Summary
holding that tax return preparer owed client no fiduciary duty
Summary of this case from Tarpon Bay Partners LLC v. Zerez HoldingsOpinion
No. 19119.
2014-09-30
Arthur IACURCI v. Larry SAX et al.
Benjamin Blue Hume, for the appellant (plaintiff). Kerry R. Callahan, with whom, on the brief, was David R. Makarewicz, Hartford, for the appellees (defendants).
Affirmed.
Eveleigh, J., filed dissenting opinion.
Benjamin Blue Hume, for the appellant (plaintiff). Kerry R. Callahan, with whom, on the brief, was David R. Makarewicz, Hartford, for the appellees (defendants).
ROGERS, C.J., and PALMER, ZARELLA, EVELEIGH, McDONALD and ROBINSON, Js. ROBINSON, J.
The principal issue in this certified appeal is whether, under the specific circumstances of this case, a certified public accountant performing tax return preparation services had a fiduciary relationship with his client. The plaintiff, Arthur Iacurci, appeals, upon our grant of his petition for certification, from the judgment of the Appellate Court affirming the trial court's grant of the motion for summary judgment filed by the defendants, Larry Sax, and Cohen, Burger, Schwartz & Sax, LLC, on the ground that the plaintiff's accounting malpractice action was time barred. See Iacurci v. Sax, 139 Conn.App. 386, 411, 57 A.3d 736 (2012). On appeal, the plaintiff claims that the Appellate Court improperly concluded that there was no genuine issue of material fact with respect to the tolling of the three year statute of limitations for torts, General Statutes § 52–577, via the fraudulent concealment statute, General Statutes § 52–595. The plaintiff contends specifically, in connection with a claim of first impression regarding shifting the burden of proving fraudulent concealment in cases involving fiduciaries, that the Appellate Court improperly: (1) determined that the question of whether a fiduciary duty exists presents a question of law, rather than deferring to the trial court's factual finding that a fiduciary relationship existed between the parties; and (2) concluded that there was no fiduciary relationship on the facts of this case. We disagree and, accordingly, affirm the judgment of the Appellate Court.
We granted the plaintiff's petition for certification for appeal limited to the following issue: “Did the Appellate Court properly affirm the trial court's entry of summary judgment against the plaintiff?” Iacurci v. Sax, 308 Conn. 910, 61 A.3d 1100 (2013).
General Statutes § 52–577 provides: “No action founded upon a tort shall be brought but within three years from the date of the act or omission complained of.”
General Statutes § 52–595 provides: “If any person, liable to an action by another, fraudulently conceals from him the existence of the cause of such action, such cause of action shall be deemed to accrue against such person so liable therefor at the time when the person entitled to sue thereon first discovers its existence.”
See footnote 9 of this opinion and accompanying text.
The record reveals the following facts and procedural history. From 1989 to 2006, Sax, who is a certified public accountant, prepared federal and state income tax returns for the plaintiff on behalf of the accounting firm presently known as Cohen, Burger, Schwartz & Sax, LLC. Client engagement letters exchanged by the parties specified that the defendants would prepare the tax returns using information the plaintiff furnished, and also provide income tax advice to him. The engagement letters stated that, in the absence of instructions from the plaintiff, the defendants would use their professional judgment to resolve tax questions in his favor “whenever possible.” The engagement letters cautioned, however, that the plaintiff bore “the final responsibility for the income tax returns,” and instructed him to review the returns carefully before signing them.
We note that the defendants denied all allegations of wrongdoing, but do not appear to contest any of these historical facts for summary judgment purposes.
In his affidavit, Sax admitted to preparing the plaintiff's taxes from 1989 to 1999 at a predecessor firm, Schwartz and Sax, LLP. Sax thereafter served the plaintiff at Cohen, Burger, Schwartz & Sax, LLC, which was formed in 1999.
From 1989 through 2003, the defendants filed tax returns for the plaintiff that reported his real estate investment income as capital gains using schedule D. From 2004 through 2006, however, the defendants filed tax returns for the plaintiff that reported his real estate investment income as ordinary income using schedule C. In January, 2007, the plaintiff hired Robert Walsh, a financial planner, to prepare his tax returns. Walsh also reviewed some of the plaintiff's previously filed tax returns. Walsh believed the defendants erred in reporting the plaintiff's real estate investment income using schedule C, rather than schedule D, and brought the change to the plaintiff's attention because Walsh thought it had caused a tax overpayment. It was at this point, in late January, 2007, that the plaintiff first discovered that the defendants had changed the way his real estate investment income was reported.
On November 10, 2009, the plaintiff commenced this action against the defendants. He alleged that, in February, 2007, he sent amended tax returns to the Internal Revenue Service (IRS) that sought reclassification of his real estate investment income under schedule D for the filings made from 2004 through 2006. The plaintiff further alleged that, following an audit, the IRS accepted the proposed reclassification and began reimbursing his overpayments. The plaintiff claimed that, as a result of the defendants' professional malpractice and negligence, he sustained damages arising from audit expenses and missed investment opportunities while the IRS possessed his overpayment funds. The plaintiff claimed these damages were caused by the defendants' arbitrary change to the way in which he reported his real estate investment income, as well as their failure to discuss the ramifications of this change with him.
In answering the complaint, the defendants raised the special defense that the plaintiff's claims are time barred by the applicable three year statute of limitations, § 52–577. The defendants subsequently moved for summary judgment, asserting that the action was untimely under § 52–577 because it was commenced on November 10, 2009, a date more than three years after the last act on which the plaintiff's claims were based—namely, the defendants' completion and filing of his tax returns on April 17, 2006. The plaintiff objected to the motion for summary judgment, arguing that a genuine issue of material fact existed as to whether the defendants' alleged fraudulent concealment tolled the statute of limitations in accordance with § 52–595. On March 23, 2011, the trial court granted the defendants' motion for summary judgment on the basis that the plaintiff's action was time barred.
The plaintiff also requested leave to amend his reply pleading to the special defense, dated January 27, 2010. The plaintiff's amended reply asserted: “[T]he applicability of the tolling provisions of ... § 52–595, Connecticut's fraudulent concealment statute, in that: (a) at all times, a fiduciary relationship existed between the plaintiff and the defendants; (b) the defendants never disclosed to the plaintiff the specific acts on the part of the defendants which are alleged in [the] plaintiff's complaint to constitute negligence; (c) at all times, the defendants had a fiduciary duty to make such disclosure to the plaintiff; and (d) said negligent acts of the defendants were not discovered by the plaintiff until late January of 2007....”
In concluding that the action was time barred, the trial court reasoned that the defendants had presented unrefuted evidence that the last act on which the plaintiff's claims were based occurred on April 17, 2006, more than three years prior to the commencement of the action on November 10, 2009. The trial court then concluded that, because the defendants made out a prima facie case for summary judgment, the burden shifted to the plaintiff to establish a genuine issue of material fact with regard to whether the fraudulent concealment statute tolled the statute of limitations. The trial court then cited Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, 281 Conn. 84, 105, 912 A.2d 1019 (2007), in which this court concluded that, in order to establish fraudulent concealment, a plaintiff must show that a defendant: “(1) had actual awareness, rather than imputed knowledge, of the facts necessary to establish the [plaintiff's] cause of action; (2) intentionally concealed these facts from the [plaintiff]; and (3) concealed the facts for the purpose of obtaining delay on the [plaintiff's] part in filing a complaint on their cause of action.” The trial court then cited to Falls Church Group, Ltd., for the proposition that nondisclosure is sufficient to satisfy the second element of fraudulent concealment “when the defendant has a fiduciary duty to disclose material facts.” (Internal quotation marks omitted.) Id., at 107, 912 A.2d 1019.
