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Posted: November 1, 2017

Breach of Contract May be Breach of Fiduciary Duty, But Only for Professionals

On October 19, 2017, the First Department issued a decision in Panattoni Development Co., Inc. v. Scout Fund 1-A, LP, 2017 NY Slip Op. 07334, holding that a breach of contract may also be a breach of fiduciary duty, but only in the case of professionals, explaining:

If New York law applies, Scout relies on Bullmore v Ernst & Young Cayman Is. (45 AD3d 461 [1st Dept 2007]), which says, conduct amounting to breach of a contractual obligation may also constitute the breach of a duty arising out of the relationship created by contract which is nonetheless independent of such contract. Immediately thereafter, however, Bullmore said, Professionals such as investment advisors, who owe fiduciary duties to their clients, may be subject to tort liability, since in these instances, it is policy, not the parties’ contract, that gives rise to a duty. Scout is not suing plaintiff qua professional investment advisor; rather, Scout is suing it as managing member of PIM, a relationship that was created by the parties’ contract (the LLC Agreement).

(Internal quotations and citations omitted).

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