In Pitts v. Rivas, Rivas brought claims against his accountants for negligence/malpractice, fraud, breach of fiduciary duty, and breach of contract, based on alleged errors in financial statements that harmed his business. 709 S.W.3d 517 (Tex. 2025). The central legal issue involved the “anti-fracturing rule” developed by Texas courts, which prevents plaintiffs from recharacterizing professional negligence or malpractice claims as other causes of action (such as fraud or breach of fiduciary duty) to obtain litigation advantages. The court held that this rule applies to accounting malpractice cases. The Court stated:

Importantly, the anti-fracturing rule does not categorically bar a client from pursuing multiple causes of action against a professional, including claims for fraud or breach of fiduciary duty. Instead, the rule prohibits plaintiffs from attaching these labels, and others like them, to their allegations when the gravamen of the allegations is that the defendant failed to exercise the requisite degree of care or skill in the provision of professional services. If additional facts supporting additional claims are supported by the allegations and evidence, then the gravamen of the claim may extend beyond a claim for professional negligence, and the plaintiff may rightly maintain such a claim.

Id. The court determined that Rivas’s fraud claim was barred by the anti-fracturing rule because the gravamen of the allegations was negligent conduct (errors and failure to disclose), not intentional fraud.

The Court also held that, as a matter of law, no fiduciary duty existed between Rivas and his accountants under the undisputed facts and the terms of their engagement. The Court held that the accountant-client relationship, even when accompanied by personal trust or friendship, does not create a fiduciary duty unless a legally recognized fiduciary role is undertaken. The Court also addressed an argument that there was an informal fiduciary duty. The Court stated:

Unlike the attorney-client relationship, Texas courts have not held that an accountant-client relationship automatically gives rise to fiduciary duties under Texas law. Rivas does not argue otherwise, so we have no occasion to comment on that question. Rivas argues instead that an informal fiduciary relationship arose due to his close personal and business relationship with his accountants. We disagree.

We have held in the past that an informal fiduciary relationship can arise from personal relationships of special trust and confidence. Neither party has questioned that precedent, and we need not reconsider it here in order to reject Rivas’s argument that fiduciary duties arose under these facts.

Because a fiduciary relationship entails exceptionally high duties, this Court has repeatedly held that the law will not lightly impose fiduciary duties on the parties in a business relationship. Under our precedent, in order for there to be any possibility that parties to a business relationship owe each other informal fiduciary duties arising from a special relationship of trust and confidence, the special relationship must have existed “prior to, and apart from, the agreement made the basis of the suit.”

Further, a party’s subjective belief that his business associate is a fiduciary is always insufficient to create such a relationship. Were the law otherwise, an unusually trusting person could unilaterally impose fiduciary duties on business associates who do not expect to be subjected to such heightened duties.

Id. The Court also addressed the parties’ engagement letter and its impact on fiduciary duties:

These written contracts provide a strong, objective indication that these parties, however friendly and cordial their relationship may have been, contemplated that the law would treat them as having an arm’s-length business relationship—not a fiduciary relationship giving rise to special legal duties. To impose a fiduciary duty on a party who enters into a business transaction using an engagement letter that disclaims such duties and goes to great pains to hold the counter-party at arm’s length would be to give judges and juries—rather than the parties themselves—the authority to define the parameters of the parties’ legal relationship. The freedom of contract includes the freedom to define the nature and scope of a business relationship in a way that forecloses the imposition by courts of duties inconsistent with the parties’ agreement. The parties did so here, and Rivas’s evidence about their personal relationship cannot displace the choices reflected in the parties’ written agreement. Because there was no fiduciary relationship as a matter of law, summary judgment on the breach of fiduciary duty claim was proper.

Id. The Court reversed the lower court’s decision that allowed the fraud and breach of fiduciary duty claims to proceed, rendering judgment for the defendants (the accountants).

Justice Huddle had a concurring opinion to discuss her thoughts on informal fiduciary relationships:

In a nutshell, Rivas asserted that while the law does not technically regard the accountant-client relationship as fiduciary in nature, a fact-finder could nevertheless find that a fiduciary relationship and corresponding duties materialized because Rivas’s accountants, Brandon and Linda Pitts, were close personal friends in whom Rivas developed subjective feelings of trust and confidence. This sort of theory—that an “informal” fiduciary duty may arise based on a “special” or “confidential” business or social relationship that the law does not recognize as fiduciary in nature—is routinely advanced. It also routinely fails, as it has today, and for good reason.

