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Is Every Agent A Fiduciary?

In common parlance, a fiduciary is someone you can trust.  The word itself is related to the Latin word, fidere, meaning to trust.  We name our dogs “Fido” because dogs are trustworthy companions.  For example, a dog named Hachiko (忠犬ハチ公) faithfully returned every day for nine years to Shibuya Station in Tokyo to greet his master who had passed away.

Corporations certainly place trust in their officers as their agents, but are officers fiduciaries because they are agents?  The Restatement (Third) of Agency unequivocally defines agency as a fiduciary relationship:

Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.

California’s definition of “agency” is found in Civil Code Section 2295.  Notably missing from this definition is any characterization of the relationship as “fiduciary”:

An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency.

Section 2322(c) of the Civil Code, however, provides that the authority to act as an agent, however broadly expressed, does not authorize the agent to “a duty to which a trustee is subject under Section 16002, 16004, 16005, or 16009 of the Probate Code.  These sections of the Probate Code define a trustee’s duty of loyalty (§ 16002), to avoid conflicts of interest (§ 16004), not to undertake an adverse trust (§ 16005), and to keep trust property separate and identified (§ 16009).  Surely, this is a most determinedly roundabout way of describing an agent’s duties.  Nonetheless, California courts, citing Section 2322(c), have found “Any agent is also a fiduciary, whose obligation of diligent and faithful service is the same as that of a trustee.”  Duffy v. Cavalier, 215 Cal. App. 3d 1517, 1534 (1989).

In addition, a corporate officer may also be an employee of the corporation.  The California Labor Code defines both the standard of performance and the obligations of employees to their employers.  For example, Section 2860 provides “Everything which an employee acquires by virtue of his employment, except the compensation which is due to him from his employer, belongs to the employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.”

© 2010-2017 Allen Matkins Leck Gamble Mallory & Natsis LLP

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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