This quotation cites a proposition that has gained general acceptance in federal cases applying Connecticut law. See, e.g., Fenn v. Yale University, 283 F.Supp.2d 615, 636–37 (D.Conn.2003). As the trial court acknowledged, however, this court has “not yet decided whether affirmative acts of concealment are always necessary” to satisfy the second element of fraudulent concealment under § 52–595. (Internal quotation marks omitted.) Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. at 107, 912 A.2d 1019. The trial court nonetheless proceeded as though a fiduciary's mere nondisclosure, if found, could supplant the need for evidence of acts of intentional concealment. The Appellate Court followed a similar course. See Iacurci v. Sax, supra, 139 Conn.App. at 394 n. 2, 57 A.3d 736.
We emphasize that, in Falls Church Group, Ltd., this court only explained, in the context of evaluating a vexatious litigation action, that a law firm had probable cause to believe that it could assert a fraudulent concealment claim in light of federal precedent allowing fiduciary nondisclosure to substitute for intentional concealment. Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. at 103–105, 107–108, 112, 912 A.2d 1019. That is, in Falls Church Group, Ltd., this court did not actually adopt the federal approach of allowing fiduciary nondisclosure to substitute for the second element of a fraudulent concealment claim. Nor do we adopt the federal approach in the present case, as the parties have not brought it directly into dispute. Rather, in the present case, we will assume without deciding that a fiduciary's nondisclosure could satisfy the second element of fraudulent concealment for the purpose of § 52–595.
Applying Falls Church Group, Ltd., in this context, the trial court reasoned that the plaintiff presented evidence to satisfy the second element of fraudulent concealment via fiduciary nondisclosure. It observed that the plaintiff submitted an affidavit in which he attested to “[relying] on the defendants as tax experts with their superior knowledge and skill” and “trust [ing] the defendants to prepare his taxes for him for seventeen years....” The trial court also observed that Walsh signed an affidavit averring that the defendants owed the plaintiff a fiduciary duty and that, in his opinion, the “change in the plaintiff's tax status was a material fact that should have been disclosed.” Accordingly, the trial court determined that the plaintiff “submitted sufficient evidence to establish that the defendants had a fiduciary relationship with the plaintiff and [that] their failure to disclose his changed status on the tax returns was a breach of their duty to disclose material facts to [him].” Because, however, the plaintiff did not present any evidence with regard to the first or third elements of fraudulent concealment—namely, the defendants' actual awareness of the facts necessary to establish the plaintiff's cause of action and the defendants' withholding of such facts for purposes of delaying the plaintiff's filing of a complaint—the trial court held that the plaintiff had failed to demonstrate the existence of a genuine issue of material fact concerning the potential application of § 52–595. The trial court, therefore, reasoned that the plaintiff's claims were time barred and granted the defendants' motion for summary judgment.
The plaintiff appealed from the judgment of the trial court to the Appellate Court, claiming that, following its determination that the defendants owed him a fiduciary duty, the trial court improperly failed to shift the burden of proof to make the defendants responsible for demonstrating that one or more of the fraudulent concealment elements could not be satisfied. Iacurci v. Sax, supra, 139 Conn.App. at 394–95, 57 A.3d 736. The Appellate Court reasoned that this burden shifting claim was inextricably intertwined with the threshold question whether the plaintiff had presented evidence to the trial court that could support a determination that the parties had a fiduciary relationship. Id., at 396–97, 57 A.3d 736. The Appellate Court concluded that the plaintiff did not meet that burden because of, inter alia, an absence of evidence in the record that the relationship between the plaintiff and the defendants was one characterized by a unique degree of trust and confidence. Id., at 405, 57 A.3d 736. Accordingly, the Appellate Court affirmed the judgment of the trial court. Id., at 411, 57 A.3d 736.
This argument was not proffered to the trial court—as admitted by the plaintiff's counsel at oral argument before this court. The defendants raised this potential preservation issue before the Appellate Court and, likewise, brought it to this court's attention at oral argument.
Ultimately, we need not address this potential preservation issue or the merits of the plaintiff's underlying argument regarding a potentially shifting burden of proof in § 52–595 cases—which would be a matter of first impression for this court. See Martinelli v. Bridgeport Roman Catholic Diocesan Corp., 196 F.3d 409, 422 (2d Cir.1999) (“[a]lthough there is no Connecticut decision specifically addressing whether the usual practice of shifting the burden of proof to a fiduciary to prove it has acted fairly extends to an allegation of fraudulent concealment under the tolling statute, we think that under Connecticut law such an allocation is compelled”). The plaintiff's burden shifting argument is entirely dependent on whether the defendants owed him a fiduciary duty. Under our plenary review, we answer that threshold legal question in the negative.
The fiduciary relationship issue was raised before the trial court, but only superficially addressed by the parties in their initial briefs to the Appellate Court. Iacurci v. Sax, supra, 139 Conn.App. at 397 n. 3, 57 A.3d 736. Because the plaintiff's burden shifting argument depended on the demonstration of a fiduciary relationship between the parties, the Appellate Court ordered supplemental briefing on that issue. Id.
Judge Lavine dissented, concluding that the trial court improperly granted the defendants' motion for summary judgment. Id., at 423, 57 A.3d 736. In his view, whether a fiduciary relationship existed between the parties was a question of fact, meaning it was inappropriate for: (1) the trial court to resolve the question at the summary judgment stage; and (2) the Appellate Court to evaluate the question for itself in turn. Id., at 426–27, 57 A.3d 736. Judge Lavine opined that the Appellate Court should have addressed only the plaintiff's burden shifting argument—with which he agreed based on federal precedent and state precedent occurring beyond the context of § 52–595. See id., at 424–25, 427–28, 57 A.3d 736; see also footnote 9 of this opinion. This certified appeal followed. See footnote 1 of this opinion.
On appeal, the plaintiff claims that the Appellate Court improperly: (1) disturbed the trial court's determination that the defendants owed him a fiduciary duty, which he characterizes as a factual finding; and (2) concluded that he did not present evidence to the trial court that could support a determination that the parties had a fiduciary relationship. We address each claim in turn.
I
We begin with the plaintiff's claim that it was improper for the Appellate Court to disturb the trial court's determination that the defendants owed him a fiduciary duty. The plaintiff contends that “appellate courts should not decide questions of fact” and argues that fiduciary duty determinations fall under this general prohibition. The plaintiff does not, however, direct our attention to any case law that supports the specific proposition that fiduciary duty inquiries are questions of fact. Rather, he emphasizes that the existence of a fiduciary duty is “purely fact driven” and must be evaluated “based upon the facts of each case.” The plaintiff thus contends that, in absence of clear error, the Appellate Court was bound to adopt the trial court's determination that a fiduciary relationship existed between the parties. In response, the defendants cite Biller Associates v. Peterken, 269 Conn. 716, 849 A.2d 847 (2004), and Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 830 A.2d 752 (2003), for the proposition that fiduciary duty determinations are legal, and not factual, in nature. We conclude that the trial court's determination that the defendants owed the plaintiff a fiduciary duty was a conclusion of law not subject to deference on appeal.
Cases from this court dating back to the nineteenth century have recognized that “whether [some] duty exists is a question of law.” Schoonmaker v. Albertson & Douglass Machine Co., 51 Conn. 387, 392 (1883). This principle was restated many times during the next two centuries: “The existence of a duty is a question of law and [o]nly if such a duty is found to exist does the trier of fact then determine whether the defendant violated that duty in the particular situation at hand.” (Internal quotation marks omitted.) Petriello v. Kalman, 215 Conn. 377, 382–83, 576 A.2d 474 (1990); accord, e.g., Dugan v. Mobile Medical Testing Services, Inc., supra, 265 Conn. at 807, 830 A.2d 752. Given the many types of legal duties that can exist, it is most important to observe that this standard has been applied specifically in cases involving purported fiduciaries. See Biller Associates v. Peterken, supra, 269 Conn. at 721–22, 849 A.2d 847. Because a fiduciary duty determination is a question of law, it is subject to plenary review on appeal. Id., at 722, 849 A.2d 847. Under plenary review, an appellate court must decide whether the trial court's determination is “legally and logically correct and find[s] support in the facts that appear in the record.” (Internal quotation marks omitted.) Id.
