I'm off today to Pepperdine University in Malibu to present my paper, Must Salmon Love Meinhard? Agape and Partnership Fiduciary Duties, to the Herbert and Elinor Nootbaar Institute on Law, Religion and Ethics Conference on Love and Law. Herewith the abstract:
Jeffrie Murphy has noted that “John Rawls claimed that justice is the first virtue of social institutions,” but Murphy then went on to ask “what if we considered agape to be the first virtue? What would law then be like?” When I was asked to contribute a paper on business organization law to a conference organized around Murphy’s question, the conference call immediately brought to mind then-Judge Benjamin Cardozo’s opinion in Meinhard v. Salmon, which famously held that a managing partner “put himself in a position in which thought of self was to be renounced, however hard the abnegation.” The parallels between Cardozo’s framing of the partner’s duties and a standard definition of agape, which holds that it is a “self-renouncing love,” are obvious and striking.
What then would partnership fiduciary duty law be like if it were organized around the value of agape? This essay concludes that partners need not love one another, at least as a matter of legal obligation. Agape is simultaneously too indeterminate and too demanding a standard to be suitable for business relationships. On the other hand, however, I conclude that partners ought to love one another. An analysis of Cardozo’s rhetoric and the intent behind it suggests that agape has great instrumental value. Partners who love one another can trust one another. In turn, partners who trust one another will expend considerably less time and effort — and thus incur much lower costs — monitoring one another. Agape thus should not be the law, but the law should promote agape as best practice.
To be presented at the Law and Love Conference, to be held at Pepperdine University School of Law, on February 7-8, 2014.
Here's what I intend to say in the 10 minutes I've been allocated (for citations see the draft of the original paper):
The call for our conference brought to mind Benjamin Cardozo’s opinion in Meinhard v. Salmon, which famously held that a managing partner “put himself in a position in which thought of self was to be renounced ….” The parallels between Cardozo’s framing of the partner’s fiduciary duties and common formulations of agape are obvious and striking.
This observation suggests several questions. First, did Cardozo intend the analogy to agape? Second, is agape an appropriate legal standard? Third, if not, does agapic love have any relevance to the governance of partnerships?
In Meinhard, Cardozo cloaked the fiduciary principle in rhetorical finery: “Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. …. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.”
Somewhat later in the opinion, Cardozo observed that Salmon “was much more than a coadventurer. He was a managing coadventurer.” In that capacity, Salmon owed Meinhard an even higher duty than the one already articulated for equal partners. “Salmon had put himself in a position in which thought of self was to be renounced, however hard the abnegation.”
Agape is often described in ways that strikingly resemble Cardozo’s description of a fiduciary’s duties. Agape, for example, is said to be the “‘perfect love,’ which seeks the good of the beloved beyond thought of self.” It is “a devotion that gives whatever is best for others without thought of self-gain.” Agape thus “is the willingness to let the self be destroyed rather than that the other cease to be; it is the commitment of the self by self-binding will to make the other great.” All of which sounds remarkably like Cardozo’s articulation of the “punctilio principle,” which has been described as requiring “a loyalty that pricks one’s own possible rationalizations of self-interest with the sharp point of selflessness.”
Did Cardozo intend to analogize partnership fiduciary duties to agapic love?
Geoffrey Miller observes that Meinhard is replete with religious imagery: “The image is one of religion, transcendence and mysticism. The connotation is that when it comes to dealings with co-partners, a person must behave with monastic purity, placing always the other’s interests above his own.”
It is plausible, moreover, that Cardozo encountered the concept of agape in his early life. Cardozo’s college studies included philosophy and he had received sufficient religious training to celebrate his bar mitzvah. In his judicial career, as Judge Posner has noted, Cardozo demonstrated a highly “moralistic streak.”
Ultimately, of course, such inquiries are bootless. Although it is interesting to speculate on Cardozo’s intentions, we simply don’t know.
Let me turn then to the more pertinent question: Is agapic love suitable as a legal standard? I am afraid not, even if one sets aside such standard objections as the purported inadmissibility of religious norms in making civil law for a secular society.
First, agape is too indeterminate a standard. In discussing the problem with a broad conception of fiduciary duty, under which the fiduciary has “a duty to act in the best interests of the beneficiary,” Lionel Smith aptly observes that “the indeterminacy of such a duty is such that any lawyer would agree that this cannot be its correct formulation.” When one adds an agape-based duty to renounce thought of self to Smith’s standard, the duty becomes less rather than more determinate.
Second, agapic love is too high of a standard. To see why, suppose we could put the question back to Cardozo by asking whether it is possible for the law to elevate the behavior of the market to some moral pinnacle. We might observe, as a learned economist has done, that “… we bourgeois are neither saints nor heroes. The age is one of mere iron—or aluminum or plastic—not pagan gold or Christian silver.”
Accordingly, no realistic social order can assume “heroic or even consistently virtuous behavior” by its citizens. Everybody puts love of self ahead of love of neighbor at least some of the time.
As Martin Luther King Jr. recognized in a profound commentary, obligations such as agapic love thus are “beyond the reach of the laws of society. They concern inner attitudes, genuine person-to-person relations, and expressions of compassion which law books cannot regulate and jails cannot rectify. Such obligations are met by one's commitment to an inner law, written on the heart.”
What then can the law do? Dr. King famously extended his argument by observing that “the law could not make people love their neighbors, but it could stop their lynching them.” What law does is to provide a “coercive backstop”: “Doubts about the prevalence of [love] in the population can be mitigated by a backstop regime of legal protection that enforces [love].” But the difficulty with of Cardozo’s rhetoric now becomes obvious. Bringing to bear the state’s monopoly on the use of coercive force on those who fall short of the legal standard is the very antithesis of agape.
While the law therefore should not mandate agape, the law can point to it as an aspirational ideal. In other words, if we understand Cardozo’s rhetoric as having a teaching function, we see that what he is really teaching is not the law but morals. Meinhard thus is properly understood as an example of how courts influence best practice.
This is a familiar concept to business lawyers. We frequently see courts seeking to influence not just the minimal standards of law, but also to set aspirational standards of best practice.
If that’s what Cardozo was trying to do, what makes agape an appropriate aspirational ideal? An answer is to be found in the common observation that those who engage each other in agapic love inevitably come to trust each other. This is so because agape promotes and preserves community. “Agape is a willingness to go to any length to restore community.” If one partner knows that his fellow partner will go to such lengths, trust inevitably follows.
This insight is critical because trust has considerable instrumental value in business settings. Just as friction reduces the efficiency of a machine, transaction costs are a dead weight loss making transacting less efficient. Trust lubricates business relationships and thus reduces transaction costs, especially those known as agency costs.
Contracts are a useful, but ultimately imperfect, device for minimizing agency and other transaction costs. Accordingly, parties frequently rely on noncontractual social norms to minimize transaction costs. Trust’s role as a social lubricant is especially important in this context. If I trust you to refrain from opportunistic behavior, I will not invest as many resources in ex ante contracting. After all, “Whoever can be trusted with very little can also be trusted with much ....” If you prove trustworthy, moreover, I also will not need to incur ex post enforcement costs. Trust thus is not only honorable; it is socially useful. In turn, by promoting trust, agape as an aspirational ideal therefore has considerable social value.