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Fiduciary relationships, Fiduciary liability, Property fiduciaries, Cognitive theory, Judicial behavior, Role schemas, Rothko v. Reis (In re Estate of Rothko), First Alabama Bank v. Martin, Millikan v. Hughes (In re Estate of Collins)


Courts | Legal History


Is there anything special or distinctive about fiduciary relationships? Or is the term "fiduciary" nothing more than a label that obscures rather than clarifies? Recently, several law-and-economics scholars, building on the economic literature on agency costs, have argued that nothing categorically distinguishes fiduciary from nonfiduciary legal relationships. So-called fiduciary relationships, they argue, are nothing more or less than contractual relationships.

This Essay hypothesizes that courts possess a fairly well-developed schema of the fiduciary role, but have not developed a comparable schema for ordinary contracting parties. The fiduciary role-schema often makes courts more likely to over-interpret behavior of fiduciaries than in the case of conventional contracts. This attribution of qualities to fiduciaries strongly influences how judges analyze the causes of losses to beneficiaries. In some cases, the fiduciary schema alone produces this attribution effect. In others, additional cognitive biases that behavioral decision theorists have identified and analyzed reinforce the schema. In the final Part of this Essay, I will discuss how the fiduciary schema may work together with the well-known hindsight bias to expose fiduciaries to an unusually high risk of liability.

Publication Citation

Published in: Cornell Law Review, vol. 85, no. 3 (March 2000).