We note this court's approach in Biller Associates v. Peterken, supra, 269 Conn. at 721–22, 849 A.2d 847, is consistent with that of other states. See, e.g., Gliko v. Permann, 331 Mont. 112, 120, 130 P.3d 155 (2006) (“whether a fiduciary duty exists between two parties is a question of law”); National Plan Administrators, Inc. v. National Health Ins. Co., 235 S.W.3d 695, 700 (Tex.2007) (same).
The plaintiff properly observes that, in many cases, the existence of a fiduciary duty may turn on the unique facts presented in the record. The fact driven nature of a question of law does not, however, transform it into a question of fact. Bass ex rel. Bass v. Miss Porter's School, 738 F.Supp.2d 307, 330 (D.Conn.2010); cf. Fraser v. United States, 236 Conn. 625, 632–33, 674 A.2d 811 (1996) (“[d]uty is a legal conclusion about relationships between individuals” that is “determined by the circumstances surrounding the conduct of the individual” [internal quotation marks omitted] ). Contrary to the arguments made by the plaintiff and the conclusions in the dissenting opinion at Appellate Court; see Iacurci v. Sax, supra, 139 Conn.App. at 426–27, 57 A.3d 736 ( Lavine, J., dissenting); given the undisputed underlying facts, the Appellate Court properly decided, as a matter of law, whether the defendants owed the plaintiff a fiduciary duty. The Appellate Court was not required to defer to the trial court's determination that the parties had a fiduciary relationship as a matter of law. See Biller Associates v. Peterken, supra, 269 Conn. at 722, 849 A.2d 847. Accordingly, the Appellate Court properly engaged in a plenary review of the record to determine whether the undisputed factual evidence supported the trial court's conclusion that a fiduciary relationship existed between the parties.
We emphasize that, when the resolution of a question of law, such as the existence of a fiduciary duty, depends on underlying facts that are in dispute, that question becomes, in essence, a mixed question of fact and law. Thus, we would review the subsidiary findings of historical fact, which “constitute a recital of external events and the credibility of their narrators,” for clear error, and engage in plenary review of the trial court's “application of ... legal standards ... to the underlying historical facts.” (Internal quotation marks omitted.) Lindholm v. Brant, 283 Conn. 65, 76–77, 925 A.2d 1048 (2007); see also, e.g., Haas v. Haas, 137 Conn.App. 424, 432, 48 A.3d 713 (2012) (whether continuing course of conduct tolls statute of limitations is mixed question of law and fact, with underlying factual findings reviewed for clear error and ultimate conclusions of law subject to plenary review).
II
We next turn to the plaintiff's claim that the Appellate Court improperly concluded that he had not presented evidence to the trial court to support a determination that the parties had a fiduciary relationship. Specifically, the plaintiff notes that he filed an affidavit in which he attested to “[relying] on the defendants as tax experts with their superior knowledge and skill when compared to his own knowledge of tax matters.” The plaintiff observes that the defendants had prepared his taxes for seventeen years, and that he justifiably placed his trust in their decisions about how his tax returns were prepared. In the plaintiff's view, the Appellate Court did not appear to take these relationship dynamics into account. He contends that the majority opinion concluded, as a matter of law, “that there can be no fiduciary relationship when one party is a tax preparer and the other party is a client.”
The plaintiff and the dissent further rely on Walsh's affidavit attesting that, “in his expert opinion, the defendants owed a fiduciary duty to the plaintiff....” Walsh's affidavit is only informative to the extent that he describes facts surrounding the services he provided to the plaintiff in January, 2007. Walsh's expertise in tax preparation does not qualify him to render an opinion on the legal question of whether the defendants owed the plaintiff a fiduciary duty. See State v. Douglas, 203 Conn. 445, 453, 525 A.2d 101 (1987) (“in order to be admissible, the proffered expert's knowledge must be directly applicable to the matter specifically in issue”). Moreover, even if a fiduciary duty could properly be found to exist in the present case, any averment by Walsh as to whether that duty was breached would be inadmissible. See Updike, Kelly & Spellacy, P.C. v. Beckett, 269 Conn. 613, 652 n. 30, 850 A.2d 145 (2004) (expert testimony that certain conduct constituted breach of fiduciary duty was improper legal opinion on ultimate issue).
In response, the defendants argue that the Appellate Court did not conclude that a tax return preparer can never have a fiduciary relationship with a client. Rather, the defendants contend that the Appellate Court properly observed that the relationship between a tax return preparer and a client is not ordinarily fiduciary in nature. The defendants concede that a tax return preparer might owe its client a fiduciary duty under different circumstances. They argue, however, that the Appellate Court properly concluded that, here, the plaintiff did not present any unique factual evidence that would be consistent with a fiduciary dynamic. Specifically, the defendants contend that the plaintiff did not present evidence of a unique degree of trust or expertise, nor of dominance or control. They further contend that the plaintiff did not present any evidence that the relationship between the parties “invite[d] the kind of fraud or self-dealing that requires imposing heightened, fiduciary duties.” The defendants warn that if, as the plaintiff hopes, “a client may declare a professional his fiduciary by simply proclaiming lesser knowledge and reliance ... every business person [would be turned into] his or her clients' or customers' fiduciaries.” We agree with the defendants and conclude that, based on the specific circumstances of this case, they did not owe a fiduciary duty to the plaintiff.
“The standards governing [an appellate tribunal's] review of a trial court's decision to grant a motion for summary judgment are well established. Practice Book [§ 17–49] provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.... In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... [T]he scope of our review of the trial court's decision to grant the [defendants'] motion for summary judgment is plenary.” (Internal quotation marks omitted.) Romprey v. Safeco Ins. Co. of America, 310 Conn. 304, 312–13, 77 A.3d 726 (2013). “[I]n the context of a motion for summary judgment based on a statute of limitations special defense, [the defendants] typically [meet their] initial burden of showing the absence of a genuine issue of material fact by demonstrating that the action had commenced outside of the statutory limitation period.... When the plaintiff asserts that the limitations period has been tolled by an equitable exception to the statute of limitations, the burden normally shifts to the plaintiff to establish a disputed issue of material fact in avoidance of the statute.” (Citation omitted.) Id., at 321, 77 A.3d 726. Put differently, it is then “incumbent upon the party opposing summary judgment to establish a factual predicate from which it can be determined, as a matter of law, that a genuine issue of material fact exists.” Connell v. Colwell, 214 Conn. 242, 251, 571 A.2d 116 (1990).
Thus, to toll a statute of limitations by way of our fraudulent concealment statute, a plaintiff must present evidence that a defendant: “(1) had actual awareness, rather than imputed knowledge, of the facts necessary to establish the [plaintiff's] cause of action; (2) intentionally concealed these facts from the [plaintiff]; and (3) concealed the facts for the purpose of obtaining delay on the [plaintiff's] part in filing a complaint on their cause of action.” Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. at 105, 912 A.2d 1019. For purposes of this case, we assume, without deciding, that the second element of fraudulent concealment, namely, intentional concealment, could alternatively be satisfied upon a plaintiff's submission of evidence that a defendant owed him a fiduciary duty and failed to disclose information as that duty required. See footnote 8 of this opinion.
