Formal Adoption of the Anti‑Fracturing Rule and Contract‑Driven Limits on Informal Fiduciary Duties: Pitts v. Rivas

Introduction

In Pitts, et al. v. Rivas, et al., the Supreme Court of Texas decisively addresses two recurring issues in professional-liability litigation: (1) whether plaintiffs may repackage professional negligence into other torts to avoid procedural hurdles, and (2) when, if ever, a fiduciary duty arises from informal personal or business relationships in the professional-services context. The Court formally adopts and applies the “anti-fracturing rule,” holding that a client cannot refashion an accountant-malpractice claim as fraud to secure a longer limitations period. It also holds that, as a matter of law on the undisputed record, no fiduciary duty arose between the client and his accountants.

The dispute arose from a decade-long relationship between homebuilder and developer Rudolph Rivas and Pitts & Pitts, the accounting firm run by Brandon and Linda Pitts. After alleged errors in compiled financial statements surfaced in 2016, Rivas’s lenders curtailed credit and his business collapsed. In 2020, Rivas sued for negligence, fraud, breach of fiduciary duty, and breach of contract. The trial court granted summary judgment for the accountants on all claims. The Dallas Court of Appeals affirmed as to negligence and contract, but revived the fraud and fiduciary-duty claims. The Texas Supreme Court granted review limited to the revived claims and renders judgment for the defendants on all claims.

The opinion has broad consequences for professional-liability litigation in Texas. It makes clear that the gravamen of the plaintiff’s allegations—not artful labeling—controls, and that engagement letters allocating responsibility and disavowing heightened duties can be powerful evidence that the parties intended an arm’s-length, non-fiduciary relationship.

Summary of the Opinion

• Anti-fracturing rule: The Court expressly adopts and applies the anti-fracturing rule to professional malpractice claims, including accounting malpractice. Courts must look to the gravamen of the allegations. If the essence is a complaint about the quality of professional services (i.e., failure to exercise ordinary professional care and skill), the claim sounds in malpractice and cannot be recast as fraud, fiduciary breach, or contract to gain procedural advantages like longer limitations.
• Fraud claim barred: Rivas’s fraud theory—that the accountants overstated their QuickBooks proficiency, mishandled entries, delayed disclosure, and proposed concealing errors—does not extend beyond professional negligence. The harm flowed from the accounting errors themselves, not from independent deceptive conduct; thus the fraud claim is barred by the anti-fracturing rule.
• No fiduciary duty as a matter of law: The Court does not hold that an accountant-client relationship is per se non-fiduciary, but it concludes that, on these facts, no fiduciary duty existed. Subjective trust, personal cordiality, dinners, family friendships, discounted homebuilding, and extensive professional reliance do not create an informal fiduciary relationship, especially where engagement letters allocate responsibilities, disclaim assurance, and emphasize an arm’s-length relationship.
• Disposition: The Court reverses the court of appeals’ revival of the fraud and fiduciary-duty claims and renders judgment for the defendants on all claims. It affirms the court of appeals’ disposition of the already-dismissed negligence and contract claims.
• Concurrence: Justice Huddle (joined by Justices Lehrmann, Bland, and Young) agrees with the judgment but urges the Court to abandon the notion of “informal” fiduciary relationships altogether, arguing that fiduciary duties should arise only from legally recognized fiduciary roles or by contract. The majority applies existing precedent without reaffirming it and signals no view on whether it should be retained.

Analysis

Precedents Cited and How They Shaped the Decision

The Court situates its holding within a well-developed body of appellate decisions on anti-fracturing and the broader Supreme Court jurisprudence disfavoring artful pleading.

