Also known as: fiduciary duty of care · fiduciary duty of loyalty · fiduciary duty of good faith · fiduciary duty · duties of care and loyalty
Written by attorneys · grounded in primary & secondary sources — see below
Duties that a fiduciary owes to the beneficiary. The duty of care requires the fiduciary to act with the skill and diligence that a reasonably prudent person would exercise in similar circumstances. The duty of loyalty requires the fiduciary to place the beneficiary's interests above the fiduciary's own and to account for any profits derived from the relationship. The duty of good faith requires the fiduciary to act honestly and without self-dealing.
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Fatou Fall, a member of a member-managed LLC, used her position to secure a contract that funneled a side payment to her personal account. The company discovered the payment and demanded an accounting. Fall must turn over the profit because the duty of loyalty requires her to hold as trustee any benefit derived from the conduct of the company's affairs.
Fumiko Fujimoto, a general partner in a limited partnership, arranged financing for the partnership and received an undisclosed commission from the lender. The limited partners sued to recover the commission. Fujimoto must account for the payment because the duty of loyalty requires her to hold as trustee any profit derived from the conduct of the partnership's affairs.
Felicia Fuentes, a partner in a general partnership, learned of a business opportunity through partnership contacts and pursued it personally without disclosure. The partnership sued to recover the resulting profits. Fuentes must surrender the gains because the duty of loyalty requires her to account for any benefit derived from the conduct of the partnership's business.
Francesca Fiore, personal representative of an estate, sold estate property to a corporation in which she held a substantial interest without court approval. The beneficiaries sued for damages. Fiore is liable to the same extent as a trustee of an express trust because the exercise of her power was improper and breached her fiduciary duty.
Frederick Ferguson, a promoter forming a corporation, sold his own land to the new entity at a markup without disclosing the profit to all contemplated initial investors. The corporation sued to rescind the transaction. Ferguson must disgorge the secret profit because promoters owe a fiduciary duty of loyalty that requires full disclosure and approval from all original investors.
Fabian Flynn, a director of a public corporation, circulated a proxy statement containing material misrepresentations to secure shareholder approval of a merger. A shareholder sued to set aside the merger. The directors' fiduciary duties of care, loyalty, and good faith support a private right of action for damages caused by the misleading solicitation.
Yes. The duty of loyalty requires full disclosure of any conflict so that the beneficiary can decide whether to consent or take other protective action. Failure to disclose prevents informed ratification and exposes the fiduciary to liability for resulting profits or losses.
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…proposing the merger. The complaint was in two counts, the first based on diversity and claiming a breach of the directors' fiduciary duty to the stockholders. The second count alleged a violation of § 14(a)[^maj-1] of the Securities Exchange Act of 1934 with reference to the proxy solicitation material. The trial court held…
…“corporate democracy,” presumably the Court means the rights of shareholders to vote and to bring derivative suits for breach of fiduciary duty
…there was a market shortage. The Second Circuit turned aside an effort by small shareholders to bring this claim of breach of fiduciary duty
…case involving "the reach and coverage of § 10(b)," 430 U. S., at 464, we considered whether § 10(b) "reached breaches of
…term 'material' is used in this context to mean relevant and of a magnitude to be important to directors in carrying out their fiduciary duty of care
No. Liability for breach of the duty of loyalty turns on the fiduciary's improper conduct and the resulting benefit to the fiduciary, not on proof of loss to the beneficiary. The fiduciary must account for any secret profit even if the beneficiary is unharmed.
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The duty of care imposes an objective standard of ordinary experience and intelligence. A fiduciary is also held to any higher standard she purports to possess, so both the objective and subjective components must be satisfied.
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No. The duty of loyalty prohibits competition concerning the subject matter of the agency even when the agent works only evenings and weekends. Secret formation of a competing venture while the relationship continues constitutes a breach regardless of the timing of the work.
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