Turning to the standard for determining whether a fiduciary relationship exists, this court has recognized that some actors are per se fiduciaries by nature of the functions they perform. These include “agents, partners, lawyers, directors, trustees, executors, receivers, bailees and guardians.” (Internal quotation marks omitted.) Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. at 108–109, 912 A.2d 1019. Beyond these per se categories, however, a flexible approach determines the existence of a fiduciary duty, which allows the law to adapt to evolving situations wherein recognizing a fiduciary duty might be appropriate. Id. This court has instructed that, “[a] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other.... The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him.” (Internal quotation marks omitted.) Id., at 108, 912 A.2d 1019. With these principles in mind, “we have recognized that not all business relationships implicate the duty of a fiduciary.” Hi–Ho Tower, Inc. v. Com–Tronics, Inc., 255 Conn. 20, 38, 761 A.2d 1268 (2000).
This court has not previously considered whether a tax return preparer, including an accountant, ordinarily owes a fiduciary duty to its client. Consistent with the foregoing general principles, our cases considering whether ad hoc fiduciary duties existed in business relationships have turned on the presence of a special vulnerability. See Sherwood v. Danbury Hospital, 278 Conn. 163, 196, 896 A.2d 777 (2006). That is, “trust and confidence,” “superior knowledge, skill or expertise,” and an expectation that one party is “under a duty to represent the interests of the other” are typically necessary, but not always dispositive, conditions giving rise to a fiduciary duty in business settings. Rather, particular attention is given to whether there is a “great opportunity for abuse of the confidence reposed in” the hired party. (Internal quotation marks omitted.) Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. at 108, 912 A.2d 1019. This follows logically from the need to avoid assigning the serious, significant duties that are expected of a fiduciary to every business arrangement. Ostensibly, any time one party hires another to perform a service on their behalf, “trust and confidence” is placed in the latter party. Likewise, most customers and clients invariably rely on a service provider's “superior knowledge, skill, or expertise” in their trade. The unique element that inheres a fiduciary duty to one party is an elevated risk that the other party could be taken advantage of—and usually unilaterally. That is, the imposition of a fiduciary duty counterbalances opportunities for self-dealing that may arise from one party's easy access to, or heightened influence regarding, another party's moneys, property, or other valuable resources. All of this precludes us from unduly extending the scope of fiduciary obligations to all ordinary business relationships.
Indeed, the presence of some special vulnerability is also a common thread among per se fiduciary relationships. See, e.g., Fink v. Golenbock, 238 Conn. 183, 210, 680 A.2d 1243 (1996) (jury could reasonably find breach of fiduciary duty in light of testimony that director absconded with corporate funds for personal speculative investments); see also R. Cooter & B. Freedman, “The Fiduciary Relationship: Its Economic Character and Legal Consequences,” 66 N.Y.U. L.Rev. 1045, 1046 (1991) (hallmark of per se fiduciary relationship is that “a beneficiary entrusts a fiduciary with control and management of an asset,” which “necessarily involves risk and uncertainty”).
To the extent that courts in other jurisdictions have addressed the present question, they have concluded that a fiduciary relationship does not exist when a client relationship is limited to the preparation of tax returns. See Sorenson v. H & R Block, Inc., 107 Fed.Appx. 227, 230–31 (1st Cir.2004) (affirming holding that tax return preparer was not fiduciary or agent); In re Marcet, 352 B.R. 462, 472 (Bankr.N.D.Ill.2006) (tax advisor and tax return preparer was not fiduciary where no evidence was adduced to show control or advice regarding client's finances); Peterson v. H & R Block Tax Services, Inc., 971 F.Supp. 1204, 1214 (N.D.Ill.1997) (same). The plaintiff has not directed this court's attention to any decisions holding to the contrary.
The cases cited by the dissent for the proposition that “other jurisdictions that have considered this issue have concluded that there may be sufficient evidence adduced to hold a tax preparer to a fiduciary responsibility in the absence of said tax preparer offering investment advice,” namely, Watts v. Jackson Hewitt Tax Service, Inc., 579 F.Supp.2d 334 (E.D.N.Y.2008), Green v. H & R Block, Inc., 355 Md. 488, 735 A.2d 1039 (1999), and Basile v. H & R Block, Inc., 777 A.2d 95 (Pa.Super.2001), appeal denied, 569 Pa. 714, 806 A.2d 857 (2002), do not dictate a contrary conclusion in the present case. Those decisions are factually or legally distinguishable from the present case.
First, the federal District Court's decision in Watts v. Jackson Hewitt Tax Service, Inc., supra, 579 F.Supp.2d at 339–40, is distinguishable because that court did not consider whether a fiduciary relationship existed between the plaintiffs and the defendant, a major tax preparer, which was claimed, inter alia, to have engaged in practices with respect to the calculation of its fees and the sale of financial products, such as refund anticipation loans, which constituted violations of New York unfair trade practices statutes and common-law fraud by omission. In considering the plaintiffs' common-law fraud claim, the court noted that, under New York law, a claim of fraudulent omission or concealment must allege, inter alia, a breach of a duty to disclose; id., at 350; and that such a duty “arises in three situations: (1) where a party has made a partial or ambiguous statement, as a party cannot give only half of the truth; (2) where a party has a fiduciary duty to another; or (3) where a party has superior knowledge that is not available to the other party and the party with superior knowledge knows that the other party is acting on the basis of mistaken knowledge.” (Internal quotation marks omitted.) Id., at 352. The District Court observed that the tax preparer defendants denied the existence of a fiduciary relationship, but did not address that potential issue because of allegations in the plaintiffs' complaint that satisfied the other options for establishing a duty to disclose, namely, that the “[d]efendants are alleged to have made a partial and ambiguous representation of their minimum fees to customers,” and that they “had superior and exclusive knowledge of the actual charges applied to each customer's tax preparation fee, especially regarding the seasonal multiplier fee.” Id.
As the Appellate Court noted; see Iacurci v. Sax, supra, 139 Conn.App. at 409 n. 8, 57 A.3d 736; the Pennsylvania intermediate appellate court's decision in Basile v. H & R Block, Inc., supra, 777 A.2d at 95, is distinguishable because of the factual depth of the record in that case with respect to establishing the presence of unequal bargaining power, with the attendant risk of self-dealing, requisite to establishing a fiduciary relationship. In Basile, the court considered “whether evidence produced by the parties in discovery is sufficient to demonstrate a confidential relationship between the plaintiff class of Pennsylvania taxpayers ... and mass-market tax preparer,” H & R Block, Inc. (Block). Id., at 98. Basile involved claims that Block's failure to disclose that its “Rapid Refund” service was in reality an extremely high-interest loan breached, inter alia, state and federal consumer protection statutes, and Block's common-law fiduciary duty. (Internal quotation marks omitted.) Id. The court held that there was sufficient evidence of a fiduciary relationship to defeat Block's summary judgment motion, noting that the plaintiffs “did not deal on equal terms, but ... sought Block's assistance from a position of pronounced intellectual and economic weakness.... The plaintiffs have adduced a significant quantum of evidence, much in the form of internal Block documents, tending to demonstrate that Block's customers possessed limited education and suffered from chronic economic scarcity. The evidence suggests as well that Block encouraged these customers to repose a high level of trust in the company and that the [p]laintiffs responded by placing their trust in Block, both to prepare their tax returns and to secure their tax refunds. Possessing no significant expertise in the services Block offered ... the [p]laintiffs made no distinction concerning the role Block played in tendering the ‘Rapid Refund’ service, but rather ... merely sought the most expeditious way to comply with the tax laws and to recoup taxes they had overpaid. In point of fact, many of Block's customers had no significant understanding of the ‘Rapid Refund’ service.” (Citations omitted.) Id., at 106. Citing Block's internal marketing studies, the court further emphasized that the “evidence suggests further that Block recognized its customers' confusion and exploited a corresponding opportunity to abuse [their] trust for personal gain.” (Internal quotation marks omitted.) Id.; see also id., at 104–105 (discussing marketing studies that showed defendant's awareness that low income customers used Rapid Refund to address pressing financial needs); id., at 105–106 (noting Block trained its employees to “provide minimal explanation” of Rapid Refund, despite fact that record demonstrated customers' confusion about tax preparation and refund process and followed preparers' directions without question).
