Saturday, May 20, 2017

Loyalty to Whom (or What)?

Loyalty has been in the news lately.  The POTUS, according to some reports, asked former Federal Bureau of Investigation ("FBI") Director James Comey to pledge his loyalty.  Assuming the basic veracity of those reports, was the POTUS referring to loyalty to the country or to him personally?  Perhaps both and perhaps, as Peter Beinart avers in The Atlantic, the POTUS and others fail to recognize a distinction between the two.  Yet, identifying the object of a duty can be important.

I have observed that the duty of government officials is not well understood in the public realm. Donna Nagy's fine work on this issue in connection with the proposal of the Stop Trading on Congressional Knowledge ("STOCK") Act, later adopted by Congress, outlines a number of ways in which Congressmen and Senators, among others, may owe fiduciary duties to others.  If you have not yet been introduced to this scholarship, I highly recommend it.  If we believe that government officials are entrusted with information, among other things, in their capacity as public servants, they owe duties to the government and its citizens to use that information in authorized ways for the benefit of that government and those citizens.  In fact, Professor Nagy's congressional testimony as part of the hearings on the STOCK Act includes the following in this regard:

Given the Constitution's repeated reference to public offices being “of trust,” and Members’ oath of office to “faithfully discharge” their duties, I would predict that a court would be highly likely to find that Representatives and Senators owe fiduciary-like duties of trust and confidence to a host of parties who may be regarded as the source of material nonpublic congressional knowledge. Such duties of trust and confidence may be owed to, among others:

  • the citizen-investors they serve;
  • the United States;
  • the general public;
  • Congress, as well as the Senate or the House;
  • other Members of Congress; and
  • federal officials outside of Congress who rely on a Member’s loyalty and integrity.

There is precious little in federal statutes, regulations, and case law on the nature--no less the object--of any fiduciary the Director of the FBI may have.  The authorizing statute and regulations provide little illumination.  Federal court opinions give us little more.  See, e.g., Banks v. Francis, No. 2:15-CV-1400, 2015 WL 9694627, at *3 (W.D. Pa. Dec. 18, 2015), report and recommendation adopted, No. CV 15-1400, 2016 WL 110020 (W.D. Pa. Jan. 11, 2016) ("Plaintiff does not identify any specific, mandatory duty that the federal officials — Defendants Hornak, Brennan, and the FBI Director— violated; he merely refers to an overly broad duty to uphold the U.S. Constitution and to see justice done.").  Accordingly, any applicable fiduciary duty likely would arise out of agency or other common law.  Section 8.01 of the Restatement (Third) of Agency provides "An agent has a fiduciary duty to act loyally for the principal's benefit in all matters connect with the agency relationship."  

But who is the principal in any divined agency relationship involving the FBI Director?  

The Director of the FBI is appointed by the President with the advice and consent of the Senate and his work is done as part of the work of the Department of Justice (in which the FBI resides).  Yet, it would seem from the overall components of the FBI Director's position and duties that his service is of a more general public nature--one that might more saliently give rise to a duty to the United States and its citizens generally.  Any duty of loyalty would be owed to those beneficiaries accordingly.  Enforcement options would flow from there.

Of course, this same question (to whom or what fiduciary duties are or may be owed) exists in non-governmental (private) applications as well.  My favorite context in which this question is relevant is the law governing corporate directors' fiduciary duties.  Here is what I offered on this point in a recently published article (footnotes omitted) about which I will write more in a subsequent post:

Adding to the complexity is some doctrinal confusion—or perhaps just a lack of clear expression—in decisional law about the institution or constituencies to which or whom director and office fiduciary duties are owed. Some decisional law describes fiduciary duties owed to the corporation and other court opinions refer to duties owed to the corporation and its shareholders. Although anecdotal observation reveals that the latter cases may predominate more in change-of-control settings (where shareholder value primacy plays a more leading role), the shareholder beneficiary language also occurs in other settings. For example, in a leading case on director fiduciary duties relating to decisions made in the zone of insolvency, the Delaware Supreme Court articulated the beneficiary of the duties both ways in separate parts of its opinion.

The referenced case is N. Am. Catholic Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007), with exemplar references to both objects of corporate fiduciary duties occurring on page 101 of the reported opinion.  As in the public governmental context, the beneficiary of the public duty is highly relevant in this context as a matter of applied legal doctrine, as well as theory and policy.  Among other things, the identity of the beneficiary of a corporate fiduciary duty may answer questions about whether shareholders may or must sue in a derivative action rather then a direct action.

