South Carolina Intellectual Property Litigation

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Ordinary Care, Reasonable Care and The Fiduciary Duty – The First in a Series of “Spectra” Posts

Posted in Confidential Information, ERISA, Fiduciary Duty, General, Jury Issues / Trial, Non-Disclosure Agreements, Policy

We like to put things in order, right? It helps us understand the concepts and the analytical process further identifies distinguishing characteristics. In the legal world, however, complex concepts are more appropriately placed on a spectrum, rather than a list. provides a non-physics definition of “spectrum” as follows: “a broad range of varied but related ideas or objects, the individual features of which tend to overlap so as to form a continuous series or sequence, e.g., the spectrum of political beliefs.”

Key words: range, related and overlap. Today, we look at the following three related legal duties, each of which overlap, but are also unique and distinct:

1. Ordinary Care, e.g., as owed by a bank to its depositors and customers in the handling of their checking transactions (likely a result of privity of contract and statute);

2. Reasonable Care, most commonly found in auto accident cases (arises the moment you turn the key and engage a pedal), medical malpractice, and other so-called “negligence” cases;

3. The Fiduciary Duty, e.g., as owed by a Trustee to a beneficiary, a lawyer in a lawyer-client relationship, or a by a 401(k) plan fiduciary to the participating employees (limited generally to special relationships, but also created by statute, as in case of ERISA and 401(k) plans).

To begin to illustrate how these three duties are related and can overlap, we introduce a fourth: The duty of confidentiality is generally included within The Fiduciary Duty. This duty can also arise in conjunction with all three duties identified above by: (a) special relationship; (b) contract, for example as a non-disclosure agreement (NDA); (c) court order; or (d) statute, as in duty to protect personal information such as social security numbers, etc., to the extent that hackers do not already have all that.

How Do These Three Legal Duties Differ?

Ordinary Care is characterized by what is customary in any given context. In other words, are you doing what others like you in your field are also presently doing? For example, just because average speed on a Detroit-to-Novi freeway is 96 mph, making such conduct “customary,” that speed is still likely a violation of applicable law. As such, the person driving 96 mph causing an accident violates her duty of Reasonable Care. Recall from the link above, Reasonable Care is defined as, “the level of care that someone of ordinary prudence would have exercised under the same circumstances.” Note that establishing evidence of the Ordinary Care standard will likely require “expert” testimony. For example (back to banking), what if the expert witness testifies that Bank of America is doing something to protect your accounts that Wells Fargo is not doing? Would Chase or JP Morgan then be held to the Ordinary Care standard set by BoA, or could that be an issue for the jury?

So how do we determine what is prudent (Reasonable Care) vs. what is customary (Ordinary Care)?

Assume a “hypothetical utopian” community has 100% of its citizens acting with the utmost level of care, liability under a Reasonable Care standard is still evaluated by what would a reasonable person have done, not as compared to the hyper-vigilant utopians. In contrast, if a “hypothetical” community of reckless people is used to establish Ordinary Care, then the level of care owed under an Ordinary Care could be far less than that of Reasonable Care.

So how does The Fiduciary Duty differ from Reasonable Care and Ordinary Care?

The Fiduciary Duty, arguably, subsumes the Duty of Reasonable care and adds to it the Duty of Loyalty. One held to a Fiduciary Duty standard is required to act with respect to the affairs of the client-beneficiary in the same manner he or she would act with respect to their own affairs. Avoidance of conflicts of interests is implicit in The Fiduciary Duty.

So does this mean that the person owing The Fiduciary Duty, if a reckless person in their own right, then only owes the client the same recklessness for which they would apply to their own affairs? Certainly not. In fact, one of the primary differences between a Reasonable Care Duty and The Fiduciary Duty is that The Fiduciary Duty is owed to a specified individual or group of people, whereas, the duty of Reasonable Care is generally owed to all persons in any particular context, e.g., all persons driving or riding on the road in which you drive your vehicle.

Can the conduct of the client or beneficiary of the duty owed negate or reduce the duty owed?

