Fiduciary_Litigation_Update_Nov2011 by xiangpeng

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									FIDUCIARY LITIGATION UPDATE

              Prepared by:

            Dana G. Fitzsimons Jr.
               Meghan L. Gehr
             McGuireWoods LLP
         Fiduciary Advisory Services
              901 E. Cary Street
          Richmond, Virginia 23219
               (804) 775-7622
      dfitzsimons@mcguirewoods.com
                                           TABLE OF CONTENTS
                                      FIDUCIARY LITIGATION UPDATE
                                                                                                                                   Page


PART A: TRUST INVESTMENTS .......................................................................................1
1.       Gallagher v. Keybank, N.A., 2011 U.S. Dist. LEXIS 107361 (N.D. New York,
         September 22, 2011)......................................................................................................1
2.       Reed v. Regions Bank, 2011 Ala. LEXIS 138 (September 9, 2011)................................2
3.       Matter of Lasdon, 2011 NY Slip Op 51710U (New York County Surrogate’s
         Court, August 23, 2011) ................................................................................................3
4.       Parris v. Regions Bank, 2011 U.S. Dist. LEXIS 92167 (W.D. Tennessee, August
         17, 2011) .......................................................................................................................4
5.       Matter of Hyde, 2011 NY Slip Op 21195 (Warren County Surrogate’s Court,
         May 20, 2011) ...............................................................................................................5
6.       Guest v. Frazier, 2011 Cal. App. Unpub. LEXIS 2106 (March 22, 2011) .......................6
7.       Museum Associates v. Schiff, 2011 Cal. App. Unpub. LEXIS 1752 (March 10,
         2011).............................................................................................................................7
8.       Scanlan v. Eisenberg, 2011 U.S. Dist. LEXIS 24681 (N.D. Illinois, March 9,
         2011).............................................................................................................................8
9.       Figel v. Wells Fargo Bank, N.A., 2011 U.S. Dist. LEXIS 24134 (S.D. Florida,
         March 9, 2011); Figel v. Wells Fargo Bank, N.A., 2011 U.S. Dist. LEXIS 25291
         (S.D. Florida, March 1, 2011) ........................................................................................9
10.      In re: The Mark Anthony Fowler Special Needs Trust, Washington Court of
         Appeals Division II Case #39729-3 (February 8, 2011)................................................10
11.      In re: Helen Rivas Trust, 2011 NY Slip Op 50008U (Monroe County Surrogate’s
         Court, January 5, 2011) ...............................................................................................11
12.      Matter of Knox, 2010 NY Slip Op 52234U (February 24, 2010); Matter of Knox,
         2010 NY Slip Op 52251U (November 24, 2010)..........................................................11
13.      W.A.K., II v. Wachovia Bank, N.A., 2010 U.S. Dist. LEXIS 72289 (July 19,
         2010); W.A.K., II v. Wachovia Bank, N.A., 2010 U.S. Dist. LEXIS 79074
         (August 5, 2010); W.A.K., II v. Wachovia Bank, N.A., 2010 U.S. Dist. LEXIS
         87934 (August 25, 2010) .............................................................................................14
14.      Estate of Warden, 2010 PA Super 121 (July 9, 2010)...................................................15
15.      Matter of Hunter, 2010 NY Slip Op 50548U (March 31, 2010)....................................16
PART B: DEFENSES AND LIMITATIONS TO ACTIONS..............................................17
1.       In the Matter of Trust for Grandchildren of Wilbert L. and Genevieve W. Gore,
         2010 Del. Ch. LEXIS 188 (September 1, 2010)............................................................17
2.       Stuart et al. v. Snyder, 2010 Conn. App. LEXIS 556 (October 19, 2010)......................18
3.       John H. Meeks, Trustee v. Successor Trustee of the trusts under the will of
         Michael Holliday, 2010 Tenn. App. LEXIS 554 (July 28, 2010) ..................................19
4.       Jefferson State Bank v. Lenk, 2010 Tex. LEXIS 618 (February 16, 2010)....................20


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5.        In Re Estate of Helen Bandemer, George Bandemer and Marvin Bandemer v.
          Martin Bandemer and Norman Bandemer, 2010 Mich. App. LEXIS 1922
          (October 12, 2010) ......................................................................................................20
6.        Judith Bristol et al. v. Andrew R. Clark, Jr. and Rebecca E. Moore, 2010 Cal.
          App. Unpub. LEXIS 8169 (October 14, 2010) .............................................................21
7.        Daniel L. Hemphill v. Jay F. Shore, 2010 Kan. App. LEXIS 112 (September 24,
          2010)...........................................................................................................................22
8.        Kristofer Kastner v. InTrust Bank, 2010 U.S. Dist. LEXIS 120927 (November
          15, 2010) .....................................................................................................................23
9.        Crawford Supply Group, Inc. v. LaSalle Bank, N.A., 2010 U.S. Dist. LEXIS
          4691 (N.D. Ill. 2010) ...................................................................................................24
PART C: ARBITRATION ...................................................................................................26
1.        Decker v. Bookstaver, 2010 U.S. Dist. LEXIS 52428 (E.D. Missouri May 26,
          2010)...........................................................................................................................26
2.        Schmitz et al. v. Merrill Lynch et al., 2010 Ill. App. LEXIS 1160 (October 27,
          2010)...........................................................................................................................26
PART D: SETTLEMENTS ..................................................................................................27
1.        In Re Estate of Billy Joe Stricklan, 2010 Tenn. App. LEXIS 410 (June 28, 2010) ........27
2.        Kevin McNulty Saunders v. Sondra Muratori, 2010 Colo. App. LEXIS 1170
          (August 19, 2010)........................................................................................................28
3.        Phyllis Sigal Carlin v. Leslie Javorek, Fla. App. LEXIS 10339 (July 14, 2010) ............30
4.        Suzanne C. Radford v. Melinda Shehorn, 2010 Cal. App. LEXIS 1455 (August
          19, 2010) .....................................................................................................................30
PART E: NO-CONTEST CLAUSES ...................................................................................31
1.        In Re Estate of Dorsey W. Rohrbaugh, 80 Va. Circ. 253 (Fairfax Circuit Court,
          March 31, 2010) ..........................................................................................................31
2.        Derringer v. Emerson, 2010 U.S. Dist. LEXIS 79522 (August 6, 2010)........................32
3.        Claude Arnall v. Dawn Arnall, 2011 Cal. App. Unpub. LEXIS 366 (January 19,
          2011)...........................................................................................................................32
4.        Claude Arnall v. Dawn Arnall, 2010 Cal. App. Unpub. LEXIS 9218 (November
          19, 2010) .....................................................................................................................33
5.        Glory Kaufman v. JP Morgan Chase Bank, 2010 Cal. App. Unpub. LEXIS 8559
          (October 28, 2010) ......................................................................................................34
6.        Lange v. Nusser, 2011 Cal. App. Unpub. LEXIS 1576 (March 2, 2011).......................34
7.        Christopher Gene Fazzi v. Norma Jean Klein, 2010 Cal. App. LEXIS 2112
          (December 14, 2010) ...................................................................................................35


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PART F: POWERS OF ATTORNEY..................................................................................36
1.        James Munn v. Michael D. Briggs et al., 2010 Cal. App. LEXIS 860 (June 10,
          2010)...........................................................................................................................36
2.        Siegel et al. v. JP Morgan Chase Bank, 2011 Fla. App. LEXIS 1925 (February
          16, 2011) .....................................................................................................................37
PART G: PRE-DEATH WILL CONTESTS .......................................................................38
1.        Deirdre Foster v. Winifred Foster, 2010 Ark. App. LEXIS 629 (September 15,
          2010)...........................................................................................................................38
PART H: JURISDICTION...................................................................................................39
1.        Nelms v. Kramer, 2011 U.S. Dist. LEXIS 21957 (March 3, 2011)................................39
2.        John Fitzgerald Kennedy v. the Trustees of the Testamentary Trust of the Last
          Will and Testament of President John F. Kennedy, 2010 U.S. App. LEXIS 22573
          (October 28, 2010) ......................................................................................................39
3.        Noel v. Liberty Bank of Arkansas, 2010 U.S. Dist. LEXIS 72298 (July 16, 2010)........40
4.        Emil Peter III, v. Hon. Susan Schultz Gibson, 2010 Ky. LEXIS 297 (December
          16, 2010) .....................................................................................................................41
PART I: STANDING............................................................................................................41
1.        Sheryl Ragen v. Peter Veloz, 2010 Cal. App. Unpub. LEXIS 7262 (September
          13, 2010) .....................................................................................................................41
2.        In Re: James Craig Guetersloh, 2010 Tex. App. LEXIS 8730 (November 1,
          2010)...........................................................................................................................43
3.        Joshua Lickter et al. v. Maggie Lickter, 2010 Cal. App. LEXIS 1849 (October
          27, 2010) .....................................................................................................................43
4.        Suleman v. Superior Court of Orange County, 2010 Cal. App. LEXIS 8 (January
          8, 2010).......................................................................................................................44
PART J: FUNDING, CONSTRUCTION, AND CREATION OF TRUSTS.......................45
1.        Kucker et al v. Kucker, 2011 Cal. App. LEXIS 88 (January 26, 2011) .........................45
2.        Schmidt v. Hart, 2010 Ore. App. LEXIS 1183 (January 8, 2010)..................................46
3.        Conserve Community, LLC etc. v. Conserve School Trust etc., 2010 Wisc. App.
          LEXIS 921 (November 16, 2010) ................................................................................47
4.        In Re Estate of Skaff etc. v. Skaff et al., 2011 Mich. App. LEXIS 10 (January 4,
          2011)...........................................................................................................................48
5.        Hood v. Todd, 2010 Ga. LEXIS 407 (May 17, 2010) ...................................................49
6.        Citizens Business Bank v. Carrano et al, 2010 Cal. App. LEXIS 1896 (November
          5, 2010).......................................................................................................................49
7.        Weinberger v. Morris, 2010 Cal. App. LEXIS 1668 (September 24, 2010)...................50

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8.    In re Trusts created by Flood, 2010 N.J. Super. LEXIS 243 (December 29, 2010)........52
9.    Fidelity National Financial Inc. v. Friedman, 2010 U.S. Dist. LEXIS 61835, 3-4
      (C.D. Cal. June 17, 2010) ............................................................................................52
10.   Citizens National Bank of Paris v. Kids Hope United, Inc., 235 Ill. 2d 565
      (December 18, 2009) ...................................................................................................53
PART K: AMENDMENT, MODIFICATION, AND TERMINATION OF TRUSTS .......56
1.    In the Matter of Trust D Created under the Last will and Testament of Harry
      Darby, 2010 Kan. LEXIS 427 (June 25, 2010).............................................................56
2.    Montegani v. Cassinerio, 2011 Cal. App. Unpub. LEXIS 1594 (March 2, 2011) ..........56
3.    Bruner v. Bruner, 2011 Mass. LEXIS 17 (January 27, 2011)........................................58
4.    Jarvis et al. v. National City and PNC Bank National Association, 2011 Ky. App.
      LEXIS 20 (February 4, 2011) ......................................................................................58
5.    Shepard v. Barrell, 2010 Mass. App. Unpub. LEXIS 1146 (October 22, 2010).............59
6.    The Fundamentalist Church of Jesus Christ of Latter-Day Saints v. The
      Honorable Denise P. Lindberg, Third District Court Judge, 2010 Utah LEXIS
      115 (August 27, 2010) -...............................................................................................60
7.    Perosi v. LiGreci, 2011 N.Y. Misc. LEXIS 341 (February 14, 2011)............................61
8.    In re Trust of Hrnicek, 2010 Neb. LEXIS 142 (December 3, 2010) ..............................62
9.    Zagorski v. Kaleta (In re Estate of Michalak), 2010 Ill. App. LEXIS 869 (August
      20, 2010) .....................................................................................................................63
10.   Reid v. In Re: Estate of Sonder, 2011 Fla. App. LEXIS 4035 (March 23, 2011)...........64




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                            FIDUCIARY LITIGATION UPDATE1

                             PART A: TRUST INVESTMENTS

1.      Gallagher v. Keybank, N.A., 2011 U.S. Dist. LEXIS 107361 (N.D. New York,
        September 22, 2011)

        A.      Patricia Gallagher is the settlor and a beneficiary of a charitable remainder trust
                created on June 8, 2001 with Keybank as trustee. The trust was intended to
                qualify as a charitable remainder annuity trust (CRAT). The trust was funded in
                March of 2002 with 4,500 shares of Wyeth stock with a value of $300,000 at $65
                per share. Keybank later determined that the trust did not qualify as a CRAT as
                originally drafted, and notified the drafting attorneys in May or June of 2002.
                The drafting attorneys then prepared an amendment to the trust that was signed
                by both Patricia and Keybank by July of 2002.

        B.      By the time the trust was amended, the Wyeth stock had dropped to $49 per
                share, and thereafter dropped further. The stock represented 85% of the trust
                assets until July of 2003. By October of 2008, the value of the trust had fallen to
                only $66,000.

        C.      Patricia sued in state court to surcharge Keybank for the investment losses,
                alleging breach of contract, breach of fiduciary duty, negligence and breach of
                trust, and seeking $216,000 in damages. Keybank removed the suit to the federal
                court for the Northern District of New York and brought a third-party complaint
                for negligence and indemnification against the lawyers who drafted the trust.
                Keybank claimed that the drafting attorneys’ failure to properly draft the trust as
                a qualifying CRAT prevented Keybank from selling the Wyeth stock in a timely
                manner (presumably because of the taxable gain from the sale where the trust did
                not qualify as tax-exempt). The drafting attorneys moved to dismiss the claims
                against them and Keybank moved to amend their third-party complaint to drop
                the negligence and indemnification claims and instead seek contribution from the
                drafting attorneys.

        D.      The court dismissed all of the claims against the drafting attorneys and refused to
                allow Keybank to amend its third-party complaint, on the grounds that: (1)
                Keybank failed to allege privity with the attorneys to support the negligence
                claim; (2) Keybank failed to allege any facts to support a finding of express or
                implied indemnification owed by the drafting attorneys; and (3) under New York
                law, contribution is only available where the claim sounds in tort unless there is
                some independent legal duty, and here the claim was purely economic and based
                on a contract with no independent legal duty owed by the attorneys to Keybank.




1
 Case summaries are taken from the McGuireWoods Fiduciary Advisory Services email releases by
Dana G. Fitzsimons Jr. and Meghan L. Gehr. To subscribe to receive future releases, please visit:
http://www.mcguirewoods.com/news-resources/email/
2.   Reed v. Regions Bank, 2011 Ala. LEXIS 138 (September 9, 2011)

     A.     In 1982, Elizabeth Walter created separate trusts for her daughters with one of
            her daughters as trustee. In 1983, Regions Bank became custodian for the trusts.
            In 1994, Regions Bank became investment advisor for the trusts.

     B.     In November 2008, the trustee fired Regions Bank as custodian and investment
            advisor and filed suit. The trustee and the beneficiaries sued Regions Bank and
            three affiliated companies — Morgan Asset Management, Inc., Morgan Keegan
            & Company, Inc., and Regions Financial Corporation — alleging that the
            companies acted in concert under the trade name of “Regions Morgan Keegan
            Trust” and all participated in the trust investment activities (collectively,
            “Regions”). The plaintiffs’ causes of action included breach of fiduciary duties,
            negligence, wantonness, fraud, reckless or negligent misrepresentation,
            suppression, deceit, common-law indemnity, violation of the Alabama Securities
            Act, conspiracy to deceive and defraud, and breach of certain Alabama statutory
            duties.

     C.     The plaintiffs alleged that Regions: (1) extensively invested the trust assets in its
            own affiliated funds; (2) knew the funds were high risk, unsuitable for the trusts,
            and illiquid, and many backed by subprime mortgages; (3) failed to disclose the
            defects in the funds, misrepresented the risk in the funds, made other material
            misrepresentations, and omitted material facts; (4) only retained its appointment
            as investment advisor as a result of the plaintiffs’ reliance on its
            misrepresentations; (5) following decreases in the funds in 2007, assured the
            plaintiffs that the funds were solid investments, the value would soon stabilize,
            lost value would be recovered and the decline was a temporary market reaction;
            (6) suppressed negative information about the funds; (7) induced the plaintiffs to
            retain the funds to their detriment; (8) sold their own holdings in the funds while
            retaining the trust investments in the funds; and (9) failed to warn the trustee of
            any problems with the funds.

     D.     The affiliated companies moved to dismiss the claims against them on the
            grounds that the claims were derivative in nature, not asserted in compliance
            with court rules, and should be dismissed. The trial court refused to dismiss the
            claims and the affiliated companies sought a writ of mandamus from the
            Supreme Court of Alabama.

     E.     A divided Alabama Supreme Court, with two dissents, granted the petition,
            issued the writ, and dismissed the claims on grounds that the claims were
            derivative claims that belonged to the investment funds themselves and not to the
            trusts as individual investors in the those funds. The court concluded that the
            plaintiffs failed to allege any injury distinct from the injury to the funds
            themselves, even though the plaintiffs did not allege that their losses resulted
            from the mismanagement of the funds themselves and notwithstanding the
            several distinct legal theories under which the plaintiffs sought relief.

     F.     The court set these distinctions aside, and reduced and characterized the
            plaintiffs’ allegations to what the court called simply a claim for reduction in the
            value of the investment funds due to the mismanagement of the funds. The court
            then concluded that the claims (as reduced and characterized by the court) were


                                             2
            for an injury to the corporation as a whole and as such should be characterized as
            derivative claims. The court set aside the plaintiffs’ numerous distinctions
            between their claims and the company’s claims and focused on the common
            financial harm from the loss in value of the funds. The court also rejected the
            distinction that the company would not have standing to bring claims related to
            the trusts. The court relied on the test under Maryland law (the funds were
            governed by Maryland law) that the injury must be distinct from the injury
            suffered by the company in order to avoid derivative treatment, and refused to
            find anything distinct about the injury suffered by the trusts.

     G.     As a result of its conclusion that the plaintiffs’ claims were derivative, the court
            found that the plaintiffs failed to comply with the applicable state statute
            governing derivative claims and therefore the circuit court lacked subject matter
            jurisdiction. Accordingly the court ordered the circuit court to dismiss the action
            as to the related companies.

     H.     Two justices dissented and issued separate dissenting opinions on the grounds
            that: (1) the law imposes duties on investment advisors that run to the individual
            investor that are distinct from shareholder claims; (2) the investor’s loss, unlike
            the fund’s loss, is traceable to fraudulent investment advice and distinct from a
            shareholder that invests in assets independently and without fraudulent
            investment advice; (3) the court improperly failed to apply controlling Maryland
            cases; (4) the fund did not have standing to bring the trust claims; (5) the
            plaintiffs’ claims were not claims about the mismanagement of the fund itself,
            but were rather about fraud and other breaches in connection with investment
            advice, and a different injury with a distinct cause of action from a shareholder
            claim; (6) courts in other jurisdictions have recognized the distinction between
            claims of fraudulent inducement to invest and derivative claims for losses
            suffered by the fund when mismanaged; (7) the purposes of a mutual fund and a
            trust are not the same, and therefore the duties owed are distinct and the trust
            claims should not be characterized as derivative claims.

3.   Matter of Lasdon, 2011 NY Slip Op 51710U (New York County Surrogate’s Court,
     August 23, 2011)

     A.     Under his will, Stanley Lasdon created trusts for the benefit of his grandsons
            Michael and Daniel. Mr. Lasdon's wife, Gene; daughter, Susan (the mother of
            Michael and Daniel); and son, Jeffrey, were named as co-trustees. Gene died in
            2006. Michael’s trust was to terminate when Michael turned 35, on August 20,
            2004. Daniel’s trust was to terminate when Daniel turned 35, on March 2, 2007.
            Susan as co-trustee sought to distribute the trust assets, but Jeffrey refused to
            authorize the termination of the trusts until March 4, 2008, after Michael and
            Daniel brought suit against Jeffrey. The trust assets consisted primarily of
            substantial holdings in Pfizer stock. The stock declined in value prior to finally
            being distributed to the beneficiaries, and the beneficiaries sued to surcharge
            Jeffrey for the loss in value. The New York County Surrogate’s Court granted
            summary judgment in favor of the beneficiaries on their surcharge claim, but the
            court reserved decision on the calculation of the amount of the damages.

     B.     The parties stipulated to the dates on which distribution of the stock should have
            been made, the value of the stock on that date, and the value of the stock on the


                                             3
            date actually distributed, but disagreed on other aspects of the calculation of the
            damages to be awarded to the beneficiaries.

     C.     The trial court ruled as follows with respect to the calculation of damages: (1)
            the surcharge award should not be reduced by the capital gains that have been
            incurred by the beneficiaries upon timely receipt and then sale of the stock, since
            the case was not about a trustee’s failure to timely sell the stock, and the
            beneficiaries could have opted to retain the stock and receive a step up in basis at
            their deaths; (2) there is no reason to depart from the “anti-netting” rule that
            prevents a trustee from offsetting the loss in the stock with gains in other assets
            retained by the trustee, and a trustee who has breached his duties cannot use to
            his own advantage the investment “fruits” that belong to the beneficiaries; (3) the
            change to total return investing under the Uniform Prudent Investor Act does not
            require a change to the anti-netting rule, since this is not a case about prudent or
            imprudent investments but rather a case where the trustee’s conduct made the
            trustee a guarantor of investment performance by withholding distributions; (4)
            an award of compound interest at a rate of 6% is appropriate to make the
            beneficiaries whole for the lost opportunity to do with the property as they
            wished; and (5) Jeffrey’s reasonable attorneys’ fees and costs are chargeable to
            the trusts up to the point that jurisdiction over all of the necessary parties was
            obtained by the court in the accounting action (i.e., the costs of preparing the
            accountings, which were for the benefit of the trust, but not the costs of
            defending the trustee in the surcharge action), but the amount of the fees are to be
            reduced by 25% for being somewhat excessive, leaving a proper charge to the
            trusts for attorneys’ fees in the amount of $70,258.

4.   Parris v. Regions Bank, 2011 U.S. Dist. LEXIS 92167 (W.D. Tennessee, August 17,
     2011)

     A.     William Parris served as co-trustee of the Sara G. Parris Grantor Trust. Union
            Planters National Bank of Memphis served as co-trustee until it merged with
            Regions Bank in 2004, at which time Regions Bank became co-trustee with
            Parris.

     B.     Parris brought claims against Regions Bank for breach of trust, negligence,
            violation of the Prudent Investor Act, and violation of the Tennessee Consumer
            Protection Act, alleging that: (1) Regions recommended that the trust invest in a
            “proprietary junk bond fund” called the Regions Morgan Keegan Inc. High
            Income Fund; (2) committed inappropriate self-dealing as part of its plan to
            increase the holdings of its trust customers in affiliated junk bond funds; (3)
            failed to disclose material facts including the fund’s risks and fees; and (4)
            invested 72% of the trust’s assets in the fund, and failed to diversify the
            investment or protect the trust assets despite problems with the fund (including
            holdings in subprime debt obligations) and other “storm warnings” about the
            volatility of the investments. Parris sought compensatory damages against
            Regions in the amount of $92,000 and punitive damages of $500,000.

     C.     Regions moved for summary judgment dismissing the claims, which the court
            rejected. The court held that summary judgment was not appropriate due to the
            running of the one-year statute of limitations under the Alabama Uniform Trust
            Code because Regions did not proffer evidence that would require a jury to


                                             4
            conclude that Parris had inquiry notice of the claims against Regions more than
            one year before he brought the suit. The letter sent by Regions to Parris
            informing him of the investment in the fund, which Parris signed, provided few
            details about the fund, and stated only that the fund would earn more income than
            current trust investments. The court held that the letter alone was not adequate to
            justify summary judgment based on the running of the one-year limitations
            period where the letter provided no information about the fund, was sent on
            Union Planters and not Regions letterhead and thereby concealed Regions’
            relationship to the fund, and was not otherwise adequate to give rise to inquiry
            notice that would start the limitations period.

     D.     In a footnote, the court commented that to the extent Regions relied on the trust
            account statements sent to Parris, Regions failed to explain how the statements
            could put Parris on inquiry notice about a possible claim for breach of trust. The
            court noted that while the trust account statements, combined with other facts not
            in the record, might show inquiry notice, the court could not reach such a
            conclusion based on the statements alone or the facts in the record at the
            summary judgment stage.

