Pursuing and Defending Breach of Fiduciary Duty Claims Against Trustees of Closely Held Business Assets

Recording of a 90-minute CLE webinar with Q&A


Conducted on Tuesday, June 27, 2017
Recorded event now available


This CLE webinar will provide estate planning counsel, fiduciary advisers, and litigators with a thorough and practical guide to pursuing and defending breach of fiduciary duty claims against trustees whose trusts have significant or controlling interests in closely held businesses. These circumstances often arise after the death of a principal owner or founder. The panel will discuss the risks involved when an employee or officer of a closely held business serves as a trustee, detail possible issues concerning conflicts of interest, and describe various states’ rules and approaches to claims against trustees/managers after the death of a principal owner of a closely held corporation.

Description

Breach of fiduciary duty claims often arise in the context of closely held businesses that are held in trust. Some or all of the business is often placed in trust as a result of the estate planning decisions of the owner or founder. Disputes often arise when the trustee also serves as an officer or manager of the business owned or controlled by the trust. The legal standards against which the actions and decisions of a trustee and an officer and director are measured are different, and potentially conflicting. Striking a balance between these differing legal standards, the needs of the ongoing business, the directives of the trust, and the wishes of the beneficiaries can be challenging, frequently leading to breach of duty claims against the trustee.

Conflicts can arise regarding whether to make distributions from the trust, how to manage the business, or even in determining whether to sell part or all of the business. These conflicts lead to the question of whether the trustee is complying with his fiduciary duty to act in the interests of the beneficiaries.

While the “business judgment” rule often protects a trustee acting as an officer/manager when making these decisions, the fiduciary duties owed by trustee acting as such sets a higher standard in evaluating decisions. As a result, courts in some jurisdictions are applying an enhanced scrutiny standard of review to determine whether a trustee is entitled to rely upon the business judgment rule, with some courts holding that a stricter “fairness standard” of scrutiny is appropriate for trustee/managers. Counsel involved in breach of fiduciary duty claims involving trusts holding closely-held business assets must fully evaluate the level of scrutiny courts will impose on trustees/managers in these types of claims.

Listen as our experienced panel provides a practical guide to the issues involved in pursuing or defending breach of fiduciary duty claims against trustees who are also officers or managers of closely held businesses held by trusts.

Outline

  1. Breach of fiduciary duty claims against trustees who are also officers or managers of closely held businesses held in whole or in part by a trust
    1. Management decisions, including distribution, capital expenditures, diversification of business lines, and sale or divestiture of some or all of the business
    2. Improper delegation claims
    3. Conflict of interest claims
  2. Business judgment rule application, including legislative initiatives
  3. Enhanced scrutiny, fairness standard, and gross negligence in evaluating business decision-making
  4. Documentation to evaluate fiduciary’s discretion

Benefits

The panel will discuss these and other important topics:

  • Identifying increased possibility of conflict of interest claims due to having to strike a balance between the duties owed as trustee and those owed as officer/manager.
  • How courts apply the standard of fiduciary duty and the business judgment rule in evaluating whether a trustee/manager acted properly.
  • Business judgment rule presumptions relating to the good faith and ordinary care of the trustee acting as officer/manager, and how those presumptions might be rebutted.
  • What types of documents and fact patterns could impact whether the trustee/manager can demonstrate that they met their fiduciary duties and obligations.

Faculty

Kenneth J. Fair, Partner
Wright & Close, Houston

Mr. Fair's practice focuses on in the area of general commercial litigation, with an emphasis on complex probate, trust, and fiduciary litigation. He represents executors, trustees, and beneficiaries in will contests, disputes over will and trust interpretation, removal actions, and fiduciary-liability actions. He has written and presented on trust, probate and guardianship issues.

Robert C. Port, Partner
Gaslowitz Frankel, Atlanta

Mr. Port has extensive experience in general commercial litigation and fiduciary disputes involving wills, trusts, estates, guardianships and conservatorships. With an emphasis on representing investors harmed by the misconduct of their stockbroker, investment advisor, insurance agent, or other trusted advisor, he handles court and arbitration cases across a broad range of fiduciary and financial disputes. 

Tina N. Babel, Principal
Carmody MacDonald, St. Louis

Ms. Babel practices in the area of business litigation with a concentration in fiduciary litigation. She represents businesses and individuals in both defense and plaintiff's work, managing a wide array of disputes, including those arising out of contract, tort, breach of fiduciary duty, and class action disputes. She is a featured speaker at numerous fiduciary litigation CLE programs.


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Anderson Hunter Law Firm

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Estate Planning Advisory Board

Gary D. Altman

Principal and Founder

Altman & Assoc.

Brian M. Annino

Partner

Annino Law Firm

Richard S. Franklin

Member

Franklin Karibjanian & Law

J. Leigh Griffith

Partner and Practice Group Leader - Tax

Waller Lansden Dortch & Davis

L. Paul Hood, Jr.

Consultant, Speaker and Author

The University of Toledo Foundation

Denise L. Iocco

Partner

Windels Marx Lane & Mittendorf

Donna J. Jackson

Atty

Donna J. Jackson, Attorney at Law

Salvatore J. LaMendola

Member

Giarmarco Mullins & Horton

Edwin P. Morrow, III, Esq.

Senior Wealth Specialist

Key Private Bank Wealth Advisory Services

Scott K. Tippett

Atty

The Tippett Law Firm

Susan M. von Herrmann

Partner

Perkins Coie

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