Belliveau v. Barco, Inc.

Belliveau v. Barco Inc.

Written by Taher Kameli & Chathan Vemuri

On January 28, 2021, the Fifth Circuit Court of Appeals re-interpreted the parameters of fiduciary duty and the breach thereof in relation to third party sublicensing and clarified what was necessary for a fiduciary duty to exist.[1] In the case of Belliveau v. Barco, Inc., the Fifth Circuit ruled that the defendant in this case did not owe a fiduciary duty to the plaintiff as there was no formal fiduciary relationship between Plaintiff and the Defendant’s in-house counsel despite Plaintiff’s claims of in-house counsel allegedly agreeing to act at his discretion on matters concerning their IP.[2]

The Fifth Circuit also found that there was no informal fiduciary relationship because there was no special relationship of trust and confidence prior to and separate from the agreement at issue in the suit.[3]

The plaintiff, Richard Belliveau, provided lighting systems for high profile events and co-founded a professional lighting company called High-End, his involvement in which has been haphazard.[4] Both the Plaintiff and High-End executed an Exclusive License and Operation Agreement (the “High End License”) which gave the latter an exclusive license to all of the Plaintiff’s intellectual property created between his departure and return to High-End as well as future intellectual property.[5] In particular, the High-End License gave High-End sole discretion to license or sublicense the plaintiff’s intellectual property so long as High-End did so using “ ‘commercially reasonable efforts to commercialize’ it.”[6] In exchange, the plaintiff would receive an annual royalty between $200,000 and $350,000.[7]

A year later, the defendant, Barco, Inc., acquired High-End’s stock as part of a sublicense agreement and several of the sublicenses signed by High-End with Barco yielded substantial sublicense royalties for the plaintiff.[8] However, due to financial difficulties on High End’s part, the defendant contracted with Electronic Theater Controls (ETC) to sell High-End to it in a stock purchase.[9]

However, the plaintiff disagreed with the defendant’s choice not to include him in the sale negotiations despite defendant’s executive allegedly assuring him he would be kept in the know about the deal and would have role in approving it, and resigned from the company in anger due to changing his status from Chief Technology Officer to a mere independent contractor.[1] The plaintiff filed suit, alleging breach of fiduciary duty and fraud by nondisclosure, among other claims.[2] The District Court for the Western District of Texas disagreed and the Fifth Circuit Court of Appeals agreed.[3]

The Fifth Circuit ruled that the plaintiff did not have either a formal or informal fiduciary relationship with the defendant whose violation constituted a breach of fiduciary duty.[4] As such, there was no duty to disclose on the defendant’s part and therefore, no actionable fraud by non-disclosure.[5] As the court noted, “[a] fiduciary relationship…is a sine qua non of a breach of fiduciary duty claim.”[6] The Court noted that fiduciary relationships can arise from formal and informal relationships.[7] The former “arises as a matter of law and includes the relationships between attorney and client, principal and agent, partners, and joint ventures.”[8]

The latter arises when one party relies on another party, regardless of the nature of the relationship.[9] All that matters for a fiduciary relationship to exist is that there is a special confidence that is put in another who is bound to act in good faith to protect the interests of the other person.[10]

In this case, the plaintiff could not show either a formal or informal relationship with the defendant and its in-house counsel. The plaintiff claimed that there was an implied attorney-client relationship which was created when he claimed to have agreed with the defendant’s legal employees to protect his intellectual property interests (“IP”) sublicensed to the defendant.

However, this was merely a subjective belief of a formal fiduciary relationship which is not enough, for both parties must intend to create this relationship and there was no evidence of that in this case.[11] The affidavit submitted by the plaintiff to support his claims was found by the Fifth Circuit to be “vague and conclusory.”[12] Nor did the plaintiff properly explain which defendant attorneys agreed to at his discretion regarding his IP or if they intended to do so in a legal capacity.[13] Similarly, the Fifth Circuit found no evidence of an informal fiduciary duty.

The Fifth Circuit held that in order for an informal fiduciary relationship to exist, there had to be a special relationship of trust and confidence prior to and separate from the agreement at issue in the lawsuit.[1] However, in this case, the plaintiff’s relationship with the defendant and its agents entirely revolved around the High-End License at issue and did not exist before hand apart from this business arrangement.[2] Therefore, there was no informal fiduciary duty.

Overall, because of the lack of formal and/or informal fiduciary relationships with the defendant, the plaintiff could not show that there was a breach of fiduciary duty. Nor could the plaintiff show that there was a duty to disclose, the violation of which could have supported a fraud by nondisclosure claim.[3] As such, the summary judgment motion dismissing both of these claims was upheld.[4]

Please fill out the form below or give us a call at (312)-233-1000 if you have any questions about the Fifth Circuit ruling in Belliveau v. Barco, Inc., and what the Seventh Circuit has ruled on the subject of defining where a fiduciary relationship exists or not.

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[1] Id. at 134.

[2] Id. at 134-5.

[3] Id.

[4] Id.

[1] Id.

[2] Id.

[3] Id. at 132.

[4] Id. at 132-35.

[5] Id. at 132.

[6] Id.

[7] Id.

[8] Id. at 132-33.

[9] Id.

[10] Id.

[11] Id. at 133.

[12] Id.

[13] Johnson, David Fowler, Court Holds That a Defendant Did Not Owe a Fiduciary Duty to an Affiliate’s Licensee Because Its In-House Attorneys Did Not Have an Attorney/Client Relationship to the Plaintiff and There Was No Informal Confidential Relationship, Nat’l Law Rev. (Feb. 28, 2021)

[1] Johnson, David Fowler, Court Holds That a Defendant Did Not Owe a Fiduciary Duty to an Affiliate’s Licensee Because Its In-House Attorneys Did Not Have an Attorney/Client Relationship to the Plaintiff and There Was No Informal Confidential Relationship, Nat’l Law Rev. (Feb. 28, 2021)

[2] Id.

[3] Id.

[4] Belliveau v. Barco, Inc., 2021 U.S. App. LEXIS 2489, 2, 987 F.3d 122, 126 (5th Cir. 2021).

[5] Id.

[6] Id.

[7] Id.

[8] Id. at 127.

[9] Id.