     E.     The court rejected Regions’ other arguments as follows: (1) the claims were not
            barred by ratification as a result of Parris’s acceptance of dividends from the
            fund, receipt of account statements, or approval of the initial purchase of the
            fund, because Regions could not conclusively show that Parris had all the facts
            necessary to form an opinion about the investment in the fund; (2) the claims
            were not barred by consent, acquiescence, waiver, laches, or estoppel because
            Regions made only a conclusory argument without supporting factual evidence in
            the record; (3) the Consumer Protection Act claims were adequately pled by
            incorporating all of the factual allegations in the complaint by reference; and (4)
            Parris had standing to bring the claims against Regions Bank, notwithstanding
            the Probate Court of Jefferson County, Alabama’s appointment of a trustee ad
            litem to pursue claims on behalf of Regions’ trust accounts in various class
            actions pending before the court.

5.   Matter of Hyde, 2011 NY Slip Op 21195 (Warren County Surrogate’s Court, May
     20, 2011)

     A.     Charlotte Hyde and Nell Cunningham were the daughters of Samuel Pruyn, who
            founded Finch Pruyn, a large manufacturer in Glenn Falls, New York. Charlotte
            and Nell created trusts that were funded with large concentrations of Finch Pruyn
            stock. Following a downturn in the paper market, the trust beneficiaries filed
            objections to the trust accountings filed by Glens Falls National Bank and Trust
            Company and an individual co-trustee for the Hyde trusts, and an accounting for
            the same 20-year period filed by Banknorth, N.A. and an individual co-trustee for
            the Cunningham trust, alleging breach of fiduciary duty and seeking surcharge
            for failure to diversify the trust investments. The trustees prevailed in the
            litigation. (A summary of the case appears in our spring 2008 FAS Release
            available here: http://www.mcguirewoods.com/news-
            resources/item.asp?item=3072).

     B.     Prior to the trial, one family of trust beneficiaries, the Renz family, withdrew
            their objections to the accountings and acknowledged in writing that they would


                                            5
            not share in any surcharge award to the Whitney family (that pursued the
            litigation against the trustees) under the common law pro tanto doctrine.

     C.     After the trial and the decision in favor of the trustees, the Renz family moved to
            have the attorneys’ fees incurred by the trustees in their successful defense
            allocated to the Whitney family’s interest in the trusts, and not to the trust
            principal which would diminish the shares of the Renz family. The trial court
            denied the motion and the appellate division affirmed. The court of appeals
            granted leave to appeal and reversed and remanded the case to the trial court to
            allocate the attorneys’ fees and expenses based on numerous criteria set out by
            the court of appeals.

     D.     With respect to the attorneys’ fees and costs incurred by the trustee in connection
            with the Article Ninth Trust, which was held 60% for the Renz family and 40%
            for the Whitney family, the trial court allocated the fees incurred prior to the
            Renz family’s withdrawal of its objections to the trust corpus, and allocated the
            balance of the fees and costs one-half to the Whitney shares, and one-half to the
            trust corpus, on the grounds that: (1) the Renz family received some benefit from
            the diversification of investment caused by the litigation; (2) the Whitneys
            brought the suit in good faith, with factual support, and not as a vehicle for
            retaliation against other family members; and (3) the Whitneys had a significant
            economic interest in the litigation.

     E.     With respect to the attorneys’ fees and costs incurred by the trustee in connection
            with the Article Seventh Trust that was solely for the benefit of the Whitneys, the
            trial court allocated the fees to the trust corpus.

     F.     With respect to the Cunningham trust, the trial court allocated the attorneys’ fees
            and costs incurred by the trustee to corpus, in which the Renz family had a one-
            twelfth interest, on the grounds that: (1) the objections were filed by the father of
            the current beneficiaries who had died before the litigation was completed; (2)
            the Whitney children were merely substituted as parties, and under the pro tanto
            doctrine would not have received the benefits of any successful recovery against
            the trustee; (3) accordingly, the Whitney children should not be punished for the
            actions of their father; and (4) the impact on the Renz family was de minimus
            since they held only a small share in this trust.

6.   Guest v. Frazier, 2011 Cal. App. Unpub. LEXIS 2106 (March 22, 2011)

     A.     In 1997, Anthony and Lottie Guest executed a revocable family trust. Following
            the death of the survivor of them in 2005, their daughter, Gloria, became trustee.
            The trust terms provided for outright distribution of 62.5% of the residuary trust
            assets to Gloria and 37.5% to her brother, Richard. Richard and Gloria agreed
            that Gloria would manage Richard’s share of the trust assets and pay him a
            monthly stipend. Richard suffered from multiple sclerosis and depended on the
            stipend to pay for his living expenses.

     B.     In 2006, Gloria sold real property and invested 97.5% of the trust assets in a
            mutual fund that consisted almost entirely of junk bonds. In 2007, she removed
            60% of the fund shares and placed them in her own separate account.




                                             6
     C.     In May of 2008, Richard’s attorney wrote to Gloria and demanded that she
            immediately distribute Richard’s share of the trust assets outright to Richard and
            prepare an accounting. Gloria, through counsel, refused to distribute assets and
            invoked a trust term that granted her certain powers with respect to the interest of
            a beneficiary who is mentally or physically unable to manage financial affairs.
            That same month, Gloria transferred $51,400 out of the trust account to herself,
            leaving $196,100 in the account. In August of 2008, Gloria received an
            evaluation from Richard’s psychologist, who concluded that Richard could
            handle his own financial affairs, but she still refused to distribute the trust assets.

     D.     In September of 2008, Richard sued to remove and replace Gloria as trustee, and
            the court appointed a successor trustee and ordered Gloria to turn over the assets
            and account for the trust. The successor trustee sold the fund shares, but by that
            time the value had dropped with a resulting loss to the trust in the amount of
            $71,972.73. Gloria filed her account in June of 2009, and Richard filed
            objections and sought to surcharge Gloria for breach of trust, termination of trust,
            and attorneys’ fees. Richard alleged inconsistencies in the account, and alleged
            that Gloria withdrew more than her share of the trust assets and failed to report
            personal property, keep proper records, file proper tax returns, or diversify
            investments.

     E.     The trial court ruled in Richard’s favor, awarded Richard $82,000 in attorneys’
            fees and costs, and surcharged Gloria an additional $70,000 for loss in the trust
            account. The court found that Gloria breached her duties by investing the trust
            assets in junk bonds and refusing to distribute the trust assets, and denied
            payment of her fees on the basis that she defended her actions in bad faith.
            Gloria appealed.

     F.     On appeal the California court of appeals affirmed the trial court on the grounds
            that: (1) the boilerplate language in the trust agreement does not rise to the level
            of waiving the Prudent Investor Rule, which Gloria violated by investing
            Richard’s entire share of the trust assets in the junk bond fund; (2) Gloria
            breached her duty by refusing to distribute the trust assets, especially in view of
            the trial court’s finding that Gloria refused to distribute in retaliation for
            Richard’s hiring counsel and demanding distribution; (3) the trial court
            inherently, if not explicitly, found that Gloria did not have reasonable or probable
            cause to defend her actions by finding that she acted in bad faith; and (4) Gloria
            did not prevail on appeal and is not entitled to have her attorneys’ fees paid out of
            the trust.

7.   Museum Associates v. Schiff, 2011 Cal. App. Unpub. LEXIS 1752 (March 10, 2011)

     A.     A charitable remainder annuity trust was created by court order in 1984. The
            CRAT paid a 6% annuity to Susan Cole for her lifetime with the remainder
            passing to the Los Angeles County Museum of Art (LACMA) for the purchase of
            Japanese and Chinese art. The trust was funded with approximately $1.3 million.
            Michael Schiff became successor trustee in 2001, at which time Susan was
            expected to live another 26 years.

     B.     Beginning in 2001, the trustee prepared annual letters to LACMA. The letters
            sent in 2001, 2002, and 2003 disclosed the value of the trust assets and described


                                              7
            the trust assets generally. The 2002 and 2003 letters enclosed a management
            contract for the trust’s investment in “FMI LLC” and represented that the
            investment would provide 12.54% return. The 2004 letter informed LACMA
            that it was necessary to renegotiate the FMI investment by taking an assignment
            of a promissory note from DollarWorks, Inc. to the trust in the amount of
            $650,000, secured by 157,500 shares of DollarWorks stock.

     C.     In 2006, Susan renounced her interest in the trust. LACMA then sought
            information about the trust assets, and in 2007 petitioned for surcharge against
            the trustee for imprudent investment of the trust assets in FMI and DollarWorks.
            LACMA only received interest payments on the $650,000 promissory note until
            October 2007, and received less than $80,000 in total payments on the
            promissory note. The trial court surcharged the trustee in the amount of
            $532,701, plus prejudgment interest. The trial court rejected the trustee’s claim
            that his letters were sufficient to trigger the commencement of the statute of
            limitations on LACMA’s claims. The trustee appealed.

     D.     On appeal, the California Court of Appeals affirmed the trial court and held that
            the letters lacked sufficient information to give rise to a duty on the part of
            LACMA to inquire about claims, and therefore were not adequate to start the
            running of the statute of limitations period.

8.   Scanlan v. Eisenberg, 2011 U.S. Dist. LEXIS 24681 (N.D. Illinois, March 9, 2011)

     A.     Martin Bucksbaum, along with his brother Matthew, founded General Growth
            Properties, Inc., one of the largest publicly traded real estate investment trusts in
            the country. Martin established a series of trusts for his daughter, Mary, and her
            descendants. The trusts were drafted by attorneys for the Bucksbaum brothers,
            who also represented the Bucksbaum brothers in the founding and management
            of General Growth and its affiliates. The original trustees of the trusts were
            eventually replaced by General Trust Company (the Trust Company), a
            corporation formed and largely owned by one of the attorneys. Two of the
            attorneys control the Trust Company.

     B.     Two minor trust beneficiaries, by Mary as next friend, brought suit against the
            Trust Company as trustee seeking more than $200 million in damages, and
            alleging that the Trust Company (1) purchased shares of stock in General Growth
            despite an overconcentration in the investment; (2) extended $90 million in
            unsecured below-market loans to General Growth corporate insiders; and (3)
            failed to inform the beneficiaries of the transactions in advance. The
            beneficiaries also sued the attorneys and their law firm. All of the defendants
            moved to dismiss the claims.

     C.     The court found that the allegations that the Trust Company purchased the
            General Growth stock to stabilize the stock price by showing the market that the
            family was still buying the stock, and that only the trust participated in the
            stabilization purchases, were adequate to state a claim against the Trust Company
            for breach of the duties of prudence and loyalty because (1) the purpose of the
            investment (to stop a loss rather than to make money) was unusual and (2) a
            reasonable inference from the allegations is that the Trust Company exposed the




                                             8
            trust to an unreasonable risk of loss for the purpose of benefitting non-
            beneficiaries (i.e., other trusts and the defendants themselves).

     D.     The court also held that: (1) the allegations that the Trust Company made loans
            at the LIBOR rate were sufficient to state a claim against the Trust Company in
            connection with the loans since the LIBOR rate is normally lower than the rate
            for unsecured loans to individuals; and (2) the allegation that the Trust Company
            failed to inform the beneficiaries about the purchases and loans in advance was
            adequate to state a claim for breach of the duty to provide the beneficiaries with
            the information needed to protect their interest in the trust, and that a trier of fact
            could find that those matters should have been disclosed to the beneficiaries in
            advance.

     E.     The court affirmed the position of Scott and Ascher on Trusts and held that the
            beneficiaries stated a plausible claim against the attorneys, in their capacities as
            corporate officers of the Trust Company, for personal liability for participation in
            the breach of trust by the Trust Company.

     F.     The attorneys and their firm, in their capacity as counsel for the Trust Company,
            moved to dismiss the claims that they were liable to the beneficiaries for aiding
            and abetting the Trust Company in a breach of trust. Although the court noted
            that there was no Illinois decision on point, the court held that an attorney can be
            held liable for aiding and abetting his client in a breach of trust, and allowed the
            claims to go forward.

     G.     The beneficiaries also sued the attorneys derivatively on behalf of the Trust
            Company for legal malpractice, which the court allowed to go forward on the
            basis that the claim amounted to a trust derivative claim and the trust
            beneficiaries can bring a claim on behalf of a trust where the trustee refuses to
            perform its duty to do so.

     H.     The court dismissed the claims for punitive damages against the attorneys to the
            extent the claims were based on legal advice under an applicable Illinois statute,
            but allowed the claim for punitive damages to go forward against the attorneys in
            their capacity as officers and directors of the Trust Company.

9.   Figel v. Wells Fargo Bank, N.A., 2011 U.S. Dist. LEXIS 24134 (S.D. Florida, March
     9, 2011); Figel v. Wells Fargo Bank, N.A., 2011 U.S. Dist. LEXIS 25291 (S.D.
     Florida, March 1, 2011)

     A.     Gloria Figel established a trust for the benefit of her son, Terry, and grandson,
            Spencer, with Wells Fargo Bank, N.A. as trustee. The trust terms gave the
            trustee broad powers with respect to investments, and broad powers to make
            distributions to Terry and Spencer. Terry made numerous requests for trust
            distributions to support a high lifestyle even though he had never held a job, to
            pay alimony to his ex-wife, for child support and tuition for Spencer, and to
            purchase a home he shared with Spencer. In 2007, the trustee informed Terry
            that he needed to reduce his budget because he was consuming trust assets at a
            rate of 7% per year. The trustee sent Terry detailed quarterly account statements,
            but Terry largely ignored the statements. The trustee allegedly invested the trust
            assets in equities rather than in bonds, and the beneficiaries alleged that had the


                                              9
             trustee invested 70% of the trust portfolio in bonds or fixed income, the trust
             would have more than $3 million in additional funds. The trustee invested the
             trust assets 70% in equities and 30% in fixed income to keep up with Terry’s
             large principal demands and to balance the interests of the current and future
             beneficiaries, and in 1999 and 2003 Terry requested and ratified that asset
             allocation. All of the assets purchased for the trust were on the trustee’s buy list.

      B.     The court granted summary judgment in favor of the trustee, noting that the
             beneficiaries could not point to any case where a trustee was found to have
             breached his fiduciary duty merely because (in hindsight) the trustee invested the
             trust assets in a manner that did not earn as much as it could have, and did not
             point to any action of the trustee that was contrary to the trust terms. The court
             also held that Terry could not claim that he was unaware of the trustee’s conduct
             because he had received regular account statements, and was therefore barred by
             his consent to the trustee’s conduct.

10.   In re: The Mark Anthony Fowler Special Needs Trust, Washington Court of
      Appeals Division II Case #39729-3 (February 8, 2011)

      A.     In 2000, the court established a special needs trust for Mark Anthony Fowler,
             with Wells Fargo Bank, N.A., as trustee, to hold the settlement proceeds from
             litigation following an injury. At the time the trust was created, Fowler’s life
             expectancy was 58 years. The trustee regularly submitted its annual accountings
             to the court, and the court regularly approved the accountings and the trustee’s
             compensation. In 2008, the trustee submitted its accounting for 2007–2008,
             which showed that the trust had suffered a 12% loss in value during the economic
             downturn and that the trust assets were invested 65.5% in equities, 31.5% in
             bonds, and 3% in cash (during the same period the trust investments
             outperformed the S&P 500 Index by 2.5%).

      B.     The trial court refused to approve the trustee’s accounting and stated that due to
             the loss in the equities the trustee should move all of the trust investments into
             FDIC-insured accounts with diversified institutions. The trust’s investment
             manager testified that moving all of the trust investments into insured deposits
             would be a mistake and risk premature depletion of the trust. A guardian ad
             litem appointed by the court agreed and concluded that the trustee had invested
             the trust assets prudently. Notwithstanding, the trial court ordered the trustee to
             move the trust assets into insured deposits.

      C.     The trustee appealed, and Fowler’s guardians joined in the appeal, with no parties
             supporting the trial court’s actions. The Washington Court of Appeals reversed
             the trial court on the grounds that: (1) the trial court did not find that the trustee
             abused its discretion or breached the trust, and therefore the trial court lacked the
             authority to control the trustee’s exercise of its discretion; (2) the court cannot
             interfere with a trustee’s discretion merely because the court would have
             exercised that discretion differently; (3) the decline in the investments was the
             result of a decline in the market, and not from the trustee’s selection of inferior
             assets; (4) the balanced investment approach by the trustee was prudent; (5)
             beneficiaries can be disserved by undue conservatism (i.e., by investing only in
             FDIC-insured accounts) as well as by excessive risk-taking; and (6) the trustee
             was prudent in not selling at the bottom of the market and locking in losses.


                                              10
11.   In re: Helen Rivas Trust, 2011 NY Slip Op 50008U (Monroe County Surrogate’s
      Court, January 5, 2011)

      A.     Helen Rivas created a perpetual charitable trust in 1945 for the benefit of the
             University of Rochester with a predecessor to Bank of America, N.A., as trustee.
             At the same time that she created the trust, Helen also gave $2 million to the
             university outright. The trust provided for the distribution of income, but the
             court in a prior lawsuit modified the trust to pay out the greater of net income and
             a 5% unitrust amount annually to the university and to allow a $2.4 million
             principal distribution to the university. The trust terms established an Investment
             Advisory Committee (Advisory Committee), with two members appointed by the
             university and one by the trustee, and provided that the trustee was to take
             directions from the committee concerning investments for the trust.

      B.     In 2009, a majority of the Advisory Committee (over the dissenting vote of the
             member appointed by the trustee) directed the trustee to invest all of the trust
             assets in the university’s long-term investment pool (LTIP). The terms of the
             contract with the LTIP gave the university sole discretion for the investment of
             all of the trust assets, allowed annual withdrawals up to 10% of the assets and
             allowed the university to select the custodian of the assets (which would be
             Northern Trust Company). The trustee sought a determination from the court as
             to whether the investment in the LTIP would be consistent with the settlor’s
             intent and the trust terms. The attorney general appeared in the case but did not
             actively participate.

      C.     The court held that the investment in the LTIP would violate the settlor’s intent
             and the trust terms because: (1) even though the trust terms directed the trustee
             to invest the trust assets in the manner directed by the Advisory Committee, the
             trust agreement as a whole made clear that the trustee would still have fiduciary
             duties and a role with respect to the trust investments, and the trust agreement
             cannot be interpreted to disregard that role; (2) Helen could have given the trust
             assets outright to the university along with her other gift, but chose not to do so
             and instead established a trust with supervision by the trustee; (3) the power of
             the Advisory Committee is not unlimited and cannot be used in contravention of
             the trust purposes; (4) the investment would remove the trustee and the
             committee from the investment process and move the custody of the trust assets
             to parties that are not trustees of the trust; (5) the investment would allow
             withdrawals of 10% which could impeded the goals of the trust (i.e., the
             perpetual existence of the trust); (6) there are concerns that the persons with
             power over the fund would have a conflict between their loyalties to the
             university and their loyalties to the settlor’s goals, and a trustee must not place
             itself in a position of conflict; (7) the investment would be an improper
             delegation of the trustee’s and the Advisory Committee’s investment authority;
             and (8) the investment standard governing the LTIP — the Uniform Prudent
             Management of Institutional Funds Act — is a lesser standard than the Prudent
             Investor Act that applies to the trust.




                                             11
12.   Matter of Knox, 2010 NY Slip Op 52234U (February 24, 2010); Matter of Knox,
      2010 NY Slip Op 52251U (November 24, 2010)

      A.     Seymour Knox II (Mr. Knox) created a trust under a trust agreement in 1957 for
             the benefit of his son Seymour Knox III (Seymour), with a predecessor to HSBC
             Bank as sole trustee. The Knox family had long been involved with the bank,
             and both Mr. Knox and his son Northrup headed the bank for many years. The
             Knox family was one of the bank’s most important clients and among the
             founders of the modern version of the bank. Seymour and Northrup also founded
             the Buffalo Sabres NHL hockey franchise.

      B.     The trust provided for discretionary income and principal distributions among
             Seymour’s children and more remote descendants on a per stirpes basis, with the
             goal of treating Seymour’s children equally. The trust was funded with 5,000
             shares of Woolworth stock and 5,200 shares of Marine Midland (now HSBC)
             stock. At the time Mr. Knox created the trust, he was on the board of directors of
             both Woolworth and Marine Midland and owned 13% of all Woolworth stock.

      C.     Within a year following the creation of the trust, the trustee sold 2,100 shares of
             Woolworth stock and purchased other equities. The trustee retained the balance
             of the stock at Mr. Knox’s request. In 1985 the Woolworth stock made up 38.1%
             of the trust portfolio, which increased to 40.2% by 1996. The concentration was
             approved by the trustee’s regional manager due to the low cost basis of the stock
             and “the sensitive nature of these issues on this account.” In 1991, the trustee
             wrote to Seymour and recommended the sale of the stock, but said they would
             continue to hold the stock because “co-trustee” Seymour did not want the stock
             sold. By 1995, Woolworth was showing signs of trouble and stopped paying
             dividends. That year, at Seymour’s request, the trust invaded principal to make
             up for the income lost when Woolworth stopped paying dividends, but continued
             holding a 33.6% concentration of the stock. There was no documentation in the
             file as to why the stock was retained. Seymour died in 1996. In 1997, Northrup
             wrote to the trustee and warned against holding Woolworth stock, and informed
             the trustee that all Woolworth stock in the Knox Foundation had been sold. That
             year, the trustee sold 5,000 shares of Woolworth stock, leaving 23,000 shares in
             the trust, making up a 21.1% concentration. That same year, Woolworth was
             removed from the trustee’s “hold list.” In 1998, the trustee sold another 3,000
             shares. Later that year, the trustee received 20,000 shares of Venator (the
             successor to Woolworth) stock in an exchange. The trustee did not fully divest
             the trust of Woolworth stock until 1999, four years after it stopped paying
             dividends.

      D.     When the trust was created, it was also funded with 5,200 shares of Marine
             Midland stock. The trust agreement expressly authorized the retention of the
             Marine Midland stock, even if the asset was not otherwise authorized by law as a
             suitable trust investment and even if the bank was acting as trustee. Internal bank
             documents stated that Mr. Knox understood that the trustee had complete
             authority to sell the bank stock for purposes of diversification, and that Mr. Knox
             was not adverse to the sale but hoped other assets would be acquired rather than
             the bank stock sold. In 1981, Seymour informed the trustee of his preference to
             retain the bank stock, and the trustee retained the stock. The only documentation
             of the annual decision to retain the stock was a literal rubber-stamped entry in the


                                             12
     investment diary, with no analysis in the trust files. The bank stock was finally
     sold in 1987.

E.   In 1969, Mr. Knox and Seymour requested that the trustee purchase stock in
     Dome Petroleum and Leesona Corporation for the trust. The trustee determined
     these stocks were not good trust investments, but purchased them anyway on the
     approval of Mr. Knox and Seymour. Despite the trustee’s negative conclusions
     about the Dome stock, it was held in an overweight position (well above 10% of
     the trust portfolio, and by 1981 as high as 43.4%) at Seymour’s direction, whom
     the bank internally referred to as a “co-trustee” even though he was not actually a
     co-trustee. Even though Leesona was an off-list security not proper for the trust,
     the trustee held a concentration in Leesona as high as 30.4% of the trust portfolio
     on Seymour’s authorization. There was no documentation in the file explaining
     the retention of the overweight position. The trust also retained an overweight
     position of Digital Equipment stock (as high as 20%) without documentation.

F.   In September of 2006, the trustee brought an action in the Surrogate’s Court to
     settle its accounting from 1957 to 2005 and to resign and be discharged as
     trustee. Seymour’s children objected to the accounting and alleged that the
     trustee negligently retained the Venator Group (the predecessor to Woolworth)
     stock. The guardian ad litem appointed for Seymour’s minor descendants also
     filed objections alleging that the trustee breached its duty by failing to diversify
     investments, violating its own internal procedures in making investments,
     improperly abdicating its fiduciary role to Mr. Knox and Seymour, and being
     engaged in an overall pattern of imprudence and negligence.

G.   The court held that the trustee breached its fiduciary duty and was negligent in
     purchasing the Dome and Leesona stock at the direction of a non-trustee (at
     different times Mr. Knox and Seymour) when the trustee’s own analysis
     concluded those stocks were not proper trust investments. On critical
     management issues, the court concluded that the trustee simply deferred to Mr.
     Knox and Seymour, even to the extent of allowing one or both of them to
     effectively override the best consideration of the sole trustee.

