Imposing Fiduciary Duties on Political Partnerships

by Jennifer Kolton December 1 2006, 15:34

In a change from the ordinary politics of promoting the supremacy of one party platform over another, this past campaign season aspiring candidates promised bi-partisan cooperation on several key issues.  It is interesting to think, though, of what these candidates meant by “cooperation.”  Analogizing the promised cooperation to a legal partnership framework, candidates could be interpreted to have campaigned to form bi-partisan political partnerships under which they would owe fiduciary duties of loyalty and care to their political foes.  While cooperating under a duty of loyalty and care may sound appalling to the newly elected candidates, imposing legal-inspired fiduciary duties on political partnerships could benefit the American economic and political landscape. 

As a brief review of fiduciary duties, the Revised Uniform Partnership Act (RUPA) requires that a partner owes to the partnership and the other partners the duty of loyalty and the duty of care.[1]  The duty of care encompasses “refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.”[2]  The duty of loyalty includes an anti-theft provision, a prohibition against self-dealing, and a prohibition against competing against the partnership.[3]  In a revered opinion well-known to law students, Justice Cardozo described the standard of behavior for the duty of loyalty as “[n]ot honesty alone, but the punctilio of an honor the most sensitive.”[4] 

It is somewhat hard to believe that aspiring candidates envisioned serving the adverse party with the “punctilio of an honor the most sensitive.”  Additionally, in today’s world, without pointing to specific examples, the media highlights all sorts of “grossly negligent or reckless” conduct of well-known political figures, some who resign or are removed from office, and some who remain in office, with or without the disdain of the American public.  Alas, when we think of those bad apples who have gone astray in their political dealings, we doubt that political figures can cooperate with care and loyalty toward each other when they cannot refrain from their own acts of negligence or recklessness. 

Yet, all is not lost.  Shortly after the polls closed and the results were announced, prominent political leaders met and reaffirmed the spirit of bi-partisan cooperation echoed in campaigns throughout America.[5]   One leader stated “[w]e won’t agree on every issue . . . [but] we will do our very best to address big problems.”[6]  Another leader added that “we will work together – we being Republicans and Democrats, the president and the Congress – to solve the problems and make [Americans’] lives better, more secure and our country more safe.”[7]  Regardless of who these leaders are, or what parties they represent, the message is clear: political leaders want to work together to help America. 

This inspiring message, if put to use, could greatly benefit the American economy in terms of cooperating on issues such as social security, minimum wage, immigration, health care, and the war in Iraq.  What the message seems to lack at this point, however, are standards of conduct for this cooperation, which this article likens to the fiduciary duties imposed on legal partners. 

The duty of care, as applied to political partners, begins with one’s own actions and the reality of the political spotlight.  This duty encompasses the responsibility to refrain from grossly negligent or reckless conduct, intentional misconduct, and knowing violations of law.  Several political examples of breaches of this duty come to mind – lying under oath, breaking into an opposing party’s national headquarters, and violating campaign finance laws, to name a few.  Abidance by this duty, and the subsequent diminution of such breaches, would allow politicians, political parties, and cooperative alliances more time to focus on key issues and less time fighting corruption.  Although the duty of care begins with individual political behavior, the duty would serve political partnerships as a whole as a mechanism to regulate political conduct.   

The duty of loyalty would require politicians to put aside their differences when serving a political partnership to solve looming problems such as social security.  Today’s working generation works without definite security that there will be anything left in the social security system to supplement their retirement.  With regards to issues like social security, there is no room for self-dealing or competing against the political partnership, because to do so would prolong the life of the issue until it is too late to make a positive difference.  Furthermore, on issues like social security, political figures are not only partners, but also could be viewed as directors of an American corporation, with the duty to do what is best for the shareholders of American citizenship. Yet, as either partners or directors, the accompanying fiduciary duties constrain politicians’ conduct to what is best for the country. 

Predictably, if politicians agreed to the complete scope of legal fiduciary duties they would have to sacrifice some degree of loyalty to their own party and set aside personal viewpoints on certain issues.  However, fiduciary duties in the political context are not expected to lead to complete agreement on all issues and are instead offered as a standard for political behavior in joint endeavors.  Indeed, it is the spirit of democracy, free speech, and open dialog that characterizes American politics.  Thus, as a last resort for particular issues, RUPA allows a partnership agreement to contractually restrict fiduciary duties provided that the agreement cannot eliminate the duty of loyalty or unreasonably reduce the duty of care.[8]  This would allow political cooperation on certain key issues, while reserving those hotly contested issues as categories that may be disputed without violating the duty of loyalty to the other party. 

As a final note, one might ask why imposing legal fiduciary duties would be more effective than other recourse, such as impeachment, media attention, and public condemnation.  First, while impeachment is a potential remedy, it is rarely used.  Second, political figures have suffered the effects of media attention and public condemnation for years, yet scandal persists.  As an alternative, fiduciary duties would constrain the need for impeachment, negative media attention, and public condemnation by imposing a standard of behavior that would preempt these ineffective constraints.  As a counterargument, fiduciary duties may lead to increased political litigation.  Yet, even the threat of judicial recourse for breach of the duty of care or loyalty may adequately deter reckless conduct or self-dealing.  At the very least, by recognizing the existence of the duties of care and loyalty, politicians know what is expected of them and consequently may not engage in behavior that would breach these duties. 

In summary, hopeful candidates recited campaign promises for bi-partisan cooperation.  After the election, American leaders then reaffirmed their intentions for such cooperation.  Yet, what is missing from this proposed cooperative equation is a standard of conduct.  To fill this void, bi-partisan political partnerships could model their behavior off the fiduciary duties of care and loyalty of legal partnerships to the benefit of the American society and economy.

[1] REV. UNIF. PARTNERSHIP ACT §404(a) (1997).

[2] Id. at §404(c).

[3] D. Gordon Smith & Cynthia A. Williams, BUSINESS ORGANIZATIONS: CASES, PROBLEMS AND CASE STUDIES 74 (Aspen Publishers 2004).

[4] Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928).

[5] See Dana Bash, Ed Henry & John King, Bush, Dems Promise Cooperation as Senate Shifts, CNN.COM, Nov. 9, 2006, at http://www.cnn.com/2006/POLITICS/11/09/election.main/index.html.

[6] Id.

[7] Id.

[8] REV. UNIF. PARTNERSHIP ACT, supra note 1 at §103.

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