Prof. Larry E. Ribstein from the University of Illinois School of Law, a leading scholar on business entities, has given considerable thought to the concept of fiduciary duties.\u00a0 When this author thinks of fiduciary duties, he thinks of three broad obligations – care, confidentiality, and impartiality.<\/p>\n
Prof. Ribstein, in a recent article, seeks a unified fiduciary standard centered in the entrustment of property by one person to another.\u00a0 More precisely, Prof. Ribstein\u2019s \u201cdefinition [of a fiduciary relationship] focuses on the particular type of entrustment that arises from a property owner\u2019s delegation to a manager of open-ended management power over property without corresponding economic rights.\u201d<\/p>\n
In this way, \u201ca fiduciary relationship differs from the broader category of agency relationships.\u201d\u00a0 Prof. Ribstein finds the existence of a fiduciary relationship when \u201cthe resulting separation of ownership and control means the agent might manage the property so as to realize benefits without incurring the full costs of her conduct.\u201d<\/p>\n
As a corollary, Prof. Ribstein adds that his \u201cview of the fiduciary relationship is necessarily contractual in the sense that one becomes a fiduciary only by contract, including by contracting for a relationship in which the law says fiduciary duties arise.\u201d<\/p>\n
This interpretation makes a great deal of sense, because it focuses on the situations in which a fiduciary relationship may be said to arise<\/strong>.\u00a0 We look a transfer of control or management to a third party, in which the third-party is not subject to contractual restraints on misconduct.\u00a0 In this way, the law of fiduciary duties seeks to restrain misconduct by managers who otherwise may not be held accountable.<\/p>\n While I applaud Prof. Ribstein\u2019s coherent frame to determine when fiduciary relationships may be said to exist (more on this below), this author does not fully endorse his definition of fiduciary duties as consisting solely of \u201cthe strict fiduciary duty of selflessness.\u201d\u00a0 Prof. Ribstein adds that,<\/p>\n
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<\/a>Yet this author disagrees with the conclusion that, \u201cThe fiduciary duty of unselfishness should be distinguished from duties that can exist outside the fiduciary setting, including the duties of care, good faith and fair dealing, and to refrain from misappropriation.\u201d\u00a0 The fact that these duties can be said to overlap with other obligations at law does not mean that we should exclude them from the list of duties found applicable once a fiduciary relationship is established.<\/p>\n