June 2021

Posted June 15, 2021

J.P. Morgan Trust Company of Delaware, et al. v. Hadley Fisher and Michael Fisher, C.A. No. 12894-VCL (June 14, 2021)

                In an unusual beginning to litigation, JP Morgan itself filed this case seeking a broad declaration that it did not breach its duties as trustee of the relevant trust during the time period from 2010 through 2016.  Trust beneficiaries filed counterclaims claiming that JP Morgan had in fact breached its duties and, at trial, contended that JP Morgan had breached its duty of care by being grossly negligent.

                In this post-trial decision, the court found that JP Morgan didn’t breach its fiduciary duties and, in its opinion, the court examined each significant alleged breach in some detail.  As this case went through contested discovery as well as a full trial, it is presumed that all involved parties, particularly the trustee itself, had significant legal expenses.

                As to those expenses, the court found that “justice and equity” required JP Morgan to bear its own legal fees as well as half of the fees incurred by the necessary guardian ad litem, who represented the interests of entirely innocent parties (the complaining adult beneficiary is on the hook for the other half of the GAL’s expenses). The court explained, “JP Morgan sought absolution, and this litigation did not confer any benefits on the Trust.”

               Near the end of this opinion, the court included a footnote of which corporate trustees should be aware. That footnote reads,

“Although the practice of demanding a release is widespread, a trustee who insists on a release as the price [for] doing what is in the best interests of the trust—and what the trustee’s fiduciary duties therefore require—engages in self-interested conduct by extracting a personal benefit at the expense of the trust and its beneficiaries. The trustee’s insistence on a release may also fuel the beneficiaries’ concern about improper conduct, as it did in this case. It seems likely that if JP Morgan had not demanded a release when JP Morgan wanted to resign in 2014, then another trustee could have taken over the administration of the Trust, and this litigation might never have happened.” See attached Opinion, page 47, n.9.