Thursday, August 27, 2009

Breach of Fiduciary Duty: Make Sure You Can Prove Damages

In a Virginia Supreme Court case from earlier this year, SunTrust Bank v. Farrar, the plaintiff beneficiaries did not establish sufficient proof of damages in a breach of fiduciary duty claim against a trustee, and ended up losing. They had sued claiming that the trustee should have sold a coal mine at some point during a ten year-plus period, but didn't, and therefore caused them damage. But they left Hamlet out of the play. Specifically, they failed to introduce evidence of a possible sale during the period they were complaining about.

This case highlights the mistake of overlooking what appears to be the obvious. I'm not casting stones here; in cases like this, it is easy to get so wrapped up in the more complex legal issues, that the basics can be overlooked.

If you're going to sue a trustee for failing to sell a trust asset at the right time, you need to show that the trustee could have sold the property. Apparently, the trustee had not done much to market the property, but the Court held that without proof that someone could or would have bought it, the trustee could not be held liable for breach of fiduciary duty for not selling it.

This case should also be a warning to beneficiaries of trusts and estates to hold the fiduciary's feet to the fire before bringing a claim (i.e., "What are you doing to market this property"?).

It seems simple with the benefit of hindsight, but this case should be a reminder to all that it is not that hard to miss the obvious.

(P.S. Sorry for the long absence. Between vacations, work and a host of other things, I have not had time to post for quite a while. Things seem to be settling down, so I should be posting more often.)