What is the Status of Fiduciary Duty Law?

Our attorneys are routinely asked questions regarding fiduciary duty law, so we decided to put together a resource where our clients can reference recent cases that reflect the current status of fiduciary duty law.  Continue reading below to gain some insights into these cases to learn more:

Don’t Assume Your Assisted Living Facility Owes Your Loved One a Fiduciary Duty

In Hager v. Smithfield East Health Holdings, LLC, the NC Court of Appeals held that this is an intensive factual inquiry.  It declined to create a de jure fiduciary relationship between assisted living facilities with memory wards and their residents.  First, to create a de jure fiduciary relationship on the basis of special knowledge and skill alone would greatly expand the limited list of de jure fiduciary relationships.  Second, a person may with to place a relative with Alzheimer’s in a long-term care facility for reasons other than the specialized knowledge of the care providers, whether for a lack of a physical space in the home or insufficient time to provide the necessary degree of care and supervision.

Why Was The Defendant Found Not at Fault?

Even though the defendant owned a 56.3 percent interest in the limited liability company, since the LLC’s operating agreement defined a “majority” as 67 percent or greater of the LLC’s issued voting shares, the trial court was wrong to instruct the jury that the defendant owed fellow owner’s a fiduciary duty as a matter of law.  Rather, the jury should have been allowed to deliberate whether the defendant owned plaintiffs a fiduciary duty.

In the context of an LLC, a group of members with an aggregate majority ownership to not owe a fiduciary duty to minority members.  While it is true that, in the corporate context, a “controlling shareholder” may include a group of shareholders with an aggregated majority interest action in concert, the Courts have routinely refused to extend this rule to LLCs.  The parties’ rights and duties are governed by the operating agreement, not the general rules of fiduciary relationships.

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