Expert testimony is not necessary to establish a claim of breach of fiduciary duty in the usual securities case.
Plaintiffs, heirs of the late Jon Bogue, brought suit against various defendants, all of whom were associated together as securities brokers and investment advisors, arising from their handling of Bogue’s account. Plaintiffs alleged a violation of the Colorado Securities Act and breach of fiduciary duty. Defendants moved to dismiss the claim. Their motion to dismiss the Securities Act claim was granted on the ground that the allegations lacked sufficient detail, but the Court finds that the breach of fiduciary duty claim passes the test for specificity.
Interestingly, procedural requirements accompany the use of expert testimony under Colorado law, specifically where there is an assertion of professional negligence. In such cases, Colorado law requires the plaintiffs to file a certificate of review with the Complaint and Defendants protest that Plaintiffs failed to file the certificate of review. They maintain that the breach of fiduciary duty claim asserts a form of professional negligence and expert testimony is necessary to prove the alleged breach. The Court rejects the argument and denies the motion to dismiss the breach of fiduciary duty claim.
The Court holds that “(t)he statute [requiring the filing of a certificate of review] applies to all claims against licensed professionals wherein expert testimony is required to establish the scope of the professional’s duty or the failure to reasonably conduct himself or herself in compliance with the responsibilities inherent in the assumption of the duty.” (Emphasis supplied.) The instant Complaint does allege that defendants are, variously, licensed investment advisors, investment advisor representatives, certified financial planner/advisors, and/or brokers. But the breach of fiduciary duty claim does not solely rest on allegations that defendants breached standards of conduct owed by such licensed professionals to their clients.
The complaint alleges that defendants had discretionary authority over Bogue’s account and investments, that defendants and Bogue entered into a relationship of trust and confidence pursuant to which defendants agreed or assumed a duty to act for Bogue’s benefit, and that defendants breached that duty by placing and maintaining Bogue’s money into investments that benefitted defendants rather than Bogue and that defendants failed to disclose that they were acting in their own interests. Proof of a claim for breach of fiduciary duty based on such allegations does not necessarily require expert testimony, the Court decides. Thus, the motion to dismiss for lack of a certificate of review is denied.
(ed: This decision synopsis was taken from a SOLA summary originally written by SOLA Contributing Editor Paul J. Dubow.) (SOLA Ref. No. 2019-33-07)
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