Texas probate litigator J. Michael Young reported here in his Texas Probate Litigation Blog on a high profile case involving two Texas trusts worth upwards of $4 billion entitled: Hunt vs. Hunt: The Fight Inside Dallas’ Wealthiest Families. The family drama swirling around this litigation makes for interesting reading, but it also distracts from what is conceptually a pretty simple conflict-of-interests case.
Al III is accusing Uncle Tom of conflicts of interest because of his roles as chairman of the board of Hunt Petroleum and as trustee for both of the trusts that own the company. . . .
Two Hunt Petroleum executives serving on the advisory panel of Hassie’s trust were concerned enough about the changes in Texas law that they asked the trust’s beneficiaries in January 2007 to release them from liability. Their request, according to a review of the document, cited potential conflicts relating to the need to diversify trust holdings, to avoid self-dealing, to “invest and manage the trust assets solely in the interest of the beneficiaries,” and to keep a beneficiary reasonably informed of trust activities. In other words, all of the things that Al III and his attorney, Bill Brewer, are complaining about.
Misconduct + No Damages = Empty Victory
As an outside observer I think the trust-beneficiary/plaintiff’s toughest challenge will be to demonstrate that the malfeasance he’s accusing his trustee of, even if true, has actually harmed the trust in some way. Here’s how one observer quoted in the article put it:
Wes Holmes, a Dallas lawyer specializing in trust and estate disputes, is quite possibly the last lawyer left in Dallas who has not worked for the Hunt family. Trust law is quite malleable, unlike tax law, he says. Even self-dealing isn’t always illegal, if the end result was fair and benefited the beneficiary, included full disclosure and didn’t line the pockets of the trustee. “But as a general proposition, you don’t get to come in and rewrite the trust,” he says.
Proving damages will likely require a team of forensic accounts to comb though truck loads of files and untangle of maze of interrelated, closely held entities whose business operations span the globe. No easy task. An alternative strategy would have been to examine the trust books first and sue for malfeasance later . . . only after you’ve uncovered your smoking gun evidence. The "ask questions first, sue later" approach is possible in trust litigation because trust beneficiaries are legally entitled to this disclosure at any time, they don’t have to sue their trustee for malfeasance to get at the trust books. This is a big difference between trust litigation and general commercial litigation that is often overlooked.