Good Faith and Fiduciary Duties to Third Parties, Principals and Partners

1. Good Faith and Fiduciary Duties to Third Parties, Principals and Partners By Dean Donald J. Weidner Florida State University College of Law For the College of Advanced Judicial Studies Naples, Florida, June 8, 2012

2. Fiduciary Duties In General • The primary fiduciary duties are (a) care and (b) loyalty, with loyalty being very powerful. • Good faith is also sometimes discussed as a fiduciary duty. • There has never been a bright line between these duties. • Stone v. Ritter, 911 A.2d 362 (Del. 2006) discusses the ebb and flow among the duties of care, loyalty and good faith. • There are colliding judicial philosophies on fiduciary duties. • The statutes governing various business organizations intervene significantly in this area. Donald J. Weidner

3. The Grand Old Florida Case on Fiduciary Duties • Quinn v. Phipps, 113 So. 419 (1927). • Justice Terrell: “The Term ‘fiduciary or confidential relation’ is a very broad one. It has been said that it exists, and that relief is granted, in all cases in which influence has been acquired and abused-in which confidence has been reposed and betrayed. The origin of the confidence is immaterial. The rule embraces both technical fiduciary relations and those informal relations which exist whenever one man trusts in and relies upon another.” Donald J. Weidner

4. The Grand Old Florida Case (cont’d) • More from Justice Terrell: “Stripped of all embellishing verbiage, it may be confidently asserted that every instance in which a confidential or fiduciary relation in fact is shown to exist will be interpreted as such. The relation and duties need not be legal; they may be moral, social, domestic or personal. If a relation of trust and confidence exists between the parties (that is to say, where confidence is reposed by one party and a trust accepted by the other, or where confidence has been acquired and abused), that is sufficient as a predicate for relief. The origin of the confidence is immaterial.” (emphasis added) Donald J. Weidner

5. Others Reject Special Treatment of Fiduciary Duties Contractarians Reject the Special Treatment of Fiduciary Duties. “Fiduciary duties are not special duties; they have no moral footing; they are the same sort of obligations, derived and enforced in the same way, as other contractual undertakings.” (emphasis added) Frank H. Easterbrook and Daniel R. Fischel, Contract and Fiduciary Duty, 31(1) J.L. & Econ. 425, 427 (1993). Donald J. Weidner

6. Fiduciary Duties Not Special (cont’d) More from Easterbrook and Fischel: “Scholars of non- or antieconomic bent have had trouble coming up with a unifying approach to fiduciary duties because they are looking for the wrong things. They are looking for something special about fiduciary relations. There is nothing special to find. There are only distinctive and independently interesting questions about particular consensual (and thus contractual) relations. . . . Searching for the right definition of a fiduciary duty is not a special puzzle. In short, there is no subject here, and efforts to unify it on a ground that presumes its distinctiveness are doomed.” Id. at 438. (emphasis added) Donald J. Weidner

7. Others Insist that Fiduciary Duties Are Special “But fiduciary relationships also have important features which differ from those of loan transactions and agreements for the purchase and sale of goods. Though fiduciary relationships may, like marriage relationships, be part of the same genus, they are, like marriage relationships, members of a different species. They differ in doctrinal structure. They differ in ethical basis. Some contractualist writing, going beyond suggestions as to lexical definition, denies one or the other of these two propositions. This Article aims to establish that both are true.” Scott FitzGibbon, Fiduciary Relationships Are Not Contracts, 82 Marq. L. Rev. 303, 305 (1999). Donald J. Weidner

8. Historical Treatment by Courts Contracts Embracing Fiduciary Relationships Have Been Treated Specially. “Traditionally, a contract embracing a fiduciary relationship is treated specially. The law of agency states that agency ‘is both a consensual and a fiduciary relation.’ Although the agency relation normally involves a contract, ‘it is a special kind of contract, since an agent is not merely a promisor or a promisee but is also a fiduciary.’ This means that the agent's ‘duties are similar to those of a testamentary trustee to the beneficiaries.’ Any ‘gaps’ in the contract are filled with this in mind, and specific provisions are interpreted with this is mind. Doubts are resolved against the fiduciary.” Donald J. Weidner, Cadwalader, RUPA and Fiduciary Duty, 54 Wash. & Lee L. Rev. 877, 901 (1997). Donald J. Weidner

