united-states education currency trusts-and-estates
Breach of fiduciary duty for poor management of endowment?
<p>If the board of trustees of a private university keeps investing the endowment through an expensive firm run by their friends, despite substandard performance, could a case be made for breach of fiduciary duty? The economists employed by the university have long urged the board to invest in index funds instead.</p>

<p>I know I would need to consult a lawyer specializing in this area, but I'd like to know first if I would be laughed at or if this is a reasonable question.</p>

<blockquote>
  <p>could a case be made for breach of fiduciary duty?</p>
</blockquote>

<p>Yes, I think, although not every person or stakeholder would have <em>standing</em> to sue the board of trustees of the private university.</p>

<p>The prima facie elements of breach of fiduciary duty are "<em>(i) the existence of a fiduciary duty; (ii) a knowing breach of that duty; and (iii) damages resulting therefrom</em>", <a href="https://www.leagle.com/decision/infco20110926088" rel="nofollow noreferrer"><em>Johnson v. Nextel Communications</em>, 660 F.3d 131, 138 (2011)</a> (I am not aware of any material differences in other jurisdictions).</p>

<p>Absent any explicit disclaimers of fiduciary duty, (1) the element of <em>existence</em> of that duty is applicable because the trustees' relation with the university is not one of <em>arms length</em>; (2) in their deliberate --rather than negligent-- decision to do business with their friends, the trustees are knowingly and intentionally disregarding the advice from economists of the university, despite the evidenced financial detriment of that deliberate decision; and (3) the element of <em>damages</em> would be proved from the expenses as billed by the firm, coupled with any losses the friends' subpar performance may be causing to the university.</p>
