Thursday, October 27, 2011

Emerson Electric Co. v March & McLennan, November 30, 2011

The court of appeals doesn't believe Emerson had the right to bargain with a fiduciary with the facts before it.  No thought there about whether fiduciary duties should be "a reflection of moral uprightness, of fundamental honesty, fair play and right dealing in the general and business life of members of society."

Hopefully the Supreme Court will read the abundant literature to the contrary (not cited by Emerson), including Judge Hand's belief that " he has suffered a wrong; he has lost his chance to bargain with the facts before him" United States v. Rowe

Samuel W. Buell also has insights in his essay  Novel Criminal Fraud which ought to guide the Court's thinking.

The court of appeals apparently forgot that fiduciary relationships do not fall from the sky; they are not defined by statute; they arise from facts.   Firms put trust and confidence in their insurance agents, expecting honesty, fair play, and right dealing. Fiduciary duties are implied from facts.  When courts say an insurance agent has a fiduciary duty that is a legal conclusion implied from the factual nature of the agent/insured relationship.

Both the trial court and the court of appeals deprived Emerson of a jury determination whether a fiduciary duty existed.

Marsh & McLennan made much of a red herring argument: that the General Assembly permitted agents to be paid commissions. That is irrelevant.  Under the Restatement of Agency (Third) Section 8.11 (2005) (not cited by Emerson) an agent a very broad duty to assemble information and to provide all information "the agent knows or has reason to know the principal would wish to have."

The briefs are here.

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