The Role of Corporate Integrity Agreements in the Expansion of Fiduciary Duties

Abstract

Academics have long debated the purpose and scope of fiduciary duties. The academic debate has mostly ignored the role of Corporate Integrity Agreements (CIAs). CIAs can blur the line between the law and aspirational governance. As a contractual arrangement, the terms of CIAs between health care companies and the government require heightened compliance duties. Unlike regular contractual arrangements, however, the enforcement of CIAs goes beyond contractual remedies. The breach of a CIA can be treated like a breach of law for purposes of the duty of care. Courts are increasingly recognizing the role of CIAs and their implications for directors' fiduciary duties. A prominent recent decision, In re Pfizer, illustrates the role of CIAs in the evolution of fiduciary duties. Although the court in Pfizer did not conclude that the CIAs actually created fiduciary duties, the court opined that the CIAs imposed affirmative obligations on Pfizer's board that went well beyond the basic fiduciary duties required by Delaware law. A broader reading of this phraseology suggests that fiduciary duties could perhaps be augmented by contractual arrangements such as CIAs. It seems possible that future courts, in following this reasoning, may interpret CIAs as expanding the basic legal duty of care.