Fiduciary Law and Good Faith

Abstract

This Chapter uses corporate law as a case study to evaluate the content of the fiduciary duty of good faith. Tracing its development from Van Gorkom through to the present, the Chapter shows how good faith, though part of the duty of loyalty, has become a gap-filler, policing the space between generally-exculpated breaches of care and the more obvious breaches of loyalty. This Chapter also surveys good faith case law to show the most common “red flags” for which corporate officers and directors should be monitoring. An analysis of two of the most recent good faith cases – City of Birmingham and In re Wells Fargo – show how the theory of publicness can be used to predict future good faith developments. Finally, the Chapter ends by showing that the duty of good faith’s expansion into trust law, parallels its corporate development by emphasizing its gap-filler function.