“We firmly believe that under the law every person is considered innocent until proven unable to pay us back.” Skip Hunter, Bail Bondsman. Bail bondsman accepted money to post bond, but did not post the bond or return the money. CRS 10-2-704 imposes fiduciary duties on “insurance producers” such as bail bondsmen. At common law, suretyship law controlled bail bondsmen, which the Court relied on for this Opinion. There are three parties to a suretyship: principle (criminal defendant), surety (bail bondsman), and the creditor (the court). A creditor is akin to an insured under the insurance statutes, and the fiduciary duty is owed to the insured. Thus, the bail bondsman did not owe any fiduciary duties to the criminal defendant. The case was remanded because it was not clear that the Insurance Commission would have reached the same result using the correct interpretation of the law.
Tag Archives: Fiduciary Duties
Milton Michael Trujillo, Insurance Producer with Bail Bond Authority, License No. 60267 v. Colorado Division of Insurance, 2014CO17 (March 17, 2014)
Michael Weinstein; Kenneth Major; Manymajors Managements, Inc.; and Business Mechanic, Inc., v. Colborne Foodbotics, LLC 2013CO33 (June 10, 2013)
“LLCs combine the limited personal liability of a corporation with the single-tier tax treatment of a partnership.” (Opinion). Here, the Court interpreted the Colorado Limited Liability Company Act, CRS 7-80-606 (Act), and concluded that a judgment Creditor of the LLC could not bring suit against either the Managers or the Members of the LLC. The Managers were companies owned by the Members (natural persons). Creditor obtained a judgment against the LLC. Managers then induced the LLC to distribute its assets to the Members. Creditor sued the Members under the Act for an unlawful distribution, and sued the Managers for a common law breach of fiduciary duty claim. The Court concluded that under the express terms of the Act, only an LLC can sue its members for unlawful distributions. And, Act does not extend corporation common law to an LLC in any instance except a veil-piercing claim.
“We all get a second chance; it’s called tomorrow.” Anon. Moye White (MW) represented David Beren in probate litigation. MW employed and assigned to Beren’s case an attorney with a past of disciplinary proceedings, mental illness, alcoholism, and related arrests. MW sued Beren for its attorneys’ fees; Beren counterclaimed for breach of fiduciary duty claiming he should have been told about the attorney’s history. The court of appeals disagreed; a law firm does not have a duty to disclose such history to a client. Any risk posed by an attorney’s past conduct is speculative, and therefore not material. For the same reason, no ethical duty to disclose such information exists under professional conduct rules 1.4 or 7.1. The court of appeals also upheld costs awarded MW for uploading documents into a document review platform and costs incurred after a pretrial offer of settlement.
To trustee or not to trustee? That was the question facing a son, who was trustee for a trust benefiting his father. The trust, established in 2004, took a turn for the worse in 2008 and 2009. After a significant loss, the father sued his son, claiming he breached the trust agreement. The trial court found the son breached the agreement by purchasing stocks on margin and failing to diversify investments, which the trial court found to be “imprudent” under the uniform prudent investor rule, codified at CRS 15-1.1-102. The court of appeals reversed in part, finding it was error for the trial court to utilize the statutory rule because the trust documents expressly permitted the son to invest trust assets without regard to whether the investments would be permissible under law. Although a trust cannot contract away all fiduciary duties, it can reduce the threshold for imprudence.
Casey, et. al. as class representatives v. Colorado Higher Education Insurance Benefits Alliance Trust, 2012COA134 (August 16, 2012)
Unexpected long-term disabilities are sometimes worse than death. This case involves CGIA immunity arising from a trust created by public colleges to provide employees with long-term disability benefits. When Mesa State pulled out of the trust, its employees sued the trust for their contributions, alleging breaches of fiduciary duties and inverse condemnation. If plaintiffs’ claims lie or could lie in tort, the defendants would be immune. The court of appeals held that the trustees’ fiduciary duties were written into the contract, so they were not tort claims. Neither the breach of the duty of good faith, nor the inverse condemnation claims were tort claims either. But the economic loss rule barred some contract damages. Fraud claims based on alleged misrepresentations by any attorney regarding benefits, however, could lie in tort because they alleged fraud.
The “extensive edifice of the attorney regulation and discipline system” protects attorneys from breach of fiduciary duty claims from third parties. In this case, an attorney contracts with medical providers to provide his clients with medical care. In exchange, the providers take a medical lien on any settlement funds the attorney secures in payment for motor vehicle accident claims. The attorney puts his clients’ settlement funds into a COLTAF account and then pays providers from those funds. But the relationship turns “toxic,” and the attorney starts withholding payments. The providers claim the attorney breached a fiduciary duty. The Court holds that arms-length business transactions like this do not create a fiduciary relationship. Also, attorneys owe duties to their clients, not third party creditors of clients. Here, the providers could recover only what was owed.