Confidential and Fiduciary Relationships – Overview

There are a lot of cases and statutes on these topics. However, in general, a confidential relationship is a relationship where one party has placed confidence in the integrity and fidelity of another person to act for the first party’s benefit, and the other party voluntarily accepts that role.

In this context, “confidential” doesn’t mean secrecy – it refers to the confidence that someone places in another person to take action for the first person’s benefit.

A confidential relationship can be founded on a moral, social, domestic, personal, or legal relationship or duty (including, for example, pursuant to statute, case law, or contractual agreement). See, for example, Richelle L. Roman Catholic Archbishop of San Francisco (2003).

Unfortunately, the above general definition is very broad and, thus, is not very helpful.

Whether or not a relationship is a confidential relationship is a question of fact. See, for example, O’Neil v. Spillane (1975). But a confidential relationship doesn’t necessarily create a fiduciary relationship and duty. See, City of Hope National Medical Center v. Genentech, Inc. (2008). A fiduciary duty is one of the highest duties established by law. In Richelle for example, in which the court denied the existence of a fiduciary relationship, the court held that in the circumstance of a confidential relationship, fiduciary duties nevertheless only arise when the following are present: (1) the vulnerability of one party to the other which (2) results in the empowerment of the stronger party by the weaker party which (3) empowerment has been solicited or accepted by the stronger party and (4) prevents the weaker party from protecting herself or himself. See also, for example, Marriage of Bonds (2000), holding that a confidential relationship can arise between family members and friends when substantive or procedural deficiencies in a transaction are combined with great age, weakness of mind, sickness or other incapacity of one party to the transaction.

In other words, confidential and fiduciary relationships require more than simply trust and confidence – they also require that the party who is claiming the confidential or fiduciary relationship to also prove not only trust and confidence, which exists in a lot of relationships and is relatively easy to simply claim, but also weakness of mind, or inability to take action and to protect oneself, and evidence of justifiable reliance.

You should note that the issue of whether or not there is a confidential or fiduciary relationship also can be, but is not necessarily, related to issues pertaining to possible fraud (intentional or negligent misrepresentation, concealment, or promise without intent to perform) or undue influence.

Thank you for reading this post. If you have found value in this post, I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Every case situation is different. You do need to consult with professionals about your particular situation. This post is not a solicitation for services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only

Blogs: California trust, estate, and elder abuse litigation and contentious administrations; D&O, audit committee, governance and risk management