In Patterson v. McMickle, 191 S.W. 3d 819 (C.A. Tex 2006), the administrator of the Estate of Daniel Myracle sued the attorney and his structured settlement broker for negligence, breach of fiduciary duty, fraud, and violations of the Texas Deceptive Trade Practices Act. The administrator alleged that the attorney and broker obtained two annuities for Daniel Myracle, the second of which did not have a guaranteed refund of the premium and was to be deferred for 15 years. However, Daniel died a year after the settlement and 14 years before the second annuity was to begin monthly payments. Because the annuity did not have a guaranteed return of premium, the estate was not entitled to any payment or refund.
In granting McMickle’s motion for summary judgment, the trial court found that McMickle owed no duty to Sharnae Myracle, Daniel’s mother, who had been displaced as Daniel’s personal representative before the settlement. McMickle argued that, at most, he owed duties to Daniel’s attorney and personal representative. The Court of Appeals affirmed. Although the Court of Appeals did not have to decide whether McMickle owed a duty to Daniel’s attorney and personal representative, it seems clear that such a direct relationship would be sufficient to survive a summary judgment motion.
Contrast with Westrope v. Ringler Associates, 2015 WL 672243 (D. Ore. 2015), in which the court found that plaintiffs stated negligence and statutory claims against brokers hired by the defense attorneys based on the fact that annuities obtained by the brokers were intended to benefit the plaintiffs, who were therefore third party beneficiaries. The annuities were issued by Executive Life Insurance Company of New York, which ultimately became insolvent, resulting in a shortfall to plaintiffs in their annuity payments. Thus, even though the court found no fiduciary duty and no direct relationship between the defense brokers and plaintiffs, plaintiffs’ claims could still proceed. But see Moore v. EPS Settlements Group, 14-cv-080521 (S.D. Fl. 2014), which found no duty owed by the defense brokers to plaintiffs.
While the Patterson court focused on McMickle’s relationship with Daniel’s mother, finding that since there was a conflict between Daniel and his mother, therefore McMickle could not also have a duty to the mother, the Westrope court ignored the fact that the defense brokers were adverse to the plaintiffs and therefore could not also be representing them.
The lines between plaintiff and defense broker have become increasingly blurred, but it’s safe to say that those brokers who may be deemed to have plaintiffs as clients will likely be held to have a fiduciary duty to those plaintiffs; but even if there is no client relationship, or even an adverse relationship, courts may find a basis for liability based on a third-party beneficiary theory.
Stephen R. Harris is a member with Cozen O'Connor in Philadelphia, Pennsylvania.
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