CACI 4102 Duty of Undivided Loyalty—Essential Factual Elements
California Civil Jury Instructions CACI
4102 Duty of Undivided Loyalty—Essential Factual Elements
[Name of plaintiff] claims that [he/she/nonbinary pronoun/it] was harmed by [name of defendant]’s breach of the fiduciary duty of loyalty. [A/An] [agent/stockbroker/real estate agent/real estate broker/corporate officer/partner/[insert other fiduciary relationship]] owes [his/her/nonbinary pronoun/its] [principal/client/corporation/partner/[insert other fiduciary relationship]] undivided loyalty. To establish this claim, [name of plaintiff] must prove all of the following:
1.That [name of defendant] was [name of plaintiff]’s [agent/stockbroker/real estate agent/real estate broker/corporate officer/partner/[insert other fiduciary relationship]];
2.That [name of defendant] [insert one of the following:]
[knowingly acted against [name of plaintiff]’s interests in connection with [insert description of transaction, e.g., “purchasing a residential property”];]
[acted on behalf of a party whose interests were adverse to [name of plaintiff] in connection with [insert description of transaction, e.g., “purchasing a residential property”];]
3.That [name of plaintiff] did not give informed consent to [name of defendant]’s conduct;
4.That [name of plaintiff] was harmed; and
5.That [name of defendant]’s conduct was a substantial factor in causing [name of plaintiff]’s harm.
New June 2006; Revised June 2010
Directions for Use
The instructions in this series are intended for lawsuits brought by or on behalf of the principal. They also assume that the plaintiff is bringing a legal cause of action, not an action in equity. (See Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819 [251 Cal.Rptr. 530].)
For a breach of fiduciary duty instruction in cases involving attorney defendants, see CACI No. 4106, Breach of Fiduciary Duty by Attorney—Essential Factual Elements.
While the advisory committee has not included “employee” as an option for identifying the defendant agent in element 1, there may be cases in which certain employees qualify as “agents,” thereby subjecting them to liability for breach of fiduciary duty.
If the parties dispute whether the plaintiff gave informed consent (element 3), the court may wish to add explanatory language or a separate instruction on what constitutes informed consent. (See, e.g., Rest. 3d Agency, § 8.06(1).)
Sources and Authority
•Restatement Third of Agency, section 8.01, states: “An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship.”
•Restatement Third of Agency, section 8.02, states: “An agent has a duty not to acquire a material benefit from a third party in connection with transactions conducted or other actions taken on behalf of the principal or otherwise through the agent’s use of the agent’s position.”
•Restatement Third of Agency, section 8.03, states: “An agent has a duty not to deal with the principal as or on behalf of an adverse party in a transaction connected with the agency relationship.”
•Restatement Third of Agency, section 8.04, states: “Throughout the duration of an agency relationship, an agent has a duty to refrain from competing with the principal and from taking action on behalf of or otherwise assisting the principal’s competitors. During that time, an agent may take action, not otherwise wrongful, to prepare for competition following termination of the agency relationship.”
•Restatement Third of Agency, section 8.05, states:
An agent has a duty
(1)not to use property of the principal for the agent’s own purposes or those of a third party; and
(2)not to use or communicate confidential information of the principal for the agent’s own purposes or those of a third party.
•Restatement Third of Agency, section 8.06, states:
(1)Conduct by an agent that would otherwise constitute a breach of duty as stated in §§ 8.01, 8.02, 8.03, 8.04, and 8.05 does not constitute a breach of duty if the principal consents to the conduct, provided that
(a)in obtaining the principal’s consent, the agent
(i)acts in good faith,
(ii)discloses all material facts that the agent knows, has reason to know, or should know would reasonably affect the principal’s judgment unless the principal has manifested that such facts are already known by the principal or that the principal does not wish to know them, and
(iii)otherwise deals fairly with the principal; and
(b)the principal’s consent concerns either a specific act or transaction, or acts or transactions of a specified type that could reasonably be expected to occur in the ordinary course of the agency relationship.
(2)An agent who acts for more than one principal in a transaction between or among them has a duty
(a)to deal in good faith with each principal,
(b)to disclose to each principal
(i)the fact that the agent acts for the other principal or principals, and
(ii)all other facts that the agent knows, has reason to know, or should know would reasonably affect the principal’s judgment unless the principal has manifested that such facts are already known by the principal or that the principal does not wish to know them, and
(c)otherwise to deal fairly with each principal.
•“Every agent owes his principal the duty of undivided loyalty. During the course of his agency, he may not undertake or participate in activities adverse to the interests of his principal. In the absence of an agreement to the contrary, an agent is free to engage in competition with his principal after termination of his employment but he may plan and develop his competitive enterprise during the course of his agency only where the particular activity engaged in is not against the best interests of his principal.” (Sequoia Vacuum Systems v. Stransky (1964) 229 Cal.App.2d 281, 287 [40 Cal.Rptr. 203].)
•“The determination of the particular factual circumstances and the application of the ethical standards of fairness and good faith required of a fiduciary in a given situation are for the trier of facts.” (Sequoia Vacuum Systems, supra, 229 Cal.App.2d at p. 288, internal citation omitted.)
•“[T]he protection of the principal’s interest requires a full disclosure of acts undertaken in preparation of entering into competition.” (Sequoia Vacuum Systems, supra, 229 Cal.App.2d at p. 287, internal citation omitted.)
•“It is settled that a director or officer of a corporation may not enter into a competing enterprise which cripples or injures the business of the corporation of which he is an officer or director. An officer or director may not seize for himself, to the detriment of his company, business opportunities in the company’s line of activities which his company has an interest and prior claim to obtain. In the event that he does seize such opportunities in violation of his fiduciary duty, the corporation may claim for itself all benefits so obtained.” (Xum Speegle, Inc. v. Fields (1963) 216 Cal.App.2d 546, 554 [31 Cal.Rptr. 104], internal citations omitted.)
•“A fiduciary relationship is ‘ “any relation existing between parties to a transaction wherein one of the parties is … duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter’s knowledge or consent.” ’ ” (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29 [130 Cal.Rptr.2d 860].)
•“Inherent in each of these relationships is the duty of undivided loyalty the fiduciary owes to its beneficiary, imposing on the fiduciary obligations far more stringent than those required of ordinary contractors. As Justice Cardozo observed, ‘Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive is then the standard of behavior.’ ” (Wolf, supra, 107 Cal.App.4th at p. 30, internal citation omitted.)