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John H Langbein - One of the best experts on this subject based on the ideXlab platform.
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Trust Law as regulatory Law the unum provident scandal and judicial review of benefit denials under erisa
Northwestern University Law Review, 2013Co-Authors: John H LangbeinAbstract:When the participant in an ERISA-covered employee benefit plan seeks judicial review of the plan administrator's decision to deny a claimed benefit, should the standard of review be deferential, effectively presuming the correctness of the denial, or should the court examine the merits afresh, applying so-called de novo review? In the prominent ERISA case of Firestone Tire & Rubber Co. v. Bruch (1989), the Supreme Court held that, on account of ERISA's protective purpose, the standard of review should be de novo. However, in an ill-considered aside, the Court assumed (and thus effectively decided) that the employer could alter that standard by inserting terms in the plan requiring deferential review. Even though resolving benefit claims is a fiduciary function under ERISA, and even though plan administrators are commonly officers of the employer (or its insurer) who have a financial interest in denying claims, ERISA plans now routinely require deferential review, and courts routinely obey. A major scandal in claims administration has come to light in recent years that underscores how dangerous it has been to allow ERISA plans to skew the standard of review towards self-serving decisionmakers. Regulatory authorities and courts have now established that Unum/Provident Corporation, the nation's largest disability insurance carrier, was engaged in a program of deliberate bad faith denial of meritorious claims in both ERISA and non-ERISA markets. This article reviews these events. The Unum/Provident saga shows convincingly that the Supreme Court underestimated the danger of allowing ERISA plan sponsors to require judicial deference to conflicted plan decisionmakers. This article refutes a line of Seventh Circuit ERISA cases that deprecates the dangers of conflicted plan decisionmaking on supposed Law-and-economics principles. The article contrasts a strand of Eleventh Circuit authority that has been able to reduce the harm. A main theme of this article is that the Supreme Court's misstep in Bruch was premised on a misunderstanding about how Trust Law bears on ERISA. The Court reasoned that because ERISA is rooted in Trust Law, and Trust Law allows the settlor to alter the standard of review, ERISA should allow similar latitude to benefit plan sponsors. That syllogism is fLawed. The Law of Trusts is prevailingly a branch of the Law of gifts, which aspires to maximize the donative autonomy of the settlor who creates the Trust. In ERISA, by contrast, Congress drew upon Trust Law principles in support of a regulatory purpose, restricting the autonomy of plan sponsors in order to protect plan participants. Trust Law rules that conflict with ERISA's regulatory purpose ought not to be transposed to ERISA. A variety of provisions of ERISA are shown to provide textual support for this view.
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burn the rembrandt Trust Law s limits on the settlor s power to direct investments
Social Science Research Network, 2010Co-Authors: John H LangbeinAbstract:Most but not all rules of Trust Law are default rules that the settlor (creator) of a Trust is free to alter or abridge. There are, however, a few mandatory rules, which the settlor may not vary or defeat. Among them is the long-established rule against capricious purposes, an anti-dead-hand rule that has been applied in rare cases in which settlors attempted to impose Trust terms that would have required Trustees to destroy or waste Trust assets. In recent years, the two most authoritative sources of American Trust Law - the Restatement (Third) of Trusts and the Uniform Trust Code - have reformulated the rule against capricious purposes, clarifying the principle that has always been its rationale. Section 27(2) of the Restatement provides that “a private Trust, its terms, and its administration must be for the benefit of its beneficiaries.” Section 404 of the Code codifies this benefit-the-beneficiaries standard. A few years ago I published an article explaining why the benefit-the-beneficiaries rule should be understood to place outer limits on a settlor's power to require a Trustee to make or to retain Trust investments that are manifestly harmful to the interests of the beneficiaries. A recent writer has challenged that view, asserting that Trust Law should “provide no aid in cases where a settlor intentionally and thoughtfully impaired beneficiaries’ economic rights.” The present article explains why such extreme deference to settler's intent would violate fundamental principles of fiduciary obligation. The starting point is Gareth Jones’ arresting observation that although an owner “may destroy his own Rembrandt, …he cannot establish a Trust and order his Trustees to destroy it.” I discuss the reasons why the benefit-the-beneficiaries requirement prevents a settler from saddling a Trust with value-impairing provisions harmful to the interests of the beneficiaries, and why that rule must apply to manifestly harmful investment provisions. Trust Law grants the settler virtually unbounded freedom to select beneficiaries, apportion beneficial shares, and tailor administrative provisions, but it does not permit the settlor to destroy the core principles of fiduciary obligation that define a Trust.