H.   With respect to the Woolworth stock, the court held that the trustee should have
     sold the stock when it became an off-list holding in 1997 at the latest, and that
     the trustee offered no plausible explanation for its gross dereliction of its
     fiduciary duty. The court rejected the trustee’s defense that the stock produced
     one-third of the trust’s income because there was no documentation of that
     rationale during the administration, other stocks could have generated more
     income, and the stock was retained by the trustee after it stopped paying
     dividends. The court was also sharply critical of the trustee’s distribution of
     principal to make up for the lost Woolworth dividends, without any analysis and
     simply at Seymour’s request.

I.   With respect to the bank’s stock, the court held that: (1) the trust instrument
     exonerated the trustee for holding its own stock, but only where it exercised its
     discretion with respect to the stock; and (2) since there was no proof that the
     trustee performed any actual analysis about the prudence of holding the stock and
     ignored its fiduciary duties, the trustee could not be absolved of it negligence by
     the trust terms.


                                      13
      J.     The court held that the trustee negligently managed the trust by: (1) failing to
             maintain documentation; (2) failing to develop an investment plan; (3) being
             indifferent to bank policies; (4) acquiescing to directions by a non-trustee and
             treating Seymour as a co-trustee; (5) failing to sell the bank stock at the inception
             of the trust; and (6) failing to sell 90% of the Woolworth stock at the inception of
             the trust and the balance of the shares by 1991.

      K.     In a supplemental decision concerning damages against the trustee, the court: (1)
             used a straightforward application of the Matter of Janes method of calculating
             damages; (2) awarded 9% interest compounded annually, finding that a 9%
             return would have been earned by the trust assets if invested properly; (3)
             awarded actual damages in the amount of $21,437,084; (4) declined to order the
             trustee to return commissions due to a lack of evidence of malevolence or
             dishonesty; and (5) reserved decision about the trustee’s attorneys’ fees.

13.   W.A.K., II v. Wachovia Bank, N.A., 2010 U.S. Dist. LEXIS 72289 (July 19, 2010);
      W.A.K., II v. Wachovia Bank, N.A., 2010 U.S. Dist. LEXIS 79074 (August 5, 2010);
      W.A.K., II v. Wachovia Bank, N.A., 2010 U.S. Dist. LEXIS 87934 (August 25, 2010)

      A.     In Karo v. Wachovia Bank, N.A., 2010 U.S. Dist. LEXIS 46929, the U.S. District
             Court for the Eastern District of Virginia granted summary judgment for
             Wachovia Bank in a suit alleging that the bank breached its fiduciary duties as
             trustee by retaining an overweight position of its own stock in a trust. (For our
             complete discussion of the decision see: http://www.mcguirewoods.com/news-
             resources/item.asp?item=4820).

      B.     The plaintiff’s appeal was subsequently rejected by the U.S. Court of Appeals for
             the Fourth Circuit without a reported decision.

      C.     On August 5, 2010, the federal district court awarded payment out of the trust of
             the trustee’s reasonable attorneys’ fees and costs for its successful defense in the
             amount of $825,233.10. The court noted that the Virginia Uniform Trust Code
             allows the payment of reasonable attorneys’ fees and a reasonable amount can be
             determined by first establishing a “lodestar figure” by multiplying the reasonable
             number of hours expended by a reasonable rate. The court considered the twelve
             “Johnson” factors set out by the Fourth Circuit in determining the lodestar
             amount, and reached its determination of the amount of the fee award based on
             the following conclusions: (1) the trustee met its burden of proving that the
             hourly rates are consistent with the prevailing rate in Richmond for similar work;
             (2) the number of attorney hours claimed were a bit excessive, and reduced the
             hours by 15% due to the “vigorous manner in which [the trustee’s attorneys]
             litigated the case"; (3) the paralegal hours should be reduced by 25% for clerical
             tasks performed by a paralegal; (4) the trustee did not have any unsuccessful
             claims and enjoyed a high degree of success, so further reductions were not
             required; and (5) while expert fees appeared to be excessive, plaintiff introduced
             no persuasive evidence to support a reduction of the fee.

      D.     One of the trust beneficiaries, William A. Karo (“Drew”), had signed a letter of
             retention that indemnified the trustee for any liabilities, including attorneys’ fees
             and costs, incurred by the trustee in connection with the retention of its own
             stock. On July 19, 2010, the court granted the trustee summary judgment and


                                              14
             ruled that the indemnification agreement was a valid contract and, to the extent
             the trustee’s attorneys’ fees and costs were not recoverable from the trust, Drew
             was contractually liable for any remaining costs, expenses, and fees that the court
             determined were recoverable. The court rejected Drew’s arguments that the
             indemnification lacked consideration, should be void as a matter of public policy,
             or allowed the trustee to “double dip” on fees.

      E.     On August 25, 2010, the court ruled that Drew was required by the
             indemnification agreement to pay the trustee the $35,962.04 incurred by the
             trustee in seeking enforcement of the indemnification agreement. The court
             refused to award the trustee the other fees it sought from Drew on the grounds
             that: (1) the trustee did not seek payment of $53,727.70 of the fees out of the
             trust and did not explain why those fees were omitted, and these fees exceeded
             the $825,233.10 approved by the court as reasonable; and (2) the court refused to
             award payment by Drew of any fees for the underlying action that exceeded the
             $825,233.10 approved by the court as reasonable.

14.   Estate of Warden, 2010 PA Super 121 (July 9, 2010)

      A.     Under his will, Clarence Warden established a trust that was funded with 110,000
             shares of stock in Mr. Warden’s company, Superior Tube Company, with a value
             of $1.5 million at the time of Mr. Warden’s death in 1951. The trust terms
             provided that the trustees were not liable for any actions taken in good faith. Mr.
             Warden expressed a preference for a focus on long-term performance with
             respect to trust investments, and restricted the sale of the company unless all
             trustees consented to the sale and the sales price was not below the book value of
             the stock.

      B.     In 1987, Mr. Warden’s grandson successful petitioned the court to be appointed
             as successor trustee of the trust, to serve along with Wachovia Bank, N.A. No
             beneficiaries objected to the appointment. Through stock exchanges and name
             changes, by 1996 the trust held stock in a successor company called Superior
             Group, Inc. (SGI).

      C.     Mr. Warden’s great-grandchildren, Charles and Genevieve, who held a 12.5%
             interest in the trust income, filed objections to the trustees’ accountings and
             sought to surcharge their father and Wachovia Bank as co-trustees. The other
             beneficiaries did not file objections. At the time the beneficiaries filed the suit,
             the value of the SGI stock had increased from $1.5 million at Mr. Warden’s death
             to at least $189 million. The beneficiaries filed the suit after attending a family
             meeting where they learned of an SGI operating loss of $66 million sustained
             from 2000 through 2003 that would result in a 50% reduction in their dividend
             payments.

      D.     Following a 13-day trial, the trial court overruled the objections, and the
             beneficiaries appealed.

      E.     On appeal, the Pennsylvania Superior Court affirmed the trial court on the
             grounds that: (1) the higher standard of care for a corporate fiduciary does not
             apply where the trust instrument explicitly mandates a different standard of care
             such as the good faith standard; (2) because Mr. Warden indicated a good faith


                                             15
             standard in the trust instrument, the trustees only breach their duty if they do not
             act in good faith, which means if they intentionally acted with a dishonest state of
             mind; (3) the allegations that Wachovia failed to follow its policies, attend SGI
             board meetings, review financial statements, or meet with the co-trustee did not
             rise to the level of intentionally dishonest behavior; (4) because the trust terms
             required the consent of all co-trustees to the sale of SGI stock, and did not
             provide a mechanism for breaking a tie between Wachovia and the co-trustee,
             Wachovia did not have a duty to compel the co-trustee to sell the SGI stock; (5)
             the trustees were authorized by the trust terms to hold assets even if they did not
             generate returns; (6) a trust investment may fluctuate in value in a short-term
             time period over the administration of a trust, but a short-term decline in value is
             not a loss where the overall long-term performance of the stock shows an
             increase in value; (7) here, the asset increased from $1.5 million to $189 million,
             and the beneficiaries’ focus on the alleged $300 million loss in value between the
             1990s and 2003 was inappropriate; (8) the beneficiaries’ claims were barred by
             laches because their grandmother never objected to the trustees’ actions, no other
             beneficiaries objected to the administration prior to 2004, the beneficiaries did
             not demand an accounting until four years after succeeding to their
             grandmother’s interest in the trust, and they were aware of the high concentration
             of SGI stock 13 years before becoming beneficiaries and four years after
             becoming beneficiaries before requesting an accounting; therefore, the
             beneficiaries had an affirmative duty to inquire and bring their claims sooner.

15.   Matter of Hunter, 2010 NY Slip Op 50548U (March 31, 2010)

      A.     Upon her death in 1973, Blanche Hunter created a trust under her will that
             provided her granddaughter Pamela with income for life and granted Pamela a
             power of appointment over the trust assets at her death. Blanche named James
             W. Cook and a predecessor to JPMorgan Chase Bank as co-trustees. The trust
             was originally funded with 13,035 shares of Kodak stock. In 1980, the trust
             received additional Kodak stock from another trust created by Blanche that had
             terminated.

      B.     The individual co-trustee died in 1996, and thereafter the bank brought an action
             to judicially settle its accounts as trustee since 1973. Pamela waived any
             objections to the accounts and the bank’s accounts were judicially settled and
             approved in 1998. Thereafter, Pamela appealed and sought to set aside and
             vacate her waiver of objections. In 2002, Pamela prevailed on her claim to set
             aside the waiver, and she was allowed to file objections to the bank’s accounts
             arising out of the bank’s retention of a concentration of Kodak stock in the trust
             and the sharp decline in the value of the stock.

      C.     Pamela died during the course of the litigation and the bank filed a supplemental
             account. Pamela had exercised her power of appointment in favor of her mother
             and Pamona College, who filed objections to the bank’s account. The state
             attorney general also filed objections to the account. All of the objections
             focused primarily on the retention of a concentration of Kodak stock in the trust.

      D.     The court noted that two different legal standards applied to the retention of an
             almost 100% concentration of Kodak stock. For years prior to 1995, the prudent
             person rule applied and did not impose an absolute duty to diversify investments.


                                             16
            After 1995, the prudent investor rule did impose an affirmative duty to diversify
            investments. The court also noted the higher standard of care for a professional
            fiduciary. The plaintiffs alleged that the bank breached its fiduciary duty by
            failing to sell 95% of the Kodak stock by July of 1987, whereas the bank claimed
            that the date alleged by the plaintiffs was based on a spike in the value of the
            stock and that the entire suit was impermissibly based on investment hindsight.

     E.     Following trial, the court concluded that the bank’s conduct violated its fiduciary
            duties under any applicable legal standard for the following reasons: (1) the bank
            had a policy of diversifying investments that it failed to follow, along with other
            internal policies; (2) the bank met with Pamela only three times over 20 years,
            paid limited attention to her needs, and no attention to the needs of any remainder
            beneficiaries; (3) the bank had no written investment plan for the trust other than
            an informal aspiration to sell some Kodak stock someday at a good price; (4) the
            bank did not analyze the quality of the stock; (5) the bank’s annual investment
            review lasted only a few minutes; (5) the court rejected the bank’s argument that
            the concentration should be viewed in light of Pamela’s nontrust assets; (6) the
            bank did not monitor the stock; and (7) the bank did not consider the risk of
            holding a 100% concentration of Kodak stock.

     F.     The court held that by the summer of 1987, a prudent trustee would have sold
            95% of the Kodak stock, and it awarded damages against the trustee for the lost
            capital to the trust under the method set forth in Matter of Janes. The court
            rejected the plaintiff’s request for a higher market measure of damages due to a
            lack of proof of deliberate self-dealing or fraud. As a result of the 20-year
            pattern of neglect, the court awarded the plaintiffs compounded interest on the
            damage award and reduced the bank’s compensation to the rate allowed to an
            individual, rather than a professional, fiduciary.

            PART B: DEFENSES AND LIMITATIONS TO ACTIONS

1.   In the Matter of Trust for Grandchildren of Wilbert L. and Genevieve W. Gore,
     2010 Del. Ch. LEXIS 188 (September 1, 2010)

     A.     In 1972, Wilbert and Genevieve Gore established the Pokeberry Trust for the
            benefit of their grandchildren. During the initial trust term, the grandchildren
            would receive equal distributions of the trust’s income. At the death of the last
            surviving of Mr. and Mrs. Gore, the trust would be divided into shares, with each
            grandchild then living receiving one share of the trust. Pursuant to the formula in
            the trust, the size of each grandchild’s share was determined by the number of
            siblings each grandchild had at the division date, with more siblings resulting in a
            larger share.

     B.     Susan, one of the Gore’s daughters, had three children where each of her siblings
            had four. Under the formula, her children would therefore receive substantially
            smaller shares than their cousins. Mrs. Gore and the other beneficiaries refused
            to amend the formula. Therefore, Susan adopted her ex-husband, Jan, on July 7,
            2003 in Wyoming state court proceedings. Jan agreed that he would take no
            personal economic benefit from the trust, and that his only reason in participating
            in the adoption was to correct the trust distribution plan that treated his children




                                            17
            unfairly. Prior to the adoption, Susan had an attorney prepare a pre-adoption
            agreement, but it was never executed.

     C.     By December 2004, Jan had decided to keep any trust interest passing to him for
            himself. Susan filed a petition for construction, asking the Delaware Chancery
            Court to determine whether Jan waived his beneficial interest in the trust or
            whether he was precluded from taking a personal economic benefit by unclean
            hands.

     D.     The court dismissed Jan’s argument that unclean hands could only be used
            defensively, and noted that the doctrine of unclean hands is a rule of public
            policy to protect courts of equity from misuse, where conduct is so offensive to
            the integrity of the court that the claims should be denied regardless of their
            merit. The court held that the trust which existed between Jan, his ex-wife, and
            his children, which he had the power to abuse, created a confidential relationship
            and fiduciary duties under which Jan was obligated to meet his pre-adoption
            commitments.

     E.     Jan’s decision was motivated by greed and anger, and his conduct was a violation
            of this confidential relationship and constituted unclean hands. The court further
            held that Jan’s “grossly inequitable conduct” would not be countenanced by the
            court, and barred Jan from claiming any personal economic benefit from the
            trust. The court did not decide whether Jan would be considered a beneficiary of
            the trust based on his status as Susan’s adopted son.

2.   Stuart et al. v. Snyder, 2010 Conn. App. LEXIS 556 (October 19, 2010)

     A.     In 1993, beneficiaries of their father Kenneth J. Stuart’s (Stuart Sr.) estate filed
            an action against their brother, Stuart Jr., as executor under Stuart Sr.’s will and
            as trustee under Stuart Sr.’s trust, alleging that Stuart Jr. had misappropriated
            property from the estate for his own benefit without their consent and in
            contravention of Stuart Sr.’s estate plan.

     B.     On April 12, 2006, the beneficiaries also filed a tort action against the father’s
            estate planning attorney and Stuart Jr.’s attorney in the prior fiduciary action,
            claiming that the attorney provided legal assistance to Stuart Jr. and unlawfully
            converted estate assets.

     C.     The attorney moved for summary judgment asserting the three-year statute of
            limitations for tort actions. In support of his motion, the attorney filed affidavits
            and billing records demonstrating that the last time he had provided legal services
            was on February 5, 2003. The beneficiaries offered no contrary evidence, but
            argued that the statue of limitations was tolled by the continuing course of
            conduct doctrine and by fraudulent concealment of their cause of action. The
            trial court granted the attorney summary judgment in his favor, and the
            beneficiaries appealed.

     D.     On appeal, the Connecticut Appellate Court affirmed the grant of summary
            judgment in favor of the attorney, and rejected the claim that the attorney’s
            service as an attorney for the estate and trust created a special relationship giving
            rise to a continuing duty. The court noted that for the continuing course of


                                             18
            conduct doctrine to toll the state of limitations, there must be evidence of the
            breach of duty that remained in existence after commission of the original wrong,
            and some special relationship giving rise to a continuing duty. Because the
            alleged wrongdoings occurred during the pendency of the 1993 action when the
            attorney owed duties to the estate and Stuart Jr. as his actual clients, the attorney
            could not possibly have owed a simultaneous duty to the beneficiaries who were
            adverse to his clients. Further, the court found that even if Snyder owed the
            plaintiffs some duty as estate beneficiaries, that duty did not continue past the
            three-year statute of limitations period.

     E.     The court noted that for the statute of limitations to toll on the basis of fraudulent
            concealment, the beneficiaries have the burden of proving by of clear, precise
            and unequivocal evidence that: (1) the attorney was aware of the facts necessary
            to establish the cause of action; (2) the attorney intentionally concealed those
            facts from the beneficiaries; and (3) the concealment was directed to the very
            point of obtaining the delay. Because the beneficiaries offered no evidence and
            merely stated facts without support in opposition to the attorney’s affidavits and
            billing reports, dismissal of the claims was proper.

3.   John H. Meeks, Trustee v. Successor Trustee of the trusts under the will of Michael
     Holliday, 2010 Tenn. App. LEXIS 554 (July 28, 2010)

     A.     Michael Edward Holliday died on August 31, 2001 leaving a will that established
            a credit shelter trust and a martial trust for the benefit of his wife and children.
            Michael appointed a friend, John Meeks, as trustee. Meeks served as trustee
            from 2002 until May of 2007, when Mrs. Holliday sent him an e-mail thanking
            him for his service and informing him that she had decided to become trustee of
            the marital trust and that her sons would be serving as co-trustees of the credit
            shelter trust.

     B.     In September of 2007, Meeks wrote to the investment manager for the trusts at
            Morgan Stanley requesting a check for $250,000 in commissions for 2002 to
            2006. The family objected, and Meeks filed a lawsuit seeking $250,000 in
            compensation, claiming unjust enrichment, and requesting declaratory judgment
            that he was replaced as trustee and released from any liability for his actions as
            trustee.

     C.     The family moved for summary judgment on the monetary claims on the basis of
            waiver, estoppel, laches, and the statute of limitations, alleging that Meeks said
            he would not charge a fee, was never paid a fee, and never mentioned a fee until
            2007 (notwithstanding that the will authorized him to receive reasonable
            compensation). The trial court granted summary judgment, and found that
            Meeks waived the right to a fee by his conduct, and was equitably estopped
            because the family could have removed him earlier if they had known he would
            later seek fees. Meeks appealed.

     D.     On appeal, the court affirmed on the grounds Meeks waived his rights to fees by
            his words and deeds that created a reasonable basis for belief that compensation
            would not be sought, and that the beneficiaries were entitled to rely on that belief.
            The court found that Meeks expressly waived fees, making proof of reliance




                                             19
            unnecessary. The court denied Meeks’ claims for attorneys fees because the
            lawsuit was not related to the trust administration.

4.   Jefferson State Bank v. Lenk, 2010 Tex. LEXIS 618 (February 16, 2010)

     A.     On March 2000, Mickey Marcus died with an account at Jefferson State Bank.
            The following month, Melvyn Spillman presented the bank with fraudulent
            letters of administration purporting to appoint himself as administrator of
            Mickey’s estate. The bank, relying on what it believed to be valid letters, gave
            Spillman access to the account. Throughout the next several months, Spillman
            withdrew most of the account balance other than $1,000. Spillman was arrested
            for fraud.

     B.     Mickey had no legitimate estate representative until September 2003, when the
            probate court appointed Christa Lenk as administrator. Lenk was aware of
            Spillman’s fraud at the time of her appointment. Lenk did not contact the bank
            for two years. The bank, unaware of Lenk’s appointment, did not inform Lenk
            about the account or send her statements, although it did send some statements to
            Spillman. In June 2005, Lenk sent the bank a written demand for payment in the
            amount of $185,785, the amount allegedly withdrawn by Spillman. The bank
            refused to pay, and Lenk sued the bank.

     C.     The bank moved for summary judgment asserting the defense that Lenk failed to
            timely notify the bank of the unauthorized transactions as required by Texas
            statutes. Lenk moved for summary judgment asserting that the bank failed to
            satisfy its obligation to send or make available the account statements as required
            by law. The trial court granted the bank summary judgment. The Texas Court of
            Appeals reversed, holding that retaining account statements at the bank was
            insufficient to fulfill the bank’s duties to provide statements. The bank appealed.

     D.     The Supreme Court of Texas reversed the court of appeals and rendered
            judgment in favor of the bank on the grounds that: (1) the bank had satisfied its
            burden, and the statute of repose period began to run upon Lenk’s appointment as
            administrator; (2) Lenk had the duty and authority to act on her appointment; and
            (3) Lenk did not demand payment from the bank until after the statute of repose
            period, and therefore was barred by time. The court observed that its holding,
            which benefits customers by delaying the start of the repose period, had the effect
            of extending the bank’s potential liability well beyond one year, and refused to
            extend the period even further by delaying the start of the repose period until the
            administrator becomes aware of the account.

5.   In Re Estate of Helen Bandemer, George Bandemer and Marvin Bandemer v.
     Martin Bandemer and Norman Bandemer, 2010 Mich. App. LEXIS 1922 (October
     12, 2010)

     A.     In May 2002, Helen Bandemer created a will giving her estate equally to her four
            sons, George, Marvin, Martin, and Norman. Prior to her death, Mrs. Bandemer
            expressed the intent that any assets she held jointly with her sons pass under her
            will, and she was advised to re-title and disjoin certain assets that she held jointly
            with Martin and Norman. Mrs. Bandemer did not act on this advice. Rather, she




                                             20
            sent Martin a letter asking him to either place certain assets in her name alone, or
            to jointly title certain assets in his and his brothers’ names.

     B.     Martin never re-titled the assets, and Mrs. Bandemer died. After the probate
            court declined to recognize Mrs. Bandemer’s letter as an amendment to her will,
            George and Marvin filed a twelve-count complaint against Martin and Norman
            seeking damages and imposition of a constructive trust over the assets held by
            Martin and Norman. George and Marvin’s claims included tortious interference
            with a prospective advantage, tortious interference with a trust, intentional
            infliction of emotional distress, negligent infliction of emotional distress, fraud,
            unjust enrichment, creation of an express oral trust, conversion, constructive
            trust, undue influence, and breach of a fiduciary duty.

     C.     The trial court dismissed all of the claims. On appeal, the court affirmed the
            dismissal of the claims, and noted that the conduct was not tortious or wrongful,
            and while their conduct indicated that they were selfish and inconsiderate, their
            actions were not so extreme or outrageous as to warrant imposition of liability.

     D.     The court rejected the claims of an oral trust and conversion because there was
            no evidence that Mrs. Bandemer asked Martin to hold the property in trust for his
            brothers, and there was no evidence of intent to create a trust at the time she
            transferred assets to or placed Martin or Norman’s names on her assets. The
            court refused to impose a constructive trust, and dismissed the claims of undue
            influence and breach of fiduciary duty, because there was no evidence of
            wrongful conduct, and no fiduciary relationship between Martin and Mrs.
            Bandemer that would give rise to a presumption of undue influence.

6.   Judith Bristol et al. v. Andrew R. Clark, Jr. and Rebecca E. Moore, 2010 Cal. App.
     Unpub. LEXIS 8169 (October 14, 2010)

     A.     On January 20, 2007, Mildren Clark created a revocable trust for the benefit of
            her five children. Her son Andrew became trustee after her death. Under the
            trust terms, Andrew had discretion to divide Mildren’s personal property, and
            Andrew was directed to convert real property and the residue assets to cash and
            distribute the proceeds equally among the five children.

     B.     Andrew sold assets, and his sisters, Judith and Laura, challenged the sale and
            petitioned the probate court for an accounting. Andrew hired counsel for the
            trust and to represent Andrew in responding to the lawsuit. Andrew’s counsel
            assisted in preparing the accountings.

     C.     On February 20, 2009, the parties’ stipulated to an accounting to settle the
            account. On April 2, 2009, the court authorized payment of $11,104.98 to
            Andrew’s counsel for prior work. Thereafter, Andrew’s counsel provided
            additional services in the amount of $6,902.69 which Andrew paid from the trust
            without further court order. After Andrew made a partial distribution of the trust
            assets, Judith and Laura petitioned for removal of Andrew as trustee and objected
            to the payment to counsel without court order. The trial court removed Andrew
            as trustee, and ordered his counsel to return all sums not approved in the prior
            court order. Andrew’s counsel appealed the order.




