Multiple Loyalties and the Conflicted Fiduciary

Abstract

Fiduciary loyalty is usually understood as implying an exclusive claim held by the beneficiary over the exercise of fiduciary power by a fiduciary. The beneficiary is said to have a right that the fiduciary exercise fiduciary power exclusively in her interest. The fiduciary is said to be subject to a correlative duty to act solely in the interests of the beneficiary in acting on a fiduciary power. Fiduciary loyalty so understood is a jealous form of partiality. The jealous or exclusive conception of fiduciary loyalty is largely, but not entirely, accurate. It captures the typical case in which the conduct of the fiduciary is constrained by proscriptive rules. But it ignores cases in which proscriptive rules must be held in abeyance because the fiduciary acts under an authorized conflict. Conflicted fiduciaries unsettle conventional wisdom about fiduciary loyalty. Supposing that a conflicted fiduciary cannot be expected to be exclusively partial to her beneficiary, in what sense can she nonetheless be expected to be partial to the beneficiary? Can a conflicted fiduciary have multiple but undivided loyalties? If so, how does the conflicted fiduciary prove her loyalty? The author addresses these and other questions in light of the Supreme Court of Canada’s recent decision in Sun Indalex Finance, LLC v. United Steelworkers.

Keywords: Philosophy of Private Law, Private Law Theory, Fiduciary Relationship, Fiduciary Duty, Duty of Loyalty, Conflict of Interest, Conflict of Duty, Constructive Trust

JEL Classification: K00, K10, K11, K12, K13, K20, K22, K31