The law imposes fiduciary duties when a person has undertaken a particular role that the law regards as fiduciary in nature (trustee, guardian, executor, corporate director, to name a few). The common thread among these roles is that they afford the fiduciary—the person in that role—a high degree of control over the legal, financial, and, in some cases, deeply personal affairs of another. It is this legally recognized power to direct another’s affairs that justifies the imposition of heightened legal duties, which serve to check the fiduciary’s potential abuse of his sometimes vast legal authority over another.

In my view, these weighty duties cannot sprout into existence absent evidence that one has undertaken a role that Texas law recognizes as fiduciary in nature. In other words, the concept our cases describe as an “informal” fiduciary relationship is a fiction we should no longer entertain. The Court should lay to rest the idea that fiduciary duties could arise absent a legally recognized fiduciary relationship merely because one party, with the benefit of hindsight, invokes the vague label “relationship of special trust and confidence” to describe his business, family, or personal relationship gone awry.

A fiduciary duty is an “onerous burden that requires a party to place the interest of the other party before his own.” Texas law recognizes many fiduciary roles, and I have no quarrel with imposing extraordinary duties on those who undertake them. In these contexts, heightened legal duties are justified because the fiduciary is empowered—if not to direct, at least to impact—the rights and affairs of others. But the same is not true in the context of so-called “informal” fiduciary relationships. The construct is flawed because the so-called “informal” fiduciary wields no legal authority to direct another’s affairs that could justify a corresponding heightened fiduciary duty. The Court’s refusal to find that an informal fiduciary duty arose in any case in almost fifty years, despite the theory’s frequent invocation, proves it is time to disavow the notion that “certain informal relationships may give rise to a fiduciary duty.”

The Court first alluded to the concept in Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509, 138 Tex. 565 (Tex. 1942). That case involved a self-dealing agent. The principal—agent relationship has long been recognized as fiduciary, so the Court had no need to expand the concept of fiduciary relationships to include “informal” relationships. Yet it did so, in exceedingly broad terms:

The term ‘fiduciary’ is derived from the civil law. It is impossible to give a definition of the term that is comprehensive enough to cover all cases. Generally speaking, it applies to any person who occupies a position of peculiar confidence towards another. It refers to integrity and fidelity. It contemplates fair dealing and good faith, rather than legal obligation, as the basis of the transaction. The term includes those informal relations which exist whenever one party trusts and relies upon another, as well as technical fiduciary relations.

Id.

The Court referenced this passage several times over the following two decades, recognizing that abuse of a confidential, informal relationship can justify imposing a constructive trust. However, the existence of such a relationship was not enough; rather, that remedy was limited to cases presenting “an abuse of confidence rendering the acquisition or retention of property by one person unconscionable against another.” In this context, a constructive trust is an appropriate equitable remedy for “an abuse of either a technical fiduciary relationship or of an informal relationship where one person trusts in and relies upon another, whether the relation is a moral, social, domestic, or merely personal one.” But this history does not justify imposing heightened legal duties on nonfiduciaries when a constructive trust is not sought. It does not follow that, because an abuse of an informal confidential relationship may justify a constructive trust in equity, abuse of that same relationship also entitles the alleged principal to recover damages at law.

…

Fiduciary relationships are defined by the fiduciary’s precise, objective role and accompanying legal authority to undertake actions on behalf of others—i.e., as a lawyer, trustee, guardian, etc.—without regard to the parties’ subjective feelings about the relationship. For example, the Court has held that a partnership remained fiducial despite testimony that the partners’ personal relationship itself had become “strained.” This logic is sound: linking fiduciary responsibilities to defined roles, rather than the vicissitudes of a personal relationship, ensures that fiduciaries can conduct themselves with full knowledge of their obligations—and the consequences of breach. If the strained personal relationship between partners who are fiduciaries is not enough to remove the relationship from the rule that partners owe each other fiducial duties, then a particularly warm and trusting friendship between nonfiduciaries cannot convert theirs into a fiduciary one.