                                            21
     D.     On appeal, California Court of Appeals found that, although counsel was not a
            party to the lawsuit, she had standing to appeal on the issue of the fees because of
            her immediate, pecuniary, and substantial interest, and the adverse affect on her
            rights. Counsel was not allowed to appeal Andrew’s removal as trustee for lack
            of standing. The court reversed the trial court with respect to the fees on the
            basis that trust law authorizes a trustee to retain professional services including
            legal representation and to pay reasonable compensation for services necessary to
            administer the trust, which does not require prior court order. The court noted
            that the case would have been different if the attorney had provided legal services
            to an individual acting as both the personal representative and the trustee
            pursuant to Rule 7.700 of the California Rules of Court, which is separate and
            distinct from the provisions pertaining to trusts, and requires a prior court order
            for payment of attorney fees arising from legal services to a personal
            representative of an estate.

7.   Daniel L. Hemphill v. Jay F. Shore, 2010 Kan. App. LEXIS 112 (September 24,
     2010)

     A.     On December 28, 1984, Lee and Linna Shore created the Shore Family Trust
            with their two children, Jay and Susan, as trustees. The trust provided for
            discretionary income and principal to Jay, Susan, or their issue for their health,
            education, support, and maintenance. The trust terms relieved the trustees from
            all inventory and accounting duties under K.S.A. 59-1601 et. seq. and waived
            any bond requirement. The trust was to terminate at the death of the survivor of
            Jay and Susan and the assets were to be distributed one-half to Jay’s descendants,
            per stirpes, and one-half to Susan’s descendants, per stirpes. Susan died in 1992,
            survived by her one son, Daniel.

     B.     On April 8, 2009, Daniel sued Jay alleging breach of trust, breach of fiduciary
            duty, and conversion of trust property for personal use. Jay moved to dismiss the
            action on grounds that in 1995 all of the trust assets had been distributed, the trust
            terminated, and the final tax return was filed, and Daniel was barred by the
            applicable statute of limitations. Daniel argued that Jay’s fraudulent and
            wrongful conduct prevented him from filing his claim within the applicable
            statute of limitations period, and therefore the period should be legally and
            equitably tolled.

     C.     The trial court dismissed Daniel’s claims on the basis that: (1) the trust was a
            discretionary trust giving Jay the sole discretion to determine whether invasion of
            the principal was necessary; (2) Daniel failed to allege any specific acts of
            fraudulent conduct, misuse or theft of trust assets; (3) the applicable statute of
            limitations had not been tolled; and (4) Daniels’s claims were filed outside the
            applicable period.

     D.     On appeal, the court affirmed the statute of limitations bar on the breach of
            fiduciary duty claim, the conversion claim, and the breach of trust claim. The
            court held that the claim for conversion was barred by the two-year statute of
            limitations period proscribed in K.S.A. 60-513(a)(2) or by the ten-year statute of
            repose period under K.S.A. 60-513(b). The court found that the breach of
            fiduciary duty claim was also barred by the ten-year statute of repose period in
            K.S.A. 50-513(b). The court also noted that although Daniel did not turn 18 until


                                             22
            September 9, 2005, entitling him to bring an action within one year of his
            reaching the age of majority, the statute of repose under K.S.A. 60-515(a)
            ultimately limits the time during which a cause of action can arise to eight years
            after the time of the act giving rise to the cause of action. Because the acts
            occurred in 1993, Daniel’s 2009 claim was barred because it was filed beyond
            the eight-year period.

8.   Kristofer Kastner v. InTrust Bank, 2010 U.S. Dist. LEXIS 120927 (November 15,
     2010)

     A.     On June 5, 1996, Jessie I. Brooks executed a trust, with InTrust Bank as trustee,
            for the lifetime benefit of her daughter, Nola, with the remainder of the assets
            distributable to her grandchild Kristofer.

     B.     After the trust lost $40,485.60 from 2000 through 2008, Kristofer sued the
            corporate trustee, the trustee’s CEO, and several trust officers in his capacity as a
            trust beneficiary and as claimed representative of his deceased grandmother and
            her estate (although he was not the actual personal representative), claiming: (1)
            breach of fiduciary duty in the creation and execution of the trust; (2) breach of
            fiduciary duty to refrain from self-dealing to Jessie in entering into the trust
            agreement; (3) failing to advise Jessie on the waiver of the negligence and
            prudent investor standards in the trust agreement; (4) breach of trust against
            Jessie, her estate, and Kristofer; (5) negligent misrepresentations to Jessie, her
            estate, and Kristofer as to the nature of the trust agreement and the consequences
            of its waiver provisions; (6) fraud by silence by failing to disclose the legal effect
            of the form of the trust or waiver provisions; (7) fraud by silence by failing to
            disclose material facts concerning the nature of the trust investments or explain
            poor investments; (8) fraud in the creation and investment of the trust agreement;
            and (9) reformation of the trust agreement to remove the provisions concerning
            waivers of the negligent and prudent investor standards.

     C.     The trustee moved to dismiss on the grounds that: (1) the trust provisions were
            appropriate and in accordance with the Uniform Trustee's Powers Act and the
            Prudent Investor Act as they existed in 1996 when the trust was prepared; (2)
            Kristofer's claims were barred by the ten-year Kansas statute of repose, because
            all of the alleged wrongful conduct was predicated on the consequences of the
            waiver provisions in the trust agreement, which was executed on June 5, 1996;
            (3) the failure to join Nola as a party; (4) Kristofer was only a contingent
            beneficiary and did not have standing to bring a claim for reformation of the
            trust.; and (5) Jessie, Jessie’s estate, and Kristopher as claimed representative did
            not have standing to bring the suit.

     D.     Applying Kansas law and construing the pleadings liberally based on Kristofer
            having brought the suit pro se, the court concluded that the claims for breach of
            trust, fraud by silence, failure to disclose material facts, and fraud in the creation
            and investment of the trust agreement were not barred by the ten-year statute of
            repose under Kansas law. The court reasoned that Kristofer’s broad allegations
            that the trustee had mismanaged the trust by failing to disclose pertinent
            information and poor performance was in part due to poor investment strategy
            and that the alleged misconduct could have occurred subsequent to 1996 and
            through the filing of the complaint.


                                             23
     E.     The court held that Kristofer’s claims premised on the creation or execution of
            the trust agreement and the inclusion of certain provisions were barred by the
            ten-year statute of repose because Kristofer brought the action 14 years after his
            grandmother executed the trust agreement. The court noted that a statute of
            repose extinguishes causes of action after a certain time even though the action or
            injury may not yet have accrued. Under that statute, the court barred the claims
            arising out of the execution of the trust agreement and its terms.

     F.     The court could not conclude as a matter of law that Kristofer was not a qualified
            beneficiary, and denied the defendants motion to dismiss on this ground, and also
            found no basis for dismissal pursuant to Rule 12(b)(7) and Rule 19 for failure to
            join Nola as a necessary party. The court noted that the trustee had not met its
            burden of demonstrating that Nola was a necessary party by their failure to
            address the feasibility of her joining in the action or whether the action could
            continue without her joinder “in equity and good conscience.”

     G.     The court granted the motion to strike Jessie from the suit because a decedent
            lacks the capacity to sue or be sued, as well as her estate because only the
            personal representative of the estate is entitled to represent the estate and
            Kristofer was not named as personal representative.

9.   Crawford Supply Group, Inc. v. LaSalle Bank, N.A., 2010 U.S. Dist. LEXIS 4691
     (N.D. Ill. 2010)

     A.     Various family trusts, trust beneficiaries, and businesses of the family of
            Siegfried and Miriam Fieger (plaintiffs) sued LaSalle Bank, N.A. (LaSalle) for
            allegedly assisting the Fieger family accountant, Robert Rome in the
            embezzlement of nearly $6 million.

     B.     Seven different plaintiffs maintained checking accounts at LaSalle, and from
            2003 - 2007, Rome embezzled approximately $2.6 million from those accounts.
            He also allegedly transferred an additional $3.1 million in the plaintiffs’ funds
            from other banks to his accounts at LaSalle.

     C.     In his capacity as accountant, trustee, executor and fiduciary to the plaintiffs,
            Rome had the authority to manage their funds, sign checks, and deposit and
            transfer funds on their behalf. The plaintiffs alleged that LaSalle improperly
            honored checks from Rome, allowed him to deposit trust funds in his individual
            accounts, and made unauthorized transfers for him. Additionally, Rome set up a
            joint checking account in his name, and allegedly forged the signature of the
            other account owner – an individual trust beneficiary – that Rome used to launder
            some of the embezzled money.

     D.     The plaintiffs alleged that LaSalle knew Rome was acting as their fiduciary, and
            that LaSalle knew or should have known that he was breaching his fiduciary
            obligations when he transferred funds to his own accounts. The plaintiffs asserted
            that LaSalle’s conduct was either knowing assistance of Rome’s actions or bad
            faith. The plaintiffs believed that the size and frequency of Rome’s transactions
            were “red flags” that should have made LaSalle suspicious of Rome’s activities.




                                           24
E.   According to the plaintiffs, LaSalle’s failure to investigate Rome’s embezzlement
     prevented them from uncovering the extent of Rome’s actions and LaSalle’s
     involvement in his conduct. The plaintiffs asserted a variety of causes of action,
     including violation of Illinois’ Fiduciary Obligations Act, 760 ILCS 65/1 et seq.
     (Fiduciary Obligations Act) for LaSalle’s alleged knowledge that Rome breached
     his fiduciary duties, and failure to investigate Rome in a manner that amounted to
     bad faith. LaSalle moved to dismiss the plaintiffs’ claims for procedural reasons
     and on the grounds that their claims were precluded by the Fiduciary Obligations
     Act.

F.   In Illinois, the Fiduciary Obligations Act governs liability between a bank and a
     fiduciary acting in his or her fiduciary capacity. The purpose of the act is to place
     the burden of hiring honest fiduciaries on the principal, rather than on banking
     institutions. Section 65/2 of the act provides that, “A person who in good faith
     pays or transfers to a fiduciary any money or other property which the fiduciary
     as such is authorized to receive, is not responsible or the proper application
     thereof by the fiduciary.” Under the act, a bank will usually not be liable to the
     principal for the fiduciary’s actions, absent actual knowledge that the fiduciary is
     breaching his or her fiduciary duties. Accordingly, under the act, a bank will not
     be liable for negligence and a plaintiff cannot succeed in an action against a bank
     without proving actual knowledge or bad faith.

G.   The court granted LaSalle’s motion to dismiss the plaintiffs’ claims because the
     plaintiffs failed to allege sufficient facts to create the inference that LaSalle had
     actual knowledge of Rome’s embezzlement, or that LaSalle was otherwise acting
     in bad faith when it dealt with Rome. The court distinguished what LaSalle
     “should have known” from what LaSalle actually knew.

H.   Illinois courts routinely hold that a fiduciary’s deposit or transfer of money from
     fiduciary accounts into the fiduciary’s individual accounts, by itself, does not
     support an inference of the bank’s actual knowledge or bad faith. Likewise, the
     court found that the plaintiffs’ complaint failed to show that LaSalle suspected
     Rome of wrongdoing, or that LaSalle intentionally chose not to investigate him.
     Accordingly, the Fiduciary Obligations Act provided LaSalle with a blanket
     defense to the plaintiffs’ claims, which claims the court dismissed. (Although the
     court dismissed all of the plaintiffs’ claims, it stated that the individual
     beneficiary whose name was on the fraudulent account may be able to sue
     LaSalle for negligence in her individual capacity.)

I.   The plaintiffs in this case sought recovery from LaSalle for the millions of
     dollars lost due to their accountant’s embezzlement. In this case, Illinois’
     Fiduciary Obligations Act provided a strong defense for the corporate fiduciary
     against the plaintiffs’ actions. Nevertheless, corporate fiduciaries should always
     be mindful of the risk of fraud, and should have sophisticated risk management
     policies and procedures in place. This case should also serve as a reminder to
     high net worth individuals and trust beneficiaries to be mindful of threats to the
     family’s wealth. Prudence requires a regular review of account statements and
     financial transactions, regardless of who is designated as the family’s managing
     agent.




                                     25
                              PART C: ARBITRATION

1.   Decker v. Bookstaver, 2010 U.S. Dist. LEXIS 52428 (E.D. Missouri May 26, 2010)

     A.     In 2004, acting on the advice of an employee of Edward Jones, Lila Decker and
            her husband terminated their existing trusts, created new revocable living trusts,
            and executed a Fiduciary /Trust Account Authorization and Acknowledgement
            Form that contained a binding arbitration provision. The arbitration provision
            provided that “any controversy arising out of or relating to any of my accounts or
            transactions with you, your officers, directors, agents and/or employees for me,
            to this Agreement … shall be settled by arbitration.” The agreement provided
            that Missouri law would apply to the arbitration.

     B.     After her husband’s death, Lila sued Edward Jones and its employee for fraud,
            negligent misrepresentation, breach of fiduciary duty, and negligence. The
            company and its employee moved to dismiss and to compel arbitration. Lila
            argued that: (1) Missouri rather than federal law should be applied to determine
            whether the arbitration provision was enforceable; (2) the trust documents were
            induced by fraud and undue influence rendering the arbitration provisions
            unenforceable under Missouri law; and (3) alternatively, if federal law applied,
            the dispute was outside the scope of the arbitration provision.

     C.     The federal district court rejected Lila’s claims, and held that the choice of law
            provision in the agreement did not manifest a clear intention to foreclose
            application of the Federal Arbitration Act (FAA). Therefore, the FAA applied,
            and the court’s role under the FAA was limited to determining whether a valid
            agreement to arbitrate existed and, if so, whether the agreement encompassed the
            dispute. The court found that the language of the arbitration provision was “quite
            broad” and covered Lila’s claims.

     D.     Relying on Houlihan v. Offerman & Co. Inc., 31 F.3d 692 (8th Cir. 1994), the
            court held that the arbitration agreement was valid and encompassed the dispute,
            and rejected Lila’s argument that the absence of language specifically indicating
            that the arbitration provision applied to any agreement entered “before, or, or
            after the date the account was opened,” and the execution of the account
            authorization (which included the arbitration agreement) subsequent to the
            execution of the trusts precluded retroactive application to her claims arising
            from the formation of the trusts.

2.   Schmitz et al. v. Merrill Lynch et al., 2010 Ill. App. LEXIS 1160 (October 27, 2010)

     A.     Marvin Huth and his wife, Shirley, created the Marvin F. Huth Revocable Trust
            for the benefit of their descendants, and served as co-trustees of the trust until
            Shirley’s death. After Shirley died, Marvin remarried and amended the trust
            twice to name his new wife, Patricia, as a beneficiary and trustee of the trust.
            Marvin subsequently died.

     B.     On October 26, 2009, the trust beneficiaries sued Merrill Lynch, where trust
            assets exceeding $2.364 million had been deposited, based on alleged
            withdrawals from the trust by Patricia after Marvin’s death, and claiming breach
            of trust and professional negligence.


                                            26
     C.     Merrill Lynch filed a motion to dismiss and compel arbitration, based on the
            arbitration clauses in the client relationship agreements and trustee certifications
            signed by Marvin as trustee of the trust, and also by Patricia as successor trustee.
            The trial court denied the motion to dismiss and to compel arbitration, and
            Merrill Lynch appealed.

     D.     On appeal, the court affirmed the trial court, and held that the beneficiaries were
            not bound by the arbitration clause because: (1) a trustee does not act as an agent
            for a beneficiary and therefore has no power to subject beneficiaries to liability in
            contract or tort; (2) Marvin and Patricia were not acting as agents for the
            beneficiaries when they signed the agreements; (3) the beneficiaries had no
            contractual relationship with Merrill Lynch, and therefore were not bound by the
            terms of the agreements; and (4) the agreements did not include language
            purporting to bind any heirs, beneficiaries, assigns or any other party, offering
            further support that the agreements were not meant to bind the trust beneficiaries.

                              PART D: SETTLEMENTS

1.   In Re Estate of Billy Joe Stricklan, 2010 Tenn. App. LEXIS 410 (June 28, 2010)

     A.     Billy Joe Stricklan died leaving two wills, both of which were admitted to
            probate. In the first will (the 1982 Will), he gave his entire estate to his daughter,
            Diane Stricklan Coleman. In his second will (the 2004 Will), he gave his entire
            estate, other than $100 to his daughter, to his great-grandchildren.

     B.     On June 22, 2007, Diane filed a petition to probate the 1982 Will, and claimed
            the 2004 Will was invalid because of her father’s incompetence at the time of
            execution. Diane requested the appointment of a guardian ad litem for the great-
            grandchildren, and an attorney was appointed to serve as GAL. Three days later,
            Billy Joe’s son, Reed, the executor under the 2004 Will, offered the 2004 Will
            for probate. The probate court certified the will contest to the circuit court for
            trial.

     C.     In April 2009, after lengthy negotiations, Diane filed a motion and order for
            transfer endorsed by all parties (but not Reed), requesting that the case be
            transferred back to the probate court, on the basis that no one disputed the
            validity of the 2004 Will and the parties were prepared to file a petition for
            approval of a settlement agreement. The proposed settlement awarded half of the
            estate to Diane and half to the great-grandchildren to be held in trust. Reed was
            not a party to the settlement. The motion was granted, and after a hearing the
            probate court approved the settlement agreement.

     D.     Reed appealed on the basis of his claims that: (1) the probate court erred when it
            approved the settlement reached between the beneficiaries of the will without
            obtaining Reed’s approval, without conducting a hearing to determine whether
            the settlement was fair, reasonable, and in the best interests of the great-
            grandchildren; and (2) the settlement agreement should be set aside and the case
            remanded for probate of the 2004 Will, since Diane admitted that the 2004 Will
            was valid.




                                             27
     E.     On appeal, the court held that, because Reed was not a beneficiary under the
            1982 Will or the 2004 Will or an intestate heir, he did not have standing to bring
            the appeal. Despite Reed’s lack of standing, the court addressed the Tennessee
            statutory requirement under section 34-1-121(b) that a probate court approve the
            compromise of matters in controversy on behalf of the minors by determining
            whether settlement would be in the best interests of the great-grandchildren.

     F.     In reviewing the probate court’s decision, the court found no transcript of the
            hearing to approve the settlement in the record and only a perfunctory order, both
            of which the court deemed insufficient grounds for concluding that the best
            interests of the minors had been adequately considered. The court vacated the
            probate court’s approval of the settlement agreement and remanded the case for a
            hearing on whether the settlement would serve the best interests of the great-
            grandchildren.

2.   Kevin McNulty Saunders v. Sondra Muratori, 2010 Colo. App. LEXIS 1170 (August
     19, 2010)

     A.     In 1992, B.R. McNulty formed the McNulty Ranch Trust to provide income for
            his daughter, Sondra, and his grandson, Scott, during Sondra’s lifetime.
            Thereafter, the trust corpus was to be distributed to Mr. McNulty’s
            grandchildren, Scott, Kevin, Lisa and Kassi, in stated percentages. The trust
            corpus of the trust consisted of a ranch in Park County, Colorado, and the trust
            specified that Scott would continue as ranch manager.

     B.     The initial trustees of the trust eventually resigned, and Sondra became the sole
            trustee. Sondra sold the ranch to Scott and his wife for $1,750,000. Sondra used
            the $300,000 down payment from Scott and his wife to buy a home in the
            Bahamas. In 2006, Scott sold the property in several pieces for a total price of
            $10,037,000, after having sold conservation easements for a total price of
            $856,200.

     C.     Scott’s siblings petitioned the court for Sondra’s removal as trustee, an
            accounting, and surcharge against Sondra and Scott. The siblings sought
            damages from Sondra and Scott for both breach of fiduciary duty and for aiding
            and abetting in breach of fiduciary duty. They also requested a declaratory
            judgment voiding the sale of the property and ordering Scott to forfeit his
            remainder interest in the trust.

     D.     The parties engaged in mediation. The first conference was unsuccessful, but the
            second mediation conference resulted in settlement and a signed settlement
            stipulation. Kevin was not physically present at the mediation conference, but
            Kevin’s attorney signed Kevin’s name to the stipulation.

     E.     Thereafter, Kevin informed his attorney that he had not agreed to the settlement
            terms, and his attorney scratched his signature out of the stipulation. The
            remaining parties then sought direction from the district court. Scott’s counsel
            proposed proceeding by way of motion of Sondra, as trustee, asking the court to
            approve the settlement stipulation and then allowing the other parties to file any
            responses as appropriate. The court agreed, Kevin’s new counsel agreed, and
            Sondra filed the motion. Kevin objected to the motion and the court’s authority


                                            28
     to enforce the stipulation, and filed an affidavit stating that he had not given his
     counsel permission to sign the stipulation on his behalf, and asserted that because
     of a conflict of interest Sondra could not act on behalf of the trust.

F.   After a hearing, the trial court held that the settlement stipulation was enforceable
     because: (1) the stipulation was prudent, offered in good faith, and was fair,
     reasonable, and in the best interests of the parties; and (2) the stipulation was an
     enforceable contract under Colorado law, because the actions of Kevin’s counsel
     were indicative of Kevin’s agreement. Kevin appealed.

G.   On appeal, the court in a matter of first impression held that when trust
     beneficiaries bring suit for the benefit of a trust, a court may properly approve the
     settlement agreement, even over the objection of one of the beneficiaries, if the
     settlement is just and reasonable and that the district court did not err in
     approving the settlement stipulation. The court rejected Kevin’s objection to
     Sondra, settling claims on behalf of the trust where the siblings all had attorneys
     and were adequately represented, and she merely filed the motion for approval.

H.   The court noted that in equity, trust beneficiaries may bring suit for the benefit of
     the trust when trustees fail to do so, which is analogous to a shareholder
     derivative suit on behalf of a corporation. The court explained that in a
     derivative action, a court may approve the settlement agreement over the
     objections of a shareholder even if the shareholder is a named plaintiff in the suit,
     and extended this reasoning to the trust context. The court noted that where
     Kevin, Sondra and Scott, and the trial court all agreed that the underlying petition
     was in the nature of a derivative action in which the siblings were acting as
     representatives of the trust, the district court was authorized to approve the
     settlement of the beneficiaries’ claims even over Kevin’s objections.

I.   Examining whether the district court properly approved the settlement
     stipulation, the court again turned to shareholder derivative suits for guidance,
     and applied the principal articulated in In re Norwest Bank, 80 P.3d 98 (N.M. Ct.
     App. 2003) that in order to be approved, a mediated settlement must be fair,
     adequate, reasonable, and free from collusion or fraud, and satisfy a four factor
     test: (1) whether the proposed settlement was fair and honestly negotiated; (2)
     whether serious questions of law and fact existed, placing the ultimate outcome
     of litigation in doubt; (3) whether the value of an immediate recovery outweighed
     the mere possibility of future relief after protracted and extensive litigation; and
     (4) the judgment of the parties that the settlement is fair and reasonable. Based on
     Norwest, the court found that the lower court had adequately sought to determine
     whether the settlement was just and reasonable, and acted well within its
     discretion in approving the settlement.

J.   The court dismissed Kevin’s contention that the trial court approved an alleged
     unilateral modification to the stipulation terms by changing certain release
     provisions, and did not address the court’s alternative reasoning that the
     settlement was binding as an enforceable contract.




                                     29
3.   Phyllis Sigal Carlin v. Leslie Javorek, Fla. App. LEXIS 10339 (July 14, 2010)

     A.     Phyllis Carlin, as executor of her mother’s estate, was involved in a probate
            dispute with her sister, Leslie Javorek, over the distribution of estate assets and
            disclosure of their mother’s medical records. In 2007, Phyllis and Leslie
            executed a settlement agreement and the court reserved jurisdiction to enforce the
            agreement. Under the agreement, Phyllis was required to provide Leslie with
            certain medical documents, a list of providers, and a signed HIPAA release
            within forty-five days of execution of the agreement, with a failure to do so
            resulting in an order to comply and a duty to pay Leslie’s attorneys’.

     B.     In 2008, Leslie moved to compel compliance with the agreement. The trial court
            held an adversarial hearing and found that Phyllis had not breached the
            agreement by failing to provide medical records, but had breached the agreement
            by failing to sign the HIPAA release. The trial court determined that each party
            was responsible for her own attorneys’ fees because Phyllis had substantially
            complied and because her breach was immaterial. Phyllis appealed arguing that
            as the prevailing party, she was entitled to recover her attorneys’ fees.

