Also known as: fiduciary duties of loyalty · duty of loyalty
Written by attorneys · grounded in primary & secondary sources — see below
An obligation imposed on a fiduciary to act solely for the benefit of the principal or beneficiary. The duty requires the fiduciary to account for any property profit or benefit derived from the relationship and prohibits self-dealing or competition with the beneficiary's interests.
Felicity French serves as a member of Falcon Dynamics, a member-managed LLC. She negotiates a supply contract on behalf of the company and secretly routes a portion of the payments to her personal account. The company later discovers the diversion and demands that Felicity account for the funds received.
Francisco Frost and Felicia Fuentes form a limited partnership. Their agreement purports to eliminate the general partner's duty of loyalty in all future dealings. A limited partner later challenges a transaction in which the general partner profited at the partnership's expense.
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Felix Franco and Floyd Franklin operate a general partnership. Their agreement attempts to remove the duty of loyalty for any transaction the partners later approve. One partner later claims the waiver shields a self-dealing sale of partnership assets.
A criminal defendant directs defense counsel to present testimony the lawyer knows is false. Counsel refuses to present the testimony and informs the court of the perjury after attempting to dissuade the client.
Francesca Fiore serves as general partner of Frostline Textiles LP. She receives a kickback from a supplier in exchange for awarding a contract without disclosing the payment to the limited partners.
Fairview Manufacturing's partners learn that one partner sold equipment to the partnership at an inflated price. After receiving full disclosure of the pricing and relationship, all partners vote to approve the transaction.
Yes. An agent is a fiduciary with respect to matters within the scope of the agency and must put the principal's interests ahead of the agent's own or those of competing clients.
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No. A partnership agreement may not alter or eliminate the duty of loyalty except as otherwise provided in the statute.
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All partners may authorize or ratify the transaction only after full disclosure of all material facts.
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Yes. The duty of loyalty requires the member to account to the company and hold as trustee any property profit or benefit derived from the conduct of the company's activities or from appropriation of a company opportunity.
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No. Counsel's duty of loyalty does not extend to assisting a client in committing perjury and counsel must first attempt to dissuade the client then consider withdrawal or disclosure.
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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…