Does North Carolina recognize a claim for aiding and abetting breach of fiduciary duty? The North Carolina Court of Appeals shed a little bit of light on the question this week., but it wasn’t very illuminating.
The linchpin for this frequently made claim has been the twenty year old case of Blow v. Shaughnessy, 88 N.C. App. 484, 364 S.E.2d 444 (1988), in which the Court of Appeals recognized the tort. It held simply that "a cause of action on this theory has been recognized by federal courts in securities fraud cases based on violations of section 10(b) of the Securities Exchange Act of 1934."
But six years after Blow was decided, in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994), the United States Supreme Court held that there was no liability for aiding and abetting under the securities laws, thus eviscerating the underpinning of the Blow case.
Since then, the North Carolina Business Court has expressed doubt about the continuing vitality of claims for aiding and abetting breach of fiduciary duty. Judge Diaz noted the issue most recently in Regions Bank v. Regional Property Development Corp., 2008 NCBC 8 and in Battleground Veterinary Hospital, P.C. v. McGeough, 2007 NCBC 33; and Judge Tennille wrote on the subject in Sompo Japan Insurance Inc. v. Deloitte & Touche, LLP, 2005 NCBC 2. In none of these cases, however, did the Business Court dismiss the claim on the basis that it is not recognized in North Carolina.
This week, the Court of Appeals decided the case of Hinson v. Jarvis, in which it made a passing reference to Blow which might be interpreted as giving some life to that case. In a footnote, the Court stated:
In addition to the cases discussed in this section, plaintiffs also rely on Blow v. Shaughnessy, 88 N.C. App. 484, 364 S.E.2d 444 (1988). That case, however, involved the imposition of liability on a defendant that encouraged a third party to breach his fiduciary responsibility — a securities law violation — owed to the plaintiff. Id. at 489, 364 S.E.2d at 447. This case, however, does not involve any fiduciary relationship between Mr. Jarvis and plaintiffs. We therefore find Blow distinguishable from the instant case.
That’s not a ringing endorsement of Blow, but it’s not a rejection either. What’s certainly true, however, is that the Hinson case undercuts the vitality of a claim for aiding and abetting in the tort context. The Court of Appeals refused to adopt Section 876 of the Restatement (Second) of Torts, which is the Restatement’s version of aiding and abetting liability, as a basis for holding the passenger in an automobile liable for her husband’s improper operation of the vehicle.
If that was all the Court of Appeals had said, the path would have been more clearly lit to say that we are headed towards the elimination of claims for aiding and abetting a breach of fiduciary duty (or maybe any tort). But there’s that footnote . . . .