     C.     On appeal, the Florida appellate court affirmed the trial court’s denial of payment
            of Phyllis’ attorneys’ fees because Leslie had been successful on her motion to
            compel compliance. The court reversed the trial court with respect to Leslie’s
            attorneys’ fees and ordered Phyllis to pay Leslie’s fees on the grounds that: (1)
            Leslie’s efforts to secure Phyllis’s compliance rendered Phyllis’s breach material;
            (2) Leslie was entitled to recover attorneys’ fees from Phyllis as the prevailing
            party; and (3) Leslie was entitled to fees as a special remedy for having to
            compel compliance under the agreement.

4.   Suzanne C. Radford v. Melinda Shehorn, 2010 Cal. App. LEXIS 1455 (August 19,
     2010)

     A.     Suzanne Radford and Melinda Shehorn were beneficiaries of a trust established
            by their parents, who died leaving Melinda as sole trustee. In 2008, Suzanne
            filed a petition in probate court challenging Melinda’s distribution of the trust
            assets.

     B.     The trial court ordered the parties to mediate, and the mediation ended with a
            settlement agreement consisting of two pages. The first page: (1) was printed on
            a form provided by the mediator; (2) provided that the settlement was binding on
            all parties and admissible in court; (3) had “Page 1 of 2” handwritten on the
            bottom; and (4) was signed by Melinda and her attorney but was not signed by
            Suzanne and her attorney. The second page of the agreement titled “Settlement
            Agreement” was: (1) entirely handwritten; (2) contained the substantive terms of
            the settlement; (3) was signed by both parties; (4) required that the parties
            execute mutual releases, but unlike the first page, did not specify that the release
            included unknown claims; and (5) had “Page 2 of 2” written on the bottom.

     C.     The day before the parties were to report the results of mediation to the court, a
            new attorney retained by Suzanne informed Melinda’s attorney that Suzanne was
            not bound by the agreement. Melinda moved to enforce the settlement. Suzanne




                                            30
            and Melinda submitted conflicting affidavits, and the mediator submitted an
            affidavit supporting Melinda and the validity of the agreement.

     D.     Suzanne objected to the mediator’s affidavit. The trial court overruled the
            objection, finding that the settlement agreement contained two pages, and that the
            first page contained a waiver allowing the mediator to testify. Suzanne appealed.

     E.     On appeal, Suzanne conceded that the first page of the agreement contained an
            adequate waiver of objections to admissibility, but argued that this page was not
            part of the agreement. The second page of the settlement agreement did not
            contain a waiver. The court held that the trial court erred in admitting the
            mediator’s declarations into evidence, because the mediation confidentiality
            statutes prohibit a mediator from testifying to anything about the agreement
            including the number of pages it contains. Nevertheless, the court found that the
            trial court’s error was harmless, and that Suzanne’s own declarations contained
            probative evidence supporting the finding of a two-page agreement.

                         PART E: NO-CONTEST CLAUSES

1.   In Re Estate of Dorsey W. Rohrbaugh, 80 Va. Circ. 253 (Fairfax Circuit Court,
     March 31, 2010)

     A.     Dorsey and Geanie Rohrbaugh were married in 1974. Before their marriage, they
            entered into a premarital agreement in which Mrs. Rohrbaugh waived various
            rights including the right to claim an elective share and any rights to Mr.
            Rohrbaugh’s property in Orlando, Florida.

     B.     Mr. Rohrbaugh died in 2002, and his sons from a prior marriage qualified as
            executors under the will. Under his will, Mr. Rohrbaugh gave his wife his interest
            in the Orlando property and provided a trust for her benefit to be funded with
            property in Virginia or the proceeds from the sale of the Virginia property. Mr.
            Rohrbaugh left the residue of his estate to his four children from a prior marriage.
            Before his death, Mr. Rohrbaugh sold the Orlando property and purchased
            property in Inverness, Florida, with the proceeds. Mr. Rohrbaugh’s will
            contained a no-contest clause that left any contestant to the will only $100.

     C.     In 2002, Mrs. Rohrbaugh filed a twelve-count complaint against the executors,
            which included claims to void the premarital agreement, breach of the agreement,
            elective share claims, and claims to the Florida and Virginia properties owned by
            Mr. Rohrbaugh at his death. Mrs. Rohrbaugh nonsuited various claims, and her
            other claims were found to be barred by laches or the premarital agreement.
            Cross appeals to the Virginia Supreme Court were denied.

     D.     In 2004, Mrs. Rohrbaugh filed another suit against the executors for $2 million
            claiming conversion of property by the executors and re-alleging her contract
            claims. At trial, Mrs. Rohrbaugh admitted on cross examination that she was
            contesting what she felt was the “will from hell” and that she was aware of the
            consequences of the no-contest clause. While the second suit was pending, the
            executors filed a motion claiming that Mrs. Rohrbaugh violated the no-contest
            clause. The trial court concluded that she had violated the clause, but the Virginia




                                            31
            Supreme Court reversed and remanded the ruling due to lack of evidence of the
            second lawsuit formally in the record.

     E.     On remand, the Fairfax circuit observed that no-contest clauses are strictly
            applied in Virginia in order to protect the testator’s right to dispose of his
            property as he sees fit, and the societal benefit of deterring bitter family disputes
            that will contests frequently engender. Reviewing the facts of this particular case,
            the court concluded that: (1) Mr. Rohrbaugh intended, by the use of the phrase
            “to the extent permitted by law,” that the no-contest clause be given the broadest
            possible scope; (2) Mrs. Rohrbaugh’s claims were designed to grant her property
            rights that were broader than those provided under the will; (3) Mrs. Rohrbaugh
            on cross examination revealed that her motive was to contest the will; and (4)
            Mrs. Rohrbaugh’s cumulative actions constitute an indirect contest or claim
            against the will that violates the no-contest clause. For these reasons, the court
            held that Mrs. Rohrbaugh forfeited all rights under the will other than $100.

2.   Derringer v. Emerson, 2010 U.S. Dist. LEXIS 79522 (August 6, 2010)

     A.     Richard Solem executed a living trust agreement in 2004, with himself as trustee,
            that provided at his death for the distribution of more than $2 million to his
            daughters and the balance to his charitable foundation. The trust contained a no-
            contest clause. In 2004, Solem sent a memorandum to his common law wife
            expressing his decision to change his trust to leave everything to the foundation.
            Thereafter, Solem executed a notarized summary of the changes to his trust, and
            informed his daughters that he had made changes to his estate plan.

     B.     Solem died in 2006. In 2009, the daughters filed a complaint seeking a
            declaration that the trust was not validly amended, and that they were entitled to
            a distribution of $2 million. Solem’s common law wife, as successor trustee,
            moved for summary judgment on the grounds that the action was barred by the
            statute of limitations.

     C.     The federal district court for the District of Columbia, applying Virginia law,
            granted the motion for summary judgment and dismissed the daughters’ claims
            as untimely on the following grounds: (1) a resort to the means provided by law
            to attack a will is a contest; (2) whether an action seeking interpretation of a will
            is a contest depends on the no-contest clause and the facts of the case; (3) an
            action that would thwart the purpose of the will is a contest; (4) Solem had the
            right to amend the trust by a writing delivered to the trustee, but since he was the
            trustee he only had to put in writing his amendments to render them effective; (5)
            the daughters’ claims challenging the amendment sought to invalidate the
            amendments and amounted to a contest; and (6) a trust contest must be brought
            within two years after the settlor’s death (or six months after receiving certain
            notice), and the daughters’ claims were brought two years after the statute of
            limitations had expired on the claims.

3.   Claude Arnall v. Dawn Arnall, 2011 Cal. App. Unpub. LEXIS 366 (January 19,
     2011)

     A.     Roland Arnall died on March 17, 2008, leaving a trust with his wife, Dawn, as
            trustee. Under the trust terms, Dawn was directed to pay all taxes and expenses


                                            32
            from the trust and then distribute the balance of the trust estate into sub-trusts in a
            fixed order of priority: (1) $100 million for Dawn; (2) then, $25 million for each
            of Roland’s two children; and (3) then, $10 million for Roland’s brother Claude.
            The trust provided that the trustee had six months to fund the various sub-trusts.
            As of January 19, 2011, none of the sub-trusts had been funded.

     B.     Claude sued to compel Dawn to distribute assets and for an accounting, and filed
            a safe harbor application seeking a determination of whether his proposed
            petition would violate the trust’s no-contest clause. The probate court ruled that
            the proposed petition for accounting and distribution would not violate the no-
            contest clause. Dawn appealed on the basis that Claude sought to alter the trust’s
            express funding priority by seeking funding of his share before payment of
            expenses or funding of the other sub-trusts.

     C.     The Court of Appeals affirmed the probate court on the grounds that Claude did
            not attack or seek to impair or invalidate any provision of the trust in violation of
            the no-contest clause, and rather sought “only to force Dawn to make the
            distribution exactly as specified in the trust.”

     D.     The court further noted that according to the applicable version of section 21305
            of the California Probate Code, a pleading based on the trustee’s inaction as a
            fiduciary does not violate a no-contest clause as a matter of public policy.
            Section 21305 was repealed as of January 1, 2010.

4.   Claude Arnall v. Dawn Arnall, 2010 Cal. App. Unpub. LEXIS 9218 (November 19,
     2010)

     A.     Claude Arnall filed two identical safe harbor applications under section 21320 of
            the California Probate Code, one with respect to a trust and one with respect to
            the will of his brother the decedent, Roland Arnall, based on an alleged partially
            performed oral contract. Claude’s claim sought $47.2 million representing the
            alleged unpaid portion of a contract for the sale of his interest in a company he
            had jointly owned with the decedent.

     B.     Strictly construing the no-contest clause, the probate court found that neither
            claim violated the instruments’ respective no-contest clause provisions. Dawn
            appealed.

     C.     On appeal, the California Court of Appeals affirmed the probate court, finding
            that Claude’s claim was a creditor’s claim seeking only to collect money owed
            him under an oral sales agreement and therefore did not violate the no-contest
            clause. The court based its holding on the fact that nothing in Claude’s safe
            harbor petition challenged the trust or will’s characterization of the decedent’s
            dispositions or the relative percentage allocations to each beneficiary, and rather
            merely reduced the amount of the money given to other beneficiaries.

     D.     Further, the court denied Dawn’s request on appeal to include a finding that
            Claude would be deemed to have violated the no-contest clauses, if a court later
            found that Claude’s claim was frivolous, noting that the decision about whether
            the beneficiary’s proposed action would be a will contest may not involve a
            determination of the merits of the action itself.


                                             33
5.   Glory Kaufman v. JP Morgan Chase Bank, 2010 Cal. App. Unpub. LEXIS 8559
     (October 28, 2010)

     A.     In March of 2009, Glory Kaufman, as beneficiary of the Donald B. Kaufman
            Revocable Trust, filed two applications under California Probate Code section
            21320 for a determination that proposed petitions to remove and surcharge the
            trustee would not violate the trust’s no-contest provision. The proposed petitions
            alleged breach of fiduciary duty, and an amended petition alleged gross
            negligence and reckless indifference by JP Morgan Chase Bank as trustee for
            failing to monitor and timely sell AIG stock as it declined in value.

     B.     The trustee argued that the petitions violated the no-contest provision by seeking
            to attack a provision of the trust which specifically authorized the trustee to retain
            all share of stock in Kaufman & Broad Inc. or its successor, and because AIG
            was the successor in interest to KBI. The trial court denied Glory’s application
            on grounds that a decision would require a determination of whether AIG was in
            fact the successor to KBI, which would be outside the scope of the 21320
            application.

     C.     On appeal, the California Court of Appeals explained that a trial court ruling
            under section 21320 may not consider the merits of the proposed action itself
            because a beneficiary is not entitled to two determinations of the merits of the
            proposed actions. The court affirmed the denial of the application on the basis
            that the determination of whether AIG was the successor in interest to KBI would
            impermissibly be a determination on the merits.

6.   Lange v. Nusser, 2011 Cal. App. Unpub. LEXIS 1576 (March 2, 2011)

     A.     Ardene Lange executed a revocable trust on January 21, 1997. Under the trust
            agreement, Ardene provided at her death for her daughter, Lynda, 58 percent of
            the trust, and the remaining 42 percent to her other two children and a grandchild.
            The sole trust asset was Ardene’s home. Lynda lived in the home with Mrs.
            Lange from February of 2004 until Mrs. Lange’s death on July 30, 2007, at
            which point, Lynda became successor trustee of the trust.

     B.     After Mrs. Lange’s death, Lynda continued to live in the house and cared for
            Mrs. Lange’s cats as provided for in the trust. Lynda did not pay rent, but paid
            for all house expenses, the costs of caring for the cats, and allowed her children
            to live in the house rent free in return for their help with the expenses.

     C.     On November 10, 2008, the other trust beneficiaries filed a petition for
            interpretation of the trust, an accounting, and claiming that Lynda breached her
            fiduciary duties as trustee and should be removed. The other beneficiaries asked
            the court to: (1) determine whether any of the cats belonging to Mrs. Lange at the
            time of her death (which the court referred to as the “cat beneficiaries”) were still
            alive, and if not, to order distribution of the trust assets to the residual
            beneficiaries; and (2) interpret the trust provisions for the cats to allow Lynda to
            arrange for alternative placements for any living cats, and to sell the house and
            distribute the proceeds.




                                             34
     D.     The beneficiaries alleged that Lynda had abused her discretion by living in the
            home rent free to care for the cats and failing to make the trust property
            productive.

     E.     The probate court ruled in Lynda’s favor, and held that the beneficiaries had
            violated the trust’s no-contest clause, thereby forfeiting their interests. The
            beneficiaries appealed.

     F.     On appeal, the court noted that Section 21305 of the California Probate Code
            governed (it has since been repealed) and therefore a safe harbor application
            seeking interpretation of the no-contest clause alone did not violate the clause
            itself. The court reversed the probate court, and held that the beneficiaries sought
            only an interpretation of the trust and did not challenge the trust’s validity, and
            rather asked the probate court to determine whether any cat beneficiaries existed
            and to establish them by some form of identification, none of which amounted to
            a contest. The court also noted that California’s statute governing animal trusts
            (Cal. Prob. Code § 15212) mandates distribution to the residual beneficiaries
            upon the death of the last cat beneficiary under the trust, and therefore a request
            for a finding as to whether any cat beneficiary was still living did not thwart the
            cat provision and instead sought only to ensure proper implementation of the
            trust’s provision.

7.   Christopher Gene Fazzi v. Norma Jean Klein, 2010 Cal. App. LEXIS 2112
     (December 14, 2010)

     A.     On January 29, 1987, Norma Jean Klein and her husband, Lloyd, created a joint
            revocable trust called the Klein Family Trust, and executed pour over wills.
            Norma and Lloyd served as co-trustees during their lives. Under the trust
            agreement, on the death of either spouse, the survivor as trustee was to divide the
            trust assets into three sub-trusts, two of which were to become irrevocable at the
            first spouse’s death. Norma’s son, Christopher, and Norma’s other children and
            stepchildren were named as remainder beneficiaries of the irrevocable sub-trusts.
            The trust agreement contained a no-contest clause. The trust agreement also
            specified a procedure for appointing successor trustees upon the death of either
            spouse, and designated Norma’s other son, Michael, as successor trustee.

     B.     Lloyd died and Norma became sole trustee. Nine months later, Norma executed
            an asset allocation agreement providing for the funding of the three sub-trusts.

     C.     In November of 2008, Christopher filed an application for safe harbor
            determination under California Probate Code former section 21320 whether his
            proposed petition constituted a contest to the trust. Christopher’s petition sought:
            (1) removal of Norma as trustee for cause; (2) a determination that the provisions
            designating Michael as successor trustee only applied to the original trust and not
            to the irrevocable sub-trusts, but that if the designation did apply to those trusts, a
            determination that Michael was unfit to serve and disqualified from serving as
            successor trustee; and (3) appointment of a professional fiduciary as successor
            trustee of the irrevocable sub-trusts.




                                             35
     D.     The trial court granted Christopher’s safe harbor petition on the grounds that the
            sub-trusts did not contain a no-contest clause or incorporate the no-contest clause
            contained in the original trust by reference.

     E.     On appeal, the California Court of Appeals reversed the trial court and found that
            the intent that the no-contest clause apply to the sub-trusts was implicit in the
            trust document, noting that because the original trust was revocable, a contest
            was never a possibility during the joint lives of the settlors.

     F.     The court similarly rejected the argument that the successor trustee provisions
            did not apply to the sub-trusts, and refused to find that Michael was unfit to serve
            because of his lack of necessary education or his hostile attitude toward
            Christopher, noting the importance of the settlors’ choice of a trustee.

     G.     The court agreed that, assuming the claim was not frivolous, Christopher’s
            request to remove Norma for cause did not violate the no-contest clause because
            the trust contained no prohibition or provision at all on an action to remove an
            individual trustee for cause. The court noted that even if the no-contest clause at
            issue had specifically prohibited any action to remove a trustee, the provision
            would have been unenforceable because a trustee cannot hide behind a no-contest
            clause and commit breaches of fiduciary duty with impunity.

                        PART F: POWERS OF ATTORNEY

1.   James Munn v. Michael D. Briggs et al., 2010 Cal. App. LEXIS 860 (June 10, 2010)

     A.     In 1983, Janell Munn executed a will exercising a testamentary power of
            appointment over a trust created by her late husband. Janell had two children,
            James and Carlyn. On December 22, 2007, Janell executed a codicil to her will
            which exercised the power of appointment to make specific gifts of $1 million to
            Carlyn’s two children, and gave the remaining funds to Carlyn. The codicil
            specifically indicated that no provisions were being made for James or his
            children, and contained a no-contest clause.

     B.     After Janell's death, her will and codicil were admitted to probate. James did not
            object to the will or codicil or challenge the validity of the $1 million gifts.
            Rather, James filed a petition alleging tortious interference with inheritance
            against Carlyn and her husband, Michael. In his petition, James alleged specific
            incidents of Carlyn and Michael’s engagement in behavior that was manipulative
            and mentally and emotionally abusive toward Janell. James alleged that Janell
            executed the codicil as a result of the wrongful conduct.

     C.     Carlyn and Michael moved to dismiss the claims, and the trial court dismissed
            the claims on the grounds that intentional interference with inheritance
            expectancy was not a recognized tort in California.

     D.     On appeal, the California Court of Appeals affirmed, and declined to recognize
            the tort of interference with an expected inheritance where the beneficiary has an
            adequate remedy in probate. The court rejected the argument that the no-contest
            clause deterred his challenge to the codicil in probate, noting that such an




                                            36
            argument would undermine the important public policies served by no-contest
            clauses.

2.   Siegel et al. v. JP Morgan Chase Bank, 2011 Fla. App. LEXIS 1925 (February 16,
     2011)

     A.     Dorothy H. Rautbord created a trust for her lifetime benefit, with the remainder
            distributable to her children including her sons, Daniel and Simon Siegel. The
            trust terms allowed the trustee in its sole discretion to pay so much of the income
            and principal as the trustee deemed necessary for Dorothy’s support,
            maintenance, health, comfort, or general welfare. Dorothy reserved the power to
            amend, modify, or revoke the trust and specifically excluded any attorney-in-fact
            from exercising her power. Dorothy appointed JP Morgan Chase Bank as
            trustee.

     B.     Dorothy also executed a power of attorney and named her daughter, Ms. Novak,
            as agent. Ms. Novak’s powers as agent included the power to make gifts to
            individuals or charitable organizations, provided the gifts were reasonably
            consistent with Dorothy’s pattern of giving or her estate plan, or were not in
            excess of the annual exclusion from federal gift tax. The power of attorney
            specifically excluded any power to revoke, amend or withdraw principal from
            any trust where Dorothy reserved the power to amend or revoke the trust.

     C.     During Dorothy’s life, Ms. Novak made large withdrawals of principal from the
            trust by signing revocation letters, which the trustee approved. In addition, the
            trustee issued checks for numerous gifts and made large distributions for
            Dorothy’s general welfare.

     D.     Dorothy died in 2002, and thereafter the trustee filed a complaint for judicial
            settlement of its accountings and sought a discharge of its liability for its actions
            as trustee. Dorothy’s sons filed an answer and affirmative defenses, alleging that
            expenditures were not made for proper trust purposes. The trial court concluded
            that the issue whether expenditures were appropriate was a question of law to be
            determined by the court, and then proceeded to grant summary judgment in favor
            of the trustee based on its findings that: (1) gifts were permitted under the trust
            instrument; (2) the sons lacked standing to challenge any distributions made prior
            to Dorothy’s death because the trust was revocable; and (3) the sons had no
            present interest in the trust assets during Dorothy’s life.

     E.     On appeal, the Florida Court of Appeals remanded certain questions of fact
            which required more than a mere interpretation of the trust instrument, and found
            that the trial court had incorrectly treated the question of whether the withdrawals
            were appropriate and authorized as a question of standing. The court disagreed
            with the trial court’s interpretation of the trust instrument and the power of
            attorney, and found that: (1) the trust agreement gave no power to the trustee to
            make gifts or invade principal unless requested by Dorothy; (2) while the power
            of attorney gave Ms. Novak the power to make gifts, it did not provide for the
            invasion of trust principal for that purpose; and (3) the trust restricted the power
            of the trustees and imposed a duty to invade principal only for Dorothy’s support,
            maintenance, health, comfort, or general welfare.




                                            37
     F.     The court noted that the trust had significant provisions to dispose of the trust
            property at Dorothy’s death to specific persons, demonstrating a purpose not only
            to benefit herself during her lifetime, but to benefit specific other persons, and
            that permitting the trustee to deplete the trust principal by lavishing gifts on
            others would thwart this intent.

     G.     The court found the trustee’s reliance on the attorney-in-fact’s authority to make
            gifts as misplaced and remanded the issue for further factual determinations,
            based on the court’s view that: (1) the gifts were not within Dorothy’s pattern of
            giving and her estate plan (certain gifts were made to Ms. Novak’s employees
            and to persons Dorothy did not know); (2) Ms. Novak’s withdrawals of trust
            principal exceeded her authority and should never have been authorized by the
            trustee; and (3) the numerous gifts suggest that the power to gift was not
            exercised with Dorothy’s best interests in mind.

     H.     Turning to the objection to expenditures for Dorothy such as lavish birthday
            parties, airline tickets for friends, health expenses, pets, and similar items, the
            court rejected the trial court’s determination that the sole discretion granted the
            trustee under the trust instrument summarily enabled these expenditures, noting
            that under New York law even where the trustee had the sole discretion to
            determine the appropriateness of expenditures, the court should still determine
            the proper use of that discretion.

     I.     The court reversed the award of summary judgment in favor of the trustee, and
            remanded the case for further factual determinations by the trial court.

                     PART G: PRE-DEATH WILL CONTESTS

1.   Deirdre Foster v. Winifred Foster, 2010 Ark. App. LEXIS 629 (September 15, 2010)

     A.     Winifred Foster filed a “pre-death will contest” action during her lifetime to
            declare the validity of her will and her living trust dated June 26, 2007. The
            execution ceremony was videotaped. The circuit court upheld the validity of the
            documents.

     B.     Winifred’s granddaughter, Deirdre, appealed the circuit court’s determination
            alleging that: (1) the will was not properly executed; (2) the will was procured by
            her sister, Nayla, by undue influence; (3) collateral estoppel prevented Nayla
            from claiming Winifred was competent; and (4) the trial court ignored evidence
            of incompetence and lack of testamentary capacity.

     C.     On appeal, the court affirmed the trial court on the grounds that: (1) Deirdre’s
            failure to raise each argument at trial prevented ruling on each issue in Deirdre’s
            favor on appeal; (2) the will was validly executed and signed by two witnesses in
            Winifred’s presence; (3) publication was made by inference from Winifred’s
            explanation of her bequests to Nayla prior to execution; (4) Winifred’s attorney
            had contacted her about preparing the June 2007 documents, and Winifred had
            paid him directly for drafting the will and trust; (5) Winifred stated in the video
            that she intended Nayla to be the sole beneficiary under her will; (6) collateral
            estoppel did not apply to Nayla’s prior filing of a guardianship action for
            Winifred, because the issue had not actually been litigated and Winifred had not


                                            38
            been finally adjudicated incompetent; and (7) complete sanity in a medical sense
            at all times is not essential to testamentary capacity, provided capacity exists at
            the time the will is executed.

     D.     The trial court had sufficient evidence to conclude that Winifred had the requisite
            capacity, based on video and witness testimony, at the time of the signing.

