Intern (Actually a Project Veritas Undercover Plant) in Political Organization Didn’t Have “Fiduciary Duty” to Organization

An excerpt from today’s long decision in Democracy Partners, LLC v. O’Keefe by D.C. Circuit Judge Karen LeCraft Henderson, joined by Judge Harry Edwards (read this post for more on the facts and on a separate fraud claim):

Creamer [the target of a Project Veritas undercover investigation] brought those claims under the provisions of the federal and D.C. wiretapping laws that make it unlawful to secretly record a conversation with another “for the purpose of committing any crim[e] or tor[t].” The jury agreed with Creamer that Maass [a Project Veritas employee who, under false pretenses, applied for and got an internship at Cramer’s Democracy Partners organization -EV] violated these provisions because she was a fiduciary of Democracy Partners and surreptitiously recorded her conversations with Democracy Partners staff in order to breach her fiduciary duty—which is a tort in D.C….

A fiduciary is an agent who exercises delegated power on a principal’s behalf. “[P]ower” means the actual or apparent authority to take actions that “affect the legal rights and duties” of the principal. This requirement separates the fiduciary relationship from the ordinary contractual arrangement. “[L]awyers, trust companies, realtors, or the like,” are common examples of fiduciaries because the decisions they make often carry legal consequences for the other party…. Courts thus recognize that the fiduciary relationship is a “special confidential relationship” that “transcends” an arms-length business transaction.

In our view, no reasonable jury could find that Maass was a fiduciary of Democracy Partners because the evidence failed to show Maass was an agent with any degree of delegated power to act on Democracy Partners’ behalf. To explain why, we ignore Maass’s title as an unpaid intern and focus solely on “the facts of [her] relationship” with Democracy Partners—most relevantly, the “promises made, the type of services or advice given and the legitimate expectations of the parties.”

There were no promises exchanged between Democracy Partners and Maass that gave her any power to act as Democracy Partners’ agent…. Creamer offered no evidence of any written or oral employment agreement with Maass—let alone one that empowered her to take legally binding actions on behalf of Democracy Partners. Nor could a jury reasonably infer such an agreement based on “the type of services or advice” that Maass provided Democracy Partners.

Maass did not give Democracy Partners any “advice” because she lacked the relevant knowledge or experience. Democracy Partners knew this because the fake resume Maass provided did not list any experience beyond bartending and waitressing. As for “services” rendered, Maass performed no services typical of a fiduciary. She exercised no power of attorney, actual or apparent. She did not execute any contracts, manage corporate funds, or order the disbursement of money. The only discrete tasks that Creamer recalled asking Maass to perform—taking stock of political signs and compiling snippets of news footage from the Internet as part of Democracy Partners’ “bracketing” program—required little skill or discretion, did not require Maass to handle confidential information and did not carry any legally binding consequences for Democracy Partners.

Creamer’s principal argument, echoed by our dissenting colleague, is that Maass became Democracy Partners’ fiduciary because of her passive exposure to confidential information while an intern there. Creamer emphasizes the times in which Maass accepted his invitation to sit in on closed-door business meetings, during which Democracy Partners staff and clients talked confidentially.

But Maass was no more than a passive observer during these discussions. Creamer did not invite Maass to these meetings so that she could offer her acumen on polling strategies or make decisions about future bracketing events—she was there to listen and learn. Creamer testified that he invited Maass to one private meeting at the DNC headquarters partly because he knew that she was already headed there for an unrelated errand. J reason, he explained, was simply to introduce her to fellow colleagues.

At most, Maass’s presence at the meetings may have given rise to a legitimate expectation that Maass would not divulge what she saw and heard at the closed-door meetings. But an implied contractual obligation not to disclose information (Maass never signed a non-disclosure agreement) cannot elevate a party to the privileged status of a fiduciary ….

Jidge Robert Wilkins dissented on this point:

The Restatement [of Agency] also provides that an “adviser may be subject to a fiduciary duty of loyalty even when the adviser is not acting as an agent.” Furthermore, the District of Columbia recognizes, as a subset of the breach of fiduciary duty, the tort of “breach of confidential relationship,” which is an “unconsented, unprivileged disclosure to a third party of nonpublic information that the defendant has learned within a confidential relationship.” …

[T]he Majority concludes that the absence of a written contract means that there were no promises “exchanged between [the Plaintiffs] and Maass” and thus no agency relationship, but the Restatement of Agency acknowledges that “the consensual aspect of agency does not mean that an enforceable contract underlies or accompanies each relation of agency. Many agents act or promise to act gratuitously.”

The Majority also concludes that because Maass provided clerical services “requir[ing] little skill or discretion,” her internship cannot provide the basis for a fiduciary relationship, she merely had “passive exposure to confidential information” and was not part of a fiduciary or confidential relationship within the meaning of District of Columbia law. To be sure, the Majority’s conclusion is perfectly reasonable, but that does not mean that the jury’s opposite conclusion was not also reasonable. The jury, considering the evidence in the light most favorable to the Plaintiffs, could conclude: (1) that the relationship involved an implied duty of loyalty and confidentiality; (2) that Maass understood this duty and implicitly agreed to it by not objecting when she was told she would have to sign an NDA; and (3) that the political nature of the work carried a legitimate and customary expectation of confidentiality and trust.

Judges, Senators, business leaders and various professionals hire interns every day, and I dare say that all of them would be surprised to learn that, as a matter of law, their interns have no enforceable fiduciary duty to preserve the confidentiality of information learned during the course of the internship. Yet, at bottom, that is what the Majority holds, because I do not see how one distinguishes the terms of Maass’ internship from the terms of the thousands of others occurring across the country at this very instant….

Benjamin Barr and Stephen R. Klein represent O’Keefe and Maass.