Equitable Fiduciaries, Business Organization Fiduciaries, and Cognition: Explaining the Divide in Fiduciary Obligation Law

Abstract

Scholarship on fiduciary obligation law has long been divided into two camps: traditionalists and contractarians. Those two camps have largely been talking past each other, however, because each fails to appreciate that there are really two distinct, coherent bodies of fiduciary obligation law. There are traditional fiduciary relationships rooted in equity and modern, statutory and contractual fiduciary relationships. Much of the confusion in the case law can be attributed to judges attempting to apply assumptions developed for traditional, equitable fiduciary relationships to modern, statutory and contractual fiduciary relationships where those assumptions no longer belong.Scholars and judges should appreciate that there are two bodies of fiduciary obligation law and that they require different approaches. Rather than the top-down analysis that has typically been applied to traditional fiduciary obligations, judges should apply a bottom-up analysis to modern, statutory and contractual obligations. That is, judges should perform a data-driven analysis that closely examines the relative statutory and contractual language. This will better fit the needs of legislatures in providing for those fiduciary relationships and the needs of parties in entering into them. The modern, statutory and contractual form of fiduciary obligation is a rational response to a design problem stemming from changes in the law and in the economy.