Research Handbook on Fiduciary Law
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Research Handbook on Fiduciary Law

Edited by D. G. Smith and Andrew S. Gold

The Research Handbook on Fiduciary Law offers specially commissioned chapters written by leading scholars and covers a wide range of important topics in fiduciary law. Topical contributions discuss: various fiduciary relationships; the duty of loyalty and other fiduciary obligations; fiduciary remedies; the role of equity; the role of trust; international and comparative perspectives; and public fiduciary law. This Research Handbook will be of interest to readers concerned with both theory and practice, as it incorporates significant new insights and developments in the field.
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Chapter 11: Culpable participation in fiduciary breach

Deborah A. DeMott

Abstract

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.

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