• Anti-fracturing lineage in Texas courts of appeals: For decades, intermediate courts have policed attempts to “convert what are really negligence claims” into fraud, fiduciary breach, or contract claims. See, among many, MURPHY v. GRUBER, 241 S.W.3d 689, 693–99 (Tex. App.—Dallas 2007, pet. denied); DUERR v. BROWN, 262 S.W.3d 63, 70–75 (Tex. App.—Houston [14th Dist.] 2008, no pet.); WON PAK v. HARRIS, 313 S.W.3d 454, 457–59 (Tex. App.—Dallas 2010, pet. denied). The Court endorses these formulations, emphasizing that plaintiffs must do “more than merely reassert the same claim for [professional] malpractice under an alternative label”; they must plead and prove elements that “go beyond what traditionally has been characterized as [professional] malpractice.” Duerr, 262 S.W.3d at 70.
• Early articulation and policy rationale: SLEDGE v. ALSUP, 759 S.W.2d 1, 2 (Tex. App.—El Paso 1988, no writ), captured the core rationale: “Nothing is to be gained by fracturing a cause of action arising out of bad legal advice or improper representation into claims for negligence, breach of contract, fraud or some other name.” Beck v. Law Offices of Edwin J. (Ted) Terry, Jr., P.C., 284 S.W.3d 416, 427 (Tex. App.—Austin 2009, no pet.), echoed that the rule prevents plaintiffs from seeking “longer limitations periods, less onerous proof requirements, or other tactical advantages.”
• Supreme Court’s anti–artful-pleading jurisprudence: The Court aligns the anti-fracturing rule with its repeated instruction to look past labels to the claim’s essence. See YAMADA v. FRIEND, 335 S.W.3d 192, 196–97 (Tex. 2010) (health care liability claims cannot be “spliced” into other causes of action to avoid statutory requirements); B.C. v. Steak N Shake Operations, Inc., 512 S.W.3d 276, 283 (Tex. 2017) (gravamen controls); Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428, 433 (Tex. 2017) (artful pleading cannot evade forum-selection clauses); BAYLOR UNIV. v. SONNICHSEN, 221 S.W.3d 632, 636 (Tex. 2007) (courts focus on the “true nature of disputes”).
• Distinguishing genuine fraud: Citing LATHAM v. CASTILLO, 972 S.W.2d 66, 69 (Tex. 1998), the Court preserves the line between negligent and deceptive conduct: real fraud claims remain viable when they truly extend beyond malpractice and independently cause harm. But mere overstatement of competence or non-disclosure of mistakes ordinarily falls within the duty of care, not a separate fraud.
• Fiduciary-duty framework: The Court draws on its longstanding caution against lightly imposing fiduciary duties in commercial settings. See MEYER v. CATHEY, 167 S.W.3d 327, 331 (Tex. 2005); Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997). A party’s subjective belief in a confidant’s loyalty is insufficient. See Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962); Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594–95 (Tex. 1992).
• Contract primacy: The opinion emphasizes that the parties’ engagement letters—assigning the client responsibility for financial statement preparation, internal controls, and fraud prevention, while disavowing assurance—are compelling evidence of an arm’s-length relationship. This tracks the Court’s freedom-of-contract cases. See In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129–33 (Tex. 2004); Gym‑N‑I Playgrounds, Inc. v. Snider, 220 S.W.3d 905, 909–14 (Tex. 2007); Schlumberger, 959 S.W.2d at 181–82.
• Vicarious liability: Because the underlying tort claims fail, the vicarious-liability claim fails as a matter of law. See Agar Corp. v. Electro Circuits Int’l, LLC, 580 S.W.3d 136, 140–41 (Tex. 2019).

Legal Reasoning

1) Adopting and Applying the Anti‑Fracturing Rule

While the Court had previously acknowledged the rule’s use by courts of appeals, it had not expressly adopted it. That changes here: “We apply the rule today.” The Court confirms that:

• The gravamen controls. Courts must “look to the gravamen of the facts alleged” to classify claims. Labels do not control.
• Scope is not confined to the engagement letter’s subject. The anti-fracturing rule “is not limited to the subject matter of the client’s engagement letter” and is not confined by whether a task is “technically” within the professional’s core discipline. The question is whether the facts alleged “traditionally sound in professional negligence.”
• Additional claims may survive—but only if they truly go beyond malpractice. If a plaintiff pleads additional, non-duplicative facts supporting the independent elements of a separate tort (e.g., fraud) and raises a fact issue on those elements, such claims are not barred.

