5.2.2 Not Effective Substitutes for a Broad Fiduciary Duty
The contractarian concept of good faith and fair dealing, and the very limited notion of loyalty under the revised acts, are not effective substitutes for a broad fiduciary duty that used to regulate partner conduct. In a Maryland case, the court applied the “good faith” in contract standard to police partner conduct, instead of the traditional fiduciary duty of common law. Predictably, the court focused on the subjective intent of the partner rather than on that partner’s conduct per se. In this case, the author of numerous techno-thriller novels (Tom Clancy) and his ex-wife (Ms. King) created a limited partnership for the purpose of developing and marketing a series of novels using Mr. Clancy’s name but ghost written by another writer picked for the job because of his skill “to affect a ‘Clancyesque’ style of writing.” The partnership entered into a joint venture with a third party to effectuate the project and a series of 12 books were released – all best sellers. At that point, Mr. Clancy announced that he was going to withdraw permission for the joint venture to use his name on further books.
18.104.22.168 The partnership agreement authorized Mr. Clancy to engage in other business ventures, even ventures competing with the partnership. The issue was whether any duty of loyalty owed by Mr. Clancy to the partnership and his partner would preclude such action. Under prior law, of course, a general fiduciary duty would trump any partnership agreement term to the contrary: “Clancy concedes that, contract law aside, his pertinent actions, which animated King’s suit, would violate the fiduciary duty he owed to [the partnership]”under the law of Maryland before the adoption of the 1997 Revised Uniform Partnership Act. Under the new act, however, the court held that Mr. Clancy needed only to show that he acted in good faith with his business partner even if his actions were adverse to the partnership. If, on the other hand, he acted out of personal spite against her, he would have breached his obligation of good faith dealings. The good faith/bad faith distinction is a question of fact and the case was remanded for trial to determine that fact.