W.C. Bunting (Stetson University – College of Law) has postred The Forgotten Binary Paradigm in Modern Fiduciary Law on SSRN. Here is the abstract:
This Article identifies a fundamental but overlooked distinction in fiduciary law: fiduciary relationships exist in two qualitatively different forms that create vastly different consequences for personal liability. In “principal-agent relationships,” principals retain complete control rights and face vicarious liability for their agents’ wrongdoing. In “beneficiary-trustee relationships,” beneficiaries possess only beneficial control rights while trustees possess management control rights, in addition to control duties—shielding beneficiaries from automatic vicarious liability.
Current law obscures this distinction through imprecise nomenclature. Courts label attorneys “independent contractors” when denying vicarious liability for attorney wrongdoing yet acknowledge their fiduciary status. The Restatement (Second) of Agency compounds this confusion by creating the contradictory category of fiduciaries who are simultaneously “independent contractors” and “agents.” The Restatement (Third) of Agency abandons the term, “independent contractor,” altogether. This conceptual muddle extends to corporate law, where identical rules govern both closely held corporations (resembling principal-agent relationships) and public corporations (resembling beneficiary-trustee relationships).
The Article proposes the following terminology: “agents” for controlled fiduciaries whose principals face vicarious liability; “trustees” for autonomous fiduciaries whose beneficiaries avoid such liability; and “independent contractors” exclusively for non-fiduciary relationships. This framework helps clarify several doctrinal issues—from attorney-client liability to corporate veil-piercing to the scope of corporate constitutional rights. By making this implicit binary structure explicit, this Article provides a conceptual framework for determining when those who benefit from fiduciary relationships should bear responsibility for fiduciary misconduct. The result is a more nuanced law of fiduciary obligations that appropriately distinguishes between economic incentives and managerial control.
Highly recommended.