Applying these principles, the Court holds that Rivas’s “fraud” theory—overstated QuickBooks proficiency, operational mistakes, delayed admission, and a proposal to “amortize” away the errors—does not transcend professional negligence. Overstating expertise, misusing software, and late disclosure are “classic” professional-duty-of-care issues, not independent fraud. Critically, the damages flowed from the errors themselves (the restatement and resulting lender reaction), not from any actionable deception distinct from the deficient services.

2) No Fiduciary Duty as a Matter of Law

The Court does not decide whether accountants ever owe fiduciary duties as a matter of law; rather, accepting that some fiduciary duties may arise in narrowly defined relationships, it holds that none arose here under undisputed facts. The reasons:

• No preexisting special relationship. Any “informal” fiduciary relationship must predate and exist apart from the business relationship that forms the basis of the suit. Here, the personal rapport developed contemporaneously with (and through) the professional engagement, not before it.
• Subjective trust is insufficient. A client’s high degree of trust—even reliance on professional advice—does not establish fiduciary status. Otherwise, fiduciary duties could be unilaterally imposed by a trusting party.
• Social ties and favors do not transform an arm’s-length professional relationship. Dinners, family friendships, unpaid explanatory assistance, and a discounted homebuilding project for the accountant do not create fiduciary obligations.
• Engagement letters confirm arm’s-length dealings. The written contracts strongly indicate both sides intended a non-fiduciary, limited-scope relationship: no assurance, no duty to detect fraud, and the client’s responsibility for GAAP selection, fair presentation, internal controls, and fraud prevention. Imposing fiduciary duties contrary to such agreements would displace contractual allocation with judicially invented obligations.

Because no fiduciary relationship existed, the breach-of-fiduciary-duty claim fails outright without resort to anti-fracturing analysis.

3) Concurrence: A Call to Retire “Informal” Fiduciary Duties

Justice Huddle’s concurrence (joined by Justices Lehrmann, Bland, and Young) urges abandoning the “informal fiduciary relationship” doctrine entirely. The concurrence argues:

• Fiduciary duties are an “onerous burden” justified only when a party assumes a legally recognized fiduciary role (e.g., trustee, agent, guardian) or contractually undertakes such duties.
• The “informal” fiduciary concept lacks clear, predictable standards; it has not produced a Texas Supreme Court finding of such a duty in nearly half a century; and it risks post hoc imposition of unexpected duties based on subjective trust.
• Equity’s flexible constructive-trust remedy for abuses of confidential relationships does not justify recognizing a freestanding, damages-liability fiduciary duty outside recognized roles.

The majority neither endorses nor rejects this view, disposing of the case under existing precedent and expressly signaling that the opinion should not be read as reaffirming the “informal fiduciary” doctrine.

Impact and Practical Implications

For plaintiffs and pleading strategy

• Limits on recharacterization: Plaintiffs cannot sidestep malpractice limitations and proof standards by recasting professional negligence as fraud or fiduciary breach. The Court’s adoption of anti-fracturing will likely prompt earlier dismissals or summary judgments against re-labeled claims.
• Independent fraud must truly be independent: To plead fraud that survives anti-fracturing, plaintiffs must allege and adduce evidence of deception that is not merely the professional’s deficient service or self-serving gloss on it, and they must tie damages to the deception itself.
• Limitations discipline: The two-year statute for professional negligence will loom larger. Delayed discovery will not rescue claims labeled as fraud when the gravamen remains malpractice.

