Also known as: duty of care and loyalty · duty of care · duty of loyalty · fiduciary duties
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
A fiduciary obligation requiring a person in a position of trust such as an agent partner member or director to refrain from engaging in grossly negligent or reckless conduct, willful or intentional misconduct, or knowing violation of law.
A fiduciary obligation requiring a person in a position of trust such as an agent partner member or director to refrain from engaging in grossly negligent or reckless conduct, willful or intentional misconduct, or knowing violation of law.
Select any source to read its text and confirm it supports the definition.
A fiduciary obligation requiring a person in a position of trust such as an agent partner member or director to place the interests of the beneficiary ahead of personal gain by avoiding self-dealing and conflicts.
Select any source to read its text and confirm it supports the definition.
A fiduciary obligation requiring a person in a position of trust such as an agent partner member or director to place the interests of the beneficiary ahead of personal gain by avoiding self-dealing and conflicts.
Each sense below has its own examples, sources, and questions.
Danielle Dixon stood on a train platform when a package fell and exploded nearby. She suffered emotional distress but no physical impact. A court holds the railroad owes her no duty because she was outside the zone of foreseeable physical risk at the moment of the negligent act.
Daniel Diaz negligently drives toward a crosswalk creating an unreasonable risk of fright to pedestrians. Dylan Duffy suffers a heart attack solely from the resulting emotional shock. Diaz remains liable because the duty of care was designed to protect against bodily harm arising through fright.
Members must refrain from grossly negligent reckless willful or intentional misconduct or knowing violations of law. Ordinary negligence does not breach the duty.
Supporting sources
When conduct violates a duty designed to protect against fright that creates an unreasonable risk of bodily harm the actor remains liable even if harm occurs solely through internal operation of the fright.
Supporting sources
Dwight Dorsey a member of a member-managed LLC learns of a valuable lease during company business and takes it for himself. The company may require Dorsey to account for the profit and hold it as trustee because the opportunity arose in the conduct of the LLC's affairs.
Dakota Industries a limited partnership agreement states that general partners owe no duty of loyalty. When a partner diverts a partnership opportunity the clause is ineffective because the statute prohibits altering or eliminating the duty of loyalty.
Dynamic Solutions a general partnership agreement purports to eliminate the duty of loyalty. A partner who secretly competes with the firm remains liable because the statute forbids altering or eliminating the duty of loyalty except in limited circumstances not present here.
Damian Decker tells his lawyer he intends to commit perjury at trial. The lawyer refuses to present the testimony and threatens to inform the court. The lawyer's actions satisfy the duty of loyalty because assisting perjury is not part of effective assistance and ethical rules require remedial steps.
No. Uniform partnership statutes prohibit altering or eliminating the duty of loyalty except in narrow circumstances such as ratification after full disclosure. Any attempt to waive the duty outright is invalid.
Supporting sources
Yes. A member or partner who derives a profit or benefit from an opportunity arising in the conduct of the entity's affairs must account to the entity and hold the benefit as trustee.
Supporting sources
…to enjoin a proposed merger between Case and the American Tractor Corporation (ATC) on various grounds, including breach of the fiduciary duties of the Case directors, self-dealing among the management of Case and ATC and misrepresentations contained in the material circulated to obtain proxies. The injunction was denied and the…