After 80 years, Meinhard v. Salmon, 249 N.Y. 458, 1928, is still memorable for its elegant statement of the obligations of those bound by fiduciary ties compared to those subject only to the “morals of the market place.”

The eloquence of the language fashioned by Chief Judge Benjamin N. Cardozo has become as meaningful as the holding in the case. It is Shakespearean in format and reminiscent of the King James rendering of the Bible.

In Meinhard, Cardozo wrote:

“Joint adventurers, like copartners owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a work-a-day 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. 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 by the “disintegrating erosion” of particular exceptions, Wendt v. Fischer, 243 N.Y. 430, 444, 154 N.E. 303. 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.”

In “The Nature of the Judicial Process” (1921), Cardozo had formulated the distinctions which he judicially decreed some seven years later in Meinhard. He stated: “Some relations in life impose a duty to act in accordance with the customary morality and nothing more. In those, the customary morality must be the standard for the judge . . . . The morality which it expresses is not that of sensitive souls. Other relations in life . . . impose a duty to act in accordance with the highest standards which a man of the most delicate conscience and the nicest sense of honor might impose upon himself.”

Meinhard, in distinguishing between the “morals of the market place” and those when a fiduciary relation is found to exist where “the punctilio of an honor the most sensitive” is the standard of behavior, raises several problems, for example, the requirement of a legal finding that the particular facts create a “fiduciary relationship,” and an understanding of what morals are “trodden by the crowd” who are subject to the lesser “morals of the market place.”

The Meinhard decision itself showed the conflict. It was not unanimous. The dissent of three judges was based on their interpretation of the facts that there was a tenuous relationship at best which did not survive the termination of the venture between the joint adventurers and thus freed them from the restrictions of any obligations to each other in future activities, even if such activities were planned during the co-venture.

The Court of Appeals has more recently wrestled with the same problem. In a 5-2 decision in Northeast General Corporation v. Wellington Advertising Inc., 81 NY2d 704 (1993), the Court found that a “finder” did not have a fiduciary relationship with one who employed such restricted services.

The Court there analyzed Meinhard and noted that “Courts cannot infer and superimpose a duty of the finest loyalty,” in the absence of an express agreement between the parties. Nor, it held, may courts “generate” such relationship, even in the face of the fact that in the cited case the finder found a person who “had a reputation for buying companies, removing assets rendering the companies borderline insolvent and leaving minority investors unprotected,” which adverse information the finder failed to disclose.

This deconstruction of Meinhard permitted the finder to receive a finder’s fee which it claimed in the action even in the face of these activities.

The vigorous dissent in Northeast was predicated on the belief that “the plaintiff’s conduct constituted a breach of the minimum duty of disclosure that the law requires . . . and that plaintiff at the very least should be precluded from claiming his fee.”

More recent Court refusals to extend the categories of fiduciary relationship are the holdings in Dubbs v. Stribling, 96 NY2d 337 (2001), and Sonnenschein v. Douglas Elliman Gibbonst Ives, 96 NY2d 369 (2001), which denied the existence of a fiduciary relationship of a seller’s broker and the even more recent holding in Rifkin v. Century 21 Teran Realty LLC, 10 NY3d 344 (2008), which denied such relationship of a buyer’s broker (see also the adoption by the U.S. Court of Appeals for the Second Circuit of the state Court of Appeals’ holding (NYLJ, July 29, 2008, p.26).

Judge Cardozo’s reference to “market place” morals (which are of a lesser grade than those required of a fiduciary) prompts inquiry as to relationship of such “morals” to “customary conduct.”

The Latin derivation of “morals” or “mores,” according to Cassell’s “New Latin Dictionary” (1959), is from “customs.” In the plural form of “mors” it is defined as “ways, conduct, character, morals” (pp 380-381). Arguably, therefore, market place customs generate their own morals.

Law of the Merchant

This equivalence took tangible form in the law of the Law Merchant. Judge Cardozo was well aware of this. In his “Nature of the Judicial Process,” he referred to the evolving effect of trade custom among merchants, (i.e., “the market place”), which he later identified in Meinhard. The power of courts to put their imprimatur upon customs of recent growth is not lost because it is exercised with caution, said Judge Cardozo. “The law merchant, says an English Judge, is not fixed and stereotyped, it has not yet been arrested in its growth by being moulded into a code. It is . . . capable of being expanded and enlarged to meet the wants of trade.”

In his “Commentaries on the Laws of England,” Blackstone referred to the “Lex Mercatoria,” or the “custom of merchants,” and characterized it as different from common law, or “a law common to all of the realm.”

Holdsworth in his “History of English Law” noted that the Law Merchant applied to “merchants, as a class very distinct from the rest of the community” and consisted of “the customary observances of a distinct class.” He noted “the absorption of the commercial side of the Law Merchant into the common law.”

Holdsworth later noted that “the Law Merchant was chiefly based upon the works of civilians who had adapted the civil law to modern commercial needs.” He praised Lord Mansfield for his “work of creating and settling the Law Merchant which in England was in a backward and unsettled state.”

(See also definition of the “Law Merchant” and its contemporary “reflection in the Uniform Commercial Code” (Black’s Law Dictionary (8th ed., p. 903)).


Despite the apparent denigration of the “morals of the market place” in “Nature of the Judicial Process,” Judge Cardozo advised and cited with approval the thought that “we are ever and always listening to the still small voice of the herd and are ever ready to defend and justify its instructions and warnings and accept them as the mature results of our own reasoning.”

This was hardly an indictment of the morals “trodden by the crowd” he thereafter instanced in Meinhard, but showed his balancing of concepts and perhaps his feelings that pragmatic customary morals might be justified and serviceable, in addition to those whose fiduciary relationships required more exquisite standards of conduct.

Clarence S. Barasch is an attorney in New York.