Finally, Green v. H & R Block, Inc., supra, 355 Md. at 488, 735 A.2d 1039, also arising from the Rapid Refund loan process, is similarly distinguishable. In concluding that a confidential agency relationship existed between the tax preparer and the plaintiff, Maryland's highest court considered factual allegations concerning the tax return and refund loan application process, as well as the tax preparer's marketing strategies, which are far more detailed than those in the rather limited record in the present appeal with respect to establishing the requisite trust and dependency. See id., at 516–17, 735 A.2d 1039.
In contrast, courts have concluded that the relationship between a tax return preparer and a client is fiduciary in nature when a heightened risk of abuse of trust or confidence exists, such as when the tax return preparer or accountant acts as an investment advisor or manages the client's funds. See Burdett v. Miller, 957 F.2d 1375, 1381–82 (7th Cir.1992) (accountant who held himself out as expert in investments and provided advice on tax shelter investments owed client fiduciary duty); Haas v. Haas, 137 Conn.App. 424, 434–35, 48 A.3d 713 (2012) (accountant who, inter alia, filed tax returns for his elderly mother undisputedly owed her fiduciary duty by virtue of agreeing to manage her financial affairs and investments); Khan v. Deutsche Bank AG, 365 Ill.Dec. 517, 978 N.E.2d 1020, 1041 (Ill.2012) (plaintiff adequately pleaded existence of fiduciary duty via detailed allegations that defendants provided investment and tax advice); see also authorities discussed in footnote 15 of this opinion.
On the facts of this case, even when the evidence is viewed in a light that is most favorable to the plaintiff, we conclude that, as a matter of law, the defendants did not owe him a fiduciary duty. The plaintiff has not argued in this appeal that the defendants fall into one of the per se fiduciary categories. His affidavit averred that the defendants prepared his annual tax returns, and thereafter contained conclusory recitals of our standard for fiduciary duty determinations. Cf. Kottler v. Deutsche Bank AG, 607 F.Supp.2d 447, 465–66 (S.D.N.Y.2009) (vague, conclusory allegations that defendants served plaintiff as financial and tax advisor insufficient to establish fiduciary relationship). Although the plaintiff averred to placing trust and confidence in the defendants when they prepared his annual tax returns, the same might be said of any relationship where one party hires another to perform a professional service competently on their behalf. Cf. Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 247 Conn. 48, 57, 717 A.2d 724 (1998) (“[p]rofessional negligence implicates a duty of care, while breach of a fiduciary duty implicates a duty of loyalty and honesty”). Similarly, the plaintiff averred that the defendants possessed “knowledge, skill and expertise that was clearly superior” to his own in tax matters. This aptitude differential, without a corresponding risk of abuse, does not transform their professional relationship in any special way to warrant the imposition of a fiduciary duty. See Hi–Ho Tower, Inc. v. Com–Tronics, Inc., supra, 255 Conn. at 42, 761 A.2d 1268 (“[s]uperior skill and knowledge alone do not create a fiduciary duty among parties involved in a business transaction”). Nor does the undisputed duration of the parties' relationship—which is certainly lengthy at seventeen years—change its core qualitative characteristics. See In re Marcet, supra, 352 B.R. at 472 (certified public accountant who served as tax advisor and prepared income tax returns for twenty years did not owe fiduciary duty). The plaintiff did not present any other evidence regarding his claimed fiduciary relationship with the defendants.
The other undisputed evidence in the record, namely, the client engagement letters the defendants submitted to the trial court, also does not create a genuine issue of material fact that would support the plaintiff's claim that a fiduciary relationship existed. To a point, these letters are favorable to the plaintiff because they indicate that the defendants were hired to provide tax advice and, where possible, resolve tax questions in the plaintiff's favor when preparing his returns. No specific evidence was presented, however, about the extent or nature of any tax advice that was actually rendered. The absence of such evidence is fatal to the plaintiff's fiduciary claim. Granted, the plaintiff averred that he earned income through real estate investments and that the defendants prepared tax returns relating to that income. By itself, that does not, however, demonstrate that the defendants provided him with any substantive advice concerning those investments. Had the plaintiff adduced evidence, for example, of a disparity in bargaining power, or that the defendants' tax advice veered into the investment realm—such that they recommended financial transactions to him or managed his investment funds—our view of the parties' relationship may well have been different. Under that alternative scenario, a client's special vulnerability would be more readily apparent.
The dissent contends that we establish “a bright line rule to the effect that a tax preparer can never be a fiduciary, unless he also gives investment advice.” We respectfully disagree with the dissent's reading of our opinion. We readily acknowledge that a record in a different case might well establish a fiduciary relationship between a tax preparer and its client, even in the absence of investment advice or a financial planning relationship. See, e.g., Haas v. Haas, supra, 137 Conn.App. at 434–35, 48 A.3d 713; Basile v. H & R Block, Inc., 777 A.2d 95, 106 (Pa.Super.2001), appeal denied, 569 Pa. 714, 806 A.2d 857 (2002); see also footnote 15 of this opinion. Beyond conclusory allegations, this record is, however, simply devoid of any evidence that establishes a genuine issue of material fact with respect to the existence of a fiduciary relationship between the parties. Contrary to the dissent's view, there is simply no evidence in the present case of disparity in bargaining power, or special trust, to “establish that the parties were not dealing in an arm's-length transaction,” despite the relative length of their business relationship.
“The purposes of statutes of limitation include finality, repose and avoidance of stale claims and stale evidence.... These statutes represent a legislative judgment about the balance of equities in a situation involving a tardy assertion of otherwise valid rights: [t]he theory is that even if one has a just claim it is unjust not to put the adversary on notice to defend within the period of limitation and that the right to be free of stale claims in time comes to prevail over the right to prosecute them.” (Citation omitted; internal quotation marks omitted.) Flannery v. Singer Asset Finance Co., LLC, 312 Conn. 286, 322–23, 94 A.3d 553 (2014). Although the fraudulent concealment statute may toll the three year statute of limitations for torts, the plaintiff's lone theory of fraudulent concealment required him to establish a fiduciary relationship with the defendants. Because he failed to do so, his claims are time barred. Accordingly, we conclude that the Appellate Court properly affirmed the trial court's summary judgment rendered against the plaintiff.
The judgment of the Appellate Court is affirmed. In this opinion ROGERS, C.J., and PALMER, ZARELLA and McDONALD, Js., concurred. EVELEIGH, J., dissenting.
I respectfully dissent. I disagree with the majority's conclusion that the Appellate Court properly affirmed the trial court's award of summary judgment in favor of the defendants, Larry Sax, and Cohen, Burger, Schwartz & Sax, LLC. The majority concludes that “the Appellate Court properly engaged in a plenary review of the record to determine whether the undisputed factual evidence supported the trial court's conclusion that a fiduciary relationship existed between the parties.” The majority further concludes that “[o]n the facts of this case, even when the evidence is viewed in a light that is most favorable to [the plaintiff, Arthur Iacurci], we conclude that, as a matter of law, the defendants did not owe him a fiduciary duty.” I respectfully disagree.
