In 1928 Justice Benjamin Cardozo was Chief Judge of the New York State Court of Appeals. (Four years later he was appointed to the Supreme Court.) On December 31, 1928 he published the opinion for Meinhard v Salmon. Here's the story.
In 1902 Walter J. Salmon obtained a twenty year lease on the Hotel Bristol on Fifth Avenue and 42nd street in New York, on the condition that he change it from a hotel to shops and offices. To finance the venture Salmon entered a joint venture with Morton H. Meinhard. Meinhard provided the money. Salmon managed the project.
Twenty years later, when the lease was about to run out, the property owner offered Salmon an opportunity to lease the current building plus a larger piece of property for a much bigger redevelopment project. Salmon took the lease without informing or involving Meinhard.
Meinhard sued to be let into the deal on the grounds that the opportunity to renew the lease belonged to the joint venture. Here's what Justice Cardozo wrote on behalf of the court:
Joint adventurers, like copartners, owe to one another...the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.When stories emerged about unseemly financial ties between leading physicians and the pharmaceutical industry the standard defense was "I was honest in all that I did..." If we hear this lame self-justification again in 2009 our response should be - "that's not enough - as a health professional you are held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is the standard of behavior you must meet!"
As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty...Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court. For [Salmon] and for those like him, the rule of undivided loyalty is relentless and supreme
Happy New Year!