Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg - 216 Cal. App. 3d 1139, 265 Cal. Rptr. 330 (1989)

Rule:

A breach of fiduciary duty can arise when an attorney gains an unfair advantage over a former client by using confidential information acquired from the relationship, or when an attorney engages in a personal relationship with the client to the client's detriment.

Facts:

Plaintiffs, Tri-Growth Centre City, Ltd., and certain of its partners, brought suit against defendants, law firm of Silldorf, Burdman, Duignan & Eisenberg et al., to impose a constructive trust and for damages alleging breach of fiduciary duty and interference with prospective economic advantage after defendant law firm purchased certain property for which plaintiffs were negotiating. Over the years, the law firm provided legal services to the plaintiffs as individuals, and to several of the numerically designated investment entities. However, the law firm never represented plaintiffs in any legal matter. The trial court granted defendants summary judgment and plaintiffs appealed alleging breach of fiduciary duty and interference with prospective economic advantage. On review, the court found that triable issues of fact existed. Defendant lawyer argued that as a limited partner, he could not have a fiduciary obligation to the partnership. Both defendant lawyer and defendant law firm argued that there could be no breach of duty based on a pre-existing attorney-client relationship with plaintiffs or with their other partnerships.

Issue:

Did the defendants a breach a fiduciary duty to plaintiffs?

Answer:

Yes.

Conclusion:

The court held that an attorney's fiduciary duty could extend to former clients and held that scenarios existed where a limited partner such as defendant lawyer may have a fiduciary duty. Further, the court held that plaintiffs presented facts asserting that defendants acquired and used confidential information from plaintiffs that allowed defendants to offer an earlier closing date. Thus, the court reversed the decision of the trial court that granted summary judgement to defendants in plaintiffs' suit. As the court reasoned that issues of fact existed regarding the existence of a fiduciary obligation and facts demonstrating that defendants may have used improper methods to gain a business advantage over plaintiffs.