9. Historical Treatment by Courts (cont’d) • It is often easier to establish a breach of a fiduciary duty than of a contractual duty • Burdens are often shifted against those who are classified as fiduciaries. • There may be greater remedies for breach of a fiduciary duty than of a contractual duty • Tort remedies, and not merely contract remedies, are often available for breach of fiduciary duties • Including punitive damages. Rest. 2d Torts § 874, Comment b (1979). Donald J. Weidner

10. Historical Treatment by Courts (cont’d) Fiduciaries Have Greater Burdens of Proof “Once the beneficiary shows that the fiduciary engaged in a transaction with the beneficiary, or affecting the beneficiary’s rights, courts usually impose the burden of proof on fiduciaries to prove they acted in good faith and fairly, with all that implies. This burden frequently cannot be satisfied by a preponderance of the evidence. Instead, the fiduciary may satisfy his burden only if he produces clear and convincing evidence of his probity and fair dealing. Fiduciaries may also be burdened with other procedural disadvantages in trials with their beneficiaries. Fiduciary status may also affect the statute of limitations.” Dan B. Dobbs, The Law of Torts § 696, at 747(2000). (emphasis added) Donald J. Weidner

11. Florida’s Leading “Bad Faith” Insurance Case Berges v. Infinity Ins. Co., 896 So.2d 665 (Fla. 2004). • Plaintiff had his car insured. He let a friend drive it. The friend drove drunk, crossed a center line and killed a mother and seriously injured her daughter. Plaintiff’s insurance policy limits were $10,000 bodily injury per person and $20,000 per accident. • The deceased’s husband, though not appointed a personal representative, made a time-limited offer to the Insurance Company to settle within policy limits. • Defendant Insurance Company did not pay the claim within the time limit, the offer to settle was withdrawn and a $1.4 million judgment was awarded against Plaintiff. • Insurance Company had not notified Plaintiff until one month after the expiration of the offer to settle “about the possibility of an excess judgment and his right to retain independent counsel.” • Plaintiff sued the Insurance Company for a bad faith refusal to settle and for failing to advise Plaintiff of the settlement offer. Donald J. Weidner

12. Berges v. Infinity Ins. Co. (cont’d) Justice Pariente: Case Concerns Fiduciary Obligation “This case concerns an insurer’s fiduciary obligation to protect its insured from a judgment exceeding the limits of the insurance policy.” Mostly Discussed in Terms of Good Faith Most of Justice Pariente’s opinion discussed “the duty of good faith” and the duty to act “fairly and honestly” toward the insured. That At Least Requires Due Care “An insurer, in handling the defense of claims against its insured, has a duty to use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business.” Imposed Because of Control over Another’s Affairs “For when the insured has surrendered to the insurer all control over the handling of the claim, including all decisions with regard to litigation and settlement, then the insurer must assume a duty to exercise such control and make such decisions in good faith and with due regard for the interests of the insured.” Donald J. Weidner

13. Berges v. Infinity Ins. Co. (cont’d) Specific Aspects of the Duty of Good Faith: An insurer’s duty of good faith specifically obligates it to: • advise the insured of settlement opportunities, • advise on the probable outcome of the litigation, • warn of the possibility of an excess judgment, and • advise the insured of any steps he might take to avoid same. “The duty to inform the insured of the settlement opportunities is one of the duties subsumed within the duty of good faith owed by an insurer to an insured.” “The failure to inform the insured of the settlement offer does not automatically establish bad faith; it is simply one factor for the jury to consider in determining whether the insurer acted in bad faith.” Donald J. Weidner

14. Berges v. Infinity Ins. Co. (cont’d) • Justice Anstead, Concurring: “Where the insurance company knows that the liability is clear and the damages clearly in excess of the policy limits, that obligation usually requires an insurance company to seize upon any opportunity to settle within the policy limits.” 896 So.2d at 685 (emphasis added) Donald J. Weidner

15. Berges v. Infinity Ins. Co. (cont’d) Justice Wells, Dissenting: “[T]here are strategies which have developed in the pursuit of insurance claims which are employed to create bad faith claims against insurers when, after an objective, advised view of the insurer’s claims, bad faith did not occur. This is a strategy which consists of setting artificial deadlines for claims payments and the withdrawal of settlement offers when the artificial deadline is not met. The goal of this strategy is to convert a policy purchased by the insured which has low limits of insurance into unlimited insurance coverage.” (emphasis added) “Bad faith judgments against insurers drive up the premium costs for all insured's, particularly for insured's who purchase low-limits liability insurance policies. Liability insurance is a pool of money. The pool is filled by premiums and drained by claims.” “The decision in this case will have future impact on Florida citizens who need to have this insurance at affordable rates.” Donald J. Weidner

