Sacramento E.D.M., Inc. v. Hynes Aviation Indus. - No. 2:13-cv-0288-KJN, 2017 U.S. Dist. LEXIS 59216 (E.D. Cal. Apr. 18, 2017)

Rule:

Under California law, a "fiduciary or confidential relationship may arise whenever confidence is reposed by persons in the integrity and good faith of another. If the latter voluntarily accepts or assumes that confidence, he or she may not act so as to take advantage of the others' interest without their knowledge or consent." City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal. App. 4th 445, 483, 80 Cal. Rptr. 2d 329 (1998). "The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach." Knox v. Dean, 205 Cal. App. 4th 417, 432, 140 Cal. Rptr. 3d 569 (2012).

Facts:

Plaintiffs Sacramento E.D.M., Inc. ("Sac EDM") and Dan Folk (collectively "plaintiffs") brought an action asserting claims for breach of fiduciary duty, fraud, constructive fraud, and tortious interference with contract against defendants Hynes Aviation Industries, Inc. ("HAI"), Michael K. Hynes ("Hynes"), and Hynes Children TF Limited ("Hynes Children") (collectively "defendants") based on various acts of alleged self-dealing defendants engaged in over the course of the parties' business relationship between 2004 and 2012. Defendants HAI and Hynes filed counterclaims against plaintiffs, alleging that plaintiffs breached their payment obligations under a number of contracts that defendants alleged the parties entered into over the course of their business relationship.

Issue:

Did Hynes, while acting on behalf of HAI and Hynes Children, breach his fiduciary duties owed to both plaintiffs?

Answer:

Yes.

Conclusion:

The court found that Hynes, while acting on behalf of HAI and Hynes Children, breached his fiduciary duties owed to both plaintiffs and committed constructive fraud through his misrepresentations in connection with the equipment lease contracts and the parties' agreement regarding the repayment of the US Banc judgment. The court also found that Sac EDM breached its contractual obligations to HAI to make monthly payments on the remaining balance of the operating loans HAI had extended to it over the course of the parties' business dealings, under the equipment lease contracts under which HAI was lessor and Sac EDM was lessee, and under its agreement to reimburse HAI for the monthly payments HAI made towards the premiums on Dan Folk's and Hynes' life insurance policies.