An Alternative Take on Damages in Breach of Fiduciary Duty
Airey v Remmele 2012 NY Slip Op 22299 Decided on October 15, 2012 Supreme Court, Erie County NeMoyer, J. is a case we started to read, and then had to go back to the beginning to sort out. Who would have thought that this story would have happened in the Buffalo area?
While this is not a legal malpractice case, it does have implications for the value of damages in a breach of fiduciary duty claim. "The complaint states discrete causes of action for breach of contract, breach of fiduciary duty, negligence, and fraud or misrepresentation (or, more accurately, fraudulent omission of a material fact). The gravamen of each cause of action is that Remmele held herself out to the public and to plaintiff and plaintiff's then wife as a "marital counselor"; that plaintiff and his then wife engaged defendant to provide "marriage counseling" to the couple in an attempt to "reconcile" their "differences"; that as part of such counseling, plaintiff disclosed to defendant intimate details with respect to his "marriage and his relationship"; that plaintiff paid defendant for such counseling; but that plaintiff eventually learned that defendant had a sexual relationship or extramarital affair with plaintiff's wife, leading to the commencement of divorce proceedings between plaintiff and his wife. "
"The Court has no intention here to delineate all of the categories or species of damages that might be recovered by plaintiff upon proof of a breach of a contractual or tort duty allegedly assumed by defendants. The Court would note, however, that it probably would countenance an effort by plaintiff to recover his alleged economic or "out-of-pocket" damages in the form of the loss of the benefit of his bargain with defendants. In other words, this Court would have no problem with plaintiff's recouping any money he had paid [FN2] to defendants specifically for marital counseling if, as alleged, Remmele did not in fact use her best efforts to help the marriage but instead subverted it by embarking on a sexual relationship with plaintiff's wife. Quite simply, the idea that a self-professed counselor could accept and keep a fee earmarked for marriage or relationship counseling despite entering into a secret sexual relationship with one of the counseled parties is beyond this Court's acceptance.
Addressing defendants' challenges to the individual causes of action, the Court concludes that plaintiff has sufficiently alleged the existence of a contract whereby defendants would provide marital counseling to plaintiff and his then wife, and that plaintiff further has sufficiently alleged a breach of that contract and resultant damages. Plaintiff alleges that beginning in 2009 and continuing into 2011, plaintiff engaged the paid services of defendants for the purposes of providing marriage counseling. Although defendants have denied that, they have not done so conclusively, their documentary evidence notwithstanding. Although the e-mail exchange of November 2010 and the more formal written contract of January 2011 certainly tend to show that plaintiff was engaged as a "business coach," neither the exchanged e-mails nor the terse written contract on their face refute the allegation that defendant was already engaged in providing marriage counseling to the couple. Indeed, this Court notes that the November 29, 2010 e-mail from defendant to plaintiff's wife — which e-mail defendant herself describes as having formed the first consultation contract — afforded the couple an $800 "[c]ourtesy, current client discount" from defendants' "[r]egular [c]ost." That contractual term at least arguably buttresses plaintiff's assertion that there was a pre-existent counseling relationship and undermines defendant's contrary assertion. Similarly, and again, the January 28, 2011 meeting summary, which is relied upon by [*5]both parties, tends to show that defendant counseled the couple with regard to their personal or marital relationship as well as their relationship at work.
By the same token, and for similar reasons, the Court concludes that plaintiff has adequately pleaded the essential elements of cause of action for breach of fiduciary duty, professional negligence or malpractice, and fraudulent concealment. These causes of action present a somewhat closer question for the Court, however, given defendant's apparent lack of State licensing or other recognized professional credentials or certification as a psychologist, social worker, therapist, or the like. Nevertheless, it appears to the Court that defendant may have held herself out to the public as someone qualified to counsel individuals or couples in their relationships, including their marriages, and that indeed is plaintiff's explicit allegation. Thus, the Court concludes, plaintiff has sufficiently alleged the existence of a fiduciary duty [FN3] and other relationship of trust between himself and defendant, defendant's breach thereof,
defendant's exploitation of intimate information, and defendant's concealment of the arguably material fact that, while purporting to counsel the couple in their marriage, defendant was having a sexual affair with plaintiff's wife.[FN4] Further, plaintiff has sufficiently alleged that defendant provided negligent and careless counseling to plaintiff and did not possess the ordinary skill, knowledge, or ability of those holding themselves out to the public as marriage counselors.
Concerning plaintiff's demand for punitive damages, the fact is that punitive damages might well be recoverable upon proof of defendants' commission of fraud and possibly their breach of fiduciary duty and negligence as well (see Dupree, 87 AD3d at 978 [upholding punitive damages award against physician who assumed role as plaintiff's mental health therapist but who had sexual affair with her]). Any such award would be aimed at punishing the wrongdoer and deterring similar conduct by others (see Laurie Marie M. v Jeffrey T.M., 159 AD2d 52, 59 [2d Dept 1990], affd 77 NY2d 981 ; Peters v Newman, 115 AD2d 816, 817 [3d Dept 1985], appeal dismissed 67 NY2d 916 ; see also Le Mistral, Inc. v Columbia Broadcasting Sys., 61 AD2d 491, 494 [1st Dept 1978], appeal dismissed 46 NY2d 940  [citing 14 NY Jur, Damages, § 176 for proposition that "exemplary damages are [generally] recoverable in all actions ex delicto based upon tortious acts which involve ingredients of malice, fraud, oppression, insult, wanton or reckless disregard of the plaintiff's rights, or other circumstances of aggravation, as a punishment of the defendant and admonition to others"]; see generally Walker v Sheldon, 10 NY2d 401, 404-405 ). Thus, punitive damages may be awarded where the [*6]wrong complained of is "actuated by evil and reprehensible motives" (Walker, 10 NY2d at 404), is "intentional and deliberate, and has the character of outrage frequently associated with crime" (Prozeralik v Capital Cities Communications, 82 NY2d 466, 479 , quoting Prosser and Keeton, Torts § 2, at 9 [5th ed 1984] [internal quotation marks omitted]). However, such punitive damages may be awarded only in proportion to any actual injury inflicted by the defendant (see generally Correia v Suarez, 52 AD3d 641 [2d Dept 2008]).
Here, in the absence of an order dismissing the tort causes of action, there is no basis for ruling out any claim for punitive damages that might be premised thereon, certainly not at the threshold. Plaintiff is entitled to explore through discovery defendant's alleged conduct, both with respect to this couple and in general.
Accordingly, the motion of defendants to dismiss the complaint is DENIED, although it is DETERMINED as a matter of law that plaintiff may not recover damages, including for emotional distress, on account of the sexual relationship between defendant and plaintiff's then wife or the consequent damage to or destruction of the marriage. "