SW Legal Educational Publishing

Tax Preparer, As an Agent for a Principal, Is in a Fiduciary Relationship
Description Maryland high court held that H&R Block, as a tax preparer, had an agency relationship with its clients, and owed the clients, as principals, a fiduciary obligation to be loyal to the interests of the principals and disclose any information about their relationship that the principal may reasonably want to know.
Topic Agency
Key Words Agent; Duties
C A S E   S U M M A R Y
Facts H&R Block was sued in a class action suit on behalf of all those in Maryland for whom H&R prepared taxes and participated in its "Rapid Refund" program by obtaining a "Rapid Anticipation Loan." H&R obtained its clients loans based on the refund expected. The suit alleged that H&R failed to disclose how it financially benefited by arranging these loans, and that was a breach of its fiduciary duty in an agency relationship that existed as a tax preparer. The trial court dismissed the suit; plaintiff appealed.
Decision Reversed. An agent has a duty to his principal to act solely for the benefit of the principal in all matters connected with his agency. The fundamental duties of an agent are loyalty to the interest of his principal and the need to avoid any conflict between that interest and his own self-interest. One of the primary obligations of an agent to his or her principal is to disclose any information that the principal may reasonably want to know. The failure to disclose information material to agency constitutes a breach of the principal-agent relationship. When there is such a breach, the principal may sue to recover profits for her or himself. The principal need not prove that she was harmed by the action of the agent for breach of the relationship arising from the agent's failure to disclose its financial interests in their relationship to the loan program. It is for a jury to determine at trial if an agency relationship existed and if the agent breached its duty to its principals.
Citation Green v. H&R Block, Inc., 735 A.2d 488 (Ct. App., Mary., 1999)

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