When Do Your Clients Owe Fiduciary Duties?

A fiduciary duty is the highest standard of duty imposed by law.

According to Black’s Law Dictionary, a fiduciary is “[a] person who is required to act for the benefi t of another person on all matters within the scope of their relationship,” and, thus, a fiduciary relationship is one founded on trust and confidence reposed by one person in the integrity and fidelity of another.  As Justice Cardozo articulated it early in his career, the standard of behavior for a fiduciary is “not honesty alone, but the punctilio of an honor the most sensitive.” Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546 (1928). And, according to the Minnesota courts, the law imposes on a fiduciary “the highest obligation of good faith, loyalty, fair dealing and full discharge of material matters” affecting the party to whom the duty is owed. Comm. Assocs., Inc. v. Work Connection, Inc., 712 N.W.2d 772, 779 (Minn. App. 2006).

Most attorneys and clients recognize that relationships founded on trust and confidence are fiduciary in nature. Thus, for example, attorneys and accountants are fiduciaries for their clients, physicians owe a fiduciary duty to their patients, and agents generally owe a fiduciary duty to their principals. Not unsurprisingly, many clients, even fairly sophisticated persons or entities, lack a good understanding of the other types of relationships or circumstances that may give rise to a fiduciary duty on their part vis-à-vis other parties.  Although by no means exhaustive, this article identifies some of the more common ways in which clients subject themselves to the heightened, fiduciary obligation.