Breach of Trust Lawsuit in Florida Still Going Strong

Jeffrey H. Skatoff

What is believed to be the longest and nastiest breach of trust lawsuit in State of Florida history is still going strong, after over a decade, many appeals, and several weeks of trial.  The latest trial of the case was completed earlier this year and is once again going to appeal.  The probate court, after a two week trial, handed JP Morgan a complete and total victory over the beneficiaries of the estate and trust.  

Facts
Dorothy Rautbord died in 2002, survived by three adult children.  She lived an opulent Palm Beach lifestyle, collecting art, frequenting Palm Beach charity galas, and making significant charitable gifts.  She also had a history of making significant gifts to her various family members, staff, and friends.

In 1990, Ms. Rautbord executed a Revocable Trust, which was amended a number of times.  At all times relevant, JP Morgan Chase ("JPMorgan"), or its predecessors, was the corporate trustee.

During Ms. Rautbord's lifetime, the 1990 Trust provided that the Trustee shall distribute income and principal for Ms. Rautbord's support, maintenance, health, comfort and general welfare, as determined by the Trustee "in its sole discretion."

Upon her death, the 1990 Trust was to be distributed to her three children, Simon, Judy, and Dan.

In 1991, Ms. Rautbord made Judy her attorney in fact pursuant to a power of attorney.  The power of attorney was very broad.  The 1990 Trust, however, contained a limitation which stated that all "powers of amendment, modification, and revocation shall be personal to [Ms. Ratbord] and shall not vest in or be exercisable by any person or corporation acting in any fiduciary or like relationship ***"

Dan and Simon challenged a number of actions undertaken by JPMorgan and/or Judith regarding distributions, disbursements and gifts made from the Trust, including support and maintenance for Ms. Rautbord, creating new trusts from the corpus of the existing 1990 Trust, and making significant gifts to third parties during Ms. Rautbord's lifetime. Some of the withdrawals were made with a series of revocation letters executed by Judith, pursuant to which amounts were withdrawn from the 1990 Trust.

2006 Appellate Opinion - Standing
JPMorgan issued an accounting to Dan and Simon.  JPMorgan filed a trust complaint seeking to ratify the accounting and specifically to ratify the principal distributions made under the alleged authority of the revocation letters executed by Judith.

The trial court granted summary judgment to JPMorgan Chase on the grounds that Dan and Simon had no standing to challenge the withdrawals from the 1990 Trust, because the trust was revocable at that time.  The trial court reasoned that the brothers had "no present interest in the trust during the time that the decedent was alive."

In Siegel v. Novak, 920 So.2d 89 (4th DCA 2006), the appellate court reversed, holding that the brothers did have adequate standing.

The first issue was whether New York or Florida law applied.

The Court held that the concept of "standing" was one of substantive law, as opposed to procedural law.  As such, the standard for determining choice of law is decided under the "significant relationship" test.  Under the significant relationship test, the Court held that New York law applied because the trust from 1995 to 2002 was a New York trust governed by New York law.

The Court noted some New York law under which beneficiaries of revocable trusts do not have standing to challenge actions made by the settlor/trustee during the settlor/trustee's lifetime.

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Breach of Trust Lawsuit in Florida Still Going Strong