Friday, June 03, 2005

The Power of Attorney

In Vinogradov v. SunTrust Bank, Inc., the Maryland Court of Special Appeals reviewed the grant of summary judgment against an investor who granted a power of attorney to her stockbroker. She complained that the broker's employer was negligent in failing to oversee the broker's trades on her behalf and that the employer was liable for the broker's alleged breach of fiduciary duty. She claimed losses of almost a million dollars.

The customer claimed that SunTrust and the broker owed her a duty to:
  1. Monitor her accounts, the trading activity and transfers in and out of the accounts, to exercise reasonable care to prevent loss or harm, and to advise her of any suspicious activity in these accounts; and

  2. To monitor her accounts to ensure that SunTrust's internal policies, as well as the policies of the National Association of Securities Dealers [NASD] regarding suitability were followed.
In support of her claim, she offered evidence that SunTrust was concerned about the level of trading activity on the account. She proffered the affidavit of an expert witness who testified that the defendants "had breached an industry standard of care" by providing " insight into 'securities industry regulatory requirements and relevant standards of care.'" However, the evidence showed that after its investigation, SunTrust was comfortable that the broker had acted properly and that his actions fell within the parameters of the power of attorney granted to him by the plaintiff.

The Court concluded that "even assuming that SunTrust ordinarily would have a duty to warn [the plaintiff] of suspicious activity in her accounts, the [power of attorney] absolved SunTrust of such duty by the broad language that gave [the broker] every right to take the actions he took with regard to [her] funds and by fully protecting SunTrust while it relied on the [power of attorney]." The Court further found that SunTrust's "concern over account activity is not the same as concern over a particular individual's conduct."

Simply put, SunTrust's investigation revealed that the broker was acting properly and well within the authority granted by the plaintiff to the broker.

Finally, the Court rejected the breach of fiduciary duty claim, since "Maryland does not recognize a separate tort action for breach of fiduciary duty."

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