Duty of Care; Duty of Loyalty

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Photo: Brendon Kalei'aina Lee

Fiduciary duty is an obligation to act in the best interest of another party. A trustee has a fiduciary duty to the trust’s beneficiaries. This includes the duty of care: the legal responsibility of a person or organization to avoid any behaviors or omissions that could reasonably be foreseen to cause harm to others. This also includes the duty of loyalty: often called the cardinal principal of fiduciary relationships, the term refers to a trustee’s duty to administer the trust solely in the interest of the beneficiaries and following the terms of the trust. This often gets misinterpreted as loyalty to the board, which is false.

Much has been said by a member of the Board of Trustees about their disagreement with the board’s decision to not provide the State Auditor unredacted executive session minutes for its audit of the Office of Hawaiian Affairs’ limited liability companies. What is conveniently left out by this trustee when they are addressing groups around town, is not only are these executive session minutes, but they are also attorney-client privileged discussions. This trustee claims that if the Office of Hawaiian Affairs has nothing to hide then they should just turn over the information. You may be asking, how is demanding the Board of Trustees to give up the board’s attorney-client privilege fiduciarily responsible and adhering to the duty of care and loyalty to the trust? It is not. If these privileges were not protected, as claimed by an organization that frequently files frivolous lawsuits against the Office of Hawaiian Affairs, then why would the State specifically exempt these conversations from the Sunshine Law?

This trustee claims that in the interest of “transparency” the Office of Hawaiian Affairs needs to open up its books. Our administration has provided nearly 1,000 different documents that have been requested. How much more open can you get, especially given that the Office of Hawaiian Affairs is not the party being audited, rather it is the limited liability companies that are being audited – another fact not shared by this trustee.

Is it fiduciarily responsible to voluntarily waive attorney client privilege when the other party has full legal authority to subpoena the Office of Hawaiian Affairs and allow a judge to determine the relevance of redacted and protected materials? No, it is not. To set a precedence that attorney-client privilege is not protected not only undermines the Office of Hawaiian Affairs’ ability to do business, it also sets a very dangerous precedent for the rest of the State’s agencies. A trustee’s duty of care and loyalty is not just to its beneficiaries, but also to the trust. Publicly saying that, as a trustee, you disagree with the rest of the board while omitting the reason the board took this position and omitting all the facts about the situation is not only reckless, it is a breach of that duty of care and loyalty to the trust and its beneficiaries.