Weekend Open Thread: The Failed Fibbing Fiduciary


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I haven’t gotten to write much about impeachment since the hearings started, though I’ve been glued to the NPR feed most of the time, so we might as well take on a light but timely look at the “high crimes and misdemeanors” standard for impeachment.

The whole debate over what a “high crime and misdemeanor” is, which is pretty well established in law but which we’ll see the Republicans try to muddy up starting on Saturday, seems to have missed out on the most obvious example of the standard that we have in our legal system: the “fiduciary relationship.”  (Because this is a big part of commercial and corporate law, Trump should know what it is from business school, even if not his own life..)

This seems to be such a clear analogy, and one that people should largely be able to understand based on their knowledge of other fiduciary relationships in their lives, that I can’t understand why (so far as I can tell) Democrats or other observers haven’t raised it.

A fiduciary relationship — like the one you have with your bank, your lawyer, your real estate agent, or your business partner,  but not with a salesperson, a sports coach, a restaurant, or gardener — allows your partner in that relationship tremendous latitude in terms of how it does its business.  But there also some lines that it can’t cross: a duty of competent care and a duty of loyalty.

An entity can have a fiduciary relationship with any other type of entity — person, business, corporation, trust, religious institution, animal (as in the case of some wills), or even a nation.  The “fiduciary relationship” defines (not perfectly, but pretty aptly) the relationship is between the President — who is both the leader and servant of the country — and the country itself under the Constitution.

What constitutes due “care” in the President’s responsibility to the country is up for argument — though not whimsically refusing to provide legally approved and obligated aid to a strategic ally whom we’ve promised to protect in return for their giving up nuclear weapons when it is involved in a shooting war with a strategic opponent, in a case where providing that aid is not likely to provoke attack  (as was the case under Obama when Russia invaded Crimea), might be a classic case of as breach of the duty of care — but the duty of loyalty is pretty clear.  In most fiduciary relationships, you can charge a mutually agreed upon fee or cut for your services, but you can’t cheat the beneficiary of your trust, either directly or by diverting gain from them to you.

A “high crime or misdemeanor” may thus be thought of a serious material (one that matters) breach of this fiduciary relationship.  The fit isn’t perfect, but it’s something that we’re all familiar with in examples like our banker, our lawyer, our real estate agent, or our business partner.  In the business world it also applies to CEOs and members of a Board of Directors — and, guess what?  the “CE” in “CEO” stands “Chief Executive” and the Chair of the Board often also has the title of “President.”

You want to know more?  OK, take it away, Wikipedia!  (Internal links removed; go there yourself.  Underlined emphasis is mine.)

fiduciary duty is the highest standard of care in equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the “principal“) such that there must be no conflict of duty between fiduciary and principal, and the fiduciary must not profit from their position as a fiduciary (unless the principal consents). The nature of fiduciary obligations differs among jurisdictions, [and can contain either or both proscriptive (or negative) and prescriptive (positive) fiduciary obligations.

In English common law, the fiduciary relation is an important concept within a part of the legal system known as equity. In the United Kingdom, the Judicature Acts merged the courts of equity (historically based in England’s Court of Chancery) with the courts of common law, and as a result the concept of fiduciary duty also became applicable in common law courts.

When a fiduciary duty is imposed, equity requires a different, stricter standard of behavior than the tortious duty of care in in common law. The fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, not to be in a situation where their fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from their fiduciary position without knowledge and consent. A fiduciary ideally would not have a conflict of interest. It has been said that fiduciaries must conduct themselves “at a level higher than that trodden by the crowd”and that “[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty.”

When Donald Trump endangered our relationship with Ukraine, — and with Poland and other countries in Eastern Europe that it blocks from Russia — by withholding aid, it may or not have violated a fiduciary duty of competent care, and the President deserve ample benefit of the doubt about such decisions.  (Although maybe not this much.  His actions will leave a permanent mark on the country, making other nations less willing to trust us just in case we elect someone like this again.  For example, in retrospect, Ukraine probably shouldn’t have given up its nuclear weapons — and other countries in similar situations will be less likely to do so.)  But at a minimum straining the duty of care raises the stakes over any breach of the duty of loyalty at issue in such decisions.

And that’s the impeachment fight in a nutshell.  President Trump may have had the right to sell Ukraine down the river — although that right is not unbridled.  (He probably couldn’t claim that a refusal to defend Hawaii from attack satisfied his duty of care.)  But to make such a decision based on a conflict of interest — in that he was willing to give that aid but he wanted to get the basis for an anti-Biden talking point and ultimately campaign ad out of it — that is a gaping breach of the duty of loyalty that in turn, exposes his lack of competent care as unjustifiable.  And that’s why this is clearly an impeachable offense.

This is your Weekend Open Thread.  Talk about that, or whatever else you’d like, under reasonable bounds competent care.


About Greg Diamond

Somewhat verbose attorney, semi-retired due to disability, residing in northwest Brea. Occasionally runs for office against bad people who would otherwise go unopposed. Got 45% of the vote against Bob Huff for State Senate in 2012; Josh Newman then won the seat in 2016. In 2014 became the first attorney to challenge OCDA Tony Rackauckas since 2002; Todd Spitzer then won that seat in 2018. Every time he's run against some rotten incumbent, the *next* person to challenge them wins! He's OK with that. Deposed as Northern Vice Chair of DPOC in April 2014 (in violation of Roberts Rules) when his anti-corruption and pro-consumer work in Anaheim infuriated the Building Trades and Teamsters in spring 2014, who then worked with the lawless and power-mad DPOC Chair to eliminate his internal oversight. Expelled from DPOC in October 2018 (in violation of Roberts Rules) for having endorsed Spitzer over Rackauckas -- which needed to be done. None of his pre-putsch writings ever spoke for the Democratic Party at the local, county, state, national, or galactic level, nor do they now. One of his daughters co-owns a business offering campaign treasurer services to Democratic candidates and the odd independent. He is very proud of her. He doesn't directly profit from her work and it doesn't affect his coverage. (He does not always favor her clients, though she might hesitate to take one that he truly hated.) He does advise some local campaigns informally and (so far) without compensation. (If that last bit changes, he will declare the interest.)