Yes. For example, in banking law, frequently referred to as the UCC, the bank owes a duty of Ordinary Care unless the customer has failed, ironically, to exercise Reasonable Care by inspecting returned checks for forgeries, or for forgeries by the “same wrongdoer.” Similarly, in a common law negligence case where the duty of Reasonable Care is owed, if the plaintiff is negligent or “comparatively negligent,” then he or she may also lose the benefit of the legal duty owed as the cause of the injury is attributed to their own actions.

The Fiduciary Duty necessarily implies that the party owing this duty must act in the best interests of the beneficiary (loyalty), and no such legal concept like comparative fault can be used to mitigate or eliminate The Fiduciary Duty owed. This is true of lawyers and their clients, of a Trustee for children who have lost their parents and have trust funds to care for them left behind, and also recently covered when a party takes on the “fiduciary” responsibility to ensure that a company’s 401(k) plan is managed in a way that is in the best interests of the employees and not to provide for unnecessary fees or unnecessarily excessive management charges over and above what would have been customarily available.

What to do if you think you have a claim for breach of a legal duty owed?

If you or someone you know has a claim or thinks you might have a claim for breach of Fiduciary Duty, contact me to discuss it and learn what options may be available to you. While past results are no guaranty of future performance, our firm has the experience and ability to handle these types of cases and take them to trial, if necessary.
[Future “spectra” series posts will include: (1) standard of review for appellate matters including / ranging from any evidence, to abuse of discretion, to de novo review; and (2) trademarks including from fanciful, to arbitrary, to suggestive, to descriptive, to generic.]

Fish Tank Trade Secrets

Posted in Confidential Information, Jury Issues / Trial, Non-Disclosure Agreements, Policy, Trade Secrets

Sammy, Nuk or Tiger

I. Background Fish Tank Facts:

In September of 2012, our family had plans to host several families at our house to watch the Clemson v. Florida State football game being played in Tallahassee. My wife loves people and entertaining. To create a fun, festive, and pleasant environment for the game, she and the children, while running errands that Saturday, decided to purchase a small fishbowl. Included in this “small” fishbowl were three Orandas. An Oranda, as shown above, is a bright “orange” and white fish from the goldfish family, pretty hearty but they do require a decent amount of space, oxygen, etc. (more than provided in a 2.5 gallon fishbowl). Continue reading “Fish Tank Trade Secrets”

Are Employee Non-Competes Good Policy? Many ways to Skin a Cat, Trade Secrets, Non-Solicitations, Confidential Information / NDA

Posted in Confidential Information, Injunctions, Jury Issues / Trial, Non-Disclosure Agreements, Policy, Trade Secrets

At least two states, Michigan this year and Massachusetts in 2014, have proposed legislation to curtail / eliminate the rights of parties (i.e., employers) with respect to non-compete agreements. The Michigan proposal would make “void” any non-compete agreements not related to the sale of a business. California has banned these agreements for years and agreements in restraint of trade have been banned going back to 1414 in Dyer’s case, so presumably any constitutional challenges to such a ban have been vetted and failed, or else it has just been chalked up to being … California. But the California ban is not exclusive to employees residing in California, as parties and their lawyers often seek the application of Conflicts of Laws to have the law of one state applied in another state. In addressing the potential constitutional issue, courts have held that the employee’s right to be freely employed trumps the right to contract.

In contrast, in Wisconsin, there is a pending bill that would change that state’s history of restricted enforcement of restrictive covenants. So why all the attention to noncompete agreements in the employment context? Will these bills pass or are they just one of the many events of posturing or pandering that can be expected in all legislative branches? To highlight that this is an issue that makes a difference, we refer you an older post by Jonathan Pollard where the lawyers fought over whether or not Florida (favorable to noncompetes) or Minnesota (noncompete likely unenforceable) law would apply.

Recently, bloggers, including Christopher McKinney and Eric Meyer, have addressed this subject. Apparently the state legislatures believe there is sufficient evidence of employers being heavy handed (i.e., Jimmy Johns) in the application of non-competes, Continue reading “Are Employee Non-Competes Good Policy? Many ways to Skin a Cat, Trade Secrets, Non-Solicitations, Confidential Information / NDA”