16. Berges v. Infinity Ins. Co. (cont’d) Justice Wells, Dissenting (cont'd): “I do not believe that it is acceptable for the Court to merely say that bad faith is a jury question. It is the Court’s responsibility to have logical, objective standards for bad faith and not to avoid setting definitive standards by declaring bad faith to be a jury question.” “The Court should recognize that it has the responsibility to reserve bad faith damages, which is limitless, court-created insurance, to egregious circumstances of delay and bad faith acts. The Court likewise has a responsibility to not allow contrived bad faith claims that are the product of sophisticated legal strategies and not the product of actual bad faith.” Id. (emphasis added) Donald J. Weidner

17. Berges v. Infinity Ins. Co. (cont’d) Justice Wells, Dissenting (cont'd): “Presenting all bad faith cases to a jury does not provide for the objective analysis required. What the jury knows in these cases is that there is a tragically and grievously injured victim, that the insured had very low limits of insurance, and that if the jury finds against the insurer, then all of the victim’s damages will be paid by the insurer. It is these very facts which are not allowed to be known by a jury in liability cases because of the known prejudicial influence these facts are known to have on jury verdicts.” (emphasis added) “I conclude that what is needed are express guidelines which include set time periods in which all insurers must presumptively make decisions on claims and issue payments. The guidelines should set out the conditions for payments such as for the appointment of guardians. There is also a need for defined penalties for failure to meet these time requirements rather than limitless insurance.” (emphasis added) Donald J. Weidner

18. Berges v. Infinity Ins. Co. (cont’d) Justice Cantero, Dissenting: Justice Cantero referred to the “fiduciary duty” of the insurer. 896 So.2d at 687. However, he would have held, as a matter of law, no breach of duty here. First set out the duty, citing Guiterrez: An “insurer must investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.” Boston Old Colony Insurance Co. v. Gutierrez, 386 So.2d 783, 785 (Fl. 1980)(emphasis by Justice Cantero). “To establish a breach of this duty, claimants must demonstrate more than mere negligence; they must prove the insurer acted in bad faith....that the insurer breached its fiduciary duty to the insured by ‘wrongfully refusing to settle the case within the policy limits, and exposing its insured to a judgment which exceeds the coverage provided by the policy.” Donald J. Weidner

19. Berges v. Infinity Ins. Co. (cont’d) Justice Cantero, Dissenting (cont’d): “An insurance company acts in bad faith in failing to settle the claim against its insured within its policy limits when under all the circumstances it could and should have done so had it acted fairly and honestly towards its insured and with due regard for his or her interest.” “Clearly mistakes and miscues do not meet this standard.” Donald J. Weidner

20. Florida Case Holding Church and Clergy Fiduciaries Doe v. Evans, 814 So.2d 370 (Fl. 2002). Justice Pariente, for the majority, writes: “[W]e hold that when a church, through its clergy, holds itself out as qualified to engage in marital counseling and a counseling relationship arises, that relationship between the church and the counselee is one that may be characterized as fiduciary in nature.”814 So.2d at 375. “[I]t is a question for the jury to determine whether a fiduciary relationship arose; the nature of that relationship; and whether as a result of the Church Defendants’ conduct, there was a breach of the Church Defendants’ duty as fiduciaries to Doe.” Id. Donald J. Weidner

21. Doe v. Evans (cont’d) Justice Wells, Dissenting: “To accept the present allegations as stating a cause of action results in there being an entirely unknown tort cause of action. This presents many questions. For example, what is the standard for the fiduciary duty? How is the standard to be evaluated? If this were pled as a malpractice action, the standard would be what a reasonably prudent counselor would or would not do under the circumstances. Of course, likely what is here being avoided is that a malpractice standard could inject church doctrine into the case which would result in the First Amendment bar.” 814 So.2d at 381. Donald J. Weidner

22. Agents as Fiduciaries Restatement of the Law (Third) of Agency § 1.01 (2006): “Agency is the fiduciary relationship that arises: [a] when one person (a “principal”) manifests assent to another person (an “agent”); [b] that the agent shall act on the principal’sbehalf and [c] subject to the principal’scontrol, and [d] the agent manifests assent or otherwise consents so to act.” Comment (e) to 1.01 states: Fiduciary signifies that an agent must act loyally in the principal’s interest, as well as on the principal’s behalf. Donald J. Weidner

23. Agents as Fiduciaries • “It is a legal conclusion whether a particular relationship is one of agency.” Comment (a) to 1.01. • “Whether a relationship is characterized as agency in an agreement . . . is not controlling.” Rest. 3d Sec. 1.02. • Returning to our basic question, why does it matter whether you classify a duty as fiduciary: • “Three types of consequences result from an agent’s fiduciary duties to the principal. First, if an agent breaches a fiduciary duty of loyalty, distinctive remedies are available to the principal. Moreover, burdens of proof are often allocated differently in cases alleging breach of fiduciary obligation than in civil litigation generally. A different limitation period may apply, and it may not begin to run until the principal discovers the breach of the fiduciary duty.” Comment (e) to Section 1.01.

