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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Estate Planning

Date & Time
  • event Date

    Thursday, July 18, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$297.00
CLE
ALL

This CLE course will guide estate planning counsel, fiduciary advisers, and litigators in 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 of an employee or officer of a closely-held business serving 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.

Faculty

David Fowler Johnson
Managing Shareholder/Fort Worth Office
Winstead PC

Mr. Johnson is widely recognized as one of the go-to fiduciary litigators in Texas. His practice focuses on trust, estate, and closely-held business disputes. A frequent writer and speaker, David is known around the state as a thought leader in the fiduciary area. Mr. Johnson’s experience in trust and estate disputes includes will contests, elder abuse, mental competency, undue influence, trust modification/reformation/clarification, breach of fiduciary duty and related claims. Additionally, he has a transactional practice for trust departments in providing legal opinions on the construction of trust documents, documenting release and consent agreements, resignations, successor appointments, modification of trusts, trust mergers, trust severances, etc.

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Kenneth J. Fair
Partner
Wright Close & Barger, LLP

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.

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Description

Breach of fiduciary duty claims often arise in the context of closely-held businesses held in trust. Estate planning by the owner or founder may result in placing some or all of the company in a trust. 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 for measuring the actions and decisions of a trustee and an officer and director are different and potentially conflicting. Striking a balance between differing legal standards, the needs of the ongoing business, the directives of the trust, and the beneficiaries' wishes can be challenging, frequently leading to breach of duty claims against the trustee.

Conflicts can arise regarding whether to make distributions from the trust, manage the business, or even determine whether to sell part or all of the company. These conflicts often lead to 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 trustee's fiduciary duties require a higher standard in evaluating decisions. As a result, some jurisdictions apply an enhanced scrutiny standard of review to determine whether a trustee is entitled to rely upon the business judgment rule. Some courts hold that a stricter "fairness standard" of scrutiny is appropriate for trustees/managers.

Counsel involved in breach of fiduciary duty claims involving trusts holding closely-held business assets must evaluate the level of scrutiny courts impose on trustees/managers in these types of disputes.

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
    • Management decisions, including distribution, capital expenditures, diversification of business lines, and sale or divestiture of some or all of the business
    • Improper delegation claims
    • Conflict of interest claims
  2. Business judgment rule application, including legislative initiatives
  3. Enhanced scrutiny, fairness standard, and gross negligence in evaluating business decisionmaking
  4. Documentation to evaluate fiduciary's discretion

Benefits

The panel will review these and other critical 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 correctly
  • Business judgment rule presumptions relating to the good faith and ordinary care of the trustee serving as officer/manager and how to rebut those presumptions
  • What types of documents and fact patterns impact whether the trustee/manager can demonstrate that they met their fiduciary duties and obligations