Ford v. Brooks: Breach of Fiduciary Duty Lawsuit Reinstated

An Ohio appellate court has reinstated a lawsuit which alleged that a real estate professional had breached her fiduciary duty by sharing confidential information with another client and this information helped that client successfully purchase the property.

Jeff and Lisa Ford (“Fords”) sought to purchase a home.  On July 16, 2010, the Fords visited a property that they liked and even began measuring the property for furniture.   Donna Brooks (“Salesperson”) of HER Real Living (“Brokerage”) assisted the Fords in locating the property and eventually writing an offer for the property.  The Salesperson’s husband was also a real estate professional who helped the Fords in their attempt to purchase the property, and he allegedly told the Fords they were getting a “steal”.

On July 21st, the Fords learned that the Salesperson had assisted another buyer make an offer for the same property.  The Fords submitted their own offer on July 22nd.  The Salesperson’s husband told the Fords that he had told a friend about their interest in the property, and the friend had immediately made an offer for the property through the Salesperson.  The seller accepted the other offer.

The Fords filed a lawsuit alleging that the Salesperson had breached her fiduciary duty to them by sharing their confidential information with a third party.  They also claimed that the Salesperson had failed to vigorously pursue their offer for the property but instead helped the other party purchase the property.  Additionally, they also made allegations against the Brokerage for failing to properly train the Salesperson.  The trial court dismissed the entire lawsuit, ruling that the Fords had failed to allege cognizable claims against the Salesperson and the Brokerage.  The Fords appealed.

The Court of Appeals of Ohio, Tenth District, partially reversed the trial court and returned some of the allegations to the trial court.  The court evaluated the breach of fiduciary duty allegations.  In order to show a breach of fiduciary duty, the party must show that a fiduciary relationship existed, a fiduciary duty was breached, and this caused harm to the other party.  Real estate professionals in Ohio owe their clients a fiduciary duty.

The court found that the Fords had adequately alleged a breach of fiduciary duty by the Salesperson.  First, the Fords alleged that the Salesperson had shared confidential information with a third party, which could constitute a breach of a fiduciary duty.  Second, the court found that it is possible that the act of writing two offers for the same property may constitute a breach of fiduciary duty.  Ohio law allows a real estate professional to represent multiple parties looking at the same property, but it isn’t clear whether this also allowed a licensee to write multiple offers for the same property.  Thus, the court returned these allegations to the trial court for further consideration.

Next, the court considered the allegations against the Brokerage for negligent hiring and supervision of the Salesperson.  To make this claim, a party must show an employment relationship, incompetence by the employee, the employer’s constructive knowledge of the incompetence, injury caused by the employee’s incompetence, and negligence in the hiring or supervising of the employee.  In this case, the court found that the Fords had failed to allege that the Brokerage had any knowledge of the Salesperson’s supposed incompetence, and so the court affirmed the dismissal of these allegations.

Finally, the court examined the Fords’ fraud allegations.  Fraud requires a party to show an intentional material misrepresentation that the other party justifiable relied upon to its detriment.  The Fords argued that the Salesperson’s failure to disclose “acts, omissions and/or failures to disclose material facts” constituted fraud.  The court found that the Fords had not alleged “justifiable reliance”, as the Fords had acknowledged that they knew about the second offer before submitting their offer.  Thus, the court affirmed the dismissal of these allegations but remanded to case to the trial court for further consideration.

Ford v. Brooks, No. 11AP–664, 2012 WL 760741 (Ohio Ct. App. Mar. 8, 2012).  [This is a citation to a Westlaw document.  Westlaw is a subscription, online legal research service.  If an official reporter citation should become available for this case, the citation will be updated to reflect this information.]