Fiduciary Principles and Public Offices

This chapter examines how fiduciary principles apply to public offices, focusing on what it means for officeholders to comport themselves to their respective public roles appropriately. Public law institutions can operate in accordance with fiduciary norms even when they are enforced differently from the remedial mechanisms available in private fiduciary law. In the public sector, fiduciary norms are difficult to enforce directly and the fiduciary norms of public office do not overlap completely with the positive law governing public officials. Nevertheless, core fiduciary principles are at the heart of public officeholding, and public officers need to fulfill their fiduciary role obligations. This chapter first considers three areas of U.S. public law whose fiduciary character reinforces the tenet that public office is a public trust: the U.S. Constitution’s “Emoluments Clauses,” administrative law, and the law of judging. It then explores the fiduciary character of public law by looking at the deeper normative structure of public officeholding, placing emphasis on how public officeholders are constrained by the principles of loyalty, care, deliberation, conscientiousness, and robustness. It also compares the policy implications of the fiduciary view of officeholding with those of Dennis Thompson’s view before concluding with an explanation of how the application of fiduciary principles might differ between public and private law settings and how public institutions might be designed or reformed in light of fiduciary norms.

Fiduciary Principles in Investment Advice

This chapter examines the fiduciary principles governing investment advice. Fiduciary principles in investment advice are both straightforward and complex. They are straightforward because most investment advisers are considered fiduciaries and subject to strict fiduciary duties under federal and state law. Their complex nature arises from the fact that many individuals and firms provide investment advice but are not deemed investment advisers and, therefore, are not subject to a fiduciary obligation. This chapter first explains whether and when an advisory relationship gives rise to fiduciary duties by focusing on both federal and state law, as well as the individuals and firms that typically provide investment advice. In particular, it looks at certain persons and entities excluded from the definition of investment adviser and thus not subject to the Investment Advisers Act of 1940, namely broker-dealers, banks, and family offices as well as accountants, lawyers, teachers, and engineers. The chapter also considers fiduciaries under ERISA, the Investment Company Act, and the Commodity Exchange Act before discussing the fiduciary duty of loyalty and how it is expressed and applied in investment advisory relationships; the fiduciary duty of care and how it differs from other standards of conduct, such as a duty of suitability; and other legal obligations imposed on investment advisers and how those obligations relate to an adviser’s fiduciary duty. Finally, the mandatory or default terms with regard to an investment adviser’s fiduciary duties are explored, along with remedies available for breach of fiduciary duty.

Fiduciary Law, Good Faith, and Publicness

This chapter uses corporate law as a case study to evaluate the content of the fiduciary duty of good faith. Tracing its development from Van Gorkom through to the present, the chapter shows how good faith, though part of the duty of loyalty, has become a gap filler, policing the space between generally exculpated breaches of care and the more obvious breaches of loyalty. This chapter also surveys good faith case law to show the most common “red flags” for which corporate officers and directors should be monitoring. An analysis of two of the most recent good faith cases—City of Birmingham and In re Wells Fargo—show how the theory of publicness can be used to predict future good faith developments. Finally, the chapter ends by showing that the duty of good faith’s expansion into trust law parallels its corporate development by emphasizing its gap-filler function.

New Frontiers in Private Fiduciary Law

This chapter charts new frontiers of scholarly inquiry in fiduciary law. The chapter first orients the reader by taking stock of the current state of play in fiduciary scholarship. It then identifies a range of important questions that should inspire future work in the field. More specifically, it identifies pressing questions of legal theory (conceptual and normative analysis), economic and empirical legal studies (including classical and behavioral economic analysis), and historical and sociological inquiry. The chapter also raises questions of interest to private law theorists and scholars interested in exploring the significance of fiduciary principles within various subfields, from trust and corporate law to health law and legal ethics.

Fiduciary Principles in Corporate Law

This chapter examines fiduciary duty in corporate law. Fiduciary duty is pervasive as well as all encompassing in corporate law. One common misconception about fiduciary duty in corporate law is that it is merely aspirational. Fiduciary duties are not simply moral requirements, they are legal ones. They are not merely suggestions, they represent the demands of the law. Although corporate law has often compromised rather than insisting upon strict enforcement of fiduciary law principles, these compromises are due to practical considerations that are entirely consistent with the goals of fiduciary law. In corporate law, general fiduciary law principles are balanced with practical considerations concerning the profit motive in order to achieve the best overall result for the shareholders. Understanding this tension between ambition and practicality is key to understanding fiduciary duty in corporate law. This chapter first considers the triggers for fiduciary duty in corporate law before discussing the role that the duty of loyalty plays in corporate law. It then explores the duty of care in corporate law, along with other fiduciary duties such as good faith, takeover situations and contests for control, shareholder voting rights, and the duty to monitor and the duty to disclose. The chapter proceeds by analyzing mandatory and default rules regarding the extent to which fiduciary duties can be waived in corporate law and concludes with an overview of remedies for breach of fiduciary duty.