                              PART H: JURISDICTION

1.   Nelms v. Kramer, 2011 U.S. Dist. LEXIS 21957 (March 3, 2011)

     A.     Anna Louise Madsen’s will was admitted to probate in the Kerr County, Texas
            on April 29, 2010. Aurelia Nelms, Anna’s domestic care worker, then sued Jean
            Madsen Kramer, the executor under Anna’s will, in federal district court for
            unpaid overtime compensation. The executor asked the court to abstain from
            exercising jurisdiction and transfer the case to the state court in the county where
            the will was probated.

     B.     The issue was referred to a federal magistrate, who found that state custody of
            Anna’s estate did not preclude a federal court from adjudicating Aurelia’s claim,
            since Aurelia did not raise probate matters but instead sought a determination of
            her entitlement to compensation under the Fair Labor Standards Act and damages
            in the form of unpaid overtime pay, liquidated damages, attorney fees, and costs.
            Citing the decision of the U.S. Supreme Court in Marshall v. Marshall, 547 U.S.
            293 (2006), the magistrate noted that “the probate exception . . . precludes federal
            courts from endeavoring to dispose of property that is in the custody of a state
            probate court, but it does not bar federal courts from adjudicating matters outside
            those confines and otherwise within federal jurisdiction.” In its recommendation,
            however, the magistrate noted the limits to the district court’s exercise of
            jurisdiction in the matter, stating that the federal court could not go so far as to
            order payment of a judgment from Anna’s estate because to do so would assume
            control over probate assets.

     C.     The magistrate recommended denial of the motion to abstain, finding that the
            district court had jurisdiction over Aurelia’s claim and was obliged to exercise
            jurisdiction because no important countervailing interest had been demonstrated
            sufficient to justify federal court abstention.

2.   John Fitzgerald Kennedy v. the Trustees of the Testamentary Trust of the Last Will
     and Testament of President John F. Kennedy, 2010 U.S. App. LEXIS 22573
     (October 28, 2010)

     A.     Plaintiff, John Fitzgerald Kennedy, the claimed illegitimate son of Marilyn
            Monroe and President John F. Kennedy, filed a claim in district court (1) seeking
            an order compelling the trustees of the testamentary trusts under the will of
            President John F. Kennedy to pay him funds from the late president’s
            testamentary trust upon proof of his claim to being the son of the late president
            and (2) alleging breach of fiduciary duty for failure to investigate his claims.

     B.     The district court found that: (1) the probate exception applied to the plaintiff’s
            request for an order compelling the trustees to pay John funds from the



                                             39
            testamentary trust upon proof of his claim to being a beneficiary of a class gift in
            President Kennedy’s will; and (2) the probate exception did not apply to the
            plaintiff’s request for an order compelling the trustees’ to investigate the claim.
            The district court dismissed the breach of fiduciary duty claims against the
            trustees.

     C.     On appeal, the court affirmed the district court’s decision, noting that the probate
            exception applied to the order compelling funds but did not apply to the mere
            declaration of rights to the funds. The court considered and affirmed the district
            court’s dismissal of the breach of fiduciary duty claim against the trustees, based
            on the district court’s interpretation of the word “children” under Massachusetts
            law. The court found that a fiduciary duty was only owed to beneficiaries of the
            trust, or President Kennedy’s children, and that the district court had properly
            concluded that at the time the will was executed, and in the absence of any
            contrary intent, the word children referred only to children born in wedlock. The
            plaintiff’s failure to allege any facts that could if true overcome the presumption
            that the term children included only those born in wedlock, made dismissal for
            failure to state a claim appropriate.

3.   Noel v. Liberty Bank of Arkansas, 2010 U.S. Dist. LEXIS 72298 (July 16, 2010)

     A.     On May 12, 2010, Virginia Noel, a Georgia resident, commenced an action in
            federal district court against Liberty Bank of Arkansas, based on diversity of
            citizenship and an alleged amount in controversy exceeding $75,000. Virginia
            sued in her capacity as both trustee and beneficiary of a trust, and alleged that the
            bank committed multiple errors in transfers of investment securities owned by
            the trust. Virginia sought equitable relief in the form of an accounting and
            production of documentation, along with damages discovered by the accounting.

     B.     The bank moved to dismiss based on lack of subject matter jurisdiction, arguing
            that: (1) Virginia’s complaint failed to make specific allegations demonstrating
            that the amount in controversy exceeded $ 75,000; and (2) there was not
            complete diversity of citizenship because the situs of the trust was Arkansas
            (where the bank was also located).

     C.     The district court held that, while a request for a general accounting does not
            always meet the amount in controversy requirement, here Virginia had
            sufficiently demonstrated that the amount in controversy exceeded $ 75,000 by
            specifically asking the court to determine the cause of transfer errors that
            allegedly resulted in over-deliveries of assets from three different mutual funds
            valued at $120,000, $2,800,000, and $370,000, and by providing account records
            from the bank and the trust that showed discrepancies in the asset transfers.

     D.     On diversity of citizenship, the court held that Virginia, a Georgia resident, had
            standing to sue in her capacity as both trustee and as beneficiary for an
            accounting and was entitled to bring a diversity action in either capacity on the
            basis of her own personal citizenship. The court held that diversity existed where
            Virginia was a citizen of Georgia and Liberty Bank was an Arkansas entity. The
            court noted that it was her citizenship, and not the trust situs, that determined
            diversity, therefore diversity was not defeated.




                                            40
4.   Emil Peter III, v. Hon. Susan Schultz Gibson, 2010 Ky. LEXIS 297 (December 16,
     2010)

     A.     In 1983, Emil Peter IV’s grandmother bequeathed to him all of the benefits due
            under her employee pension plan, which initially totaled $86,409.46. At the
            time, Emil was a minor and pursuant to the Uniform Transfer to Minors Act,
            Emil’s father was named custodian for Emil. Emil had only a general
            understanding that his grandmother had left him some money, and several
            distributions made by the custodian to Emil were described as gifts.

     B.     When Emil reached age 18, his father failed to give the remaining custodial
            assets to Emil as required by statute. Emil later learned of the size of his
            grandmother’s gift through public records, and filed an accounting action against
            his father in circuit court.

     C.     The circuit court dismissed the accounting action for lack of subject matter
            jurisdiction due to the UTMA’s exclusive grant of jurisdiction to the district
            court, but then changed position and held that circuit court had subject matter
            jurisdiction.

     D.     The father appealed the circuit court’s exercise of subject matter jurisdiction, and
            sought a writ of prohibition to bar an accounting of funds. On appeal, the
            Kentucky Supreme Court affirmed the circuit court’s exercise of jurisdiction on
            the grounds that: (1) while the legislature had granted district courts exclusive
            jurisdiction to order a custodian to make an accounting under the UTMA, the
            statutes only allowed a minor, a minor’s guardian, an adult member of a minor’s
            family, or a transferor of custodial property to petition the district court for an
            accounting; (2) from its plain language, the statutes only applied to minors or
            individuals petitioning on behalf of minors and therefore could not apply to
            custodial property that should have been released to an adult beneficiary; (3)
            because UTMA gave no authority to the district court to order an accounting
            based on the petitioner’s past status, the proper court for an adult to file an
            accounting action was the circuit court with general subject matter jurisdiction
            over suits in equity; and (4) because the father failed to release the custodial
            property to his son, a constructive trust was created and the rights and remedies
            of the parties as well as subject matter jurisdiction were governed by the law of
            constructive trusts and not UTMA.

     E.     Two judges dissented.

                                 PART I: STANDING

1.   Sheryl Ragen v. Peter Veloz, 2010 Cal. App. Unpub. LEXIS 7262 (September 13,
     2010)

     A.     Sheila and Tom Veloz established a family trust in 1988 that they restated and
            amended in June 2001. Sheila had two daughters from a prior marriage, Sheryl
            Ragen and Janine Ragen Jones. Tom had two sons from a prior marriage, David
            Veloz and Peter Veloz. Sheila died in July 2001. After Sheila’s death, Tom
            became the sole trustee and the trust was divided into three separate trusts: (1) a
            survivor's trust; (2) a QTIP marital trust; and (3) a non-marital trust.


                                            41
B.   Tom was the income beneficiary of the QTIP trust and Sheila’s daughters were
     the remainder beneficiaries. The remainder interest in the QTIP trust was Sheryl
     and Janine’s primary inheritance from their mother. The primary asset of the
     QTIP trust was 48,500 shares of common stock in Ultra Violet Devices, Inc., a
     closely held family company. The remaining shares of Ultra Violet were owned
     by Tom, his children, and his grandchildren. Tom served on the board of
     directors of Ultra Violet and controlled the company while he was alive.

C.   In the two years following Sheila’s death, Tom distributed $8 million to himself
     out of Ultra Violet, which was more than half of the company’s value. Tom also
     improperly characterized distributions from Ultra Violet to the QTIP trust as
     income, failed to account for company distributions to shareholders, improperly
     allocated QTIP trust expense to principal, and failed to properly invest the trust’s
     assets, investing 70% of the QTIP trust’s cash in loans to private parties that
     provided no growth of principal, while providing Tom with $200,000 of interest
     income annually.

D.   Over the five-year period of Tom’s trusteeship, the value of the QTIP trust
     decreased by almost $5.7 million to about $7.9 million. At Tom’s death, Sheila’s
     daughters had accessible assets of only about $400,000 plus a condominium.

E.   After Tom’s death, Sheila’s daughter Sheryl and Tom’s son David became co-
     trustees of the QTIP Trust. In September 2007, Sheryl as beneficiary and co-
     trustee of the QTIP trust filed an $8 million creditor’s claim in the probate court
     against Peter as trustee of a trust created by Tom, alleging that Tom breached his
     fiduciary duties during the time he was sole trustee of the QTIP trust.

F.   Peter as trustee rejected the claim in January 2008, and Sheryl filed a verified
     petition with the probate court in April of 2008. Peter filed a general demurrer to
     the petition asserting: (1) Sheryl lacked standing as a beneficiary to file the
     petition because a trust beneficiary is not the real party in interest; and (2)
     because Sheryl was only the co-trustee of the QTIP trust, she could not pursue
     her petition without the participation of her co-trustee, Tom’s son David.

G.   The trial court sustained the demurrer, ruling that Sheryl had no standing to bring
     the petition because she was not the sole trustee of the QTIP trust and because a
     beneficiary may not bring a claim against a former trustee. Nevertheless, the
     court granted Sheryl leave to amend her petition and Peter again generally
     demurred. The trial court entered an order sustaining the demurrer to the first
     amended petition without leave to amend, finding again that Sheryl lacked
     standing. Sheryl appealed.

H.   On appeal, the court reversed the trial court and held that Sheryl had standing as
     both a beneficiary and as a co-trustee to bring her claims against Peter as
     representative of Tom’s estate, on the grounds that: (1) there is an exception to
     the rule that a beneficiary is not the real party in interest for bringing a claim
     where a complaint alleges malfeasance by the trustee which confers standing to
     sue on the beneficiary under the common; (2) a trust beneficiary may bring an
     action against a third party to recover property transferred to the third party by
     the trustee in breach of trust; (3) where David took no action for appointment of a
     neutral co-trustee in his place and steadfastly refused to take any action that


                                     42
            might reduce his own inheritance under Tom’s trust, Sheryl was not required to
            obtain David’s participation and consent to file a claim or petition for the QTIP
            trust’s losses, because a co-trustee must have the ability to redress a breach of
            trust irrespective of the other co-trustee’s concurrence or refusal to take action;
            and (4) Sheryl had a right to seek redress for Tom’s breaches of trust against the
            representative of his estate, and was permitted to file a petition against Peter as
            admitted successor in interest to Tom, for recovery of the QTIP trust property
            allegedly diverted to Tom’s trust, and for Tom’s negligent handling of the QTIP
            trust..

2.   In Re: James Craig Guetersloh, 2010 Tex. App. LEXIS 8730 (November 1, 2010)

     A.     James Craig Guetersloh, who was not a lawyer, applied for writ of mandamus
            after a trial court refused to schedule a hearing on his motion to transfer venue of
            a suit he filed pro se to terminate a trust, in both his individual capacity and in his
            capacity as trustee of a trust.

     B.     In reviewing the application for mandamus relief, the court considered for the
            first time whether a trustee of a trust has the same right to appear pro se in his
            representative capacity as he does in his individual capacity. The Texas Court of
            Appeals held that the right to self-representation is not absolute, and refused to
            extend the right to appear pro se to the trustee of a trust because, as trustee,
            Guetersloh was “necessarily representing the interests of others.” The court
            found that, consistent with the Texas legislature’s definition, an appearance in the
            trial court as trustee falls within the definition of the “practice of law” and
            accordingly, a non-attorney appearing in court of behalf of a trust represents the
            interests of others and is engaging in the unauthorized practice of law.

     C.     Accordingly, the court found that Guetersloh was entitled to mandamus relief in
            his individual capacity alone, denied the request for relief in his capacity as
            trustee, and conditionally granted the writ of mandamus asking the trial court to
            schedule a hearing on Guetersloh’s individual motion to transfer venue.

3.   Joshua Lickter et al. v. Maggie Lickter, 2010 Cal. App. LEXIS 1849 (October 27,
     2010)

     A.     Lois Lickter died in August 2007, leaving a trust that provided for the
            distribution of $10,000 distributable to her grandsons, Joshua and Jezra, and the
            entire residue distributable to her son, Robert. If Robert predeceased Lois, the
            residue was to be distributed to Robert’s daughters from a prior relationship,
            Maggie and Kate. Under the trust terms, the residue would only be distributed to
            Joshua and Jezra if Robert, Maggie, and Kate all predeceased Lois.

     B.     After Lois’ death, the grandsons sued Robert, Maggie, and Kate, and the
            daughters’ mother, Mary, for elder abuse and other related causes of action that
            belonged to Lois prior to her death.

     C.     The grandsons asserted that they had standing to maintain the cause of action by
            California statute (Welfare and Institutions Code section 15657.3(d)). The
            defendants moved for summary judgment for lack of standing. The trial court




                                             43
            granted summary judgment in favor of the defendants and the grandsons
            appealed.

     D.     On appeal, the California Court of Appeals affirmed on the grounds that: the
            grandsons’ status as trust beneficiaries was insufficient to render them “interested
            persons” for purposes of pursing an elder abuse action, because they were not
            persons whose rights could be impaired, defeated or benefited by the proceeding
            as defined by the California statute.

     E.     The grandsons could not maintain an action as Lois’ successors in interest,
            because the grandsons could not prove that Robert, Maggie, and Kate should be
            treated as predeceasing Lois by clear and convincing proof that they had
            committed physical abuse, neglect, fiduciary abuse, acts in bad faith, or reckless,
            oppressive, fraudulent, or malicious action.

4.   Suleman v. Superior Court of Orange County, 2010 Cal. App. LEXIS 8 (January 8,
     2010)

     A.     Paul Peterson, an advocate for the rights of child actors, filed a petition against
            Nadya Suleman, better known as the “Octomom,” seeking the appointment of a
            guardian of her children to make financial decisions for the children. The petition
            alleged that Suleman commercially exploits her children and that a guardian
            would ensure that the children’s financial interests were adequately protected.

     B.     The probate court considered that California Probate Code section 1510 permits a
            relative or other person on behalf of a minor to file a petition for appointment of
            guardian. The probate court found that, while Peterson had no relationship with
            the family, there was no statutory requirement that the petitioner be an interested
            person or have any type of relationship with the minor named in the petition.

     C.     The probate court denied Suleman’s motion to dismiss, and issued an order
            directing the Orange County Social Services Agency to conduct an investigation
            of the family’s finances and file a report with the court on the proposed
            guardianship.

     D.     Suleman filed a petition for writ of mandate/prohibition to direct the probate
            court to vacate its order and dismiss Peterson’s petition.

     E.     The appellate court looked to the California Supreme Court’s decisions, making
            clear that the primary consideration for the guidance of the court in appointing a
            guardian is the best interest of the child, but also considered the right of a parent
            to the care and custody of his or her children.

     F.     The court noted that California law presumes that a parent is competent to care
            for his or her own children, unless it is shown that the parent is unfit to perform
            the duties imposed by the relation or has forfeited the right to custody by
            abandonment of the child.

     G.     The court specifically examined the phrase, “other person on behalf of the
            minor,” and finding no legislative history to assist in the interpretation, held that




                                             44
            such a person is one who pleads ultimate facts demonstrating financial
            misconduct or alleges information sufficient to warrant court intervention.

     H.     The appellate court held that, as a nonrelative, Peterson was required to establish
            standing by showing ultimate facts warranting court intervention, but failed to do
            so. The petition only alleged the potential for mismanagement of the children’s
            finances by Suleman, and did not provide any evidence to raise a reasonable
            inference of wrongdoing.

     I.     The court vacated the order for the Social Services Agency to conduct an
            investigation and provide a report, and issued a writ directing the probate court to
            issue an order granting Suleman’s motion to dismiss.

     J.     This case outlines a middle ground on which to base decisions subjecting a
            parent to court intervention. The decision maintains a safeguard against
            exploitation of minors by allowing unrelated third parties to file petitions for
            guardianship, if they can show sufficient information to warrant such
            appointment, but also avoids unwarranted harm to parents through the defense
            against frivolous guardianship petitions and forced release of confidential family
            information.

      PART J: FUNDING, CONSTRUCTION, AND CREATION OF TRUSTS

1.   Kucker et al v. Kucker, 2011 Cal. App. LEXIS 88 (January 26, 2011)

     A.     On June 29, 2009, at the age of 84, Mona Berkowitz created a revocable trust and
            executed a writing purporting to assign all of her real and personal property to
            herself as trustee of her trust. She also executed a pour-over will leaving any
            probate estate to the trust. On October 29, 2009, she amended and restated her
            trust, and assigned all of her shares of stock in 11 corporations and funds to the
            trust. The amendment and restatement named her daughter and niece as
            successor trustees on Mona’s death.

     B.     Mona died in November of 2009, and in February of 2010 the trustees filed a
            petition with the probate court to confirm that 3,017 shares of stock in Medco
            Health solutions, Inc. were assets of the trust. Medco was not mentioned in the
            assignment of stock signed by Mona in October 2009. The trial court held that
            Mona’s general assignment of personal property to the trust was ineffective to
            transfer the Medco shares.

     C.     On appeal, the California Court of Appeals reversed the trial court on the basis
            that there was no California authority prohibiting a transfer of stock to a trust by
            a general assignment of personal property. Focusing on implementing Mona’s
            intent, the court found that the general assignment and the pour-over will showed
            that Mona intended to transfer all of her personal property to the trust and that
            omission of the Medco shares in the subsequent assignment was an oversight
            because of misplaced stock certificates. The court noted that the general
            assignment would not have been effective to transfer real property to the trust
            under the statute of frauds, but in the case of shares of stock, the statute of frauds
            did not apply and therefore the general assignment was sufficient.




                                             45
2.   Schmidt v. Hart, 2010 Ore. App. LEXIS 1183 (January 8, 2010)

     A.     In July of 1995, Woodrow Wilson created a revocable living trust, the assets of
            which included a four-unit apartment building in Portland, Oregon. Under the
            trust terms, the tenants of the apartment building were beneficiaries of the trust,
            and the trust provided that the beneficiaries had the right to continue to live in the
            apartments for their natural lives.

     B.     The trust provided that the trustee could ask the court for instructions or other
            determinations concerning the trust. At Woodrow’s death, one-third of the net
            trust assets were to be held in a “family trust” for the benefit of the tenants. The
            family trust was to terminate upon the death the last remaining tenant, or upon
            the tenants’ ceasing to reside in the apartment building. Upon termination, the
            trust assets were to be distributed to the Woodrow and Hazel Wilson Foundation.

     C.     After Woodrow’s death, the trustee required one of the tenants to sign a rental
            agreement providing that the lease would terminate at the earlier of the tenant’s
            vacating the premises or the tenant’s death. The rental agreement also provided
            that the apartment could not be occupied by any other person.

     D.     In 2004, the tenant accepted a job in Denver, Colorado, and the tenant’s mother
            lived in the apartment. The trustee notified the tenant that she had breached the
            rental agreement by vacating the apartment and allowing her mother to occupy it,
            gave her 30 days’ notice of termination, and thereafter filed a statutory wrongful
            detainer action with the Multnomah County Circuit Court (FED court) to recover
            possession of the apartment. The tenant maintained that her departure was
            temporary and that she had the right to remain in the apartment. The FED court
            found that the tenant failed to put on adequate evidence explaining long
            absences, and that she had vacated and lost her right to live in the apartment, and
            ordered eviction of the tenant. The tenant appealed the order, and the Oregon
            court of appeals affirmed the FED court.

     E.     Thereafter, the tenant sued the trustee for breach of trust and fiduciary duties, and
            alleged that other trust beneficiaries, namely the Masonic Lodge and the
            foundation, had participated and acquiesced in receiving the benefits of the
            trustee’s misconduct. The trustee then filed a motion for summary judgment on
            the basis of the preclusive effect of the findings of the FED court that the tenant
            was no longer a beneficiary of the trust. The trustee further asserted that the
            other allegations of misconduct were barred by the statute of limitations, laches,
            and absence of a triable question of fact.

     F.     The trial court granted the trustee’s motion for summary judgment, finding that:
            (1) the FED court’s determination that the tenant had chosen not to live on the
            premises terminated her interest in the trust; (2) the trustee fulfilled his obligation
            to the trust by seeking a determination of the tenant’s residential status in the
            FED proceedings; and (3) in light of the FED court determination, the tenant was
            not entitled to be compensated on claims.

            The tenant appealed, asserting that her rights under the rental agreement were
            separate and that her rights as a trust beneficiary had not been fully litigated in
            the FED proceedings.


                                             46
     G.     On appeal, the Oregon Court of Appeals affirmed the trial court on the grounds
            that: (1) while a FED proceeding is limited in scope to the rights of possession,
            the tenant’s interest in the trust was in the nature of a tenancy rendering the FED
            proceedings preclusive in subsequent litigation; (2) the FED court’s findings that
            the tenant vacating the apartment terminated any right of possession she once had
            under the trust were entitled to preclusive effect; (3) because the tenant’s interest
            under the trust was in the nature of a tenancy, the FED court had jurisdiction and
            authority to interpret the provisions of the trust for determining the right of
            possession; (4) the scope of the preclusive effect of the FED court’s finding
            extended to the tenant’s claim to the trust, because the effect of the FED court
            ruling was to terminate the tenant’s interest in the trust; and (5) the FED court’s
            determination that the tenant chose to no longer occupy the premises was
            dispositive of her claim for breach of fiduciary duty and breach of trust.

3.   Conserve Community, LLC etc. v. Conserve School Trust etc., 2010 Wisc. App.
     LEXIS 921 (November 16, 2010)

     A.     During his lifetime, James Lowenstine established the Conserve School Trust
            and directed the trustees to establish and operate a school named the Conserve
            School on a large parcel of property owned by Lowenstine. The trustees had
            discretion to build facilities and develop the curriculum. The trustees had the
            power to open the school for regular enrollment of students beginning in the
            seventh grade and extending, in the discretion of the trustees, through high
            school. If feasible, the trustees could allow students enrolled at other private or
            public schools to enroll in the Conserve School for tutorial instruction after
            school hours and on holidays. If the IRS denied the trust charitable status, or if it
            became legally impossible or otherwise impracticable to operate the Conserve
            School, the trust terms provided for the payment of a specified sum to Rush
            Medical College and the remainder of the trust assets to Culver, an organization
            that funds college preparatory boarding schools in Indiana.

     B.     After Lowenstein’s death, the trustees spent $60 million to build the school and
            commenced formal instruction in September 2002 as a four-year college
            preparatory boarding school for students in grades nine through twelve. In 2009,
            due to the global economic downturn, the trustees reconsidered the school’s
            model and decided to transition the school to a semester school model operating
            as a semester away program, primarily for high school juniors from other
            institutions.

     C.     A group of Conserve School parents filed suit to stop the transition to the new
            model, and the circuit court held that they lacked standing to bring the suit. The
            court allowed Culver to intervene as a contingent trust beneficiary. Culver filed
            an amended complaint alleging that the semester away program violated the trust
            instrument and triggered the alternative distribution plan. The parties filed cross
            motions for summary judgment and agreed that the central issue was
            Lowenstein’s intent as reflected in the language of the trust instrument.

     D.     The circuit court found that the semester model was an appropriate exercise of
            the trustees discretion and consistent with the “regular enrollment” requirement
            in the trust instrument. The court concluded that the language allowing students
            enrolled somewhere else to come to the Conserve School was precatory and not


                                            47
            mandatory language, that the exclusive means by which students could attend
            Conserve School was not for tutorial services, and that the trust instrument did
            not prohibit “dual enrollment.” Accordingly, the circuit court granted Conserve
            School summary judgment. Culver appealed.