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why did Trust Law become statute Law in the united states
Social Science Research Network, 2007Co-Authors: John H LangbeinAbstract:The Uniform Trust Code, the first national-level codification of the American Law of Trusts, was promulgated in 2000. The Code was the product of a five-year Uniform Law Commission drafting process that entailed extensive consultation with the Trust and estates bar and the Trust banking industry. The Code is being widely enacted. Eighteen states and the District of Columbia have thus far adopted it, and many others are likely to follow. Alabama's enactment comes into effect in 2007. For the future, Trust Law in Alabama and the other Code states will be prevailingly statute Law, although the principles developed in prior case Law will continue to inform the interpretation and application of the Code. In one sense, the Code marks a great departure by codifying a previously uncodified field. In another sense, however, the Code is simply the latest step in a trend toward statutory intervention in American Trust Law that has been underway for decades. If we focus on the Uniform Laws, and I shall have more to say about why uniform legislation has so characterized the Trust field, we can identify a steady progression of enactments from the 1930s onward.
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Trust Law as regulatory Law the unum provident scandal and judicial review of benefit denials under erisa
Northwestern University Law Review, 2007Co-Authors: John H LangbeinAbstract:Essay INTRODUCTION 1315 I. THE UNUM/PROVIDENT SCANDAL 1317 II. BRUCH 1322 A. Setting the Default Standard: De Novo Review 1322 B. Subordinating De Novo Review 1323 C. The Conflict Proviso 1324 III. ERISA's CONFLICTED DECISIONMAKERS 1325 A. Plan Administration As Fiduciary Law 1325 B. Denigrating the Conflict 1327 C. Analogizing to Administrative Law.. 1331 D. Developing Bruch's Conflict Proviso 1333 IV. THE LIMITS OF Trust Law 1335 A. Default or Mandatory Law? 1336 B. Textual Support. 1336 C. Protective Principles from State Insurance Law 1340 CONCLUSION 1342 INTRODUCTION Authoritative evidence has come to light that for a period of some years, stretching from the mid-1990s into the present decade, Unum/Provident Corporation (Unum), the largest American insurer specializing in disability insurance, was engaged in a deliberate program of bad faith denial of meritorious benefit claims. Part I of this Essay reviews what is known of this episode. The Unum/Provident scandal draws attention to a major failing in how the federal courts have understood their role in reviewing benefit denials under the Employee Retirement Income Security Act of 1974 ("ERISA").1 Most disability insurance in the United States (apart from the Social Security program) is employer-provided,2 and hence ERISA-governed.3 Many, probably most, of the victims of the Unum/Provident scandal were participants and beneficiaries of ERJSA-covered disability insurance plans. As regards Unum's ERISA-governed policies, Unum's program of bad faith benefit denials was all but invited by an ill-considered passage in an opinion of the United States Supreme Court, Firestone Tire & Rubber Co. v. Bruch? which allows ERJSA plan sponsors to impose self-serving terms that severely restrict the ability of a reviewing court to correct a wrongful benefit denial. Part II of this Essay reviews the Bruch decision. Part III locates Unum's program of bad faith benefit denials in ERISA's landscape of conflicted plan decisionmaking. Most ERISA plan benefit denials are the work of conflicted decisionmakers. ERISA places the plan administrator under a fiduciary duty to act "solely in the interest of the participants and beneficiaries,"5 yet, as the Third Circuit observed of the defendant in Bruch, "every dollar saved by the [plan] administrator on behalf of his employer is a dollar in Firestone' s pocket."6 This Essay directs attention to a prominent line of Seventh Circuit cases in which that court has purported to invoke Law-and-economics principles to minimize or deny the significance of these conflicts of interest. I explain why the Seventh Circuit cases are mistaken, and I point to a contrasting strand of Eleventh Circuit case Law that, if more widely followed, could overcome much of the mischief that results from conflict-tainted benefit denials. Part IV develops the view that the Unum/Provident scandal, by demonstrating the extent of the danger of self-serving plan benefit denials, should cause the Supreme Court to revisit the branch of its decision in Bruch that allows plan drafters to require reviewing courts to defer to self-serving plan decisionmaking. …
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questioning the Trust Law duty of loyalty sole interest or best interest