24. Agents as Fiduciaries (cont’d) Catchall: One party to the relationship reposed trust and confidence in the other consistently with the other’s invitation. Restatement of the Law (Third) of Agency § 8 (2006). Most Agent Fiduciary Duty Questions Involve the Agent’s • Relationship to property owned by the principal • Confidential information concerning the principal • Undisclosed relationship with third parties who compete or deal with the principal • Undisclosed interest in transactions with the principal or competitive activity. Restatement of the Law (Third) of Agency § 1.01 (2006). Donald J. Weidner

25. Agents as Fiduciaries (cont’d) Agent has the duty to the principal to: • Act loyally for the principal’s benefit in all matters connected with the agency relationship. • Use care in acting on the principal’s behalf. • Use reasonable efforts to provide material information to the principal. • Explain all transactions that the agent has undertaken on the principal’s behalf to the principal. • Refrain from acting as or on behalf of a competitor of the principal during the agency relationship. Restatement of the Law (Third) of Agency § 8 (2006). Donald J. Weidner

26. Agents as Fiduciaries (cont’d) Agent has a duty to the principal to (cont'd): • Refrain from competing with the principal. • Refrain from misleading the principal about the agent’s intentions. • Refrain from using the principal’s property for the agent’s own purposes or those of a third party. • Refrain from communicating confidential information of the principal for the agent’s own purposes or those of a third party. • Manage the principal’s property. • Only use the property in his/her possession on the principal’s behalf, unless the principal consents to such use. Restatement of the Law (Third) of Agency § 8 (2006). Donald J. Weidner

27. Agents as Fiduciaries (cont'd) Agent has a duty to the principal to (cont'd): • Not to deal with the principal’s property, so that it appears to be the agent’s property. • Not to mingle the principal’s property with someone else’s. • Keep and render accounts to the principal of money or other property received or paid out on the principal’s account. • Act in accordance with the express and implied terms of any contract between the agent and principal. • Act reasonably and refrain from conduct that is likely to damage the principal’s enterprise. Restatement of the Law (Third) of Agency § 8 (2006). Donald J. Weidner

28. Agents as Fiduciaries (cont'd) Agent has a duty to the principal to (cont'd): • Act with care, competence, and diligence normally exercised by agents in similar circumstances. • If the agent claims to possess special skills or knowledge, there is a duty to act with care, competence, and diligence normally exercised by agents with such skills or knowledge. • Not to acquire a material benefit from a third party in connection with transactions conducted or other actions taken on behalf of the principal or otherwise through the agent’s use of the agent’s position. Duties can vary depending on the parties agreement, scope of the parties relationship, and the duration of the relationship. Restatement of the Law (Third) of Agency § 8 (2006). Donald J. Weidner

29. Agents as Fiduciaries (cont'd) Agent does not have a duty to the principal to disclose to the principal that the agent plans to engage in competition once the agency relationship has ended. During the agency relationship, an agent may take action, not wrongful, to prepare for competition following the termination of the relationship. Restatement of the Law (Third) of Agency § 8 (2006). Donald J. Weidner

30. Agents as Fiduciaries (cont'd) Avoiding a breach of fiduciary duty requires the agent to: • Obtain the principal’s consent • Act in good faith • Disclose all material facts that the agent knows or has reason to know or should know that would affect the principal’s judgment • Deal fairly with the principal Restatement of the Law (Third) of Agency § 8 (2006). Donald J. Weidner

31. Florida Case: No Agency and No Duty Donald J. Weidner Rice v. First Federal Sav. & Loan Ass’n of Lake County

32. B CL CL charges B a fee for “inspection and supervision” [1% of loan proceeds] Rice v. First Federal Sav. & Loan Ass’n of Lake County,207 So.2d 22 (Fla. 2d DCA 1968) Borrowers appealed from a judgment of foreclosure on a mortgage they gave on a building. B Note for $12,000 Construction Lender Mortgage on bldg. to be constructed partly with loan proceeds Building began to crumble (shortly after completion) Donald J. Weidner B CL Defaulted on note B CL Sued to foreclose Counterclaimed for damages for negligent inspection B CL [the building began to crumble because of construction defects]

