Are Partners Fiduciaries?

Abstract

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.