Opinion ID: 1262975
Heading Depth: 1
Heading Rank: 12

Heading: the alternative breach of duty approaches

Text: The district court ruled that the fiduciary duty owed by a majority to a minority shareholder arises from the place of incorporation of Copebras and is hence governed by Brazilian law. The breach of duty action, Panama argues, is governed by the laws of New York and Oklahoma  where the fiduciary obligations arose, were maintained and were breached. Panama asserts that fiduciary obligations which derive from a contractual relationship are governed by the law of the place governing the contract, for the tort attaches to the contractual relationship. We assume the argument advanced here is broad enough to include two kinds of duties  the good faith duty implied in every contract and the pure fiduciary duty of the Anglo-American law that arises from a trust-based relationship. Underlying the breach of duty theory of recovery is the issue whether it should be characterized as sounding in tort or in contract. Oklahoma jurisprudence indicates that it could be characterized as either, since the breach in some instances is a tort arising out of a contractual relationship. [55] Because Panama's theory is based on breach of fiduciary obligations stemming from the letter agreement, we will apply the choice-of-law rules governing the contract. As noted in Part A, supra, this test would lead to the application of Brazilian law. This conclusion is also in harmony with the Restatement (Second) of Conflict of Laws § 306, which states that obligations owed by a majority shareholder to the corporation and to the minority shareholders will be determined by the local law of the state of incorporation. [56] The Restatement drafters no doubt viewed the state of incorporation as a most significant contact in the resolution of a fiduciary obligation dispute. [57] Since Copebras is a Brazilian corporation, it would be appropriate under § 306 to apply the laws of Brazil. 1. Good faith duty of performance Oklahoma jurisprudence recognizes the common-law notion that implied in every contract is a covenant of good faith and fair dealing. [58] The Restatement also embodies the concept that the promisor owes the promisee good faith in the performance of all contractual terms. [59] Assuming that the law of Brazil also implies a good faith duty, that theory of liability would not be available to Panama here because the Brazilian court's declaration of rescission, which has res judicata effect, operates to extinguish the contract as well as any rights arising thereunder. [60] 2. The fiduciary duty A fiduciary duty in the Anglo-American sense is status-based, arising from a relationship of trust. [61] The trustee is bound to act in uberrimae fidei [62]  with the utmost good faith  toward the cestui que trust. [63] The Anglo-American trust is a concept of dichotomous title  the trustee has legal title and the beneficiary has equitable title. [64] No counterpart exists in the civil law, [65] and we are not directed to any codification of this dual title concept in the Brazilian civil-law legal system. [66] We must hence conclude that the breach of such a duty would not be recognized in Brazil.