33. Rice v. First Federal (cont’d) • Did Lender, “by undertaking the inspection of the construction site and requiring [borrowers] to pay a fee therefor, impliedly [contract] with [borrowers] to make such inspection for their benefit?” • If a Lender has a duty to its own shareholders to behave a certain way, should that duty extend to others who may suffer from its breach? • Such as Borrowers Donald J. Weidner

34. Rice v. First Federal (cont’d) • Court: A construction lender “has an interest in the progress and quality of the construction of its security proportional to the amount of the money invested and would reasonably be expected to inspect the construction and be entitled to additional compensation for its additional costs in making such inspection.” • Does this cut for or against imposing a duty on the lender in favor of the borrower? • Court’s apparent rationale • It is not necessary to impose liability to induce the lender to prevent losses because the lender is already under an economic incentive to engage in loss-avoiding behavior. • Here, the Lender’s agent did inspect the project. Donald J. Weidner

35. Rice v. First Federal (cont’d) • Court assumed that the Lender was not acting as an agent of the Borrower. Recall that under the Restatement Definition: Agency is the fiduciary relationship that arises when: • Principal manifests assent to another • That the other shall act on the principal’s behalf • And subject to the principal’s control • And the other manifests assent or consents so to act. Donald J. Weidner

36. Tort Remedies and the Fiduciary RelationshipRestatement (Second) of Torts § 874 (1979)Lake Placid Holding, Co. v. Paparone Donald J. Weidner

37. Restatement (Second) of Torts § 874 (1979) Violation of Fiduciary Duty Is Tortious Conduct “One standing in a fiduciary relation with another is subject to liability to the other for harm resulting from a breach of duty imposed by the relation.” Comment b: “A fiduciary who commits a breach of his duty as a fiduciary is guilty of tortious conduct to the person for whom he should act.” (emphasis added) “The liability is not dependent solely upon an agreement of contractual relation between the fiduciary and the beneficiary but results from the relation.” (emphasis added) “The remedy of a principal against an agent is ordinarily at law.” Donald J. Weidner

38. Florida Case on Punitive Damages Lake Placid Holding, Co. v. Paparone,508 So.2d 372 (Fla. 2d DCA 1987). Facts: • Purchaser’s assignee appeared as if he was not going to fulfill his obligation to develop and sell real estate. • Vendor filed an action seeking damages, specific performance, and foreclosure of vendor’s lien. • Vendor reacquired the property pursuant to settlement in lieu of foreclosure. • Real estate broker intervened to request portion of damages from the suit to cover her commission equal to a 50% undivided interest in the property. • Broker also claimed Vendor breached fiduciary duties and should pay punitive damages. Donald J. Weidner

39. Lake Placid Holding, Co. v. Paparone(cont'd) Judge Frank vacated findings of fraud and breach of fiduciary duty and reversed an award of punitive damages, stating: “We will not sustain an award of punitive damages for the breach of a contract save in the circumstance where the conduct producing the breach is itself endowed with the characteristics of an independent, actionable tort.” “Even a flagrant breach of contract will not support punitive damages.” “The proof which must be developed in order to warrant the award of punitive damages in the context of a breach of contract must rise to a level revealing malice, moral turpitude, wantonness ‘conceived in the spirit of mischief or criminal indifference to civil obligations.’” Donald J. Weidner

40. Fiduciary Duties In Partnerships Donald J. Weidner Florida’s Enactment of the Revised Uniform Partnership Act Jewel v. Boxer Cadwalader, Wickersham & Taft v. Beasley

41. General Standards of Partner’s Conduct (exclusive list of fiduciary duties) Revised Uniform Partnership Act §404 Florida’s Version West F.S.A. §620.8404 The only fiduciary duties a partner owes to the partnership and the other partnersare the duty of loyalty and the duty of care, as set forth in subsections (2) and (3). A partner’s duty of loyalty to the partnership and the other partners is limited to the following: • The only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care set forth in subsections (b) and (c). • A partner’s duty of loyalty to the partnership and the other partners is limited to the following: Donald J. Weidner

42. General Standards of Partner’s Conduct (cont'd) Revised Uniform Partnership Act § 404 Florida’s Version West F.S.A. § 620.8404 (a) To account to the partnership and hold as trustee for the partnership any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity; (1) To account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity; Donald J. Weidner