Social Science Research Network, 2005Co-Authors: John H LangbeinAbstract:The duty of loyalty requires a Trustee to administer the Trust solely in the interest of the beneficiaries. Any transaction in which the Trustee has an actual or potential interest violates the sole interest rule, no matter how beneficial the transaction to the beneficiaries. This Article develops the view that a transaction should not give rise to liability merely because the Trustee also benefits. Sometimes beneficiaries are better off when a transaction also benefits the Trustee. Corporation Law has wholly abandoned the sole interest rule, preferring a rule that permits a conflicted transaction that satisfies disclosure and fairness standards. Important changes have been undermining the Trust Law sole interest rule. The grievous procedural inadequacies of the equity courts that gave rise to the rule have now been overcome. The rise of professional Trusteeship has required that the sole interest rule be abridged to permit Trustee compensation. As Trusteeship has increasingly become a branch of the financial services industry, major exceptions to the sole interest rule have been recognized to facilitate Trustee-provided financial services. The rationale for these exceptions is that they benefit Trust beneficiaries by promoting integration of functions and economies of scale. This Article contends that the exceptions are wiser than the rule they modify. The duty of loyalty should be reformulated to prefer the best interest rather than the sole interest of the beneficiary. A conflicted transaction should continue to be presumed to violate the duty of loyalty, but rebuttably, not conclusively. The Trustee should be allowed the defense that the transaction was in the best interest of the beneficiaries.
Robert H. Sitkoff - One of the best experts on this subject based on the ideXlab platform.
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comment letter of professors max m schanzenbach and robert h sitkoff on the securities and exchange commission s request for comment on the names rule for mutual funds in light of esg investing and other market developments
2020Co-Authors: Max M Schanzenbach, Robert H. SitkoffAbstract:In March 2020, the Securities and Exchange Commission asked for public comment on the names rule (rule 35d-1) for mutual funds in light of developments since the rule's adoption in 2001. Among such developments, the request for comment identifies burgeoning investor interest in environmental, social, and governance (“ESG”) investing and the corresponding proliferation of funds that purport to make use of ESG factors. This response to the SEC’s request for comment has two purposes: First, we provide clarifying context for the ESG investing phenomenon and a summary of the current state of theoretical and empirical literature in financial economics on it. Second, we discuss how this context informs the critical relationship between ESG disclosure by a mutual fund, both in the fund’s name and in its prospectus, and the rules (e.g., state Trust Law or ERISA) that govern the extent to which a Trustee or other fiduciary may use ESG factors in fiduciary investment. We organize this response in four parts: (1) we provide a clarifying taxonomy on the meaning of ESG investing and the methods for implementing it; (2) we discuss the inherent subjectivity in identifying and applying ESG factors; (3) we assess the current theory and evidence on whether ESG investing can improve risk-adjusted returns; and (4) we identify four interrelated questions of regulatory policy stemming from growing investor interest in ESG investing, situating the request for comment toward potential revision of the names rule within that four-part framework. This response is largely but not entirely based on “Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee,” 72 Stanford Law Review 381 (2020), https://ssrn.com/abstract=3244665.
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Trust Law private ordering and the branching of american Trust Law
2020Co-Authors: John Morley, Robert H. SitkoffAbstract:In this chapter, prepared for The Oxford Handbook of New Private Law, we identify the principal ways in which the common Law Trust has been used as an instrument of private ordering in American practice. We argue that in both Law and function, contemporary American Trust Law has divided into distinct branches. In our taxonomy, one branch involves donative Trusts and the other commercial Trusts. The donative branch divides further to include three separate sub-branches for revocable and irrevocable private Trusts plus charitable Trusts. We explain the logic of this branching in both practical function and doctrinal form.
