THE MORALITY OF FIDUCIARY LAW.

Date01 March 2021
AuthorMiller, Paul B.

TABLE OF CONTENTS INTRODUCTION 1352 I. GENERAL ANALYTICAL FRAMEWORK 1355 A Persons 1356 B. Interests 1357 C. Values 1359 D. Reasons 1360 E. Rules 1362 II. STRUCTURAL BIPLANARITY AND THE MORALITY OF FIDUCIARY LAW 1364 A. Structural Biplanarity in Fiduciary Law 1365 B. The General Morality of (Fiduciary) Duty-Imposing Rules 1368 C. The Special Morality of (Nonfiduciary) Power-Conferring Rules 1370 D. Why Structural Biplanarity Cannot Be Ignored 1373 III. LOCI OF VALUE IN FIDUCIARY RELATIONSHIPS 1375 A. Interests of Parties 1377 1. In Mandate Formation 1378 2. In Mandate Performance 1381 3. In Mandate Termination 1384 B. Interests of Third Parties 1386 1. In Mandate Formation and Termination 1386 2. In Mandate Performance 1389 3. As a Matter of Special Morality 1390 C. Interests of the General Public 1390 1. In Mandate Formation and Termination 1391 2. In Mandate Performance 1392 CONCLUSION 1393 INTRODUCTION

Fiduciary law traverses wide and irregular terrain. With time, equity has come to extend fiduciary duties to a highly diverse set of relationships. (1) Fiduciary law's reach varies by jurisdiction but has come to encompass relationships between parents and children, guardians and wards, agents and principals, trustees and beneficiaries, executors and trustees of estates and the beneficiaries of same, directors and corporations, and trustees and charities, to name just a few. (2) Furthermore, courts have shown increased willingness to extend fiduciary duties ad hoc to relationships outside categories of relationship of recognized fiduciary status. (3)

Equity has responded to this variegation partly by tailoring the content of fiduciary duties by relationship type. Consider the duty of loyalty. (4) Some fiduciaries are subject to a sole-interest standard of conduct, according to which they must avoid all unauthorized conflicts of duty or interest. (5) Others are subject to a best-interest standard, under which their loyalty is assessed in terms of the material impact of mandate performance on the pertinent interests of beneficiaries. (6) Yet others act under a solidarity standard, whereby loyalty is a function of maintaining solidarity in the performance of a mandate in which the fiduciary has an authorized beneficial stake. (7) Similar tailoring is evident in the specification of standards of conduct associated with other fiduciary duties. (8)

It is only relatively recently that fiduciary law has attracted the kind of synthetic analysis that allows one to view it as a field unto itself. Consistent with the need of synthesis, it should be unsurprising that fiduciary scholars have thus far focused mostly on providing high-level analyses of core concepts and principles. For example, in other work, I have examined the conceptualization of fiduciary relationships as well as the content and function of fiduciary duties. (9) Others have addressed similar questions, again aiming to provide synthesis. (10)

To this point, normative questions have received less attention. In my work, I have limited myself to the relatively modest claim that fiduciary duties and remedies are justified juridically on the basis of formal properties of fiduciary relationships. (11) I have not staked claims about the value(s) implicated by fiduciary relationships or how fiduciary duties and remedies do, or should, prove responsive to them. (12) But a few other theorists have. For example, Hanoch Dagan and Sharon Hannes have argued that financial fiduciary relationships are autonomy-enhancing inasmuch as the delegation of power to fiduciaries enables beneficiaries to engage in pursuits that they value more highly. (13) Tamar Frankel has argued that the morality of fiduciary law is centrally concerned with the value of trust. (14) And Evan Criddle has argued that fiduciary law is responsive to the republican value of non-domination. (15)

Each of these accounts has some plausibility. Setting aside relationships that structure administration of the affairs of incapable persons, it seems reasonable to think that fiduciary law often enhances autonomy insofar as it enables us to shift burdens of judgment and action to representatives. (16) The formation of fiduciary relationships usually features an "entrustment" of power, and the formation or performance of a fiduciary relationship might implicate trust in some richer sense. (17) Further, to the extent that all fiduciary relationships implicate representation, (18) it seems reasonable to suppose that fiduciary law is responsive to the value of non-domination. (19)

