Does Illinois recognize a cause of action for tortious inducement of breach of fiduciary duty? The answer is yes. Our law firm recently defended a client accused of tortious inducement of breach of fiduciary duty in a lawsuit filed against it in Cook County Circuit Court. The case was settled on favorable terms to our client before trial.
In Illinois, to state such a claim for tortious inducement of breach of fiduciary duty, the plaintiff must allege facts supporting each of three elements: (1) that the defendant colluded with a fiduciary in committing a breach of duty; (2) that the defendant induced or knowingly participated in such breach; and (3) that the defendant knowingly accepted the benefits resulting from that breach. Regnery v. Meyers, 287 Ill. App. 3d 354, 364 (1st Dist. 1997) (citing Village of Wheeling v. Savros, 89 Ill. App. 3d 450, 454-55 (1st Dist. 1980)); see also, Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 508-09 (7th Cir. 2007) (citing Regnery) (affirming dismissal of claim).
First and foremost, there can be no claim for tortious inducement of breach of fiduciary duty where, as here, a plaintiff cannot allege and prove that a person or entity did breach a fiduciary duty to the plaintiff. One example would be an employee or officer of a company that breached a fiduciary duty to an employer. Lawlor v. North American Corp. of Illinois, 2012 IL 112530 at ¶¶ 69-74 (affirming decision finding that employee had not steered any business away from employer, despite unproven attempts to do so).
There also needs to be evidence that the defendant “colluded with” a person that owed a fiduciary duty to the plaintiff. Center for Pain Control v. McCall, 2012 IL App (2d) 110649-U at ¶¶ 39-40 (dismissing conspiracy claim for failure to allege the commission of any act by the defendant in furtherance of another party’s unlawful act of diverting plaintiff’s money, and holding that a “complaint must set forth more than the conclusion that there was a conspiracy; it must allege specific facts from which the existence of a conspiracy may be properly inferred.”). Plaintiff must do more than simply offer up generalized, conclusory allegations of a “conspiracy” or “collusion.” Plaintiff needs facts. Ottowa Sav. Bank v. JDI Loans, Inc., 374 Ill. App. 3d 394, 403 (2nd Dist. 2007) (affirming dismissal of tortious inducement of breach of fiduciary duty claim where plaintiff “made no specific allegations of collusion”).
As to the second element – the defendant induced or knowingly participated in such breach of fiduciary duty – the plaintiff needs to be ready to show evidence that the defendant induced or knowingly participated in the fiduciary’s breach of his or her fiduciary duty. For example, plaintiff should try to show that the defendant was the party who initiated or created the plan for the fiduciary to divert business from an employer to the defendant. Ottowa Sav. Bank, 374 Ill. App. 3d at 403 (affirming dismissal of tortious inducement of breach of fiduciary duty claim where plaintiff “made no specific allegations . . . that defendants did anything to induce CLC to breach its fiduciary duty to Ottowa . . . . Nor were there any specific allegations that any breach by CLC was caused by the defendants’ conduct.”). The court in Regnery court found that the defendant had “initiated” the idea that led to the breach of fiduciary duty. Regnery, 287 Ill. App. 3d at 364.
From a defendant’s standpoint, if there is no evidence that the defendant had any knowledge of the fiduciary’s obligations to an employer or other plaintiff, that will asssist the defense. See Ottowa Sav. Bank, 374 Ill. App. 3d at 403 (affirming dismissal of tortious inducement of breach of fiduciary duty claim where plaintiff “did not plead that defendant . . . knew the content, terms, or conditions of Plaintiff’s contract or relationship with CLC[.]”) If there is no evidence that the defendant “knowingly participated in all steps of the transaction”, that will also help the defense. See Regnery, 287 Ill. App. 3d at 364.
Lastly, plaintiff also has to allege and prove that the defendant knowingly accepted the benefits resulting from the person’s breach of fiduciary duty. For example, if the breach resulted in the defendant obtaining a new client that was wrongfully diverted from the plaintiff, that is relevant. But speculative allegations that a client might leave and go with the defendant’s company is probably not enough. See Verb v. Motorola, Inc., 284 Ill. App. 3d 460, 472 (1st Dist. 1996) (affirming dismissal of complaint containing allegations based upon theoretical possibilities of injury or damages that amounted to “conjecture and speculation”); Jamieson v. Amer. Nat. Safe Deposit Co., 133 Ill. App. 2d 647, 651 (1st Dist. 1971) (affirming dismissal of complaint against defendants and holding that “[w]hile we agree that inferences may be drawn from facts well pleaded, those inferences must be reasonable inferences and not mere conjecture and speculation”). Also, Illinois law is clear that employees (whether they are fiduciaries or not of an employer) may plan, form and outfit a competing corporation so long as they do not commence competition while still working for an employer. Cooper Linse Hallman Capital Management, Inc. v. Hallman, 368 Ill. App. 3d 353, 357 (1st Dist. 2006).
To talk about your breach of fiduciary duty case, the attorneys at DeBlasio & Gower LLC can be reached at (630) 560-1123 or via our website at http://dd-lawfirm.com/contact.php.
DISCLAIMER: This blog post is not legal advice and should not be relied on by anyone as legal advice in their particular situation. Furthermore, while DeBlasio & Gower LLC welcomes communications via its website, please be aware that communicating any information to DeBlasio & Gower LLC or any of its attorneys through its web site or via any other method without a formal engagement with the Firm does not constitute or create an attorney-client relationship between you (or any other users, senders or recipients) and DeBlasio & Gower LLC or any of its attorneys. For your protection, please do not send us confidential information until you have spoken with one of our lawyers and received authorization to send that information to our Firm. Thank you.