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introduction the oxford handbook of fiduciary Law
2019Co-Authors: Evan J Criddle, Paul B. Miller, Robert H. SitkoffAbstract:In recent years, the study of fiduciary Law has undergone a paradigm shift. Rather than treat fiduciary principles as subsidiary elements of legal fields, such as Trust Law or corporate Law, a burgeoning group of scholars has undertaken to study fiduciary Law as a coherent general field of study that encompasses aspects of both private and public Law. Case Law and academic commentary have progressed to the point that it is now possible to generate a detailed mapping of the field. To this end, the newly published Oxford Handbook of Fiduciary Law provides a near-encyclopedic survey of the terrain, focusing primarily on U.S. jurisprudence but also incorporating perspectives from other legal traditions. In its breadth and depth of coverage, the Handbook stands alone as a uniquely authoritative guide to the current state of the Law and scholarship in the field. This essay, which is the Introduction to the Handbook, explores fiduciary Law’s emergence as a general field of study and explains the Handbook’s ambitious contributions to the field. These contributions are grouped thematically into four parts. First, the Handbook surveys fiduciary principles across diverse contexts, ranging from agency Law and the Law of investment advice, to family Law and the Law of Lawyering, to public offices and public international Law. Second, the Handbook identifies and synthesizes several fundamental principles of fiduciary Law that apply across these contexts, including the core fiduciary duties of loyalty and care. Third, the Handbook explores how fiduciary principles have developed across time and in different legal traditions around the world. Lastly, the Handbook considers how different legal theories, interdisciplinary approaches, and social institutions may contribute to the academic study and development of fiduciary Law. The Handbook thus furnishes a single source to which readers can turn for guidance on fiduciary principles across a host of substantive fields, jurisdictions, and epochs.
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Fiduciary Principles in Trust Law
The Oxford Handbook of Fiduciary Law, 2019Co-Authors: Robert H. SitkoffAbstract:This book chapter, prepared for the forthcoming Oxford Handbook of Fiduciary Law, canvasses the fiduciary principles applicable to a Trustee of a donative, irrevocable private Trust subject. The focus is on prevailing American Law. The chapter examines (a) the trigger for finding a Trust fiduciary relationship and the scope of that relationship; (b) the duty of loyalty; (c) the duty of prudence across the distribution, investment, custodial, and administrative functions of Trusteeship; (d) other fiduciary duties in Trust Law, including the prominent duty of impartiality and the increasingly salient duty to give information to the beneficiaries; (e) the extent to which fiduciary principles in Trust Law are mandatory or may be waived by the settlor or by a beneficiary; and (f) the remedies available for a breach of duty by a Trustee.
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Trust Law as fiduciary governance plus asset partitioning
2013Co-Authors: Robert H. SitkoffAbstract:The theme of this essay, a commentary on two papers forthcoming in the same volume on “The Worlds of the Trust,” is that Trust Law is not a species of property Law or contract Law, but rather is a species of organizational Law. Organizational Law supplies a set of contractarian rules, some of a fiduciary character, that provide for the governance of the organization. These are the rules that provide for the powers and duties of the managers and the rights of the beneficial owners. Organizational Law also supplies a set of proprietary rules that provide for asset partitioning. These are the rules that provide for the separation of the property of the organization from the property of the organization’s managers, beneficial owners, and other insiders. Classifying Trust Law as organizational Law removes the tension between the contractarian governance and the proprietary asset partitioning features of Trust Law.
Masayuki Tamaruya - One of the best experts on this subject based on the ideXlab platform.
