Fiduciary duties arise by operation of law (i.e., when a statute says a particular relationship is a fiduciary one) or where one person (i.e., the agent) agrees to act for and on behalf of another (i.e., the principal) in a particular matter giving rise to a relationship of trust and confidence. The fiduciary duty is breached where the agent’s personal interests and fiduciary duty conflict, where the fiduciary’s duty conflicts with another fiduciary duty, or where the fiduciary profits from his position without the principal’s express knowledge and consent.
In Minnesota, a variety of claims can be made by a plaintiff against an agent who fails to abide by his obligations. For example, an agent is subject to a duty to use reasonable efforts to give his principal information that is relevant to affairs entrusted to him and which, because the agent has notice, the principal would desire to have. Essentially, it is the agent’s duty to prove that full disclosure was made to the principal.
Furthermore, a duty of loyalty exists which requires an agent to set aside his personal or conflicting interests and act solely in the best interest of the princpal. Section 13 of the Restatement of Agency defines fiduciary as “a person who has a duty, created by his undertaking, to act primarily for the benefit of another in matters connected with his undertaking.” This fiduciary duty has been more specifically examined and has been explained to mean that an agent:
In his dealings with the principal, he has the duty of full disclosure; in acting for the principal he must not prefer his own [or other’s] interests, he cannot compete with the principal nor, without disclosure of his interest, sell his own property to the principal. In carrying out the directions of the principal, he has the duty of normal care.
Warren A. Seavey, The Law of Agency 235 (1964).
Generally speaking, a member of a limited liability company owes a fiduciary duty to the company and the other members (so long as the LLC is small). Also, an officer of a limited liability company owes duties to the LLC and other members (so long as the LLC is small).
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