43. General Standards of Partner’s Conduct (cont'd) Revised Uniform Partnership Act § 404 Florida’s Version West F.S.A. § 620.8404 (b) To refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an interest adverse to the partnership; and (c) To refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership. (2) To refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an interest adverse to the partnership; and (3) To refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership. Donald J. Weidner

44. General Standards of Partner’s Conduct (cont'd) Revised Uniform Partnership Act § 404 Florida’s Version West F.S.A. §620.8404 (3) A partner’s duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. (4) A partner shall discharge the duties to the partnership and the other partners under this act or under the partnership agreement and exercise any rights consistently with the obligation of good faith and fair dealing. (c) A partner’s duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. (d) A partner shall discharge the duties to the partnership and the other partners under this [Act] or under the partnership agreement and exercise and rights consistently with the obligation of good faith and fair dealing. Donald J. Weidner

45. General Standards of Partner’s Conduct (cont'd) Revised Uniform Partnership Act § 404 Florida’s Version West F.S.A. §620.8404 (5) A partner does not violate a duty or obligation under this act or under a partnership agreement merely because the partner’s conduct furthers the partner’s own interest. (6) A partner may lend money to and transact other business with the partnership, and as to each loan or transaction, the rights and obligations of the partner are the same as those of a person who is not a partner, subject to other applicable law. (e) A partner does not violate a duty or obligation under this [Act] or under the partnership agreement merely because the partner’s conduct furthers the partner’s own interest. (f)A partner may lend money to and transact other business with the partnership, and as to each loan or transaction the rights and obligations of the partner are the same as those of a person who is not a partner, subject to other applicable law. Donald J. Weidner

46. General Standards of Partner’s Conduct (cont'd) Revised Uniform Partnership Act § 404 Florida’s Version West F.S.A. § 620.8404 (7) This section applies to a person winding up the partnership business as the person or legal representative of the last surviving partner as if the person were a partner. (g) This section applies to a person winding up the partnership business as the person or legal representative of the last surviving partner as if the person were a partner. Donald J. Weidner See Donald J. Weidner, Cadwalader, RUPA and Fiduciary, 54 Wash. & Lee L. Rev. 877 (1997). See also generally, Robert W. Hillman, Allan W. Vestal and Donald J. Weidner, The Revised Uniform Partnership Act (2011).

47. Partner’s Rights and Duties With Respect to Information FRUPA § 620.8403 sets out the partnership and partners’ rights and duties with respect to information. It is striking that these information duties are NOT fiduciary duties under the RUPA or FRUPA. See § 620.8403 (3)(a),(b) (1995). (3) Each partner and the partnership shall furnish to a partner, and to the legal representative of a deceased partner or partner under legal disability: • Without demand, any information concerning the partnership’s business and affairs reasonably required for the proper exercise of the partner’s rights and duties under the partnership agreement or this act; and • Upon demand, any other information concerning the partnership’s business and affairs, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances. Donald J. Weidner

48. Mandatory Fiduciary (and related) Duties (information and care) • Except for the mandatory rules listed in 620.8103(2), the partnership agreement controls the relations among partners and between the partnership and partner. 620.8103(1). • 620.8103(2) says the partnership agreement may not: • “unreasonably restrict the right of access to books and records under s. 620.8403(2) or to information under s. 620.8403(3).” • “unreasonably reduce the duty of care under s. 620.8404(3) or s. 620.8603(2)(c)” MANDATORY RULES CONTINUED ON NEXT SLIDE Donald J. Weidner

49. Mandatory Fiduciary (and related) Duties (cont’d)(loyalty) • 620.8103(2)(d) says the partnership agreement may not: “Eliminate the duty of loyalty under s. 620.8404(2) or s. 620.8603(2),” • However, the partnership agreement “may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable.” Also, ratification is authorized if full disclosure. 620.8103(d)(1) and (2). • MANDATORY RULES CONTINUED ON NEXT SLIDE Donald J. Weidner

50. Mandatory Fiduciary (and related) Duties (cont’d)(good faith and fair dealing) • 620.8103(2)(f) says the partnership agreement may not: “Eliminate the obligation of good faith and fair dealing under s. 620.8404(4),” • but the partnership agreement “may prescribe the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable.” • The prohibitions against unreasonable reduction and elimination are softer than the do not “vary” limitation on certain other rules. The hierarchy: • May not vary • May not unreasonably restrict or reduce • May not eliminate Donald J. Weidner