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the transformation of japanese Trust Law and practice historical contexts and future challenges
Social Science Research Network, 2020Co-Authors: Masayuki TamaruyaAbstract:Japan is one of the earliest civil Law jurisdictions that introduced common Law Trust by statute. The Trust Act of 1922 was enacted as Japan’s first comprehensive Trust legislation. Since then, Trust has been used mostly for commercial purposes. Today, commercial Trust is a zillion yen industry. The new Trust Act, which was introduced in 2006 to replace the 1922 Act, reform was primarily motivated by the desire to increase flexibility of Trust Law to meet the needs of the increasingly complex commercial Trust practices. Nevertheless, the 2006 Act contained several provisions that expressly authorize the use of Trusts for succession planning. With the rapid aging of the Japanese society, the past decade has seen growing interests in what are commonly known as ‘family Trusts,’ where the settlor looks to his family or friends to serve as Trustee to manage his or family assets or oversee succession. This paper will proceed as follows. Part I will provide historical overview of Japanese Trust practices, and introduce some of the major commercial uses of Trusts. Part II will discuss the recent rise of family Trusts and some of the issues that they brought about. Against the historical background, Part III will attempt a doctrinal exposition of some of the major doctrine of Trust Law, with some speculation on what changes might be visible on the horizon. Part IV will look at some of the challenges that Japanese Trust practice is facing in cross-border contexts.
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japanese wealth management and the transformation of the Law of Trusts and succession
Social Science Research Network, 2020Co-Authors: Masayuki TamaruyaAbstract:A sea change is taking place in the Law and practice of Trust and wealth management in Japan. As the rapidly aging society opens up to the globalised market, a flurry of legislative reform accompanies it in the areas of guardianship (1999), Trusts (2006), and succession (2018). The government introduced a number of measures to encourage intergenerational wealth transfer and diversified investment. However, neither Law reformers nor government regulators have been able to comprehend the whole picture, and the court is forced to manage and tie up complicated loose ends. This article will consider the rise of 'family Trusts' in Japan, where Trusts are used for the purposes of asset management and succession planning, with the settlor's family member or friend serving as the Trustee. After reviewing some of the recent cases. it will discuss the comparative and doctrinal implication of the Japanese development, particularly on the interface between Trust Law and the Law of succession and on the cross-border aspect of Trust relationship.
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japanese Law and the global diffusion of Trust and fiduciary Law
2018Co-Authors: Masayuki TamaruyaAbstract:This article will trace the paths of Trust Law diffusion, with the dual aim of identifying the role of Japanese Law in shaping the global evolution of the fiduciary norm and examining the doctrinal and conceptual implication that the understanding of these historic paths can bring about. The path of Trust diffusion that started from England in the seventeenth century diverged into two routes. One route went around the Cape of Good Hope toward the East, through South Africa and India. The other path went West, crossing the Atlantic and across North America. These two routes met with each other in the early twentieth century, when the Trust Act of 1922 was introduced in Japan. The westbound diffusion continued when Japan imposed its Law and industry regulation in Taiwan and Korea as part of its colonial expansion. While the colonial impact diminished over time after World War II, the common self-identification as civil-Law jurisdictions and the similarities in economic growth models have led to the development of parallel Trust doctrines in South Korea and Taiwan. On the eastbound route, Hong Kong and Singapore have emerged as the two major commercial hubs in Asia with vibrant Trust practices based on English common Law. Today, these two routes converge in mainland China, where Trust industries have played a vital role in the development of the Chinese market economy since Den Xiao Ping declared the opening up policy in 1979. Over a long period of time and across a number of jurisdictional borders, many factors interacted to shape the Law and practice of Trusts. Those factors included financial pressures, legislative imitations, academic exchange of ideas, colonial rules, commercial competitions, and shifts in national wealth and demographics. Despite some signs of the harmonization of Trust Law worldwide, in the increasingly competitive global economy, Trust service providers and their host jurisdictions are vying with each other for comparative advantages.
