advisory trust


7th Circuit finds investment firm shielded from fiduciary duty claim by power of attorney

  • August 18, 2022

An opinion from a state appellate court that was issued while the Southern Indiana District Court was considering a motion to dismiss in a fiduciary duty dispute did not change the federal judge’s decision to grant the motion, but it did alter the reasoning on which the 7th Circuit Court of Appeals affirmed.

Joseph P. Allen IV, a resident of Crawfordsville, sued Maryland-based Brown Advisory LLC and Brown Investment Advisory & Trust Co. in 2019, asserting claims under Maryland law for breach of contract and breach of fiduciary duty. The complaint arose from Allen’s belief that Elizabeth Key, his daughter who had power of attorney over his finances, had withdrawn money for her personal use and incurred tax penalties, all of which depleted the value of his IRA accounts from $2.3 million to less than $600,000 .

Also, Allen alleged his daughter and son sold two of his real properties and did not fully credit the proceeds to his Brown Advisory accounts.

Brown Advisory moved to dismiss for failure to state a claim. The investment firm argued it could not be held liable for breach of contract because it acted at the best of Allen’s daughter, who had power of attorney. In addition, the firm pointed out that Maryland does not recognize a claim for breach of fiduciary duty as an independent cause of action arising out of a contractual relationship.

Before Senior Judge Robert Miller ruled, the Maryland Court of Appeals, which is the state’s highest court, issued a ruling in Plank v. Cherneski231 A.3d 436 (Md. 2020), holding that a breach of fiduciary duty can be a standalone cause of action.

Miller dismissed the case, agreeing the daughter’s power of attorney shielded Brown Advisory from liability. On the fiduciary duty claim, the judge did not address

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