Deborah A. DeMott
The chapter considers the effect of the highly prescriptive regulatory structure of the Investment Company Act of 1940, focusing attention upon the contours of fiduciary duties in mutual funds. It advances the thesis that assessment of the role and significance of fiduciary obligations regarding investment funds, both mutual and private, turns on their distinctive characteristics, including those prescribed by regulation. It notes that the population of investment advisers now registered with the SEC includes many who advise at least one private fund, and their actions during the financial crisis suggest that advisers’ practices call into question whether they are acting consistently with their fiduciary duties.
Deborah A. DeMott
This chapter makes a case for the salience of tort law to fiduciary law, focusing on actors who culpably participate in a fiduciary’s breach of duty, whether by inducing the breach or lending substantial assistance to it. Although the elements of this accessory tort are relatively settled in the United States, how the tort applies to particular categories of actors—most recently investment bankers who serve as M & A advisers—provokes controversy. The chapter also explores the less developed terrain of actors who breach governance duties that are not fiduciary obligations because the entity’s organizational documents eliminate fiduciary duties. When an accessory actor induces or otherwise assists a primary actor’s breach of a non-fiduciary governance obligation, the relevant accessory tort is likely to be wrongful interference with contract. The chapter identifies parallels and overlaps that connect wrongful interference to culpable participation in a fiduciary’s breach. Both are intentional torts for which liability turns on whether an actor in some fashion chose to participate in another actor’s breach of duty, as well as whether the secondary actor acted with knowledge of the primary actor’s duty and made a causally significant contribution to the breach. Both torts illustrate the foundational significance of duty in tort law: actors subject to liability on accessory theories do not owe duties that replicate those of the primary wrongdoer, who is linked by contract or a fiduciary relationship to the beneficiary. By committing an intentional tort, accessory actors breach duties they themselves owe. Framed within the ambit of tort law more generally, the outcomes in controversial M & A cases do not represent departures from well-established doctrine. Instead, these cases help to illustrate what’s distinctively wrongful about lending substantial and knowing assistance to another actor’s breach of duty. The accessory wrongdoers in the chapter represent inversions of a well-known set of actors in tort doctrine, rescuers. Rescuers intervene as strangers to a situation in which another is in peril with the objective of preventing harm or mitigating its consequences for the imperiled person. Like reflected figures in a warped mirror, accessory wrongdoers choose to intervene in situations in which one actor owes a duty to another but, if the intervention succeeds, the person owed the primary duty is left worse off than had the accessory not aided the breach.