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mixed legal system from the perspective of japanese Trust Law
Social Science Research Network, 2012Co-Authors: Masayuki TamaruyaAbstract:The Law of Trust is like a drop of oil that floats on the surface of water. This remark by Professor Shinomiya, the author of a definitive treatise on Japanese Trust Law, is a reminder that the Law of Trust has yet to locate its proper place within the structure of Japanese private Law. In Japan, the Civil Code forms the basis of private Law, and a separate statute provides for the Law of Trusts. The Civil Code was drafted in the 1890s under the heavy influence of French and German jurisprudence. The Trust Law, originally enacted in 1922 and now superseded by new legislation in 2006, follows the Common Law tradition. The Law of Trusts in Japan is thus an obvious example of the mixing of the Civil Law tradition and the Common Law tradition. Nevertheless, Japanese scholars have made only a limited attempt to learn from the mixed legal system, while huge research efforts have been devoted on Trust Law and jurisprudence in England, the USA, and other Common Law jurisdictions.What can Japanese Lawyers learn from the experience in the mixed legal system, and particularly in South Africa? More generally, what does the perspective of the mixed legal system have to offer for comparative studies? This paper is an attempt to address these questions in the context of Trust Law.
Dernbach, John C. - One of the best experts on this subject based on the ideXlab platform.
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Thinking Anew About the Environmental Rights Amendment: An Analysis of Recent Commonwealth Court Decisions
SelectedWorks, 2021Co-Authors: Dernbach, John C.Abstract:In landmark decisions in 2013 and 2017, the Pennsylvania Supreme Court revitalized the Environmental Rights Amendment (Article I, Section 27) to the state constitution. It did so by rejecting a three-part test that the Commonwealth Court articulated in 1973 as a substitute for the text of the Amendment. The new standard of review, the Supreme Court said, is based on “the text of [a]rticle I, [s]ection 27 itself as well as the underlying principles of Pennsylvania Trust Law in effect at the time of its enactment.”This Article is an analysis of the Commonwealth Court’s 13 Environmental Rights Amendment decisions in the first four years after the Supreme Court revitalized the Amendment. The Commonwealth Court plays a critical role in shaping the Law of the Amendment because it is a specialized intermediate appellate court that decides questions of public Law, including constitutional questions. These 13 decisions involve a variety of permitting, zoning, and related cases that are quite different from the two Supreme Court decisions, which involved the constitutionality of statutes under Section 27. They thus provide a sense of the wide variety of contexts in which Section 27 can apply. This Article describes these cases and draws seven key themes from them about the Commonwealth Court’s approach to Environmental Rights Amendment jurisprudence during this four-year period
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The Role of Trust Law Principles in Defining Public Trust Duties for Natural Resources
University of Michigan Law School Scholarship Repository, 2021Co-Authors: Dernbach, John C.Abstract:Public Trusts for natural resources incorporate both limits and duties on governments in their stewardship of those natural resources. They exist in every state in the United States—in constitutional provisions, statutes, and in common Law. Yet the Law recognizing public Trusts for natural resources may contain only the most basic provisions—often just a sentence or two. The purpose and terms of these public Trusts certainly answer some questions about the limits and duties of Trustees, but they do not answer all questions. When questions arise that the body of Law creating or recognizing a public Trust for natural resources does not fully answer, Trustees, Lawyers, and courts often look to Trust Law for help. In fact, they have been doing so for more than a century, including in the U.S. Supreme Court’s landmark 1892 public Trust decision, Illinois Central Railroad Co. v Illinois. In this sense, Trust Law provides a set of background or underlying principles for interpreting and applying public Trusts. Using cases from around the country, this Article sets out a four-step methodology for determining when and how to use Trust Law principles to help interpret public Trusts. This methodology can be applied in any case involving the use of specific Trust principles to help interpret any particular public Trust. This Article also explains that the relevant Trust Law should not be limited to private Trust Law, but rather it should include general Trust principles, charitable Trust Law principles, and private (or noncharitable) Trust Law principles. This Article uses a 2019 Commonwealth Court of Pennsylvania decision, Pennsylvania Environmental Defense Foundation v. Commonwealth, as a case study. The case applies article I, section 27 of the Pennsylvania Constitution, which requires that public natural resources be conserved and maintained for the benefit of present and future generations. In that case, the court used an interpretation of private Trust Law to decide that the state could spend some bonus and rental payment money from oil and gas leasing on state forest and park land, which is constitutional public Trust property, for non-Trust purposes. This Article applies