Is Every Vice President a Fiduciary?

By Joe Murray

Charlotte is a banking town, and in banking towns, everyone’s a vice president. If you work for a bank, brokerage firm, or other financial institution for a couple of years, you’ll make VP, even if your duties, management responsibilities, and pay don’t change. Dunn, Andrew, Your Charlotte bank VP title doesn’t really mean much, Charlotte Agenda, Nov. 19, 2015. This VP title creep has moved into other industries, devaluing what it means to be VP. Schumpeter, Too many chiefs, The Economist, Jun. 24, 2010.

If everyone has the VP title, then can any VP be determined to be a fiduciary for a company? A throwaway line in a recent court of appeals decision, Veer Right Mgmt. Grp., Inc. v. Czarnowski Display Serv., No. COA18-420 (N.C. App. Jan. 15, 2019) (unpublished), should put fear into the hearts of low-level VPs everywhere. Veer Right sued its former VP, Timothy Jenkins, for breach of fiduciary duty. Jenkins did not “dispute he owed a fiduciary duty to Veer Right.” Instead of just accepting this admission, the court of appeals cited a case from 1967for the proposition that a VP of a company generally owed a fiduciary duty. Because of this admission and the fact that Jenkins breached his fiduciary duty (he secretly disparaged his employer to a counter party on a contract, which resulted in Veer Right losing the contract, and provided confidential information to another company that then won the contract), the court of appeals found that Veer Right had presented sufficient evidence to defeat summary judgment on the breach of fiduciary duty claim.

While I understand that this is an unpublished opinion and that on the facts Jenkins was a high-level employee of Veer Right, the court’s failure to cabin its fiduciary finding to the facts will likely lead to businesses bringing breach of fiduciary duty claims against low-level VPs when the employment relationship ends badly.At a minimum, this line and citation to Underwood will be used to defeat a motion to dismiss, and at best (or worst depending on your side of the v.) it will defeat summary judgment. Allowing an extension of fiduciary duty to low-level employees who are VPs in name only seems to do injustice to the idea of a fiduciary.

The Veer Right decision also raises the question of what a business can do when an employee sabotages the business but whose actions otherwise do not violate any laws or create a cause of action. We’re all aware of the typical claims employers make against departing employees: violation of restrictive covenants, misappropriation of trade secrets, violation of the Computer Fraud and Abuse Act, defamation, etc. But what to do when the employee simply publishes truthful, non-trade-secret facts that result in an injury to a business? There was no real claim that a business could make against most of its employees in this situation until Veer Right potentially expanded the range of fiduciaries at a business.3

Ultimately, Veer Right may not change anything—there are still plenty of employees who are not VPs and a business will still have to prove at trial that there was a fiduciary relationship. But I would not be surprised if more businesses at least allege breach of fiduciary duty along with all the other standard claims when an employee departs on bad terms.

1 Underwood v. Stafford, 270 N.C. 700, 155 S.E.2d 211 (1967).

2 Which gives me the chance to use my favorite line from Cocktail: “Everything ends badly, otherwise it wouldn’t end.”

3 The court specifically noted Jenkins’ disparagement of Veer Right in its fiduciary duty analysis. The comments attributed to Jenkins about Veer Right focused on Veer Right missing deadlines, the work habits of Veer Right’s owners, and reporting about conversations with the owners. There was no discussion as to whether these comments were defamatory or untrue.