Fiduciary Principles in Contemporary Common Law Systems

This chapter examines the principles of fiduciary doctrine that are found in contemporary common law systems. More specifically, it considers the current similarities and differences between various jurisdictions such as England, Australia, Canada, and the United States. The similarities focus on the duties of loyalty, care and skill, and good faith, as well as when fiduciary duties arise and the kinds of interests that are protected by recognition of fiduciary relationships. The chapter also discusses the issue of differences between various jurisdictions with regard to the duty of care and skill before concluding with an analysis of differences between remedies that are made available in the various contemporary common law jurisdictions when a breach of fiduciary duty arises. It shows that the regulation of fiduciaries appears to be reasonably consistent across common law jurisdictions and across various types of actors, even as such actors are expected to meet differing standards of care. Statute plays a key role in the regulation of various kinds of fiduciary actors, especially corporate directors.

Fiduciary Principles in the Canon Law

This chapter discusses the scope of principles of fiduciary duty as they appear in the canon law. It first provides a historical background on canon law and its relation to fiduciary law, noting that the medieval church and principles of fiduciary duty were interconnected in direct and positive ways. In fact, the church was governed by many of the same principles of fiduciary law that are found in modern trust law, and these principles were fully and authoritatively stated in the Corpus iuris canonici during the twelfth and thirteenth centuries. The chapter proceeds by analyzing the Corpus iuris canonici and its two books: Gratian’s Concordia discordantium canonum, also known as the Decretum, and the books of Decretals. It also traces the development of fiduciary law inherent in some of the canonical texts and explains how fiduciary principles came to be enforced in the canon law, citing examples of the width of the scope of fiduciary principles found in English court practice, including a duty applied only to the clergy. Finally, it considers whether the modern law of trusts was shaped in any way by canonical influence.

Mandatory and Default Rules in Fiduciary Law

This chapter discusses the nature and operation of mandatory and default rules in fiduciary law, arguing that loyalty is a core element of every fiduciary legal institution. Loyalty is the hallmark of fiduciary law, as it requires persons in other-regarding positions of power to perform functions selflessly, rather than selfishly. However, there are many circumstances in which a person undertakes and exercises other-regarding powers, underscoring the fact that a broad range of persons may be the subject of fiduciary law. This chapter first provides an overview of key concepts and context, focusing on the distinction between mandatory rules and default rules as well as sources of such rules in fiduciary law. It then considers fiduciary loyalty, citing examples that illustrate how a baseline of fiduciary accountability is implied by the essential nature of fiduciary legal institutions, along with the mandatory or default quality of the duties of care and good faith. The main thesis of this chapter is that loyalty is a basic constituent element of all fiduciary legal institutions. Whether fiduciary principles are mandatory involves a consideration and determination of whether the relationship or institution is inherently fiduciary as matter of law and legal classification. It also highlights the modern trend toward codification and clear legislative demarcation of mandatory and default rules in fiduciary law.

Other Fiduciary Duties

This chapter canvasses the fiduciary duties other than the primary duties of loyalty and care. The core claim is that these other, subsidiary duties are field-specific elaborations of the primary duties of loyalty and care that implement those duties as applied to commonly recurring circumstances within the particular type or kind of fiduciary relationship. Together, the primary duties of loyalty and care, structured as open-ended standards, and the subsidiary duties, structured as rules or at least more specific standards, provide for fiduciary governance by a mix of rules, specific standards, and open-ended standards that mitigates the weaknesses of governance entirely by rules or standards alone. Fiduciary law thus improves on the familiar trope of rules versus standards as competing governance strategies. The increased specification provided by the subsidiary duties simplifies application of fiduciary obligation to cases that fall within their terms. But because the primary duties of loyalty and care remain operative, the specification for recurring matters provided by the subsidiary duties does not provide a roadmap for strategic avoidance behavior. If a fiduciary acts in a manner that is inimical to the principal’s interests and not addressed by a subsidiary duty, the principal may still invoke the open-ended primary duties of loyalty and care in challenging the fiduciary’s actions.

Fiduciary Principles in Health Care

This chapter examines fiduciary principles in health care law. There is no unanimous agreement when it comes to the precise doctrinal consequences of labeling health care actors as fiduciaries in various contexts, such as personal injury, decisional authority, financial influence, and procedural rules. In the case of patients and physicians, certain attributes are said to constitute an archetypal fiduciary relationship, including agency, dependency, trust, and information asymmetry. Thus, many legal decisions and commentators argue that physicians have fiduciary responsibilities to patients. For courts, however, hospitals are not fiduciaries. They regard private hospitals as ordinary commercial enterprises. This chapter first provides an overview of arguments over whether physicians and non-physicians (for example, hospitals and health insurers) are “fiduciaries” before discussing health care fiduciaries’ duty of loyalty and duty of care, along with their other obligations such as duties of confidentiality and full disclosure. It also explores the ability of health care fiduciaries and patients to waive fiduciary duties, as well as how courts have addressed distinct causes of action for physicians’ breach of fiduciary duty. It shows that courts often invoke fiduciary concepts and terminology in discussing physicians’ obligations to patients, and that physician-patient (and other medical treatment) relationships have classic attributes of fiduciary status.