Real Estate/Development
Aug. 6, 2002
Court Complains of Case-Law Confusion
LOS ANGELES - Case law about who can be held liable for conspiracy to breach fiduciary duty is not as clear as it could be, a state appellate court said Friday, in an opinion that invited the Supreme Court to step in and review the issue.
"We see fruit salad where there should be separate stacks of apples and oranges," Justice Miriam Vogel wrote for the 2nd District Court of Appeal. Everest v. Whitehall, B150981 (Cal. App. 2nd Dist. Aug. 2, 2002).
Whitehall Real Estate Limited Partnership XI had purchased a share in an investment partnership for what one of the partners, Everest 8 Investors, considered a discount rate. Claiming also that its cut of Whitehall's buy-in payment was $3 million short, Everest filed suit against the new partner for conspiracy to breach fiduciary duty.
But in a published opinion, the court decided that Whitehall could not be found liable for conspiracy to violate fiduciary duty when it had no duty in the first place.
However, the court also said that, if Whitehall had been an employee of someone that did have a duty to Everest, and Whitehall had worked against Everest to further its own interests, it might have been liable.
If that seems confusing, so is case law on conspiracy to breach fiduciary duty, the court noted in its 10-page opinion.
"The conspiracy rule we articulate in this case is based on our interpretation of the relevant Supreme Court cases," Vogel wrote. "For the record, however, we note the existence of language in several Court of Appeal opinions that is not entirely reconcilable with our analysis."
Vogel was joined by Justices Vaino H. Spencer and Reuben A. Ortega. The court affirmed the trial court's dismissal of the suit and awarded costs to Whitehall.
"Perhaps it is time for the Supreme Court to revisit these issues," Vogel wrote in conclusion.
Katherine Gaidos
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