Finally, there is the fact that the law should serve to increase rather than decrease predictability of the consequences of one’s conduct. A so-called “informal” fiduciary would have no reason to perceive that he might owe fiduciary obligations if he does not occupy a recognized fiduciary role or undertake such a fiduciary duty by contract. As long as Texas law recognizes the theory of the “informal” fiduciary relationship, he would only come to know that he bore heightened duties to his friend or acquaintance after the fact, following costly litigation. This Court rightly strives to give Texans far more predictable outcomes. When a standard is ill-defined, “vague and subject to so many different meanings in different circumstances,” creating an independent legal remedy for the standard’s breach is “simply bad jurisprudence.” Retaining such a vague standard is no better.

Id. (internal citations omitted).

Interesting Note: This case brings up many different legal and public-policy issues. This case arises out of a business relationship: accountant and client. The Court states that generally that relationship does not create a fiduciary relationship. Should it? Accountants perform many different types of work for their clients. Some of those tasks are potentially adverse to their clients and there is a need for independence, e.g., auditing. Other types of tasks may be similar to an attorney, e.g., estate and tax planning, etc. There should not be a bright-line rule that all accountants do not owe fiduciary duties: there should be some analysis of the type of work being performed and the clients’ expectations and the public policy involved.

Also, the Court holds that an engagement letter can define a relationship. Once again, the language in this case dealt with the ambiguous relationship between an accountant and a client, not a recognized fiduciary relationship. However, what if an attorney places language in his or her engagement letter disclaiming fiduciary duties; would that be enforceable? There should be some relationships that the law states must be fiduciary in nature. For example, there are exculpatory clauses in trust documents that protect trustees from liability for certain acts. Texas courts historically limited those clauses’ application because public policy held the trustees had to have some level of fiduciary duty and responsibility. The Texas Trust Code has a provision that expressly limits exculpatory clause’s application. So, there should be some base level of fiduciary duty for recognized fiduciary relationships.

Moreover, what if the parties have a preexisting fiduciary relationship, and then the fiduciary encourages the principal to sign an agreement that disclaims or limits fiduciary duties; should that agreement be enforceable? There is a presumption that a self-dealing agreement between a principal and a fiduciary is void, and the burden is on the fiduciary to prove the fairness of the agreement. See Adam v. Marcos, 620 S.W.3d 488 (Tex. App.—Houston March 18, 2021, pet. denied) (an attorney sued the client for breaching a partnership agreement, and the court of appeals held that the partnership agreement was presumptively invalid because the attorney owed fiduciary duties to the client when it was entered into). That is the law regarding release agreements between fiduciaries and principals (at least at this time…). So, once again, the law in the fiduciary area is usually not so bright lined, and the Court should not hold that disclaimers of fiduciary duties in agreements are always enforceable.

Finally, the concept of an informal fiduciary relationship has existed in Texas for a long time, for good reason, and that concept is supported by public policy. There is historical precedent from the Texas Supreme Court and every court of appeals holding that there can be informal fiduciary relationships that create fiduciary duties by one party to another. There is nothing unfair about that. The informal fiduciary should know when they have a special relationship with someone.

However, like many civil rights in Texas, the Texas Supreme Court has chipped away at the concept of informal fiduciary duties. In 2022, the Court issued an opinion discussing informal fiduciary relationships in In re Estate of Poe, 648 S.W.3d 277 (Tex. 2022). The Court held that an officer of a company could not also owe informal fiduciary duties to a shareholder:

Our Court has recognized that an “informal” fiduciary duty may arise from “a moral, social, domestic or purely personal relationship of trust and confidence.” We have described the types of confidential relationships that can give rise to a fiduciary duty imprecisely as those “in which influence has been acquired and abused, in which confidence has been reposed and betrayed.” But we have always made clear that “we do not create such a relationship lightly.” And we have never recognized an informal fiduciary duty within the context of the operation or management of a corporation, in which the corporation’s directors have clearly defined duties to exercise their business judgment for the sole benefit of the corporation…

We have never held, in Ritchie or elsewhere, that a corporation’s director, while owing formal fiduciary duties to the corporation requiring him to manage the corporation’s affairs for the sole benefit of the corporation, simultaneously owes an informal fiduciary duty to a shareholder to operate the corporation for that shareholder’s benefit or consistent with the shareholder’s best interest. On the contrary, Ritchie suggests those two duties are incompatible. We reaffirm this principle today and hold that a director cannot simultaneously owe these two potentially conflicting duties.

Id.