In my view, taking the evidence in the light most favorable to the nonmoving party, in the opposition to the motion for summary judgment the plaintiff produced sufficient evidence to demonstrate the existence of genuine questions of material fact regarding whether a fiduciary relationship existed between the parties. The defendants did not submit any evidence to contradict the affidavits submitted by the plaintiff. Further, I disagree with the majority's position to the extent that it indicates that the plaintiff had the burden of establishing the existence of a fiduciary relationship. Rather, in my view, our case law is clear that it is the party moving for summary judgment that must demonstrate to the satisfaction of the court that there are no issues of material fact before the court may render summary judgment. While the plaintiff may ultimately have the burden of proof if the case should go to trial, it remains the defendants' burden on summary judgment to show the absence of material fact. The affidavits of the plaintiff, unopposed by the defendants, support the existence of a genuine issue of material fact in this case. Further, in my view, the majority opinion does not give effect to our jurisprudence that states that “[i]n deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.” (Internal quotation marks omitted.) DiPietro v. Farmington Sports Arena, LLC, 306 Conn. 107, 116, 49 A.3d 951 (2012). Therefore, I respectfully dissent.
Pursuant to Practice Book § 17–49, the “party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ... and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact.” (Internal quotation marks omitted.) Id. “[A] party opposing [a motion for] summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact together with evidence disclosing the existence of such an issue.” (Internal quotation marks omitted.) Home Ins. Co. v. Aetna Life & Casualty Co., 235 Conn. 185, 202, 663 A.2d 1001 (1995). “On a motion by the defendant for summary judgment, the burden is on the defendant to negate each claim as framed by the complaint....” 49 C.J.S. 392, Judgments § 327 (2009). It necessarily follows that it is only “[o]nce the defendant's burden in establishing his or her entitlement to summary judgment is met [that] the burden shifts to the plaintiff to show that a genuine issue of fact exists justifying a trial.” Id.
In this case, the plaintiff submitted two affidavits in opposition to the defendants' motion for summary judgment. The plaintiff submitted an affidavit in which he indicated that the defendants never disclosed to him that “they had changed my tax reporting status for reporting my investment income for tax purposes from 2003 through 2005. I trusted them, I had confidence in them, I knew that, in tax matters, their knowledge, skill and expertise was clearly superior to mine, and I believed, at all times, that, in preparing my tax returns, they were proceeding in my best interests.” Further, the plaintiff also submitted the affidavit of Robert Walsh, a financial planner duly licensed in the state of Connecticut who was in the business of providing clients advice in financial and tax matters. Walsh averred in his affidavit as follows: “Based upon my knowledge and experience as a tax preparer, I can state that, in my professional opinion, given the lengthy time period of the relationship between [the plaintiff] and Sax, and the nature and scope of the tax services [the defendants] rendered, [the defendants] had a special, fiduciary relationship with [the plaintiff], and a fiduciary duty and responsibility, as [the plaintiff's] tax advisers and tax preparers, to disclose to [the plaintiff] any decision on their part to materially change his tax status for reporting Florida real estate investment income.” The defendants never filed an affidavit which contested these statements. Whether a fiduciary relationship existed between the parties was central to the plaintiff's claims. Once the plaintiff established facts supporting a finding of a fiduciary relationship, it was incumbent upon the defendants to show that no fiduciary relationship existed in order to obtain summary judgment. In the absence of an affidavit to the contrary, in my view, the Appellate Court should have reversed the judgment of the trial court on the basis that a genuine issue of material fact existed that needed to be heard by the jury.
I agree with the majority that this court has recognized that “some actors are per se fiduciaries by nature of the functions they perform. These include ‘agents, partners, lawyers, directors, trustees, executors, receivers, bailees and guardians.’ ... Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, [281 Conn. 84, 108–109, 912 A.2d 1019 (2007) ]. Beyond these per se categories, however, a flexible approach determines the existence of a fiduciary duty, which allows the law to adapt to evolving situations wherein recognizing a fiduciary duty might be appropriate. Id. This court has instructed that, ‘[a] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other.... The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him.’ ... Id., at 108, 912 A.2d 1019. With these principles in mind, ‘we have recognized that not all business relationships implicate the duty of a fiduciary.’ Hi–Ho Tower, Inc. v. Com–Tronics, Inc., 255 Conn. 20, 38, 761 A.2d 1268 (2000).” Further, as Judge Lavine aptly noted in his dissent in the Appellate Court; see Iacurci v. Sax, 139 Conn.App. 386, 426, 57 A.3d 736 (2012); this court has previously stated that, “[r]ather than attempt to define a fiduciary relationship in precise detail and in such a manner to exclude new situations, we have instead chosen to leave the bars down for situations in which there is a justifiable trust confided on one side and a resulting superiority and influence on the other.” (Internal quotation marks omitted.) Dunham v. Dunham, 204 Conn. 303, 320, 528 A.2d 1123 (1987), overruled in part on other grounds by Santopietro v. New Haven, 239 Conn. 207, 213 n. 8, 682 A.2d 106 (1996). In Dunham, this court concluded that on the record, “which indicates that the defendant is the older brother of the plaintiff, and that the plaintiff continually placed his trust and confidence in the defendant for both legal and nonlegal advice, we are convinced that the court properly submitted this issue to the jury.” Id., at 321, 528 A.2d 1123.
Likewise, in the present case, on the basis of the affidavits submitted in opposition to the motion for summary judgment, I would conclude that the issue of whether a fiduciary relationship existed between the parties should have gone to the jury. In the present case, the defendants prepared the plaintiff's taxes for many years and the plaintiff submitted an affidavit to the effect that he had trust and confidence in the defendants.
Indeed, in a case presented to the jury, if the plaintiff establishes the existence of a fiduciary relationship, it becomes the defendants' “burden to disprove that it breached its fiduciary duty, hence disproving that it fraudulently concealed [the] plaintiff's cause of action.” Martinelli v. Bridgeport Roman Catholic Diocesan Corp., 10 F.Supp.2d 138, 145 (D.Conn.1998), aff'd in part, vacated and remanded in part, 196 F.3d 409 (2d Cir.1999). Therefore, if a fiduciary relationship were established, a relationship which the Appellate Court concluded did not exist, it would have been incumbent upon the defendants to disprove that it fraudulently concealed the plaintiff's cause of action, thus negating the statute of limitations defense. The Appellate Court, however, placed the burden on the plaintiff to establish fraudulent concealment since it concluded that a fiduciary relationship did not exist.
As Judge Lavine reasoned in his dissent to the majority opinion of the Appellate Court, “[t]he determination of a fiduciary relationship is fact specific and depends on the circumstances present in each case.... Whether there was a fiduciary relationship between the parties in this action is a question of fact to be determined by the trier of fact in light of all [the] circumstances present.” (Citations omitted.) Iacurci v. Sax, supra, 139 Conn.App. at 426, 57 A.3d 736. Like Judge Lavine, I would conclude that our jurisprudence suggests that we decide the existence or absence of a fiduciary relationship based upon all of the facts of the case. Indeed, only by examining all of the facts of the particular case can we implement what the majority refers to as a “flexible approach [that] determines the existence of a fiduciary duty....” The evidence adduced at the summary judgment stage in the present case constitutes, in my view, too vague a sketch upon which to make such a determination.
I note that the majority relies upon Biller Associates v. Peterken, 269 Conn. 716, 849 A.2d 847 (2004), for the proposition that an appellate court is not required to defer to the trial court's determination of whether a fiduciary relationship exists. I respectfully disagree that Biller Associates supports the majority's conclusion in the present case. Biller Associates involved an examination of the facts adduced at trial to determine if a fiduciary relationship existed. Although this court held that a fiduciary relationship did not exist in Biller Associates v. Peterken, supra, at 725, 849 A.2d 847, the reasoning is instructive given the facts of the present case. “In the seminal cases in which this court has recognized the existence of a fiduciary relationship, the fiduciary was either in a dominant position, thereby creating a relationship of dependency, or was under a specific duty to act for the benefit of another.... In the cases in which this court has, as a matter of law, refused to recognize a fiduciary relationship, the parties were either dealing at arm's length, thereby lacking a relationship of dominance and dependence, or the parties were not engaged in a relationship of special trust and confidence.” (Internal quotation marks omitted.) Id., at 723–24, 849 A.2d 847.
