In Ahmed v. Bank of Whittier, a party sued a bank for aiding and abetting breach of fiduciary duty by assisting the plaintiff’s attorney in improperly depositing settlement funds. No. 05-21-00058-CV, 2022 Tex. App. LEXIS 2987 (Tex. App.—Dallas May 4, 2022, no pet. history). The trial court granted summary judgment for the defendant, and the plaintiff appealed. The court of appeals first implied that there was no aiding and abetting breach of fiduciary duty claim under Texas law citing to an earlier opinion: Hill v. Keliher, No. 05-20-00644-CV, 2022 Tex. App. LEXIS 502, 2022 WL 213978, at *10 (Tex. App.—Dallas Jan. 25, 2022, pet. filed). Oddly, the court completely ignored the precedent in Texas that there is a knowing participation in breach of fiduciary duty claim in Texas. Nevertheless, the court then discussed whether UCC Section 3.307 created a cause of action, and correctly held that it did not. The court also held that the bank did not have knowledge of a breach of fiduciary duty:

Moreover, section 3.307 does not set out a separate cause of action for assisting in committing a fiduciary breach. See Tex. Bus. & Com. Code Ann. § 3.307; In re Conex Holdings, LLC, 514 B.R. 405, 415 (Bankr. D. Del. 2014) (mem. op.) (section 3.307 does not appear to provide for a breach of fiduciary claim). But see, Quilling v. Compass Bank, No. 3:03-CV-2180-R, 2004 U.S. Dist. LEXIS 18811, 2004 WL 2093117, *7-8, *8 n.19 (N.D. Tex. Sept. 17, 2004) (unpublished mem. op. and order) (determining whether bank had notice of breach of fiduciary duty under section 3.307 to support claim for aiding and abetting and noting that, although Texas courts had not recognized such a claim, Texas courts have recognized that one who “knowingly aids and assists in the breach” is considered a joint tortfeasor and is liable for the breach). Instead, section 3.307 sets out the requirements for determining when “the taker” of an instrument from a fiduciary has notice that a breach of fiduciary duty occurred as a result of the transaction. Tex. Bus. & Com. Code Ann. § 3.307 cmt. 1. If the taker has notice of the breach, it cannot claim it is a holder in due course in defense to a claim under section 3.306.4Link to the text of the note Id. cmt. 2. In order for the specific notice rules to be implicated regarding an instrument payable to the represented person (here Amini), three requirements must be met: (1) the instrument must be taken from a fiduciary for payment, collection, or for value; (2) the taker must have knowledge of the fiduciary status of the fiduciary; and (3) the represented person must make a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty. Tex. Bus. & Com. Code Ann. § 3.307(b).

Even assuming section 3.307 gives rise to a cause of action for assisting another in committing breach of fiduciary duty, there is no evidence that the Bank, as the taker, had knowledge of the fiduciary status of Khaleeq. Although Khaleeq was a community member and active customer of the Bank and although the Bank knew Khaleeq was an attorney and, thus, as appellants argue, a fiduciary to someone, there is no evidence that the Bank knew Amini was Khaleeq’s client. Without knowledge that Amini was Khaleeq’s client, the Bank could not know that Khaleeq had a fiduciary duty to Amini.

The affidavit testimony of the three Bank employees established that the Bank did not know Amini, did not know Amini’s relationship to Khaleeq or his law firm, and did not know Khaleeq was committing any wrongdoing by depositing the checks into his law firm’s account. Appellants’ response that the Bank knew Khaleeq was a lawyer, knew the check was for medical payment benefits for Amini, and knew Khaleeq was depositing the check into his firm’s account failed to raise a genuine issue of material fact as to whether the Bank knew Amini was Khaleeq’s client and that a fiduciary relationship existed. Therefore, the trial court did not err in granting the Bank’s summary judgment as to Amini’s claim for substantially assisting Khaleeq in committing breach of a fiduciary duty.

Id.

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Photo of David Fowler Johnson David Fowler Johnson

[email protected]
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary…

[email protected]
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. Read More

David’s financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class action, RICO actions, usury, various tort causes of action, breach of fiduciary duty claims, and preference and other related claims raised by receivers.

David also has experience in estate and trust disputes including will contests, mental competency issues, undue influence, trust modification/clarification, breach of fiduciary duty and related claims, and accountings. David’s recent trial experience includes:

  • Representing a bank in federal class action suit where trust beneficiaries challenged whether the bank was the authorized trustee of over 220 trusts;
  • Representing a bank in state court regarding claims that it mismanaged oil and gas assets;
  • Representing a bank who filed suit in probate court to modify three trusts to remove a charitable beneficiary that had substantially changed operations;
  • Represented an individual executor of an estate against claims raised by a beneficiary for breach of fiduciary duty and an accounting; and
  • Represented an individual trustee against claims raised by a beneficiary for breach of fiduciary duty, mental competence of the settlor, and undue influence.

David is one of twenty attorneys in the state (of the 84,000 licensed) that has the triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization.

Additionally, David is a member of the Civil Trial Law Commission of the Texas Board of Legal Specialization. This commission writes and grades the exam for new applicants for civil trial law certification.

David maintains an active appellate practice, which includes:

  • Appeals from final judgments after pre-trial orders such as summary judgments or after jury trials;
  • Interlocutory appeals dealing with temporary injunctions, arbitration, special appearances, sealing the record, and receiverships;
  • Original proceedings such as seeking and defending against mandamus relief; and
  • Seeking emergency relief staying trial court’s orders pending appeal or mandamus.

For example, David was the lead appellate lawyer in the Texas Supreme Court in In re Weekley Homes, LP, 295 S.W.3d 309 (Tex. 2009). The Court issued a ground-breaking opinion in favor of David’s client regarding the standards that a trial court should follow in ordering the production of computers in discovery.

David previously taught Appellate Advocacy at Texas Wesleyan University School of Law located in Fort Worth. David is licensed and has practiced in the U.S. Supreme Court; the Fifth, Seventh, and Eleventh Federal Circuits; the Federal District Courts for the Northern, Eastern, and Western Districts of Texas; the Texas Supreme Court and various Texas intermediate appellate courts. David also served as an adjunct professor at Baylor University Law School, where he taught products liability and portions of health law. He has authored many legal articles and spoken at numerous legal education courses on both trial and appellate issues. His articles have been cited as authority by the Texas Supreme Court (twice) and the Texas Courts of Appeals located in Waco, Texarkana, Beaumont, Tyler and Houston (Fourteenth District), and a federal district court in Pennsylvania. David’s articles also have been cited by McDonald and Carlson in their Texas Civil Practice treatise, William v. Dorsaneo in the Texas Litigation Guide, and various authors in the Baylor Law ReviewSt. Mary’s Law JournalSouth Texas Law Review and Tennessee Law Review.

Representative Experience

  • Civil Litigation and Appellate Law