The Fiduciary
At the heart of courts’ interpretations of the fiduciary relationship is a concern that persons who assume trustee-like positions with discretionary power over the interests of others might abuse their position.10 Black’s defines a “fiduciary” as:

[a] person holding the character of a trustee, or a character analogous to that of a trustee, in respect to the trust and confidence involved in it and the scrupulous good faith and candor which it requires … [a] person having [a] duty, created by his undertaking, to act primarily for another’s benefit in matters connected with such undertaking…a person having duties involving good faith, trust, special confidence, and candor towards another.11

[T]he relation and duties involved need not be legal; they may be moral, social, domestic, or personal. If a relation of trust and confidence exists between the parties (that is to say, where confidence is reposed by one party and a trust accepted by the other, or where confidence has been acquired and abused), that is sufficient as a predicate for relief.15


Duty of a Fiduciary
The most basic duty of a fiduciary is the duty of loyalty, which obligates the fiduciary to put the interests of the beneficiary first, ahead of the fiduciary’s self interest, and to refrain from exploiting the relationship for the fiduciary’s personal benefit.18 This gives rise to more specific duties, such as the prohibition against self-dealing, conflicts of interest, and the duty to disclose material facts.19 Perhaps the most famous description of the duty of loyalty is by Chief Judge Benjamin Cardozo in Meinhard v. Salmon, 164 N.E. 545, 546 (N.Y. 1928):
Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.20

In addition to a duty of loyalty, a fiduciary also owes a duty of care to carry out its responsibilities in an informed and considered manner and to act as an ordinary prudent person would act in the management of his or her own affairs.21 If the fiduciary has special skills, or becomes a fiduciary on the basis of representations of special skills or expertise, the fiduciary is under a duty to use those skills.22

Leave a Reply