Categorical Versus Ad Hoc Fiduciaries and the Domain of Fiduciary Duties

Abstract: Economic analysis of fiduciary law suggests that the law tends to impose fiduciary duties in situations that involve a principal-agent problem. Yet many legal relationships entail agency costs but are not treated as “fiduciary” in nature. Moreover, while some relationships are fiduciary as a categorical matter (rules), others require courts to determine fiduciary status on an ad hoc basis (standards). Utilizing a framework based on rules versus standards, this Article explores why the law employs a bifurcated approach—both rules and standards—in classifying relationships as fiduciary or non-fiduciary. It then investigates what factors courts employ in making ad hoc fiduciary determinations. These factors are useful for analyzing why the law classifies certain agency relationships, but not others, as “fiduciary” and whether the existing legal framework is socially desirable. The analysis has implications for fiduciary theory and emerging areas of fiduciary law.