the four-part methodology to the case, explains general Trust Law and charitable Trust Law principles that the Commonwealth Court of Pennsylvania did not address, and argues that the use of these principles better fits the constitutional public Trust. It concludes that the money from bonus and rental payments should be spent entirely for the purposes of the Trust. This Article draws attention to both the potential value of Trust Law principles and also to their potential danger in the interpretation and application of public Trust Laws for natural resources. Trust Law has the potential to enhance the protectiveness of public Trusts by imposing various fiduciary duties on Trustees. It also has the potential to undermine public Trusts, particularly through rules requiring or encouraging that Trust assets be financially productive. To vindicate public Trusts for natural resources, environmental and natural resources Lawyers need to become better Trust Lawyers
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The Role of Trust Law Principles in Defining Public Trust Duties for Natural Resources
SelectedWorks, 2020Co-Authors: Dernbach, John C.Abstract:Public Trusts for natural resources incorporate both limits and duties on governments in their stewardship of those natural resources. They exist in every state in the United States—in constitutional provisions, statutes, and in common Law. Yet the Law recognizing public Trusts for natural resources may contain only the most basic provisions—often just a sentence or two. The purpose and terms of these public Trusts certainly answer some questions about the limits and duties of Trustees, but they do not answer all questions. When questions arise that the body of Law creating or recognizing a public Trust for natural resources does not fully answer, Trustees, Lawyers, and courts often look to Trust Law for help. In fact, they have been doing so for more than a century, including in the U.S. Supreme Court’s landmark 1892 public Trust decision in Illinois Central Railroad Co. v Illinois. In this sense, Trust Law provides a set of background or underlying principles for interpreting and applying public Trusts.Using cases from around the country, this Article sets out a four-step methodology for determining when and how to use Trust Law principles to help interpret public Trusts. This methodology can be applied in any case involving the use of Trust principles to help interpret any particular public Trust. This Article also explains that the relevant Trust Law includes general Trust principles, private Trust Law priciples, and charitable Trust Law principles, and should not be limited to private Trust Law.This Article uses a 2019 Pennsylvania Commonwealth Court decision, Pennsylvania Environmental Defense Fund v. Commonwealth, as a case study. The case applies Article I, Section 27 of the Pennsylvania constitution, which requires that public natural resources be conserved and maintained for the benefit of present and future generations. In that case, the court used an interpretation of private Trust Law to decide that the state could spend some bonus and rental payment money from oil and gas leasing on state forest and park land, which is constitutional public Trust property, for nonTrust purposes. This Article applies the four-part methodology to the case, explains general Trust Law and charitable Trust Law principles that the Commonwealth Court did not address, and argues that use of these principles better fits the constitutional public Trust. It concludes that the money from bonus and rental payments should be spent entirely for the purposes of the Trust.This Article is intended to draw attention to both the potential value of Trust Law principles and also to their potential danger in the interpretation and application of public Trust Laws for natural resources. Trust Law has the potential to enhance the protectiveness of public Trusts by imposing various fiduciary duties on Trustees. It also has the potential to undermine public Trusts, particularly through rules requiring that Trust assets be financially productive. To vindicate public Trusts for natural resources, environmental and natural resources Lawyers need to become better Trust Lawyers
Michael L Wachter - One of the best experts on this subject based on the ideXlab platform.
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dangerous liaisons corporate Law Trust Law and inter doctrinal legal transplants
Social Science Research Network, 2012Co-Authors: Edward B Rock, Michael L WachterAbstract:In this diagnosis of the difficulties of Corporate Law's "duty of care" illustrated by Smith v. Van Gorkom, we argue that the problem is an example of the potential for mischief inherent in legal transplants. Historically, the "duty of care" was transplanted into Corporate Law from the Law of Trusts and Agency. The key issue that has bedeviled the DeLaware courts and the drafters of the Model Business Corporation Act has been the question whether directors - like Trustees and agents - should bear legal liability for negligence. We argue that the difficulties that this issue has presented for corporate Law arise because the concept was transplanted across the market/firm boundary, without recognition that that boundary represents a choice between third party judicial enforcement of market transactions and non-legal self-governance within firms. While a negligence based duty of care may be sustainable (with difficulty) for market actors like Trustees, it becomes impossible once a relationship is brought within the firm.