The affidavits in the present case establish that the parties were not dealing in an arm's-length transaction. To the contrary, the affidavits establish that the plaintiff and the defendants had a lengthy relationship in which the plaintiff relied on the defendants for tax advice and preparation. I would conclude that a question of fact exists as to whether there was a relationship of special trust and confidence. The affidavits established that, at the very least, there was a genuine issue of material fact as to whether a relationship of special trust and confidence existed. The existence of a genuine issue of material fact is particularly accentuated by the fact that the defendants did not present any affidavits to the contrary.
The majority opinion provides that “[t]o the extent that courts in other jurisdictions have addressed the present question, they have concluded that a fiduciary relationship does not exist when a client relationship is limited to the preparation of tax returns. See Sorenson v. H & R Block, Inc., 107 Fed.Appx. 227, 230–31 (1st Cir.2004)....” (Citations omitted.) Further, the majority states that “[i]n contrast, courts have concluded that the relationship between a tax return preparer and a client is fiduciary in nature when a heightened risk of abuse of trust or confidence exists, such as when the tax return preparer or accountant acts as an investment advisor or manages the client's funds. See Burdett v. Miller, 957 F.2d 1375, 1381–82 7th Cir.1992)....” (Citations omitted.) The majority suggests that other jurisdictions are in accord with its opinion, and it can not find any cases to the contrary. I respectfully disagree.
In Basile v. H & R Block, Inc., 777 A.2d 95 (Pa.Super.2001), the Superior Court of Pennsylvania reversed the trial court's order granting summary judgment in favor of the defendants on facts similar to those in the present case. In Basile, the plaintiffs retained H & R Block, Inc. (Block), to prepare their federal and state income tax returns and obtain tax refunds from the Internal Revenue Service from 1990 through 1993. Id., at 98. Subsequently, the plaintiffs filed a class action alleging that during the tax preparation Block enlisted their participation in its “ ‘Paid Refund’ ” service and did not disclose that their “ ‘rapid refunds' ” were, in fact, short-term high interest loans secured by the taxpayers' pending refunds. Id. The trial court had granted summary judgment based on the conclusion that the plaintiffs failed to adduce sufficient evidence to demonstrate a confidential relationship between themselves and Block. Id., at 99. The court in Basile relied on the fact that the Pennsylvania Supreme Court has acknowledged that “[t]he concept of a confidential relationship cannot be reduced to a catalogue of specific circumstances, invariably falling to the left or right of a definitional line.... The [c]ourt has recognized, nonetheless, that [t]he essence of such a relationship is trust and reliance on one side, and a corresponding opportunity to abuse that trust for personal gain on the other.... Accordingly, [a confidential relationship] appears when the circumstances make it certain the parties do not deal on equal terms, but, on the one side there is an overmastering influence, or, on the other, weakness, dependence or trust, justifiably reposed .... Contrary to the trial court's determination in this case, our law does not require both over[mastering] influence and ... weakness, dependence or trust.... Indeed, both elements need not appear together as in both an unfair advantage is possible.” (Citations omitted; emphasis omitted; internal quotation marks omitted.) Id., at 101.
The court in Basile further noted that “[i]f parties are engaged in a confidential relationship the apparent disparity in their positions serves as the foundation for the law's expectation of conduct between the parties and the concomitant obligations of the superior party. [T]he party in whom the trust and confidence are reposed must act with scrupulous fairness and good faith in his dealings with the other and refrain from using his position to the other's detriment and his own advantage.... As a consequence of the superior party's heightened state of duty normal arm's length bargaining is not assumed.... This is so because the presence of a confidential relationship negates the assumption that each party is acting in his own best interest.” (Citations omitted; internal quotation marks omitted) Id. The court in Basile also explained that “[t]he [Pennsylvania] Supreme Court has determined that a confidential relationship and the resulting fiduciary duty may attach wherever one occupies toward another such a position of advisor or counsellor as reasonably to inspire confidence that he will act in good faith for the other's interest.” (Internal quotation marks omitted.) Id., at 101–102.
Applying that framework to the facts before it, the court in Basile then explained that “[u]pon application of the proper standard of [a] confidential relationship ... we conclude that the evidence adduced in this case is sufficient to make a prima facie showing that the [p]laintiffs and Block engaged in a confidential relationship. As a starting point, the evidence suggests that Block actively sought customer trust in ... Block as a corporate entity and in all of the services Block offered.” (Citations omitted.) Id., at 103. “Further evidence tends to demonstrate that Block cultivated customer trust through an extended and extensive media ad campaign, the focal point of which was Block's expertise in tax matters and the trustworthy character of Block's services.” Id., at 104. “Additional evidence, in the form of Block's ‘confidential’ marketing data suggests that many of Block's customers entered their relationships with Block in a position of pronounced economic and intellectual weakness.” Id. “Nonetheless, our holding is narrow. We do not conclude that the relationship of a tax consultant to his client is confidential per se, nor do we conclude that the parties here were engaged in such a relationship as a matter of law. We conclude only that the evidence before the trial court on summary judgment was sufficient to establish, prima facie, the elements of a confidential relationship between the parties in this case. If, upon remand, the [fact finder] accepts, as truthful, evidence adduced tending to demonstrate a confidential relationship, Block will be bound by a corresponding fiduciary duty as a matter of law.” Id., at 107.
Thus, in Basile, the court recognized the possibility of a confidential relationship existing when the tax preparer only prepared the taxes and processed the tax refund. I agree with this approach. Accordingly, in the present case, I would not conclude that the evidence is sufficient to determine that a fiduciary relationship existed in this case. Rather, I would conclude that the evidence is sufficient to establish that a genuine issue of material fact exists regarding whether a fiduciary relationship existed between the plaintiff and the defendants. Thus, I would conclude that the evidence before the trial court on summary judgment was sufficient to establish, prima facie, the elements of a fiduciary relationship between the parties in this case.
Further, in Green v. H & R Block, Inc., 355 Md. 488, 495, 735 A.2d 1039 (1999), involving a similar “rapid refund” scenario, the Court of Appeals of Maryland reversed a trial court decision granting Block's motion to dismiss on the basis that sufficient facts had been alleged to warrant a factual determination regarding the existence of a principal-agent relationship that gives rise to a fiduciary duty to disclose any conflict of interest. This action also involved tax preparation and the processing of refunds. The court in Green opined that “we conclude that it would be reasonable to infer that ... Block's customers retain control over ... Block's ultimate actions and representations with respect to filing the tax return and applying for [a rapid refund]. Viewed most favorably to [the plaintiff], [Block's] relationship with its customers is analogous to other principal-agent relationships, such as between an attorney and his or her client.... An attorney who, for example, serves as his or her client's representative in negotiations to settle a lawsuit is generally not subject to the client's control over the best strategy to use in order to arrive at a good settlement, but the client controls the final decision as to whether to settle or not. The client/principal may have little knowledge of the law or negotiating strategies and so trusts the attorney/agent to further his or her interests in the settlement negotiations.” (Citations omitted.) Id., at 511, 735 A.2d 1039. The court in Green further concluded that “[s]imilar to the client who is represented by an attorney in settlement negotiations, [Block's customers] may be unknowledgeable in tax and financial matters, trusting ... Block to further his or her interests. Like the attorney representing a client in settlement negotiations, [Block] undertakes to file customer tax returns with the [Internal Revenue Service] and the loan application with the bank, but only at the direction of the customer, who ultimately controls whether ... Block takes either action with respect to the third party. It is not dispositive, as the trial court implied, that ... Block's customers do not generally exercise control over the manner in which ... Block prepares the tax filings.... [Indeed, Block's] customers retain enough control over ... Block to support a finding of an agency relationship.” Id.