     E.     On appeal, the Wisconsin Court of Appeals affirmed the circuit court on the
            following grounds: (1) the trust instrument adopted the regular enrollment
            requirement as set forth in the Internal Revenue Code by reference, and the trial
            court’s decision that “regular” did not mean “primary” was consistent with the
            language of the Internal Revenue Code; (2) a semester away program satisfied
            the full grade requirement by providing a full academic year of instruction, even
            if broken into two semesters and certain students only enrolled for one semester;
            (3) allowing students from other institutions to attend in a manner not explicitly
            designated under the Trust agreement did not violate the trust because the trust
            did not expressly prohibit it; (4) the adoption of the semester away program did
            not reflect a finding of legal impossibility or impracticability for the continued
            operation of the Conserve School triggering the alternative distribution plan; and
            (5) rather, the new program reflected the trustees’ desire to operate the school in
            a manner best suited for current economic realities.

4.   In Re Estate of Skaff etc. v. Skaff et al., 2011 Mich. App. LEXIS 10 (January 4,
     2011)

     A.     Thomas Martin was arrested and imprisoned in a state correctional facility. A
            trust for his benefit granted the trustee uncontrolled discretion to provide for
            Thomas’s support, maintenance, and education. Thomas also had the right to
            withdraw trust assets on reaching age 35, but subject to a suspension clause
            providing that his withdrawal right would be suspended during any period of
            incarceration or probation.

     B.     The Michigan state treasurer sought reimbursement from the trust for the costs of
            Thomas’s imprisonment under the State Correctional Facility Reimbursement
            Act (SCFRA). The probate court determined that the treasurer could not invade
            Thomas’s trust because it was a discretionary trust, and because of the
            suspension clause prohibiting Thomas from withdrawing funds while
            incarcerated. The treasurer appealed.

     C.     On appeal, the Court of Appeals of Michigan affirmed on the grounds that the
            trust was a discretionary trust subject to the trustee’s unfettered discretion, giving
            Thomas no ascertainable interest in the trust and no ability to invoke the trust’s
            distribution clause. The court rejected the treasurer’s argument that the
            suspension clause was void as against public policy holding that no case law or
            statute prohibited such a clause and therefore the clause did not violate public
            policy. The court noted the exception allowing a state to reach the assets of a
            prisoner in an ordinary spendthrift trust and held that this exception sufficiently
            addressed the treasurer’s public policy concerns by facilitating the state’s
            collection of assets that beneficiaries actually own. The court refused to extend
            this exception, noting that it would be a tremendous leap to expand existing
            public policy to allow states to gain access to assets in which beneficiaries have
            no ascertainable interest.



                                             48
5.   Hood v. Todd, 2010 Ga. LEXIS 407 (May 17, 2010)

     A.     John Buffington died with a will leaving the residue of his estate to separate
            trusts for each of his living children or the issue of deceased children. Under the
            will, the term “children” was specifically defined as “only the lawful blood
            descendants in the first degree of the parent designated.” The introductory
            portion of the will provided that John had two living children, Beth and Ginger.
            Beth and Ginger were named as co-executors under the will and as trustees of the
            respective residuary trusts for their benefit.

     B.     Following probate of the will, Regina Gordon Todd brought an action seeking a
            declaration that she was a trust beneficiary as a child by an extra-martial affair.
            Regina claimed that Buffington had acknowledged her as his daughter during his
            life, and that she was entitled to a share of his estate. Beth and Ginger moved for
            summary judgment on the issue of Regina’s beneficiary status, asserting that the
            will unambiguously evidenced Buffington’s intent to exclude Regina as a
            beneficiary. The probate court denied the motion and Beth and Ginger appealed.

     C.     On appeal, the Georgia Supreme Court, with one dissenting opinion, reversed on
            the grounds that: (1) the will unambiguously expressed John’s intent that only
            Beth and Ginger, the daughters born of his marriage, share as children under the
            will; (2) John expressly designated his “two living children” as executors and
            trustees and defined “children” to mean his “lawful blood descendants”; (3) the
            use of the word “lawful” demonstrated John’s intent that his daughter born out of
            wedlock not be included as a beneficiary; and (4) John’s lack of steps during his
            life to legitimize Regina as his child under the law and the use of the word
            “lawful” reflected an intent to exclude Regina, despite evidence that John
            acknowledged Regina was his daughter, provided support for her during his life,
            and even referred to her as “little bastard.”

6.   Citizens Business Bank v. Carrano et al, 2010 Cal. App. LEXIS 1896 (November 5,
     2010)

     A.     On August 2, 1966, Charles and Serena Papaz created a trust for the benefit of
            their only child, Christopher. Under the trust terms, Christopher was to receive
            income from the trust and, in the event Christopher did not survive his parents,
            Christopher’s “issue” would receive the trust assets. If Christopher died without
            issue, half of the trust assets would pass to Charles’s heirs at law and half of the
            assets to Serena’s heirs at law.

     B.     In 1984, Christopher met Kathy Carrano, a physical therapist who cared for
            Christopher while recovering from a gun shot wound. One night in 1984,
            Christopher drugged Kathy, had sex with her without her knowledge, and
            conceived a child, Jonathan. At the time, Kathy was married to another man.
            Jonathan was raised by Kathy and her husband as their child. A few years after
            Jonathan’s birth, Kathy learned that Jonathan was actually Christopher’s son.
            Kathy’s husband never legally adopted Jonathan. Christopher acknowledged that
            Jonathan was his son. Christopher’s parents did not know that Jonathan was
            Christopher’s child.




                                            49
     C.     Christopher fathered two other children out of wedlock, and as a result, Charles
            and Serena amended the trust several times to redefine the term “issue.” In an
            eighth amendment, the term “then living issue” was defined as “any issue that
            has been conceived prior to and is born after the time such issue acquires an
            interest in this trust.” In the ninth and final amendment redefining the term
            “issue” made in 1991, the definition was modified to expressly exclude “persons
            adopted into the Trustors’ bloodline and persons adopted out of the Trustors’
            bloodline.”

     D.     In December 2006, Christopher became paralyzed from the neck down and could
            no longer speak. In January of 2007, Kathy told Jonathan and Charles that
            Christopher was Jonathan’s biological father. Christopher died in June 2007, and
            Charles died in July 2007. Serena had predeceased them both in 1996.

     E.     In February 2008, Citizens Business Bank as trustee of the trust filed suit to
            determine the proper trust beneficiaries. The trial court found that the trust was
            not specific concerning the rights of someone in Jonathan’s circumstances, and as
            a result of this ambiguity the court considered extrinsic evidence to determine
            intent. The trial court determined that Charles’ and Serena’s intent was to restrict
            what might be considered Christopher’s issue to children who were biologically
            related to Christopher and for whom Christopher was legally a parent. The trial
            court held that because Jonathan was presumed to be the child of another man
            pursuant to Family Code Section 7540, Jonathan’s biological connection to
            Christopher was insufficient under the trust to fall within the definition of issue.

     F.     Jonathan appealed. On appeal, the California Court of Appeals reversed the trial
            court on the following grounds: (1) the trust was unambiguous and the trial court
            had inappropriately resorted to a consideration of extrinsic evidence; (2) the term
            “issue” was clearly, simply, and specifically defined by Charles and Serena; (3)
            the term was not fairly susceptible to more than one interpretation and no latent
            ambiguity attached to the terms requiring consideration of extrinsic evidence or
            resort to definitions supplied by the Probate Code or the Family Code; (4) none
            of the restrictions on the definition of “issue” applied to Jonathan because he had
            not been adopted by Kathy’s husband; and (5) under the unambiguous definition
            in the trust, Jonathan was entitled to a distribution of trust assets as Christopher’s
            issue.

7.   Weinberger v. Morris, 2010 Cal. App. LEXIS 1668 (September 24, 2010)

     A.     On October 12, 1996, Sue Weinberger created a trust and executed a quitclaim
            deed transferring her North Hollywood real property to the trust. The deed to the
            trust was recorded on October 31, 1996. Sue was initial trustee of the trust and
            her daughter, Sheila, was named as successor trustee, followed by her daughter’s
            fiancée, Lee. The trust gave the trustee power to dispose of all assets in the trust
            without court approval. The trust also provided at Sue’s death for the distribution
            of the trust assets to Sheila, or if she was not living at the time of final
            distribution of trust assets, to Lee. If both Sheila and Lee died prior to the final
            distribution, the trust assets were to be distributed to Sue’s heirs at law. Sue had
            another child, Robert, whom she expressly excluded from the trust. Until final
            distribution of trust assets, the trustee was permitted to make distributions for the
            health, support, maintenance, and education of the beneficiaries.


                                             50
B.   Sue died in May of 1997 and thereafter Sheila recorded an Affidavit of Death of
     Trustor as trustee. After recording the affidavit, Sheila never executed,
     delivered, or recorded any documents transferring the North Hollywood property
     out of the trust to herself as the sole trust beneficiary. Sheila died in 2002.

C.   In 2005, Lee petitioned to probate Sheila’s will. Sheila’s brother filed a contest
     to Sheila’s will. Thereafter, Lee recorded an Affidavit of Death of Trustor
     disclosing that Sheila had passed away, and as successor trustee of Sue’s trust,
     executed and recorded a deed transferring the North Hollywood property to
     himself.

D.   In 2006, Lee obtained a “reverse mortgage” loan from Pacific Reverse Mortgage
     Inc. that was secured by a deed of trust against the North Hollywood property.
     The deed of trust was recorded.

E.   The probate court denied Lee’s petition to probate Sheila’s will and also denied
     Robert’s contest of Sheila’s will. Robert then sued Lee, his attorney, and Pacific
     alleging that: (1) Lee and his attorney had falsely represented that the probate suit
     would resolve whether the North Hollywood property had passed to Lee; (2) the
     false representations had been made for the purpose of inducing Robert to delay
     efforts to enforce his interest in the property; and (3) Lee used this period of
     delay to extract the equity from the property by way of the reverse mortgage with
     Pacific.

     Robert claimed to own the North Hollywood property because the trust made Lee
     only a contingent remainder beneficiary who would receive the property only if
     Sheila predeceased Sue, a condition which did not occur. Robert claimed that
     because this condition had not occurred, the property had passed to Robert as
     Sheila’s heir at law.

F.   The trial court rejected Robert’s arguments and determined that Lee was the
     beneficiary of the trust. Robert appealed. On appeal, Robert claimed that the
     trust assets irrevocably vested in Sheila on Sue’s death under the doctrine of
     merger. Under the doctrine of merger, when the sole trustee of a trust and the
     sole beneficiary of a trust become one and the same person, the duties and
     interests merge and the trust terminates as a matter of law with the trust’s assets
     irrevocably vesting in the beneficiary.

G.   The California Court of Appeals rejected this argument on the grounds that: (1)
     Sue’s death did not transfer the real property out of the trust; (2) on Sheila’s
     death, the real property continued to remain in trust and was later distributed by
     Lee acting as trustee of the trust to himself; (3) because the trust terms provided
     for a beneficiary after Sheila’s death, the doctrine of merger was inapplicable;
     and (4) the trust terms did not require the trustee to make a prompt distribution of
     trust assets to Sheila upon Sue’s death, and instead included express language
     governing the contingency of Sheila’s death prior to a distribution of trust assets
     to her.




                                     51
8.   In re Trusts created by Flood, 2010 N.J. Super. LEXIS 243 (December 29, 2010)

     A.     Margaret Flood died in May 2008 survived by four children. Two of the children
            were disabled and beneficiaries of supplemental security income and Medicaid
            benefits. One of the children received special residential services and the other
            benefited from the Division of Developmental Disabilities.

     B.     Prior to her death, Margaret considered special needs estate planning to protect
            her daughters from obligations to reimburse the benefits received through the
            various governmental programs. Margaret consulted an attorney in April 2008,
            but her plans were interrupted by the illness of one of her daughters and her own
            injury. Margaret died in May 2008 with an estate of $480,000 and without
            having executed any estate plan.

     C.     The estate’s administrator filed an action seeking the court’s authorization to
            establish and fund trusts for the disabled daughters that he claimed Margaret
            would have created. The Division of Developmental Disabilities opposed the
            suit. The trial court applied the doctrine of probable intent to permit the
            establishment and funding of special needs trusts for the two disabled daughters.

     D.     On appeal, the New Jersey Superior Court reversed on the grounds that: (1) the
            trial judge’s well-intended decision was based on a mistaken understanding of
            the law; (2) in the absence of testamentary disposition, Margaret’s estate passed
            by way of intestacy and her children’s interest vested immediately upon her
            death; (3) the doctrine of probable intent had no application in the absence of a
            will; (4) the doctrine permits the reformation of a will in light of the testator’s
            probable intent by searching out the probable meaning intended by the words and
            phrases of the will and examining extrinsic evidence to ascertain that intent; and
            (5) the doctrine of probable intent is a rule of construction or interpretation and
            therefore presupposes an existing testamentary disposition and where there is no
            will there can be no construction.

9.   Fidelity National Financial Inc. v. Friedman, 2010 U.S. Dist. LEXIS 61835, 3-4 (C.D.
     Cal. June 17, 2010)

     A.     In 2002, Fidelity National Financial Inc. was awarded a judgment of $13.5
            million against Colin and Hedy Friedman (the Friedmans) and Farid Meshkatai
            and Anita Kramer Meshkatai (the Meshkatais). Fidelity was able to collect only
            a nominal amount from the judgment debtors despite serving more than 10 levy
            and garnishment orders on judgment debtors’ bank accounts and businesses.

     B.     In 2006, Fidelity filed an action against the debtors alleging RICO violations,
            fraudulent conveyances, and conspiracy to defraud creditors, and later amended
            their complaint to seek to set aside spendthrift provisions in trusts, and adding the
            trustees as defendants.

     C.     Following trial, the jury returned a verdict in favor of the defendants on all RICO
            claims, the fraudulent transfer claims and fraudulent concealment claims, the
            conspiracy to commit fraudulent transfer claim, and the common law and
            statutory conspiracy to commit fraudulent concealment claims.




                                            52
      D.     The issue of whether to set aside and invalidate the spendthrift provisions of all
             of the defendants’ trusts based on alleged excessive control over disbursement of
             trust assets was tried to the court. After extensive findings of fact regarding the
             nine trusts for the benefit of the various defendants, applying Arizona, California,
             and Jersey Channel Islands law, the court found that for each of the trusts the
             spendthrift provisions were valid and enforceable and rejected Fidelity’s
             argument that the judgment debtor’s excessive control mandated that the
             spendthrift provisions be set aside.

      E.     The court examined Arizona and California law governing spendthrift trusts, and
             found that where none of the trusts were self-settled or had a sole beneficiary
             serving also as the sole trustee, Fidelity failed to demonstrate that the
             beneficiaries of the defendant trusts exercised excessive control over the trust’s
             assets. The court rejected the argument that the judgment debtors had created a
             legal fiction of trustee control, and found that the trust terms and the trustee’s
             testimony demonstrated that the trustees had control over the assets.

      F.     The court noted that neither California nor Arizona law: (1) prohibit a trustee
             from delegating certain investment and management functions to a beneficiary or
             spouse of a beneficiary; (2) prohibit the beneficiary of a spendthrift trust from
             serving as the trust's protector; or (3) prohibit a friend or relative of a beneficiary
             from being the trustee of a spendthrift trust.

      G.     The court held that the following factors must be taken into account to determine
             whether there is excessive control: (1) whether the trust was self-settled; (2)
             whether the beneficiary acted as trustee; (3) whether the beneficiary had the
             ability to terminate or amend the trust; and (4) whether the beneficiary had
             “unfettered access” to the trust funds. Based on an examination of these facts,
             the court held that Fidelity failed to meet its burden of proving “excessive
             control.””

      H.     Similarly, the court found that Fidelity had failed to demonstrate “excessive
             control” over the trust governed by the Jersey Channel Islands law. Accordingly,
             the court affirmed the enforceability of the spendthrift provisions in each of the
             trusts.

10.   Citizens National Bank of Paris v. Kids Hope United, Inc., 235 Ill. 2d 565 (December
      18, 2009)

      A.     Citizens National Bank of Paris (the bank) was the trustee of two charitable trusts
             benefiting Edgar County Children’s Home (ECCH). ECCH merged with
             Hudelson Baptist Children’s Home (Hudelson) in 2003. The merged charities
             would later become Kids Hope United (Kids Hope). The bank petitioned the
             circuit court of Edgar County, Ill., to determine whether the charitable gifts to
             ECCH lapsed upon the merger of ECCH and Kids Hope.

      B.     La Fern Blackman died in 1967. Blackman’s will directed that after the death of
             her sister, Ettoile Davis, her farmland was to be held in trust, with 75% of the
             trust income to be paid to ECCH and the remaining 25% paid to a local cemetery.
             Blackman’s will provided further that in the event either or both of the named




                                              53
     charities “should cease to operate or exist,” then the trustee was to distribute the
     income to another charity selected by the trustee.

C.   Davis died in 1971. Like her sister’s will, Davis’ will directed 75% of the income
     from her trust to ECCH and the remaining 25% to the same local cemetery.
     However, the alternate distribution clause in Davis’ will provided that in the
     event either named charity “shall cease to function in its present capacity,” then
     the portion of the trust that would have gone to ECCH or the cemetery would
     instead be divided among three other local charities designated in Davis’ will.

D.   ECCH was incorporated in Illinois in 1898, and it maintained an orphanage for
     Edgar County children on Eads Avenue in Paris, Ill. In 1980, ECCH expanded its
     mission statewide and offered its health, welfare and education services to
     children throughout Illinois. ECCH maintained an endowment fund to hold its
     property, which included the original institution on Eads Avenue.

E.   In 2003, ECCH merged with Hudelson. In the organizations’ merger agreement,
     Hudelson guaranteed that it would continue ECCH’s mission of working with
     Edgar County children as long as it had the resources to do so. The property held
     by ECCH’s endowment fund was transferred to Hudelson, which subsequently
     changed its named to Kids Hope. Kids Hope closed the Eads Avenue facility in
     2006.

F.   In the bank’s petition for instructions, it noted that following ECCH’s merger
     with Hudelson, that ECCH ceased to exist. The bank sought confirmation that
     ECCH ceased to exist for purposes of the Blackman trust and direction on how
     the income payable to ECCH should be distributed under the cy pres doctrine.
     Likewise, the bank sought confirmation that ECCH had ceased to exist under the
     terms of the Davis trust so that it could distribute the net income to the remainder
     charitable beneficiaries Davis designated in her will.

G.   The bank and Kids Hope filed cross motions for summary judgment. The circuit
     court granted the bank’s motion, finding that ECCH ceased to exist following the
     merger with Hudelson. The court directed the bank to distribute the charitable
     assets according to each trust’s alternate distribution provisions. The appellate
     court reversed the circuit court’s judgment noting that a charity does not cease to
     exist for the purposes of receiving charitable bequests unless the successor
     charity cannot carry out the purposes of the original bequest. The Illinois
     Supreme Court agreed to hear the bank’s appeal.

H.   When interpreting trusts in Illinois, the court’s goal is to determine the settlor’s
     intent. The court considers the plain and ordinary meaning of the language used
     in the trust instrument. Charitable gifts are favored by the courts and are
     permitted presumptions consistent with the trust’s language in order to uphold a
     charitable bequest.

I.   The court acknowledged that ECCH ceased to exist as a separate entity when it
     merged with Kids Hope, but the court stated that the important issue was whether
     Kids Hope was suited to carry on the charitable purposes intended by the donors.
     The court noted that nothing in the restrictive condition in Blackman’s will
     showed that she intended that ECCH needed to maintain a separate corporate


                                      54
     existence in order to prevent the charitable bequest from lapsing. The court noted
     that the ECCH-Kids Hope merger agreement provided that Kids Hope would
     continue ECCH’s mission to serve the children in Edgar Country so long as it
     had the finances to do so. The court found that following the merger, Kids Hope
     was still able to carry out the purposes of Blackman’s bequest.

J.   Accordingly, since Kids Hope was able to carry out the purposes of Blackman’s
     bequest, the court found that ECCH did not “cease to operate or exist” when it
     merged with Kids Hope. Furthermore, the court rejected the bank’s argument that
     the closing of the Eads Avenue facility was evidence that ECCH ceased to
     operate or exist. The court noted that Blackman’s will made no mention of the
     Eads Avenue facility remaining open.

K.   With regard to the requirement in Davis’ will concerning whether ECCH had
     ceased to function in its “present capacity,” the court found it impossible to
     determine whether Kids Hope’s ongoing activities were equivalent to ECCH’s
     activities at the time Davis’ will was executed in 1968. The court indicated that a
     factual investigation and determination would need to be made in order to
     determine whether Kids Hope’s current activities were materially the same as
     ECCH’s activities in 1968. The court affirmed the appellate court’s reversal of
     the circuit court’s grant of summary judgment in favor of the bank with respect to
     the Davis trust, and ordered additional proceedings related thereto.

L.   In a dissenting opinion, Justice Karmeier maintained that the court’s majority
     employed a strained construction of the language of the Blackman and Davis
     wills in order to uphold the charitable bequests to Kids Hope. Justice Karmeier
     faulted the majority for focusing on whether Kids Hope had the ability and was
     suited to serve the children of Edgar County, while not considering whether it
     actually does so.

M.   The justice was concerned that Blackman and Davis clearly intended to benefit
     charities in the communities where they lived, and not necessarily the
     communities throughout Illinois served by Kids Hope. Furthermore, Justice
     Karmeier believed that the transaction costs of preparing charitable bequests
     would increase as attorneys spent additional time drafting definitions and
     providing for multiple contingencies in order to ensure that the donors’ charitable
     intent is implemented

N.   Justice Karmeier offers good counsel on drafting as every attorney should take
     extra caution when drafting charitable bequests. Charitable organizations may
     last for many years, merge with other charities, and the charitable purposes they
     serve may evolve over time. Bequests to charities should reflect the donor’s
     intentions as clearly as possible, and drafting attorneys should include clear and
     definite provisions for alternate distribution in the event a charity “ceases to
     operate or exist.” The court’s opinion in Kids Hope shows that a court may
     interpret a charitable bequest in a way unintended by the donor which may keep
     the bequest from reaching the charity the donor intended to benefit.




                                     55
     PART K: AMENDMENT, MODIFICATION, AND TERMINATION OF TRUSTS

1.     In the Matter of Trust D Created under the Last will and Testament of Harry
       Darby, 2010 Kan. LEXIS 427 (June 25, 2010)

       A.     Under his will and codicil, Harry Darby created a trust for the benefit of his
              daughter, Marjorie, and her three daughters. Under the trust terms, Marjorie was
              to annually receive $24,000 from the trust net income, along with discretionary
              principal. Each of Marjorie’s three daughters was to annually receive $8,000
              from the trust net income.

       B.     Marjorie petitioned the court to modify the trust by increasing her annual
              distribution to $40,000, adjusted for inflation, and giving herself a power of
              appointment over the trust assets. Marjorie alleged in support of her petition that:
              (1) the trust was her sole source of income and $24,000 per year was insufficient
              to cover her basic needs; and (2) modification was proper due to circumstances
              not anticipated by the settlor, necessary to achieve Harry’s tax objectives by
              avoiding the imposition of generation-skipping transfer taxes, and not
              inconsistent with a material purpose of the trust.

              The district court allowed the modification, and Marjorie sought review by the
              highest court of Kansas to render the modification binding on the IRS.

       C.     On appeal, the Supreme Court of Kansas reversed the district court and rejected
              each of Marjorie’s reasons for modification under the Kansas Uniform Trust
              Code (K.S.A. 58a-101 et seq.) on the following grounds: (1) there was
              insufficient evidence that Harry intended to create a support trust for Marjorie;
              (2) because Harry did not intend to create a support trust and rather specified
              fixed sums for his daughter and each of his granddaughters, increasing the
              amount payable to Marjorie would violate a material trust purpose by decreasing
              the funds available for Harry’s granddaughters; (3) modification to enable
              distributions in excess of the specific monthly amounts set forth in the trust
              would be inconsistent with the material purpose manifested by the spendthrift
              provision; (4) no evidence in the record indicated that Harry failed to anticipate
              the potential devaluation of future distributions by inflation; (5) increasing the
              distributions to Marjorie would inherently frustrate the growth of the trust
              principal and reduce later distributions; and (6) Harry just as likely intended
              exposure to the GST tax for his grandchildren and avoidance of federal estate tax
              on Marjorie’s death, and therefore the court refused to modify the trust
              provisions to achieve tax benefits when it would alter the dispositive provisions
              of the trust.

