Fiduciary duties arise out of the relationship of special confidence between parties. Per the Minnesota Court of Appeals, a fiduciary duty is “the highest standard of duty implied by law” and includes a “duty to act in the best interests of another.” D.A.B. et. al. v. Brown, 570 N.W.2d168,172 (Minn. App.1997); Watson’s Properties, LLC v. Menard, Inc., No. C0-01-2085, 2002 WL1364064 at *3 (Minn. App. June 19, 2002.)
Minnesota Common Law states:
a fiduciary relationship exists when confidence is reposed on one side and there is resulting superiority in influence on the other; and the relation and duties of the parties involved in it need not be legal, moral, social, domestic, or merely personal.
Toombs v. Daniels, 361 N.W.2d 801, 809 (Minn. 1985).
This means that an asymmetry in business knowledge with invited confidence could create a fiduciary relationship. However, just because two parties have long been acquaintances and one party has faith and confidence in another party, does not necessarily create a fiduciary relationship.
Fiduciary duties also exist in a corporate context. Directors and officers of corporations are fiduciaries to the corporation and its stockholders because directors and officers oversee the business affairs of the corporation. This is true under the common law but also under statute. Minn. Stat. §§ 302A.01-92 establish that officers and directors of Minnesota corporations have fiduciary duties.
Duty of Care
An officer or director has a duty of care to act as an ordinarily prudent person in like position would in similar circumstances. Minn. Stat.§ 302A.251, Subd. 1. Directors and officers must also inform themselves of all material information available to them prior to making business decisions. Failure to do so would be a breach of the duty of care to the corporation. But, Minnesota courts are reluctant to impose liability on officers and directors solely for breaching the fiduciary duty of care. In Warner v. E.C. Warner Co., 33 N.W.2d 721, 726 (Minn. 1948), the court noted that absent fraud, collusion, or like misconduct, the corporation would have no cause of action against the defendants for breach of duty of care.
Duty of Loyalty
Duty of loyalty means that officers and directors have to act in the best interest of the corporation and to hold those interests over their own. Officers and directors cannot serve their own personal interests at the expense of the corporation and its stockholders. However, a director does have some liberty when he or she determines what is in the best interest of the corporation. The Minnesota Business Corporation Act allows the director to consider:
- The interests of the corporation’s employees, customers, suppliers, and creditors,
- The economy of the state and nation,
- Community and societal considerations, and
- The long term as well as short term interests of the corporation and its shareholders including the possibility that these interests may be best served by the continued independence of the corporation. Minn. Stat. § 302A.251, Subd.5
In order to satisfy the duty of loyalty, officers and directors must also act in good faith. Minn. Stat. § 302A.251, Subd.1, § 302A.361. The Minnesota Business Corporation Act specifically defines good faith as “honesty and fact in the conduct of the act or transaction concerned.” Minn.Stat. § 302A.011, Subd.13. In other words, an officer or director must have proper motivation to satisfy the duty of loyalty when acting in the best interest of the corporation.