Fiduciary duties are critical to the integrity of a remarkable variety of relationships, including those between trustee and beneficiary, director and corporation, agent and principal, lawyer and client, doctor and patient, parent and child, and guardian and ward. Notwithstanding their variety, all fiduciary relationships are presumed to enjoy common characteristics and to attract a core set of demanding legal duties, most notably a duty of loyalty. Surprisingly, however, the justification for fiduciary duties is an enigma in private law theory. It is unclear what makes a relationship fiduciary and why fiduciary relationships attract fiduciary duties. This article takes up the enigma. It assesses leading reductivist and instrumentalist analyses of the justification for fiduciary duties. Finding them wanting, it offers an alternative account of the juridical justification for fiduciary duties. The author contends that the fiduciary relationship is a distinctive kind of legal relationship in which one person (the fiduciary) exercises power over practical interests of another (the beneficiary). Fiduciary power is a form of authority derived from the legal capacity of the beneficiary or a benefactor. The duty of loyalty is justified on the basis that it secures the exclusivity of the beneficiary's claim over fiduciary power so understood.
Les obligations fiduciaires sont essentielles pour assurer l'integrite de multiples relations, telles que celles entre administrateur et beneficiaire, directeur et societe, mandataire et mandant, avocat et client, medecin et patient, parent et enfant, ou enfin gardien et pupille. Malgre leur variete, toutes les relations fiduciaires sont presumees jouir de caracteristiques communes et generer un ensemble d'obligations juridiques, particulierement le devoir de loyaute. Etonnamment, la justification de ces obligations fiduciaires est cependant une enigme en theorie du droit prive. On ne sait pas exactement ce qui rend une relation fiduciaire et pourquoi ces relations attirent des obligations fiduciaires. Cet article s'attaque a cette enigme. Il examine les principales analyses reductionnistes et instrumentalistes qui tentent de justifier les obligations fiduciaires. Trouvant que celles-ci laissent a desirer, il offre une justification juridique alternative des obligations fiduciaires. L'auteur soutient que la relation fiduciaire est un type de rapport juridique particulier par lequel une personne (l'administrateur) exerce un pouvoir sur les interets pratiques d'une autre personne (le beneficiaire). Le pouvoir fiduciaire est une forme d'autorite derivee de la capacite juridique du beneficiaire ou d'un bienfaiteur. Le devoir de loyaute est justifie car il securise l'exclusivite de la revendication du beneficiaire sur le pouvoir fiduciaire ainsi compris.
Introduction I. The Problem of Justification II. The Range, Content, and Basis of Fiduciary Duties III. Reductivist Justifications A. The Argument from Contact B. The Argument from Property C. The Argument front Tort IV. Instrumentalist Justifications A. The Argument front Morality B. The Argument from Policy C. The Argument front (Nonfiduciary) Law V. The Juridical Justification A. Recapitulation B. The Nature of Juridical Justification C. The Juridical Basis of Justification for Fiduciary Duties D. Elements of the Juridical Justification for Fiduciary Duties E. Revisiting the Problem of Justification Conclusion Introduction
Fiduciary duties are critical to the integrity of a remarkably wide variety of relationships and institutions. (1) Lawyers, doctors, investment advisors, and other professionals are fiduciaries of their clients. Trustees, executors, and agents are fiduciaries of their beneficiaries, testators, and principals. Directors, officers, and trustees of corporations, hospitals, universities, and charities are fiduciaries of the legal entities under their charge. Parents and guardians are fiduciaries of their children and wards. These relationships and institutions are obviously of profound social and economic importance. Professional fiduciaries have charge of critical personal interests of their clients. Trustees have responsibility for great fortunes settled on trust for donative and commercial purposes. Directors and officers of non-profit and business corporations determine the disposition of vast amounts of wealth for charitable and commercial purposes. Parents and guardians determine most of what matters to the well-being of children and incapable adults.
Clearly, fiduciary duties are pervasive in modern civil society. Whether we are aware of it or not, virtually all of us have, in our lives or upon our deaths, interests subject to the discretion of a fiduciary. In most cases, where we rely on another person to represent us or to take tare of our person or property, we do so within a fiduciary relationship. Fiduciary law, as much as contract, property, or tort law, is a dominant mode of imposing legal structure on day-to-day life.
The mandates under which fiduciaries act differ widely across categories of fiduciary relationship. However, despite the diversity of factual scenarios in which fiduciary duties arise, these relationships share a set of legal principles common to all fiduciary relationships. Furthermore, all fiduciary relationships attract the consequences attached by law to this kind. The consequences are several. (2) Most prominent is the asymmetrical assignment of legal duties between the parties, notably the distinctive duty of loyalty. (3) All fiduciaries are, by virtue of this duty of loyalty, subject to exacting expectations of faithful service. Fiduciaries are expected only to pursue the interests of beneficiaries when executing a fiduciary mandate. To that end, the duty of loyalty strictly forbids conflicts of interest and conflicts of duty, on pain of powerful remedies that strip fiduciaries of any gains realized in breach. (4)
Surprisingly, given their importance, we know relatively little about the justification for fiduciary duties. Philosophers have generated important accounts of the justification for liability in tort, contract, property, and unjust enrichment. (5) However, they have been virtually silent on fiduciary duties. (6)
Claims that have been made about the justification for fiduciary duties reflect two analytical strategies. Reductivists allege that fiduciary duties are derivable from nonfiduciary forms of private liability (e.g., contract or tort). Reductivists assert that the justification for fiduciary duties, as a secondary form of liability, is the same as that of the primary nonfiduciary form of liability. Instrumentalists, by contrast, claim that fiduciary duties are directly justifiable on the basis of some independently-valuable end (e.g., a policy goal or moral norm). Most reductivist and instrumentalist argument capitalizes on important insights about the juridical character of fiduciary liability. However, for reasons that I will develop below, these arguments are ultimately unsound. This article thus offers a novel account of the juridical justification for fiduciary duties.
Juridical justificatory argument aims to reveal the justificatory structure of the settled practices and principles of liability constitutive of a given legal form of an institution or mode of interaction (e.g., the idea of ownership, contract, gift, or treaty). As I shall explain, it is different from, but has certain affinities with, Weinrib's formalism and Zipursky's pragmatic conceptualism. (7) The juridical justification for fiduciary duties contends that formal characteristics of the fiduciary relationship support fiduciary duties in all circumstances in which fiduciary duties arise.
The argument will unfold as follows. Part I explains the nature of the problem of justification. Part II offers a thin description of the juridical character of fiduciary liability, making stipulations necessary to motivate the critical and constructive contributions of the article. Parts III and IV critically assess leading claims about the justification for fiduciary duties and emphasize insights about the juridical character of fiduciary liability that they afford. Collation of these insights permits the development of a thicker description of the juridical character of fiduciary liability. Part V advances this description as well as the novel juridical justification for fiduciary duties.
The Problem of Justification
Many private law theorists, economists and doctrinalists in particular, claim only descriptive ambitions for their work. Doctrinalists aim to clarify the operation of principles of private liability, to analyze actual or apparent doctrinal problems (ambiguities in, or inconsistencies or gaps between, legal principles), and to suggest ways in which these problems may be resolved in a manner consistent with logic and precedent. (8) Economists aim to explain private law, not (or not principally) in its own terms, but rather in terms of its general economic context or impact on any of a number of measures of economic welfare (e.g., efficiency in respect of social costs, transaction costs, or information costs). (9)
While much of private law theory is concerned with descriptive problems of explanation and classification, much of it is also given...