In Matter of First Impression, California Appellate Court Finds a Claim for a Real Estate Professional’s Breach of Fiduciary Duty is Assignable

San Diego, Calif. (January 17, 2025) - The California Court of Appeal recently reversed a judgment entered in favor of real estate brokers who were sued for breaching their fiduciary duties in connection with the sale of residential real estate in Malibu. The Court of Appeal found the trial court erred when it rendered judgment in favor of the brokers on the basis that the plaintiff lacked standing to pursue claims that had been assigned to her. The trial court reasoned that claims for breach of fiduciary duty against real estate brokers are highly personalized tort causes of action, which cannot be assigned. The Court of Appeal disagreed. In a case of first impression, it held that a cause of action for breach of a real estate broker’s fiduciary duties, which seeks damages related to property rights and pecuniary interests, is assignable.

The Court of Appeal’s decision in Lazar v. Bishop, issued December 19, 2024, involved a unique set of facts. The seller bought the property in 2006. His daughter, Laura Lazar, lived at the property. The seller hired a real estate broker to sell the home. The broker listed the property for $4.2 million. Thereafter, she persuaded the seller to drop the listing price to $3.15 million, the price at which it was ultimately sold.

The seller assigned all of his rights and causes of action arising from the listing and sale of the house to his daughter, who filed suit alleging a single cause of action for breach of fiduciary duty. The seller’s daughter alleged that her broker failed to timely disclose that the buyer was represented by the same brokerage as the seller’s broker. The plaintiff claimed that this conflict of interest resulted in the seller’s agent’s failure to obtain the highest possible sales price.

The real estate defendants moved for summary judgment in February 2021, arguing the plaintiff lacked standing to bring suit because causes of action for breach of fiduciary duty are highly personalized and therefore non-assignable. The plaintiff opposed summary judgment, arguing that her cause of action was assignable pursuant to California Civil Code sections 953 and 954. The trial court granted summary judgment, finding that the plaintiff lacked standing because an action for breach of fiduciary duty is not assignable.

After judgment was entered in defendants’ favor, the plaintiff appealed that decision.

The Plaintiff’s Appeal

The plaintiff’s appeal presented a matter of first impression to the court: whether the cause of action for breach of a real estate broker’s fiduciary duty is assignable.

Courts have consistently found rights of recovery founded in property or pecuniary interests assignable, but there are two categories of exceptions to this general rule. First is the exception for highly personalized rights of recovery.  Tort causes of action for personal injury, emotional damage, or reputational damage are not assignable. Second is the exception for legal malpractice claims. Court have consistently held that legal malpractice claims are not assignable so as to protect the integrity and uniquely personal and confidential attorney/client relationship.

The Plaintiff’s Claim Does Not Involve a Highly Personalized Right of Recovery

The Court of Appeal found that the plaintiff’s claim does not involve a highly personalized right of recovery, as it is closely tied to real property (the house) and a pecuniary interest in the proceeds from the sale of the house. The plaintiff pled damages attributable only to the commission paid to the defendants, the money spent preparing the home for sale, and the amount greater than the sale price that would have been paid had the defendants not allegedly breached their fiduciary duties. Thus, the court found that the plaintiff is not seeking personalized relief, i.e., damages for emotional distress, reputational damage, or physical injuries. On the spectrum of unassignable and assignable claims, the court found that this fraud claim lands solidly on the side of assignability.

A Real Estate Broker’s Fiduciary Duty is Distinguishable from the Attorney/Client Relationship

The Court further found that the real estate broker’s fiduciary relationship is distinguishable from the attorney/client relationship. It found that a real estate broker’s relationship to the client centers entirely around a transaction, and the broker’s fiduciary duty is therefore tied to property and pecuniary interests involved in the transaction. On the other hand, the attorney/client relationship goes beyond transaction support. It is built on legal counsel and advocacy, and often involves more sensitive, confidential matters. The Court further noted that, unlike brokers, attorneys cannot act as dual agents representing both plaintiffs and defendants in the same lawsuit because of the personalized service they provide to their clients. The personalized nature of the attorney/client relationship is further evidenced by the fact that confidential communications between attorney and client are privileged. No such privilege exists for brokers.

Why This Case Matters

This ruling has potential implications for real estate agents and brokers going forward, as it significantly broadens the scope of standing in real estate lawsuits alleging breaches of fiduciary duty. While we believe each lawsuit will have to be analyzed based on its specific facts, the Lazar decision strongly suggests that courts will be more inclined to find duties of care owed by real estate agents and brokers on assigned claims. We expect this ruling will increase the number of potential plaintiffs who can sue real estate professionals.

For more information about this case, contact the authors of this alert. Visit our Professional Liability Practice page for additional alerts in this area.

Authors:

Briane Slome, Partner

Pamela Albanese, Partner