In Schmidt v. JP Morgan Chase Bank, N.A., the plaintiff’s employee opened credit cards in the employer’s name, used those credit cards for the employee’s own personal use, and paid those credit card bills with funds from the employer’s operating account and/or through advances from the employer’s line of credit. No. H-17-0532, 2018 U.S. Dist. LEXIS 43665 (S.D. Tex. February 2, 2018). The employer sued the bank for aiding and abetting breach of fiduciary duty and other claims for the amounts the employer lost as a result of the employee’s conduct. The defendant filed a motion to dismiss for failure to state a claim. The magistrate recommended granting it in part and denying it in part. Regarding the aiding and abetting claim, the court stated:

“Under Texas law, ‘where a third party knowingly participates in the breach of duty of a fiduciary, such third party becomes a joint tortfeasor with the fiduciary and is liable as such.’ To establish a claim for knowing participation in a breach of fiduciary duty, a plaintiff must assert: (1) the existence of a fiduciary relationship; (2) that the third party knew of the fiduciary relationship; and (3) that the third party was aware that it was participating in the breach of that fiduciary relationship.” Here, Schmidt alleges, in a conclusory fashion, that Defendants “knowingly participated” in Rhodes’ breach of fiduciary duty, and that they “allowed” Rhodes to open credit card accounts in Schmidt’s name without his authorization, and “allowed” Rhodes to obtain a cashier’s check from Schmidt’s account. While Schmidt does not allege that Defendants knew Rhodes was acting without Schmidt’s authorization, and does not allege that Defendants were aware of Rhodes’ fiduciary duty to Schmidt and her breach of that duty, Schmidt could arguably do so if there are facts that would support such allegations. On this record, therefore, Schmidt should be allowed an opportunity to include such allegations in an amended pleading that conforms with the requirements of FED. R. Civ. P. 11(b) in an attempt to state a plausible claim for aiding and abetting a breach of fiduciary duty.


Interesting Note. The court cites to knowing-participation cases in discussing the plaintiff’s aiding-and-abetting claim. The Texas Supreme Court has not expressly adopted an aiding-and-abetting claim for breach of fiduciary duty. It has adopted a knowing-participation claim. The law in Texas is ambiguous regarding whether knowing participation and aiding and abetting are the same or different theories, and if they are different, how they are different. This opinion certainly blurs the distinction between the two theories.