Md. 256, 268-69, 498 A.2d 642, 648 (1985) (collecting cases); Waller, 187 Md. at 194, 49 A.2d at 454. 7 This means that by asserting that shareholders may not bring direct claims against directors and officers based on an alleged breach of fiduciary duties, the defendants in effect argue that these fiduciary duties, though extant, are non-actionable. The availability of a derivative action does not suggest otherwise. As we have seen, a derivative suit may only be brought if the plaintiff alleges injury to the corporation, and cannot be brought by a plaintiff who alleges only a distinct injury to him- or herself as the result of the breach of a fiduciary duty or otherwise. Thus, the availability of derivative actions does not give shareholders a remedy that they would not have if the officers and directors owed their fiduciary duties to the corporation alone. 39 We note that there is no dispute that the fiduciary duties owed by directors and officers to the corporation are actionable, as the existence of derivative actions under Maryland law indicates. Maryland law also makes clear that the fiduciary duties owed minority shareholders by majority shareholders are actionable, and may be enforced through direct claims. See, e.g. Baker v. Standard Lime & Stone Co., 203 Md. 270, 285, 100 A.2d 822, 830 (1953); Coop. Milk Serv. v. Hepner, 198 Md. 104, 114, 81 A.2d 219, 224 (1951) (dismissing claims on other grounds). 40 Thus, in order to adopt the defendants' argument, we would be required to reach two odd conclusions about Maryland law. We would first have to conclude that the repeated assertions by the Maryland courts of the existence of fiduciary duties flowing from directors and officers to shareholders were not meant to have practical import. See Toner, 304 Md. at 268-69, 498 A.2d at 648. And we also would be forced to conclude that Maryland courts intend the term fiduciary duty to have a different meaning with regard to the duty from directors and officers to shareholders — not giving rise to enforceable rights — than it does with regard to the duty from directors and officers to the corporation and also the duty from majority to minority shareholders — giving rise to enforceable rights — even where the courts use the term only once in a sentence to refer to both sets of relationships. See, e.g., Waller, 187 Md. at 194, 49 A.2d at 454. (It is generally stated that directors occupy a fiduciary relation to the corporation and all its stockholders....) We are unaware of principles of interpretation that would support such a reading of the Maryland cases.