And this is not all. As I shall explain, fiduciary relationships implicate other important values. For example, those of protecting and promoting personal and social welfare, enabling care for dependents and those in need, and facilitating cooperation in joint pursuits. (20) Most fiduciary relationships call for the exercise of power in advancement of welfare interests of beneficiaries. (21) Virtually all of the arrangements in which we provide for dependents are structured by way of fiduciary mandate. (22) And all forms of organization supplied in law and at equity enable cooperation through fiduciary governance. (23)

What might all of this indicate about the morality of fiduciary law? In what follows I will argue that, in critical terms, it counsels avoidance of two mistakes: the first being normatively reductive analysis of the morality of fiduciary law (that is, in terms of a single value or limited set of values), and the second being structurally reductive treatment of the morality of fiduciary law in terms of fiduciary duties to the exclusion of power-conferring rules implicated in the constitution of fiduciary mandates. As for constructive indications, I shall argue two correlative points: first, the morality of fiduciary law is pluralistic as to its values and loci; and second, fiduciary law is structurally biplanar and thus inevitably normatively complex. Biplanarity and complexity are a function of the origin, function, and morality of the power-conferring rules upon which equity has engrafted fiduciary duties. (24)

The argument will unfold as follows. Part I provides a general framework for analysis of the morality of law that I assume in what follows. Part II explains the structural biplanarity of fiduciary law and shows how it generates normative complexity. Part III outlines loci of value in fiduciary relationships and shows how these values imply that the morality of fiduciary law is pluralistic. Then, I conclude with reflections on what the account of the morality of fiduciary law provided here might mean for understanding the wider normative relationship of equity to law.

  1. GENERAL ANALYTICAL FRAMEWORK

    The morality of fiduciary law is messy; here, much as ever, clarity might be achieved by settling a framework of analysis. That which is outlined below assumes arguendo the truth of moral realism and the relative advantages of interest theories of rights in analyzing the morality of private law. (25) It supposes that law, to the extent that it does or should prove responsive to objective moral value(s), manifests responsiveness in its recognition of, and apt responses to, the moral salience of the interests of persons.

    1. Persons

      I take it that law is invariably addressed to legal persons (26) and that it addresses persons in their capacity to engage, directly or indirectly (for example, via agents or representatives), in practical reasoning. Practical reason is defined as "the general human capacity for resolving, through reflection, the question of what one is to do" (27) and involves the identification of, differentiation between, deliberation with, planning in light of, and conforming of one's actions to, various kinds of practical reason, including those given by, and for, law.

      Additionally, I take it that legal persons are, directly or indirectly, the focal objects of law and associated practices of lawmaking and enforcement. (28) To say that persons are the objects of law is simply to say that the law's aims and functions are to advance or secure certain interests that persons do or can have and goods that are or can be in issue for them. Allow me to briefly elaborate.

      First, in saying that the law is addressed to legal persons, I mean to emphasize that it supplies normative guidance to individual legal persons. I do not mean that the content of the law addresses persons individually, for that would be incompatible with its generality. (29) Rather, I mean that, insofar as a core moral aim and social function of law is one of supplying normative guidance, (30) that guidance is of necessity addressed to persons individually, insofar as legal personality entails individuated capacities for rational deliberation and action. (31) This holds irrespective of the fact that the law's objects include relationships and associations because, to be effective, the law must (and does) guide persons who deliberate and act individually with respect to their interactions (relationships and associations) with others.

      Second, in saying that legal persons are the focal objects of the law, I mean, again, to emphasize that the law is a means by which to secure or advance the interests of legal persons, and so to realize the value(s) that give these interests their moral salience. Sometimes, the law protects or advances the interests that legal persons have personally, each in their own right (that is, as individuals). (32) But the law also protects and advances shared interests, including those that we can enjoy only relationally. (33) Differentiating the ways in which the law takes the interests of legal persons as its objects will become important when we consider the sense in which the nor-mativity of law is oriented by the moral salience of these interests.

    2. Interests

      I have said that legal persons are the focal objects of law. (34) But to say this is to say nothing, yet, as to how the law shows concern for persons...

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