2.     Montegani v. Cassinerio, 2011 Cal. App. Unpub. LEXIS 1594 (March 2, 2011)

       A.     In 1993, Lena Cassinerio established the Lena M. Cassinerio Family Trust
              naming her children, Bernadette, Peter, Karon, and Agnes, as beneficiaries of the
              trust. That year, Bernadette’s son, Gerald, a certified financial planner and
              investment management analyst, began advising Lena on money management
              and investments. In 1999, Lena told Gerald that she wanted her estate plan
              rewritten so that her children would not have to pay estate taxes upon her death.
              Gerald referred Lena to an attorney, Mr. Larsen, who prepared a number of estate


                                              56
     planning documents for Lena including an amended and restated trust (the 1999
     Trust).

B.   In January 2001, Lena was diagnosed with a brain tumor and underwent several
     surgeries. During this time, she told Gerald that she wanted to name additional
     trustees, and Gerald relayed the message to Mr. Larsen. Instead of summoning
     Mr. Larsen while Lena was in and out of the hospital, Lena’s daughter Agnes
     summoned an insurance agent and notary, Mr. Dryssen, to notarize Lena’s
     signature on documents. During this visit Mr. Dryssen agreed to look over
     Lena’s estate planning documents.

C.   Mr. Dryssen had no legal or tax planning training, nevertheless, on February 28,
     2001, Lena executed several documents prepared by Mr. Dryssen including
     revocation of the 1999 Trust and a new revocable trust (the 2001 Trust) naming
     her four children as beneficiaries and reserving the power to amend the trust by a
     signed writing. Sometime after February 28, 2001, Mr. Dryssen removed pages
     three and five from the 2001 Trust and substituted new pages that deleted
     Bernadette as a trust beneficiary. The pages were initialed by Lena but not dated.

D.   Lena died in November 2001 and Bernadette filed a petition for construction of
     the trust and a determination of the beneficiaries. The probate court ruled that
     the purported amendments of the 2001 Trust were invalid and that the version
     including Bernadette as a beneficiary was valid. The court held that the trust
     required amendments to be made by a “signed writing” and that Lena’s initials at
     the bottom of the substitution pages did not meet California statutory
     requirements for a signature. The probate court also found that Lena intended
     that all of her children inherit equally based on a videotape of a conversation
     between Lena and Mr. Dryssen on March 26, 2001. Lena’s other children
     appealed

E.   On appeal, the California Court of Appeal reversed the probate court’s finding as
     to Lena’s signature on the grounds that: (1) the California statute relied on by the
     probate court applied only to “signature by mark” when a person cannot write;
     (2) Lena was capable of signing her name at the time of the amendments,
     rendering the signature by mark requirements inapplicable; (3) the trust terms
     required amendment by a writing but did not require a particular form of
     signature for the signature and amendment to be valid; and (4) Lena’s use of
     initials constituted a valid signature for the amendment.

F.   Nonetheless, the court affirmed the probate court’s finding that the amendment
     was invalid on the alternative grounds that: (1) the 2001 Trust’s requirement that
     the amendment be by a signed writing implied that the amendment must be
     distinguishable from the original trust; (2) the method of “swapping out” pages of
     the document without a date served to cast doubt on the integrity of the document
     and led to ambiguity regarding when and how many times the pages were
     swapped out; and (3) Lena intended to leave her estate equally to all four of her
     children as evidenced by the video.




                                     57
3.   Bruner v. Bruner, 2011 Mass. LEXIS 17 (January 27, 2011)

     A.     Leslie Gould created a trust in 1992 that she completely amended and restated in
            2006. The trust provided that after her death the trust assets would be divided by
            a formula between a marital trust and a family trust, with the family trust funded
            with the amount that could pass free of both federal and Massachusetts estate
            taxes and provisions for funding the marital trust that were intended to
            accomplish this result. Leslie died in July 2007 and her estate tax return was
            filed in October 2008.

     B.     After filing the estate tax return, the value of the trust assets declined
            significantly and unexpectedly. As a result, if the marital trust were funded
            according to the formula no assets would remain to fund the family trust. The
            trustee brought an action seeking to reform the trust to remedy the funding
            problem by funding the family trust first and using the remaining assets to fund
            the marital trust.

     C.     The court appointed a guardian ad litem to represent the interests of the minor,
            unborn, and unascertained trust beneficiaries, and permitted the reformation
            based on: (1) its finding by clear and decisive proof that the proposed
            reformation effectuated Leslie’s intent; (2) the consent of the spouse, all other
            adult beneficiaries, and the guardian ad litem; and (3) the fact that Leslie’s
            dominant intent was to minimize the combined estate tax paid by both spouses.

4.   Jarvis et al. v. National City and PNC Bank National Association, 2011 Ky. App.
     LEXIS 20 (February 4, 2011)

     A.     On December 20, 2008, National City Bank and PNC Bank filed a complaint for
            declaratory judgment against the beneficiaries of three testamentary trusts for
            which the banks were serving as trustees, alleging that the trustees had been
            deprived of reasonable compensation for their services. In support of their claim,
            the trustees cited the repeal of Kansas statute KRS 386.180 that had previously
            provided fixed percentages for the compensation for testamentary trustees.

     B.     The beneficiaries moved for summary judgment alleging that: (1) under quasi-
            contract principles the trustees were not relieved of obligations they knowingly
            accepted simply due to the later repeal of the statute (an equitable estoppel
            argument); (2) other Kentucky statutes demonstrated a legislative intent to treat
            testamentary trusts differently from inter vivos trusts; and (3) all necessary
            parties had not been joined to the action. The trustees also moved for summary
            judgment and the trial court granted summary judgment in favor of the
            trusteesees.

     C.     On appeal, the Kentucky Court of Appeals affirmed the trial court on the grounds
            that: (1) the plain language of the repeal statute and the lack of provisions in
            place of KRS 386.180 indicated that the legislature intended to remove any form
            of statutorily imposed guidelines regulating the fee habits of trustees of
            testamentary trusts; (2) the trustees of testamentary trusts are entitled to apply a
            reasonable fee commensurate with the performance of their duties; and (3) the
            repeal was likely an attempt by the legislature to diminish the divide in treatment
            between inter vivos trusts and testamentary trusts.


                                            58
     D.     The court rejected the beneficiaries’ arguments, holding that: (1) a justiciable
            issue existed because the parties had to take some action with regard to payment;
            (2) quasi-contract theories were inapplicable where no written contract was the
            subject of dispute; (3) no law exists requiring that private parties abide forever by
            the law that existed at the inception of their relationship; and (4) all necessary
            parties were present in the action under the doctrine of virtual representation.

5.   Shepard v. Barrell, 2010 Mass. App. Unpub. LEXIS 1146 (October 22, 2010)

     A.     Between 1923 and 1931, William and Annie Barrell created six trusts for the
            benefit of their descendants and funded the trusts with stock in their
            manufacturing company, the Adams Innersole Company. In the mid 1950s, the
            company sold its manufacturing operations and the sale proceeds were added to
            the trusts. Each of the trusts provided that half of the principal be held for the
            benefit of the Barrell’s daughter and her descendants and the other half for
            benefit of the Barrell’s son and his descendants.

     B.     The trusts were to terminate and the principal distributed to then-living issue 20
            years after the death of the last of the named beneficiaries who were living when
            the trusts were created. One of the Barrell’s great granddaughters died in 1989
            (although her death did not cause the termination of the trusts), and her share of
            the income of the trusts passed to her children, including her son, John.

     C.     John and his daughters petitioned for early termination of the trusts and outright
            distribution of their share of the assets alleging that: (1) the trusts had no
            remaining purpose; (2) John’s interest in the principal of the trusts had vested; (3)
            John’s interest could be severed from the other interests; (4) all of the
            beneficiaries consented to the termination of his portion of the trusts; and (5)
            there was a risk that John’s share of the principal of the trusts would be subject to
            generation- skipping transfer taxes and that risk could be avoided if his share
            were distributed in 2010 (during temporary repeal of the generation-skipping
            transfer tax under the 2010 Tax Act).

            The trustee filed a motion for summary judgment dismissing the complaint. The
            trial court granted the trustee’s motion, and John and his daughters appealed.

     D.     On appeal, the Massachusetts Court of Appeals affirmed the trial court’s decision
            denying termination on the grounds that: (1) the settlors fixed the time for
            termination and required the trusts to remain intact until that time; (2) the
            spendthrift provisions in five of the trusts indicated the intent to provide
            continuous financial support and stability for their descendants until termination;
            and (3) because of this clear intent for continued financial support, a valid
            purpose for each of the trusts remained rendering termination improper.

     E.     The court also rejected the argument that the interests had vested, and noted that
            the beneficiaries’ interests in the principal had not yet vested because the trust
            was to terminate 20 years from the death of the named beneficiaries, several of
            whom were still living. Consequently, the trust property would not vest in the
            beneficiaries for at least another 20 years. Because John’s interest in the trusts
            was not severable and not vested, his consent alone was not enough to terminate
            his interest in the trusts. Further, not all beneficiaries had consented to


                                            59
            termination (including unborn and unascertained beneficiaries) and several
            named beneficiaries expressly denied their consent.

     F.     Lastly, the court noted that because the trusts were created prior to September 25,
            1985, the trusts were grandfathered as exempt from the GST tax, and therefore
            there was no reason to terminate the trusts for the purpose of avoiding the GST
            tax.

6.   The Fundamentalist Church of Jesus Christ of Latter-Day Saints v. The Honorable
     Denise P. Lindberg, Third District Court Judge, 2010 Utah LEXIS 115 (August 27,
     2010) -

     A.     In 1942, the predecessor to the Church of Jesus Christ of Latter-Day Saints
            formed the United Effort Plan Trust (the “UEP Trust”) for charitable and
            philanthropic purposes, but conditioned membership in the UEP Trust on
            consecration of real and mixed property to the trust. Consecration was an act of
            faith by which members deeded their property to the UEP Trust to be managed
            by church leaders who were also trustees.

     B.     The UEP Trust was amended in 1998 to qualify as a charitable trust by
            benefitting “those that consecrate their lives to the … establishment of the
            Kingdom of God on Earth under the direction of the presidents of the church,”
            rather than specifically to the trust’s founders. After sexual abuse and fraud
            scandals involving the church’s president and trustee of the UEP Trust, the court
            appointed a special fiduciary for the UEP Trust. The special fiduciary filed a
            memorandum with the court recommending that the UEP Trust be reformed.

     C.     The district court concluded that the UEP Trust should be reformed so that the
            special fiduciary could administer the UEP Trust to meet the needs of the
            beneficiaries according to neutral nonreligious principles. The district court also
            found that the trustees had breached their fiduciary duties of loyalty and prudent
            trust administration and that several of the UEP Trust provisions were
            fundamentally flawed and unworkable justifying application of the doctrine of cy
            pres to reform the trust.

     D.     The district court reformed the UEP Trust to: (1) allow the trust property to be
            used only in furtherance of legitimate trust purposes as identified by the court;
            (2) allow the FLDS leaders to offer their nonbinding input, but granting the board
            of trustees the ultimate authority to determine who would be allowed to live on
            the trust property and to asses the trust property residents’ wants and needs; (3)
            limit the board’s powers to order relocation or property sharing among trust
            property residents to situations where the relation arrangement was necessary for
            legitimate UEP Trust administrative reasons; (4) delete the trust’s requirement
            that the occupants of the trust land live in accordance with church doctrine; and
            (5) remove from the FLDS Church president several powers under the UED
            Trust.

     E.     The district court retained jurisdiction over the UEP Trust and instituted a
            process that allowed the UEP Trust participants to petition to have the houses
            they lived in distributed to them.




                                            60
     F.     In 2009, the FLDS Association petitioned the Utah Supreme Court for an
            extraordinary writ, alleging that the district court wanted to transform FLDS
            culture, liberate people it felt belonged to a dangerous cult, and suppress the
            FLDS Church’s role as the spiritual and economic center of the community.

     G.     The FLDS Association asked the Supreme Court to: (1) find that the district
            court’s actions violated the FLDS Church members’ First Amendment rights and
            their rights under Utah’s constitution; (2) declare that certain sections of Utah’s
            Uniform Trust Code were unconstitutional as applied to the FLDS Association;
            (3) enjoin the district court from taking further action in the underlying UEP
            Trust litigation; (4) declare the district court’s reformation of the UEP Trust
            unconstitutional; (5) terminate the reformed trust; (6) overturn the district court’s
            authorization to sell certain trust property deemed sacred by the FLDS
            Association; (7) terminate the appointment of the special fiduciary; and (8)
            provide other appropriate relief.

     H.     The Utah Attorney General, the Arizona Attorney General, and the UEP Trust,
            through the special fiduciary, opposed the petition alleging that the FLDS
            Association lacked standing, that other plain remedies existed, and that laches
            barred the FLDS Association’s claims.

     I.     On review, the Utah Supreme Court found that: (1) because the FLDS
            Association had waited nearly three years from the date of the trust modification
            and other parties relied on the modification, the FLDS Association claims were
            barred by the equitable doctrine of laches; and (2) the one claim not barred by
            laches (a claim that the court would disfavor current and practicing FLDS
            members in the trust administration) was not ripe for adjudication.

7.   Perosi v. LiGreci, 2011 N.Y. Misc. LEXIS 341 (February 14, 2011)

     A.     Nicolas LiGreci (Mr. LiGreci) created an irrevocable trust in 1991. Mr.
            LiGreci’s brother, John, was named as the trustee of the trust and his accountant
            was named as successor trustee. Upon Mr. LiGreci’s death, the trust proceeds
            were to be distributed in equal shares to his three children, John, James, and
            Linda. The sole trust asset was a $1 million life insurance policy on Nicolas’s
            life.

     B.     In 2010, Mr. LiGreci executed a New York statutory short form power of
            attorney designating his daughter, Linda, as agent, and his grandson, Nicolas, as
            successor agent, along with the major gifts rider to the power of attorney.
            Shortly thereafter, Linda as agent under the power of attorney executed a trust
            amendment removing her uncle John and the accountant as trustee and successor
            trustee, and in their place appointing her son, Nicholas Perosi, and Ericalee Burns
            as trustee and successor trustee, respectively. Each of the trust beneficiaries
            executed the required statutory consent to the trust amendment. Mr. LiGreci did
            not personally sign the amendment and died 15 days after its execution.

     C.     Linda and Nicolas petitioned the court for an order directing uncle John and the
            accountant to: (1) turn over all records in their possession relating to the trust or
            its assets; (2) submit to examinations before trial concerning the nature and value
            of the trust corpus when received, any income received, disbursements and


                                             61
            commissions paid, the locations of all records relating to the trust; (3) account for
            the trust; and (4) account to the court for all the trust property and effects which
            were received by John as trustee from the date of creation of the trust to the date
            of such accounting.

            Uncle John and the accountant moved the court to deny the validity of the
            amendment removing them as trustees.

     D.     The court found that: (1) the trust was irrevocable and could only be amended by
            the statutory mechanism allowing the creator of an irrevocable trust to revoke or
            amend a trust by obtaining the consent of all persons beneficially interested in the
            trust property; (2) the statutory right did not extend to Linda as agent under the
            power of attorney; (3) the statutory right to revoke is a personal right which may
            only be exercised by that individual absent language in the trust indicating
            otherwise; and (4) even construing the terms of the power of attorney at its
            broadest, the authority granted the agent with regards to trusts and estate
            instruments extended only to actions taken prospectively.

            Accordingly the court denied Linda’s and Nicolas’s petition, and vacated the
            trust amendment.

8.   In re Trust of Hrnicek, 2010 Neb. LEXIS 142 (December 3, 2010)

     A.     Leo Hrnicek and his wife had six children. Leo loaned one of his daughters,
            Brietzke, and her husband $85,000 with an interest rate of 7%. The loan was to
            be repaid over 15 years beginning on April 1, 1995, and ending in March 1,
            2010. Leo died on November 2, 1997 and gave all of his property, including the
            note, to a trust. After contentious family litigation, the court approved a
            settlement that provided that: (1) Brietzke and her co-trustee would resign as
            trustees of the trust and be replaced by First National Bank North Platte
            (FNBNP); (2) Brietzke acknowledged her debt to the trust; and (3) Brietzke
            agreed to repay the debt in full pursuant to the terms of the note.

     B.     Despite the settlement, Brietzke made no payments under the note, and FNBNP
            as trustee filed a motion asking the court to approve the retention of a trust
            distribution otherwise owed to Brietzke on the grounds that she had not repaid
            amounts due under the court’s April 23, 2003 order approving the settlement.
            FNBNP also asked the court to find Brietzke in contempt of court. Brietzke
            objected.

     C.     The court found Brietzke in contempt of court and allowed FNBNP to retain
            sufficient funds from any future distributions to fully satisfy the outstanding
            balance owed the trust. Brietzke appealed.

     D.     On appeal, the Nebraska Supreme Court affirmed on the grounds that: (1) even
            though the Nebraska Uniform Trust Code did not allow for the retention of funds
            to satisfy the unpaid amounts owed on the loan, the Nebraska probate code did
            allow for retention of funds and codified the common law remedy; (2) the
            Nebraska Uniform Trust Code provides that the common law of trusts and
            principles of equity supplement the Nebraska Uniform Trust Code except to the
            extent modified by the trust code or other Nebraska statute; (3) the retention


                                            62
            remedy of the Probate Code is equally applicable to trusts and retention of the
            trust funds was appropriate; and (4) Brietzke’s acknowledgement of the debt in
            the 2003 settlement precluded her asserting a statute of limitations defense,
            because the court’s order and the court’s exercise of its contempt powers were
            not subject to any statute of limitations.

9.   Zagorski v. Kaleta (In re Estate of Michalak), 2010 Ill. App. LEXIS 869 (August 20,
     2010)

     A.     On November 6, 2006, Bozenna Michalak, an 83-year-old Polish immigrant,
            created a revocable trust and funded it with her home. Her attorney reviewed and
            translated the entire document into Polish, and according to his testimony,
            Bozenna did not have diminished capacity at the time she executed the trust and
            understood its terms. Under the trust, Robert Kaleta would become the trustee on
            Bozenna’s incapacity. The trust provided for the distribution of the trust assets at
            Bozenna’s death to her neighbors, the Kaletas.

     B.     In January of 2007, Bozenna’s niece Jacqueline Zagorski, was alerted by the
            Chicago police of a potential exploitation of Bozenna’s financial affairs.
            Jacqueline visited Bozenna and had her name added to several of Bozenna’s bank
            accounts. During her visit, Jacqueline observed several conversations between
            Bozenna and the Kaletas but because she did not speak Polish could not
            understand the conversations. In June of 2007, Jacqueline visited Bozenna again
            because further attempts had been made on her accounts. Jacqueline applied for
            guardianship of Bozenna. Bozenna was evaluated by a doctor for the
            guardianship proceedings and was diagnosed with Alzheimer’s disease; however,
            the doctor did not indicate whether Bozenna had capacity in 2006 when she had
            executed the trust. Marcella Horan was appointed as Bozenna’s guardian ad
            litem. Bozenna was adjudicated a disabled adult and Jacqueline was appointed
            her plenary guardian.

     C.     Thereafter, Jacqueline discovered that Bozenna’s home was titled in the name of
            the trust and, according to Jacqueline, Bozenna indicated that she did not know
            any details about the trust. On Jacqueline’s motion, Marcella was reappointed as
            Bozenna’s guardian ad litem and ordered to conduct further investigation into
            Bozenna’s assets. Marcella presented a report containing interviews with nine
            people and ultimately advocating invalidation of Bozenna’s trust and alleging
            undue influence by the Kaletas. The court entered an order allowing Jacqueline
            to petition to amend the trust.

     D.     In 2008, Jacqueline petitioned to amend the trust and gave notice to the successor
            trustees and the Kaletas, alleging that Bozenna was under diminished capacity
            when she executed the trust. The Kaletas moved to dismiss the petition.

     E.     At trial, the Kaletas testified that: (1) they had been Bozenna’s neighbors and
            helped her with chores, yard work, getting around, and had invited her to spend
            holidays with them; and (2) they had no knowledge that Bozenna had intended to
            create a trust naming them as the remainder beneficiaries and that it was not until
            they were presented with the trust document that they knew of the trust.




                                            63
      F.     Jacqueline testified that: (1) the house was a mess; (2) Bozenna called Mr. Kaleta
             an “old crook”; and (3) Bozenna had specifically stated that she wanted her
             house to go to Jacqueline. Marcella testified consistent with Jacqueline’s
             testimony, and indicated that at various times Bozenna seemed to have
             diminished capacity and that certain factors pointed to undue influence over
             Bozenna by the Kaletas.

      G.     The trial court granted Jacqueline’s petition to amend the trust to substitute: (1)
             Jacqueline as successor trustee; and (2) Bozenna’s heirs at law as beneficiaries.
             The trial court also granted Jacqueline permission to seek a reverse mortgage on
             the trust property. The Kaletas appealed.

      H.     On appeal, the Appellate Court of Illinois affirmed the trial court on the grounds
             that: (1) the guardian had the authority under state law to amend the trust; (2)
             Marcella had acted properly as guardian ad litem; (3) the procedural objections to
             the proceedings were without merit; (4) Marcella’s report as guardian ad litem
             was properly admissible over objections about hearsay in the contents of the
             report, and the statements in the report were not offered to prove the truth of the
             matter asserted, but rather to show Bozenna’s mental capacity to gift her
             residence to the Kaletas; (5) Jacqueline had the burden of establishing intent by a
             preponderance of the evidence only, a burden that she had carried; (6) there was
             sufficient competent evidence to support the trial court’s decision; and (7) the
             trial court had authority to approve the reverse mortgage while the appeal was
             pending.

10.   Reid v. In Re: Estate of Sonder, 2011 Fla. App. LEXIS 4035 (March 23, 2011)

      A.     On May 17, 2000, Edgar Sonder created a trust with himself as trustee, and later
             amended the trust to name Cecelia Reid, his nurse, as successor trustee. The trust
             provided: (1) pecuniary gifts totaling $31,000 to 10 charities; (2) a $125,000
             endowment gift to the Hebrew Union College Jewish Institute of Religion after
             the payment of the pecuniary gifts; (3) after the pecuniary gifts and the
             endowment gift, a number of specific gifts to enumerated individuals including a
             $25,000 gift and a gift of an apartment to Cecelia.

      B.     Edgar died in 2005. Finding the trust assets insufficient to pay all of the gifts
             provided for in the trust, Cecelia (who was both personal representative and
             trustee) moved the court to abate the pecuniary gifts proportionately, and claimed
             that the apartment was a devise not subject to abatement. The motion to abate
             was denied and affirmed by the Florida Court of Appeals.

      C.     Cecilia then petitioned the court to reform the trust under the Florida Uniform
             Trust Code for a unilateral drafting mistake, claiming that the trust instrument did
             not evidence the settlor’s intent which was to give his apartment to Cecilia not
             subject to abatement. The probate court denied the petition finding that Cecelia
             had not meet her burden of proving by clear and convincing evidence that the
             trust as written did not reflect the settlor’s intent. Cecilia appealed the probate
             court’s denial of reformation and granting of appellate attorneys’ fees in the prior
             appeal to Hebrew Union College.




                                             64
         D.   On appeal, the Florida Court of Appeals affirmed the probate court on the
              grounds: (1) even though the scrivener of the trust testified that Edgar had never
              instructed him to create priority between the gifts and that the inclusion of the
              terms “after giving effect to” in paragraph 2 and 3 were his doing, because Edgar
              had read the trust and approved the language, he had adopted its terms rendering
              amendment improper; (2) Edgar ratified the language in two subsequent
              amendments making the gift of the apartment subordinate to the other gifts; (3)
              nothing in the record explained why Edgar, an articulate and precise
              businessman, would have approved the plain and simple trust terms if they did
              not reflect his intent; and (4) Cecilia offered no testimony establishing that Edgar
              would have preferred the gift to Cecilia over the endowment gift in the event
              both could not be satisfied.

         E.   The court dismissed the portion of the appeal regarding the award of appellate
              attorneys’ fees for lack of jurisdiction. One judge issued a dissenting opinion.




\34285011.2




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