In Jessen v. Duvall, an investor who established trusts to purchase life insurance policies sued an insurance agent for tort claims, including fraud, conspiracy, and aiding and abetting breach of fiduciary duty based on the insurance policies not being good investments and the investor losing more than $3.2 million dollars. No. 14-16-00869-CV, 2018 Tex. App. LEXIS 1369 (Tex. App.—Houston [14th Dist.] February 22, 2018, no pet. history). Three alleged events formed the plaintiff’s claims: the defendant mispresenting the resale value of the policies, the failure to disclose the commission structure of the policies, and that he failed to disclose that he paid a referral fee to the plaintiff’s tax attorney’s son. The defendant filed a motion for summary judgment, which the trial court granted. The plaintiff appealed.
The court of appeals first addressed whether the plaintiff had standing to assert the claims because the insurance policies were owned by the trusts and the plaintiff was not the trustee. The court of appeals held that the plaintiff did have standing because he asserted claims based on the advice given to acquire the policies and not a breach of contract claim under the policy:
[W]hile it is undisputed that the trustees purchased and sold the insurance policies, Jessen does not pursue claims based on duties created by the policies (contractual claims). Rather, Jessen asserts claims arising under state law (extra-contractual claims). Specifically, Jessen’s claims for fraud, aiding and abetting and conspiracy to breach a fiduciary duty, and equitable theories remain viable because he seeks redress for misrepresentations made to him prior to the trusts being created and policies purchased. There is no indication here that Jessen assigned or relinquished the extra-contractual causes of action to the trustees. As such, Jessen has standing to assert them in this litigation. See Lee v. Rogers Agency, 517 S.W.3d 137, 144-153 (Tex. App.—Texarkana 2016, pet. filed) (op. on rehearing).
Id. Regarding the claims based on the alleged failure to disclose the market value of the policies, the court held that the plaintiff failed to provide evidence that the defendant made any representations, indirectly, regarding the future market value of the policies, caused the reduced market value of the policies, or caused the plaintiff to receive a reduced value by some fraud or conspiracy. Rather, the court stated that the defendant was the only party to offer an explanation as to why the policies were sold at a loss by submitting an uncontroverted affidavit of the vice president of a company that traded in life policies, who attested to the financial collapse in the life insurance industry in 2008 and the negative financial impact it had on the resale market for life insurance policies. The court concluded that the plaintiff proffered no evidence that the reduced resale value of the policies was the result of anything more than unforeseen market conditions.
Regarding the commission structure, the court held that there was no evidence that the defendant had a duty to disclose the commission structure or that the commissions received by him were the result of a conspiracy to defraud. The evidence demonstrated that the commission was in line with industry standards, and the court held that there was no evidence that the defendant had a duty to disclosure the commission structure that was within industry norms. Moreover, in terms of damages, the plaintiff did not show he was damaged by the defendant receiving a commission as the plaintiff’s damages were based upon the decreased resale value of the life policies.
Regarding the referral fee, the plaintiff maintained that the nondisclosure of the referral fee paid by defendant was fraudulent. The court held that it was undisputed that referral fees were customary in the insurance industry and that defendant gave up part of his compensation to pay a referral fee. There was no evidence that the plaintiff paid more for the policies due to the referral fee, and the court held that there was no evidence that the defendant had any duty to disclose the referral fee. The court affirmed the summary judgment on the fraud and conspiracy to commit fraud claims.
The court then turned to the aiding and abetting breach of fiduciary duty claims. The plaintiff alleged that the defendant’s nondisclosure of the referral fee provided substantial assistance in his tax attorney’s breach of his fiduciary duty by “secretly agreeing to and then paying Bond’s son a part of the commission generated from the sale of the insurance policies to Plaintiff.” Id. “To establish aiding and abetting, the plaintiff must demonstrate that the defendant, with unlawful intent, substantially assisted and encouraged a wrongdoer in a tortious act.” The court noted that “[a]iding and abetting is a dependent claim which is premised on an underlying tort.” Id. The court then held that because the plaintiff failed to establish his breach of fiduciary duty claim against his attorney, his aiding and abetting claim also failed:
With respect to the second element, Jessen contends “Jessen has submitted evidence that Bond breached that fiduciary duty by enticing Jessen to participate in the scheme alleged, while knowing that Jessen would not be able to sell the policies for a substantial profit in the manner intended.” Jessen further claims “there is evidence that Duvall paid Jessen’s attorney Bond a kickback in order to induce him to recommend that Jessen invest in the insurance policies at issue.” … Jessen makes no reference to any part of the Texas Disciplinary Rules of Professional Conduct or case law to support his claim that Bond breached his fiduciary duty. Without the underlying tort being established, there can be no claims of aiding and abetting a breach of Bond’s fiduciary duty and/or conspiracy to breach Bond’s fiduciary duty. Moreover, even assuming, arguendo, that Jessen could establish the underlying tort, there is no evidence of Duvall knowingly aiding and abetting Bond, Sr. with such a breach. Similarly, there is no evidence of any meeting of the minds between Duvall and Bond to breach Bond, Sr.’s, fiduciary duty to Jessen. Because Jessen failed to raise any evidence to support his claim of aiding and abetting and conspiracy to breach fiduciary duty claim, summary judgment was proper.
Id. The court of appeals affirmed the summary judgment on all of the plaintiff’s claims.