This holding was very new to Texas precedent and reverses previous precedent. In Ritchie v. Rupe, the Texas Supreme Court held: “Absent a contractual or other legal obligation, the officer or director has no duty to conduct the corporation’s business in a manner that suits an individual shareholder’s interests when those interests are not aligned with the interests of the corporation and the corporation’s shareholders collectively.” 443 S.W.3d 856, 868 (Tex. 2014) (emphasis added). The court stated in a footnote to the italicized language above that: “We have recognized that in some circumstances a special relationship of trust may arise between parties prior to and independent from the parties’ business relationship, which can give rise to informal fiduciary duties.” Id. at n. 58. This was based on the following language from Schlumberger Tech. Corp. v. Swanson, which stated:

An informal relationship may give rise to a fiduciary duty where one person trusts in and relies on another, whether the relation is a moral, social, domestic, or purely personal one. See Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962); Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256, 261 (Tex. 1951). But not every relationship involving a high degree of trust and confidence rises to the stature of a fiduciary relationship. See Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992). In order to give full force to contracts, we do not create such a relationship lightly. See Thigpen, 363 S.W.2d at 253. Accordingly, while a fiduciary or confidential relationship may arise from the circumstances of a particular case, to impose such a relationship in a business transaction, the relationship must exist prior to, and apart from, the agreement made the basis of the suit. See Transport Ins. Co. v. Faircloth, 898 S.W.2d 269, 280 (Tex. 1995).

959 S.W.2d 171, 176-77 (Tex. 1997). In Consolidated Gas & Equip. Co. v. Thompson, the Texas Supreme Court previously acknowledged that in some circumstances business associates can owe informal fiduciary duties:

The usual cases of fiduciary relationship have been attorney-and-client, partners, close family relationships such as that of parent-and-child, and joint adventurers, particularly when there is an agreement among the joint adventurers to share financial gains and losses. This Court in Gaines v. Hamman, supra, as well as in Thigpen v. Locke, supra, recognized that a fiduciary relationship could arise outside of those relationships listed above when, over a long period of time, the parties had worked together for the joint acquisition and development of property previous to the particular agreement sought to be enforced.

405 S.W.2d 333, 336-37 (Tex. 1966).

So, business associates should be able to hold multiple capacities, including an informal fiduciary duty, depending on the facts of the case. The Pitts opinion allows for an argument that two parties, who are in an informal fiduciary relationship and who later start a business relationship, may still owe fiduciary duties in that business relationship.

However, Justice Huddle, who authored the Poe decision (which makes sense), in her concurrence just does not agree with any informal fiduciary relationship outside of a constructive trust remedy. That does not make any legal sense. A constructive trust is a remedy, not a cause of action. That remedy has to be based on a cause of action, which usually includes a breach of fiduciary duty claim. If there is no informal fiduciary relationship, as Justice Huddle would advocate, then there is no cause of action to support any remedy, including damages or constructive trusts. It is also troubling that some jurists do not trust our legal system, trial judges and juries, and appellate courts to determine whether the facts of a particular case support an informal fiduciary relationship. There should not be bright-line rules in many fiduciary contexts: fiduciary relationships and duties arise from equity.

For example, a father steals gold coins from his son who has special needs, and the father then uses the coins to pay off a debt to a third party, where the third party had no knowledge that the coins were improperly acquired. A jury could determine that because of a long relationship of trust and reliance that there should be an informal fiduciary relationship between the father and disabled son. Justice Huddle’s constructive trust remedy would not be sufficient because the father no longer has the coins and the innocent third-party who obtained the coins would normally not be subject to a constructive trust claim. So, under Justice Huddle’s view of the law, the special needs son would just be out of luck. He cannot recover the coins and cannot sue his father for the value of the coins, i.e., damages. That does not seem to the author to be good public policy.

For example, Texas Jurisprudence states:

The legal maxim “where there is a right, there is a remedy” has an equivalent in equity jurisprudence in the maxim that equity will not suffer a right to be without a remedy, or as it is sometimes stated, equity will not suffer a wrong to be without a remedy. [A] court of equity will devise a remedy to meet the situation.

Tex. Jur. 3rd, Equity, § 21 (emphasis added) (citing Chandler v. Welborn, 156 Tex. 312, 294 S.W.2d 801 (1956); Miers v. Brouse, 153 Tex. 511, 271 S.W.2d 419 (1954)).

In the author’s simple example, which sadly happens frequently, the father should be liable for a breach of fiduciary duty in the context of an informal confidential relationship and have to pay damages (and maybe punitive damages) for the conduct of stealing the coins from his disabled son. Any right-minded citizen of Texas would agree.