FLORIDA STATE UNIVERSITY LAW REVIEW
In short, RUPA provides “mandatory minima”46 fiduciary duties. That they are mandatory explains why contractarians do not like RUPA; that they are minima explains why the traditionalists don’t like it either.47
As noted earlier, under RUPA there are just two fiduciary duties: loyalty and care. Before RUPA, some courts had held that “good faith” is a free-standing, independent fiduciary duty whose contours and content are unclear but which can be used to punish partners whose conduct the court does not like.48 One of the major changes made by RUPA was to remove “good faith” from the category of fidu- ciary duties and convert it to an apparently contractual “obligation” of good faith and fair dealing in the discharge of a partner’s other rights or duties.49
While the obligation sounds innocuous enough—who, after all, is in favor of bad faith or unfair dealing?—it is not at all clear what it
matter of judgment; an experienced legislative draftsman would never write a bright-line constitutional “due process” clause, nor would he provide, in a busi- ness corporation act, for a “reasonable period” of notice for a shareholder’s meet- ing. Of course, that bright-line test in the RMBCA has itself been criticized, and in any event deals with clearance procedures for discrete transactions and not with categorical get-out- of-jail-free cards (except to the extent that it does exclusively define what is or is not a con- flict).
RUPA does permit the partnership agreement to include clearance procedures for au- thorizing or ratifying particular transactions when an up-front, blanket grant of permis- sion might violate the “manifestly unreasonable” standard. Official Comments to R.U.P.A. § 103(b)(3)(ii). Thus, nothing in RUPA would prevent a partnership from adopting its own version of Subchapter F. The net result is to prefer transaction-by-transaction authoriza- tion over up-front categorical permission, in spite of the burdensomeness (including rebar- gaining costs) this may entail.
46. The phrase is Dean Weidner’s. Donald J. Weidner, RUPA and Fiduciary Duty: The Texture of Relationship, 58 J.L. & CONTEMP. PROBS. 81, 82 (1995).
47. On the other hand, according to the Official Comments to subsection (b)(4), part- ners can always volunteer for liability by increasing the standard to ordinary care “or an even higher standard of care,” whatever that is. Official Comments to R.U.P.A. § 103(b)(4). One does not usually think of a guarantee as involving a “higher standard of care,” but it is certainly possible that a partnership concerned with, for example, broken equipment might adopt a policy of “you break it, you’ve bought it” without inquiring into fault at all.
48. The duty has most often been litigated in the context of a partial or complete breakup of the partnership. When a partner is expelled without cause under an agreement that does not require it, the involuntarily departing partner sometimes claims that the ex- pulsion is not in “good faith.” See, e.g., Bohatch v. Butler & Binion, 977 S.W.2d 543 (Tex. 1998). Similarly, in an at-will partnership, the voluntary departure of a partner requires the liquidation of the partnership unless otherwise agreed. Some courts have superim- posed a “good faith” requirement on the exit decision, thus converting an at-will relation- ship into something else. See, e.g., Page v. Page, 359 P.2d 41 (Cal. 1961).
The fiduciary duty of “good faith” has long existed in corporate law, although without much explication. For example, in Delaware, good faith, care, and loyalty are the three os- tensibly co-equal parts of a director’s “unitary” fiduciary duty. Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993), modified, 636 A.2d 956 (Del. 1994) (Technicolor II). But see Orman v. Cullman, 794 A.2d 5 at n.3 (Del. Ch. 2002) (treating good faith as a subset of loy- alty).
49. R.U.P.A. § 404(d).