Court Affirmed Summary Judgment For Bank On Non-Customer’s Aiding And Abetting Breach Of Fiduciary Duty Claim

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In Ahmed v. Bank of Whittier, a party sued a bank for aiding and abetting breach of fiduciary duty by assisting the plaintiff’s attorney in improperly depositing settlement funds. No. 05-21-00058-CV, 2022 Tex. App. LEXIS 2987 (Tex. App.—Dallas May 4, 2022, no pet. history). The trial court granted summary judgment for the defendant, and the plaintiff appealed. The court of appeals first implied that there was no aiding and abetting breach of fiduciary duty claim under Texas law citing to an earlier opinion: Hill v. Keliher, No. 05-20-00644-CV, 2022 Tex. App. LEXIS 502, 2022 WL 213978, at *10 (Tex. App.—Dallas Jan. 25, 2022, pet. filed). Oddly, the court completely ignored the precedent in Texas that there is a knowing participation in breach of fiduciary duty claim in Texas. Nevertheless, the court then discussed whether UCC Section 3.307 created a cause of action, and correctly held that it did not. The court also held that the bank did not have knowledge of a breach of fiduciary duty:

Moreover, section 3.307 does not set out a separate cause of action for assisting in committing a fiduciary breach. See Tex. Bus. & Com. Code Ann. § 3.307; In re Conex Holdings, LLC, 514 B.R. 405, 415 (Bankr. D. Del. 2014) (mem. op.) (section 3.307 does not appear to provide for a breach of fiduciary claim). But see, Quilling v. Compass Bank, No. 3:03-CV-2180-R, 2004 U.S. Dist. LEXIS 18811, 2004 WL 2093117, *7-8, *8 n.19 (N.D. Tex. Sept. 17, 2004) (unpublished mem. op. and order) (determining whether bank had notice of breach of fiduciary duty under section 3.307 to support claim for aiding and abetting and noting that, although Texas courts had not recognized such a claim, Texas courts have recognized that one who “knowingly aids and assists in the breach” is considered a joint tortfeasor and is liable for the breach). Instead, section 3.307 sets out the requirements for determining when “the taker” of an instrument from a fiduciary has notice that a breach of fiduciary duty occurred as a result of the transaction. Tex. Bus. & Com. Code Ann. § 3.307 cmt. 1. If the taker has notice of the breach, it cannot claim it is a holder in due course in defense to a claim under section 3.306.4Link to the text of the note Id. cmt. 2. In order for the specific notice rules to be implicated regarding an instrument payable to the represented person (here Amini), three requirements must be met: (1) the instrument must be taken from a fiduciary for payment, collection, or for value; (2) the taker must have knowledge of the fiduciary status of the fiduciary; and (3) the represented person must make a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty. Tex. Bus. & Com. Code Ann. § 3.307(b).

Even assuming section 3.307 gives rise to a cause of action for assisting another in committing breach of fiduciary duty, there is no evidence that the Bank, as the taker, had knowledge of the fiduciary status of Khaleeq. Although Khaleeq was a community member and active customer of the Bank and although the Bank knew Khaleeq was an attorney and, thus, as appellants argue, a fiduciary to someone, there is no evidence that the Bank knew Amini was Khaleeq’s client. Without knowledge that Amini was Khaleeq’s client, the Bank could not know that Khaleeq had a fiduciary duty to Amini.

The affidavit testimony of the three Bank employees established that the Bank did not know Amini, did not know Amini’s relationship to Khaleeq or his law firm, and did not know Khaleeq was committing any wrongdoing by depositing the checks into his law firm’s account. Appellants’ response that the Bank knew Khaleeq was a lawyer, knew the check was for medical payment benefits for Amini, and knew Khaleeq was depositing the check into his firm’s account failed to raise a genuine issue of material fact as to whether the Bank knew Amini was Khaleeq’s client and that a fiduciary relationship existed. Therefore, the trial court did not err in granting the Bank’s summary judgment as to Amini’s claim for substantially assisting Khaleeq in committing breach of a fiduciary duty.

Id.

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