Also known as: duties of loyalty and confidentiality · loyalty and confidentiality duty · fiduciary duty of loyalty · attorney duty of confidentiality
Written by attorneys · grounded in primary & secondary sources — see below
A fiduciary obligation requiring a person in a position of trust to act solely in the interest of the beneficiary or principal and to refrain from using confidential information for personal advantage. The duty encompasses both the prohibition on self-dealing or competition and the protection of information obtained through the relationship.
Darius Dixon, a member of Dixon Foods LLC, learns of a supplier discount available only because of the company's bulk purchasing power. He routes the discount into a personal account without informing the other members. The company later discovers the diversion and requires Dixon to account for the benefit received.
Dustin Donovan, general partner of a limited partnership that owns Drake Logistics, negotiates a volume rebate from a carrier that serves the partnership. He deposits the rebate into his own entity instead of the partnership account. The limited partners sue to recover the amount as a partnership asset.
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Darrell Duncan, a partner in a general partnership operating Decker Electronics, obtains a favorable component price solely through the partnership's order volume. He has the supplier pay the difference to a shell company he controls. The other partners demand that Duncan turn over the hidden margin.
Derek Douglas, outside counsel to Desert Oil, receives nonpublic details about an upcoming acquisition during the representation. He purchases shares in the target company before the information becomes public. The SEC brings an enforcement action alleging breach of the duty owed to the source of the information.
Damian Decker and other directors of a public corporation issue statements to shareholders that understate the company's liabilities. Shareholders who relied on the statements suffer losses when the true condition is revealed. The shareholders sue the directors for breach of the duty to communicate honestly.
Devon Drake and the other directors of a closely held corporation propose charter amendments that restrict shareholder nomination rights. They send notice that omits material facts about the effect of the amendments. A shareholder challenges the amendments as the product of a breach of fiduciary duty.
Yes. An agent must account to the principal for any profit obtained through the agency relationship, even if the profit came from a third party and even if the principal suffered no loss. The duty prevents the agent from retaining benefits that belong to the principal.
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No. Model Rule 1.8(d) prohibits a lawyer from making or negotiating an agreement for literary or media rights to a portrayal based in substantial part on information relating to the representation before the representation concludes. The prohibition protects the duty of loyalty and confidentiality.
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Yes. Even when a third party compensates the lawyer, the duties of loyalty and confidentiality run exclusively to the client. The lawyer may not disclose client information to the payor without the client's informed consent.
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The partner must disclose the opportunity and may not appropriate it for personal benefit without the consent of the other partners. The duty of loyalty requires the partner to account to the partnership for any profit derived from the opportunity.
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…theory, a fiduciary's undisclosed, self-serving use of a principal's information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of that information. In lieu of premising liability on a fiduciary relationship between company insider and purchaser or seller of the company's…