This post comes to no real answers on the question of who owes fiduciary duties to whom (or what) in the governmental and corporate contexts it references.  Rather, the post is designed to serve as a reminder that the existence of a fiduciary duty is, in itself, insufficient to any determination of the appropriateness (or inappropriateness) of the conduct of a particular public or private actor in context.  Answering applied fiduciary duty questions also requires that we understand to whom those fiduciary duties are owed and, by extension, by (or on behalf of) whom they can be enforced.

 *          *          *

 [Postscripts:  Thanks to Haskell Murray, I corrected an earlier reference to "the advice and consent of the President" to refer to the "the advice and consent of the Senate."  Also, it seems relevant to add that (as I note in a related Facebook comment), the oath of office for civil servants other than the President (found in 5 U.S. Code § 3331) is as follows:

An individual, except the President, elected or appointed to an office of honor or profit in the civil service or uniformed services, shall take the following oath: “I, AB, do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.” This section does not affect other oaths required by law.

I was admittedly thinking of this (among other things) when I wrote above that " . . . it would seem from the overall components of the FBI Director's position and duties that his service is of a more general public nature--one that might more saliently give rise to a duty to the United States and its citizens generally." There's clearly a lot more that could be said here . . . .]

 

http://lawprofessors.typepad.com/business_law/2017/05/loyalty-to-whom-or-what.html

Agency, Business Associations, Corporate Governance, Corporations, Current Affairs, Joan Heminway, Securities Regulation | Permalink

Comments

If there was any question whether the oath of allegiance is to the "as constituted government" or to the expressions of the US Constitution, I think that oath clears up the matter.

Posted by: Tom N | May 21, 2017 6:25:23 PM

Probably right, Tom N. As long as the oath of office means an oath to the Constitution's expressions, and as long as the oath supervenes any other duties that may exist, I buy your argument. I may be making the matter more complex than it actually is, as a matter of duty.

Having said that, however, an oath to "support and defend the Constitution of the United States against all enemies, foreign and domestic" and to "bear true faith and allegiance to the same" still may involve a need to interpret in context what the Constitution actually means. The Director of the FBI, the POTUS, and the Attorney General may have views that conflict. Is it clear to you that the FBI Director can rely on and act in accordance with his own understanding in those circumstances? That may not be a pure matter of duty, but I find the scant definition of positional authority and the nature of the reporting responsibilities troubling.

Posted by: joanheminway | May 21, 2017 7:10:50 PM

It is clear to me that men and women of good conscience can have an honest difference of opinion. It is bothersome that we constantly stray from the clear meaning of words and phrases straining to impose some meaning or intent that could not be “shoehorned” into its meaning at the time of adoption or amendment. The Oath is to the established and enumerated principles espoused in the Constitution, not the government that springs forth.

There is no doubt in my mind that in the case of an FBI Director, that Director should be empowered to follow the established law where it leads and affect the charge of the office without impediment. What is nagging - whether anyone who recites these oaths actually views that action as a charge solemn and whether there exists punitive consequence for failure to respect that oath? I believe that the Attorney General should even-handedly seek to enforce the established law. I think prosecutorial discretion is indispensible but only serves its purpose when exercised in good conscience rather than in furtherance of political purpose.

You and I have dialogued concerning the Imperial Presidency, government agencies and the regularity that policies promulgated by rule or order are questionable at best but dissembled as legal simply to effect a policy change ultimately knowing that it would take years through our court systems despite not surviving scrutiny. This has become the tool of statecraft. There is simply a difference in a “good conscience disagreement” and intentional contortion to effect a political rather than legal change.

A number of years ago, I was asked by an authority to look at the import of the oath of a office of a county sheriff. Ultimately, I concluded that the oath was simply ministerial in purpose without consequence. Regardless of the pledge, any purported wrongdoing had to be pursued based on statutory grounds – not violations of the oath.

Posted by: Tom N | May 23, 2017 9:44:41 AM

So, an oath of office is important and should be construed based on its plain meaning, and yet it is ministerial, may not be complied with in good faith, may instead be used for political ends, and therefore may not be properly enforceable. That leaves us to enforcement of statutory and decisional law and related regulation rather than enforcement of compliance wit the oath. Yes? Sounds about right . . . .

Posted by: joanheminway | May 23, 2017 1:11:06 PM

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