Are Partners Fiduciaries?
Larry E. Ribstein (Deceased)
University of Illinois College of Law; PERC - Property and Environment Research Center
University of Illinois Law Review, Symposium Issue, Vol. 2005, No. 1, February 2005
Illinois Public Law Research Paper No. 04-20
U Illinois Law & Economics Research Paper No. LE04-008
The proliferation of partnership-type entities raises many questions about how the traditional rules of business entities will be tailored for these new contexts. This includes questions concerning default fiduciary duties in partnership-type firms. In particular, should fiduciary duties apply to manager-owners as well as to managers in firms with passive owners? In contrast to Justice Cardozo's famous dictum in Meinhard v. Salmon, Professor Ribstein concludes that partners, as such, are not fiduciaries because they do not delegate open-ended control to their co-partners. Extending fiduciary relationships beyond this specific situation would increase litigation and contracting costs, decrease the effectiveness of owners' governance rights, and dilute true fiduciaries' legal and extralegal incentives.
Number of Pages in PDF File: 41Accepted Paper Series
Date posted: September 27, 2004
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