Opinion ID: 1711683
Heading Depth: 1
Heading Rank: 2

Heading: Breach of Fiduciary Duty and Fraud

Text: Sexton also claims that the trial court erred in directing a verdict on his counts for breach of fiduciary duty and fraud. In reviewing an order granting a motion for directed verdict, this court views the evidence in the light most favorable to the party against whom the verdict was directed. Lakeview Country Club, Inc. v. Superior Prods., 325 Ark. 218, 926 S.W.2d 428 (1996); Higgins v. General Motors Corp., 287 Ark. 390, 699 S.W.2d 741 (1985). If any substantial evidence exists that tends to establish an issue in favor of that party, it is error for the trial court to grant the motion for directed verdict. Lakeview Country Club, Inc. v. Superior Prods., supra . When the trial court granted a directed verdict on Sexton's claim for breach of fiduciary duty, it stated as follows: Well, there [have] been allegations of a breach of a fiduciary duty. And I've explained to both of you my feelings on that. Certainly both parties owed a fiduciary duty to each other. And they owed fiduciary [duties] to their clients. I don't see, though, a separate cause of action for breach of fiduciary duty for this reason. If, in fact, Mr. Milligan did breach his contract, then that included breaching fiduciary duty, I think, to the Sexton Law Firm. (Emphasis added.) The trial court apparently ruled that Milligan owed a fiduciary duty to Sexton, and we have held that that determination is a matter of law. See Long v. Lampton, 324 Ark. 511, 922 S.W.2d 692 (1996). The court's ruling was not challenged by Milligan on cross-appeal. Accordingly, we do not decide the issue of whether a fiduciary duty was owed by Milligan under these circumstances but accept the unchallenged ruling of the trial court for purposes of this discussion. After deciding that a fiduciary duty was owed, the trial court went forward and refused to submit the claim to the jury on the basis that the claim for breach of fiduciary duty was included within Sexton's claim for breach of contract. This was error. First, Sexton was entitled to have the two claims of breach of contract and breach of fiduciary duty considered by the jury if both were supported by substantial evidence. While the doctrine of election of remedies bars more than one recovery on inconsistent remedies, the doctrine does not limit the number of causes of action asserted by a plaintiff to be submitted to the jury. Cater v. Cater, 311 Ark. 627, 846 S.W.2d 173 (1993); Westark Specialties v. Stouffer Family Ltd., 310 Ark. 225, 836 S.W.2d 354 (1992). Additionally, claims for breach of fiduciary duty and breach of contract are not identical causes of action. A person may be liable for breach of contract if the complaining party can prove the existence of an agreement, breach of the agreement, and resulting damages. See Rabalaias v. Barnett, 284 Ark. 527, 683 S.W.2d 919 (1985). But a person standing in a fiduciary relationship may be held liable for any conduct that breaches a duty imposed by the fiduciary relationship. Long v. Lampton, supra . It follows that, regardless of the express terms of an agreement, a fiduciary may be held liable for conduct that does not meet the requisite standards of fair dealing, good faith, honesty, and loyalty. See Berry v. Saline Memorial Hosp., 322 Ark. 182, 907 S.W.2d 736 (1995); Texas Oil & Gas Corp. v. Hawkins Oil & Gas, Inc., 282 Ark. 268, 668 S.W.2d 16 (1984); Yahraus v. Continental Oil Co., 218 Ark. 872, 239 S.W.2d 594 (1951). The guiding principle of the fiduciary relationship is that self-dealing, absent the consent of the other party to the relationship, is strictly proscribed. See Hosey v. Burgess, 319 Ark. 183, 890 S.W.2d 262 (1995). Sexton testified that Milligan engaged in self-dealing to the law firm's detriment. Sexton further testified that without knowledge and consent, Milligan used firm resources to achieve settlements and attorney fees in the Mary Jane Wood and Scandrett cases. According to Sexton, these fees then provided Milligan with the resources to finance a settlement in the Watson case, which resulted in substantial legal fees to the exclusion of the Sexton Law Firm. The evidence is buttressed by proof that Milligan misrepresented the removal of open and closed files to Sexton on the night of Saturday, November 1, 1995. Under these unique circumstances, and, again, without deciding the issue of whether a fiduciary duty was owed by Milligan to Sexton, we hold that the trial court erred in granting Milligan's motion for directed verdict on Sexton's claim for breach of fiduciary duty. The trial court also granted a directed verdict on the fraud count because clients have an absolute right to pick the lawyer they want, and an absolute right to get their material. Unquestionably, the client owns his file. However, as this case makes clear, attorneys have an interest in files in connection with potential fees, and Sexton claims that Milligan defrauded him of his share of those fees. Particularly, Sexton claims that Milligan, as part of a larger scheme, intentionally misrepresented to him on the night of November 1, 1995, that he was taking files to storage as opposed to relocating them to his new practice. Sexton contends that the truth would have caused him to take action to prevent settlement checks on the Mary Jane Wood and Scandrett cases from being sent to Milligan's address. Essentially, Sexton asserts that Milligan's misconduct eliminated the possibility that he could stop the resulting damage. Under Arkansas law, the following elements must be established by a preponderance of the evidence in order to establish a claim for fraud: (1) a false representation, usually of material fact; (2) knowledge or belief by the defendant that the representation is false; (3) intent to induce reliance on the part of the plaintiff; (4) justifiable reliance by the plaintiff; and (5) resulting damage to the plaintiff. Calandro v. Parkerson, 327 Ark. 131, 936 S.W.2d 755 (1997); Clark v. Ridgeway, 323 Ark. 378, 914 S.W.2d 745 (1996). Viewing the evidence in the light most favorable to Sexton, as we must do, Sexton had acquired a 50 percent interest in any attorney fees acquired from the open files taken by Milligan. Sexton testified that on November 1, 1995, Milligan misrepresented his actions with the intent that they be relied upon by Sexton for the purpose of acquiring a 100 percent interest in attorney fees that would soon thereafter be achieved. Sexton further testified that he relied on that misrepresentation and was severely damaged. We conclude that there was substantial evidence that Milligan's conduct was the type of misfeasance that constituted fraud and that the issue should have gone to the jury. See Westark Specialties v. Stouffer Family Ltd., 310 Ark. 225, 836 S.W.2d 354 (1992); L.L. Cole & Son, Inc. v. Hickman, 282 Ark. 6, 665 S.W.2d 278 (1984).