Similar to Green, if this court acknowledges that the attorney-client relationship is a per se fiduciary relationship, I would conclude that the facts in this case involving a tax preparer, who is familiar with a person's financial condition, are not so different as to warrant summary judgment, effectively concluding that a jury could never find on the facts of the present case that a fiduciary relationship existed.
In addition, in Watts v. Jackson Hewitt Tax Service, Inc., 579 F.Supp.2d 334, 352 (E.D.N.Y.2008), the United States District Court for the Eastern District of New York held, in a case involving allegations of deceptive pricing practices, that the pleadings were sufficient for the court to conclude that the defendants may have had a duty to disclose more information, and their failure to fulfill this duty may constitute actionable fraudulent omission. The defendants had argued that, as a tax preparer, they did not owe a fiduciary duty to the plaintiffs. Id. The court stated that such a duty can arise out of any of three situations: namely, “(1) where a party has made a partial or ambiguous statement as a party cannot give only half of the truth; (2) where a party has a fiduciary duty to another; or (3) where a party has superior knowledge that is not available to the other party and the party with superior knowledge knows that the other party is acting on the basis of the mistaken knowledge.” (Internal quotation marks omitted.) Id. The United States District Court further explained that “[the] [d]efendants deny that they, as tax preparers, owe a fiduciary duty to the plaintiffs. However, such a duty can also arise under the first and third situations. [The] [d]efendants are alleged to have made a partial and ambiguous representation of their minimum fees to customers. They had superior and exclusive knowledge of the actual charges applied to each customer's [t]ax [p]reparation [f]ee, especially regarding the seasonal multiplier fee. Without knowledge of the seasonal multiplier and hidden fees for financial products, customers can be expected to act on the misleading impressions conveyed by the minimum fee fliers. The pleadings are sufficient for the court to conclude that [the] defendants may have owed a duty to disclose more information, and their failure to fulfill this duty may constitute actionable fraudulent omission.” Id.
As the foregoing cases from other jurisdictions demonstrate, contrary to the representations in the majority opinion, other jurisdictions that have considered this issue have concluded that there may be sufficient evidence adduced to hold a tax preparer to a fiduciary responsibility in the absence of said tax preparer offering investment advice. On the basis of the consideration of our case law and these out-of-state cases, I will now analyze the facts of the present case in relationship to the relevant authorities.
The uncontested affidavits in the present case establish several relevant facts. First, for seventeen years, between the years 1989 and 2006, the plaintiff employed the defendants to handle all of his tax work and to formulate and file his tax returns. I note that the absence of a long-term relationship was one of the reasons that the court held that there was no fiduciary relationship in Peterson v. H & R Block Tax Services, Inc., 971 F.Supp. 1204, 1214 (N.D.Ill.1997), which is cited by the majority. I recognize the fact that the majority has cited cases which suggest that a long-term relationship, standing alone, cannot justify a finding of a fiduciary relationship. The length of the relationship, however, certainly can be a factor in any determination of a fiduciary relationship. Second, the plaintiff had trust and confidence in the defendants. We have often stated that “[a] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties....” (Internal quotation marks omitted.) Falls Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, supra, 281 Conn. at 108, 912 A.2d 1019. Third, the plaintiff had confidence in the defendants, and knew that, in tax matters, their knowledge, skill and expertise was superior to his own and he believed that the defendants were proceeding in his best interests. “[There is] a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other.... The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him.” (Internal quotation marks omitted.) Id.; see also Watts v. Jackson Hewitt Tax Service, Inc., supra, 579 F.Supp.2d at 352 (emphasizing importance of superior knowledge in establishing one element of fiduciary relationship). Finally, Walsh concluded that based on the length of the relationship, and nature and scope of the services rendered by the defendants, that the defendants had a fiduciary relationship with the plaintiff and a fiduciary duty and responsibility, as the plaintiff's tax advisors and tax preparers, to disclose to him any decision on their part to materially change his tax status for reporting Florida real estate investment income.
The trial court found that “[t]aken in a light most favorable to the plaintiff, the plaintiff has met his burden with respect to the requirements of the second element of the fraudulent concealment statute. The plaintiff attests in his affidavit that he relied on the defendants as tax experts with their superior knowledge and skill when compared to his own knowledge in tax matters. He also affirms that he trusted the defendants to prepare his taxes for him for seventeen years from 1989 to 2006. Walsh attests that, in his expert opinion, the defendants owed a fiduciary duty to the plaintiff, and he further states that a change in the plaintiff's tax status was a material fact that should have been disclosed. The plaintiff has submitted sufficient evidence to establish that the defendants had a fiduciary relationship with the plaintiff and their failure to disclose his changed status on the tax returns was a breach of their duty to disclose material facts to the plaintiff.” The trial court also found that the expert's opinion would have been helpful to the jury. The majority concludes that “the trial court's determination that the defendants owed the plaintiff a fiduciary duty was a conclusion of law not subject to deference on appeal.”
To the contrary, I would conclude that the trial court found enough predicate facts to establish that there was a genuine issue of material fact regarding whether a fiduciary relationship existed and that such an issue demonstrates that summary judgment was not proper in the present case.
It appears that the majority reaches its conclusion on the basis that the defendants did not offer investment advice to the plaintiff. It reasons that “[h]ad the plaintiff adduced evidence, for example, of a disparity in bargaining power, or that the defendants' tax advice veered into the investment realm—such that they recommended financial transactions to him or managed his investment funds—our view of the parties' relationship may well have been different. Under that alternative scenario, a client's special vulnerability would be more readily apparent.” I respectfully disagree. In my view, under the facts in this case, as established by the plaintiff's affidavits, whether there was a fiduciary relationship between the parties is a question of fact to be determined by the trier of fact, in light of the totality of the circumstances. The affidavits establish a prima facie showing of a fiduciary relationship pursuant to our case law.
The cases that I have cited herein, from both federal courts and our sister states, suggest that plaintiffs do not have to show that the tax preparer gave investment advice in order to establish a prima facie case to survive summary judgment. It is not the role of either the trial court or the Appellate Court to substitute its version of the facts for what is properly the role of the fact finder. See Bayer v. Showmotion, Inc., 292 Conn. 381, 405 n. 10, 973 A.2d 1229 (2009); see also Fleet Bank, N.A. v. Galluzzo, 33 Conn.App. 662, 666, 637 A.2d 803, cert. denied, 229 Conn. 910, 642 A.2d 1206 (1994). Once the predicate issue of material fact regarding the fiduciary relationship was established, in my view, it was unnecessary to consider the burden of proof, or lack thereof, related to the fraudulent concealment.
In my view, despite acknowledging that “a flexible approach determines the existence of a fiduciary duty,” the majority establishes a bright line rule to the effect that a tax preparer can never be a fiduciary, unless he also gives investment advice. I disagree with this approach because it dismisses a court's ability to consider the fiduciary status based upon the totality of the circumstances involved in each case. There would also seem to be a tension between the majority's bright line approach and our jurisprudence that requires “[r]ather than attempt to define a fiduciary relationship in precise detail and in such a manner to exclude new situations, we have instead chosen to leave the bars down for situations in which there is a justifiable trust confided on one side and a resulting ... influence on the other.” (Internal quotation marks omitted.) Dunham v. Dunham, supra, 204 Conn. at 320, 528 A.2d 1123.
Therefore, I respectfully dissent.