For professionals (accountants, lawyers, and others) and risk management

• Engagement letters matter: Clear allocation of responsibilities (e.g., client control over GAAP selection, internal controls, fraud prevention) and disclaimers of assurance can strongly evidence an arm’s-length relationship and help defeat fiduciary-duty theories.
• Scope does not confine anti-fracturing: The rule applies to all services a professional commonly performs for a client, regardless of whether a task is enumerated in an engagement letter, if the allegations sound in professional negligence.
• Training and disclosure protocols: While late disclosure does not convert negligence into fraud, robust internal protocols for timely error identification and client notification remain critical to mitigate harm and litigation exposure.

For courts and the development of Texas law

• Settled statewide doctrine: With the Supreme Court’s express adoption, the anti-fracturing rule is now binding statewide, harmonizing decades of courts-of-appeals practice.
• Clarified boundaries: Misstatements of competence, misuse of tools, and delayed candidness, without more, generally remain within malpractice. Genuinely independent fraud survives only where deception—not negligent service—is the gravamen and cause of damages.
• Informal fiduciary duties under scrutiny: The concurrence invites eventual reconsideration of the doctrine. Until then, the opinion’s fact-intensive analysis and emphasis on preexisting relationships and contractual allocation provide a disciplined framework that will make fiduciary-duty claims against professionals difficult to sustain absent recognized roles or explicit undertakings.

Complex Concepts, Simplified

• Anti-fracturing rule: A doctrine preventing plaintiffs from “fracturing” one professional-malpractice claim into multiple causes of action (like fraud or fiduciary breach) to gain procedural advantages such as longer limitations or easier proof. Courts look to the claim’s essence—its gravamen—to classify it.
• Gravamen: The true nature of a claim, assessed by what the facts actually complain about, not how the claim is labeled in pleadings.
• Professional negligence vs. fraud: Negligence alleges substandard professional care (errors, omissions). Fraud requires intentional deception, reasonable reliance, and damages from the deception. Overstating competence or slow admission of error usually falls under negligence unless accompanied by independent, intentional deceit that causes distinct harm.
• Informal fiduciary duty: A contested doctrine recognizing fiduciary-like duties from longstanding, preexisting relationships of special trust and confidence. The Court applies it narrowly; subjective trust or cordiality does not suffice, and written contracts can negate any implication of a fiduciary relationship. The concurrence urges eliminating this doctrine.
• Compilation vs. audit (context here): A compilation engagement assists management in presenting financial statements but provides no assurance; an audit offers reasonable assurance. Engagement letters here expressly disclaimed assurance and detection of fraud, reinforcing an arm’s-length arrangement.
• Statutes of limitations: Professional negligence claims in Texas typically have a two-year limitations period. Fraud generally has a four-year period. Anti-fracturing prevents plaintiffs from exploiting the longer period by relabeling malpractice as fraud when the underlying conduct remains negligent service.

Conclusion

Pitts v. Rivas marks a significant clarifying moment in Texas professional-liability law. The Supreme Court of Texas formally adopts the anti-fracturing rule, insisting that courts look past labels to the gravamen of the allegations and treat professional-malpractice claims as such—even when dressed as fraud or fiduciary breach. The Court’s application is rigorous: representations of competence, errors in professional work, and belated disclosure do not transform malpractice into fraud, especially where the damages pivot on the professional errors themselves.

On fiduciary duties, the Court reinforces two guideposts: fiduciary obligations will not be lightly imposed in commercial relationships, and carefully drawn engagement letters—allocating responsibilities and disavowing assurance—are powerful evidence that parties intended an arm’s-length relationship. The concurrence’s invitation to retire the “informal fiduciary” concept altogether underscores a growing judicial preference for predictable, role-defined duties.

Practically, the decision will constrain attempts to extend limitations or alter proof burdens through creative pleading in professional-liability suits, not only against accountants but across the spectrum of licensed professionals. It also signals that contracting parties can—and should—use clear engagement terms to define the scope and nature of their relationships. The take-away is straightforward: where the gist is substandard professional work, Texas law will treat the case as malpractice, with all attendant rules, timelines, and defenses.