In In re Mijares, a plaintiff claimed that a defendant defrauded him and breached fiduciary duties owed to him by charging improper, excessive, and unauthorized expenses to their medical practice, causing the plaintiff’s distributions from the practice to be reduced during the roughly six years that they practiced medicine together. Case No. 19-33121-hdh7, Adv. Proc. No. 19-03243,2022 Bankr. LEXIS 1542 (N.D. Tex. Bankr. June 1, 2022). The plaintiff sought a declaration that his claims for fraud and breach of fiduciary duty were not dischargeable pursuant to sections 523(a)(2)(A) and (a)(4) of the Bankruptcy Code. The court found that the plaintiff held a valid claim against the defendant for fraud and that such claim was not dischargeable.

Regarding the plaintiff’s breach of fiduciary duty claim, the court held:

Under Texas law, to prevail on a breach of fiduciary duty claim, a plaintiff must show (1) a fiduciary relationship between the plaintiff and the defendant, (2) that the defendant breached his fiduciary duty to the plaintiff, and (3) that the defendant’s breach resulted in injury to the plaintiff or benefit to the defendant.

It is not clear whether there was a fiduciary relationship directly between the Plaintiff and the Defendant. Courts generally hold that a managing member of a limited liability company does not necessarily owe fiduciary duties to other members. Although “the Texas statute governing limited liability companies implies that certain duties may be owed, it does not define any such duties, but rather allows the contracting parties to specify the breadth of those duties in the company agreement.”

Per the Company Agreement, both the Plaintiff and the Defendant served as Manager-Members. Article VIII of the Company Agreement provides various rights, duties, and powers of the Managers. Per this section, the Managers “shall have the full, sole, exclusive and complete discretion in the management and control of the business, operations and affairs of the Company; shall make all decisions that are necessary to carry out the business of the Company . . . .” The same section goes on to require that “[a]ll decisions and actions by the Managers shall be made in the best interests of the Company.” Thus, the Company Agreement makes it clear that the Defendant owed a fiduciary duty to MD Request but does not resolve the issue of whether the members owed fiduciary duties to each other because it neither disclaims nor expressly imposes such duties.

Nevertheless, Texas law recognizes that an informal fiduciary relationship, “may arise where one person trusts in and relies upon another, whether the relationship is a moral, social, domestic, or purely personal one.” The existence of a fiduciary duty is a fact-specific inquiry that takes into account the contract governing the relationship as well as the particularities of the relationships between the parties. Some courts have taken into account the “unequal” positions of power of members in a limited liability company, such as when one member exercises superior control over the company.

Both parties testified during trial that the Defendant almost exclusively handled the finances for MD Request. The Defendant did the calculations and remitted payments to the Plaintiff. Through an established course of dealing for the better part of six years, the Plaintiff placed a special confidence in the Defendant to compensate the Plaintiff accurately and honestly for his revenue, which was to be measured as his monthly collections less his half of the shared expenses.

Based on these facts, the Court believes there is a reasonable argument that the Defendant owed fiduciary duties directly to the Plaintiff, but the Court need not make that determination since the Court has already determined the Plaintiff has a claim for fraud, and the damages for breach of fiduciary duty would be the same as those previously identified for fraud.


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Photo of David Fowler Johnson David Fowler Johnson

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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]

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