A recent ruling by Magistrate Judge Jacqueline Scott Corley addressed the interesting question of whether a consultant might owe a fiduciary duty as a de facto officer.  Music Grp. Macao Commer. Offshore, Ltd. v. Foote, 2015 U.S. Dist. LEXIS 81415 (N.D. Cal. June 22, 2015).  The ruling came in a lawsuit by a corporation against a former consultant after a crippling cyber attack.  The plaintiff corporation conceded that neither its board of directors nor anyone else authorized to do so by its bylaws appointed the defendant to serve as  its Chief Technology Officer or any other executive position.  Nonetheless, the plaintiff argued that the defendant owed it a fiduciary duty as a de facto officer.

The Court found that under California law it is "the actual appointment that creates corporate officership triggering the fiduciary duty and other attendant responsibilities."  Nonetheless, it recognized two exceptions to this general rule.

First, the Court found that "courts will recognize a de facto officer where the apparent officer assumes possession of an office under the claim and color of an election or appointment and actually discharges the duties of that office."  This exception was not available to the plaintiff because it failed to plead that the defendant was a de facto officer by virtue of a legally deficient appointment.

Second, the Court found that "California courts recognize a de facto officer as one who has no legal authority to act, but who presents himself or herself as having that authority 'with the acquiescence' of the involved party."  (citing In re Redev. Plan of Bunker Hill, 61 Cal. 2d 21, 42, 37 Cal. Rptr. 74, 389 P.2d 538 (1964)).  Plaintiff couldn't prevail under this exception because it wasn't an innocent third party.  Rather, it knew that the defendant wasn't an officer.

What Country Is Macao?

I was intrigued by footnote 11 of the opinion:

Music Group is a company incorporated in the foreign country of Macau with its registered offices in that country, as well. (See Dkt. No. 5 ¶ 1.)  Still, at oral argument the parties agreed that California law applies to the question of whether Defendant owes a duty to the corporation as its fiduciary.

Macao isn't a country.  Portugal administered Macao from 1887 until 1999 pursuant to the Sino-Portuguese Treaty of Peking.  It is now a special administrative region of the People's Republic of China.