On March 21, 2016, Janet P. Jakubowicz and Benjamin J. Lewis of the firm's Trust, Estate, and Fiduciary Litigation Team obtained a judgment totaling over $584 million in favor of four sisters, including a firm client, following a hard fought ten-day trial last September. This "sisters" versus "brothers" dispute involved members of the prominent Griffin family from Northern Kentucky, spanned nearly 30 years of trust, estate, and business transactions, and played out over the last five years in the U.S. District Court for the Eastern District of Kentucky. The judgment is believed to be the largest of its kind in Kentucky history.
Two years into the litigation, in September 2014, U.S. District Court Judge William O. Bertelsman found that two brothers had breached their fiduciary responsibilities to their sisters with a series of stock, estate and trust transactions that put the men in complete control of Griffin Industries, the family's business. Griffin Industries was started by the parties' father, John L. Griffin, in 1943. It was one of the state's largest private companies until it was sold to Darling International in 2010 for $840 million.
The case involved a dispute over the disposition of assets in the estates and trusts of the plaintiffs' parents, including stock in the family business. Some of the challenged transactions occurred more than 20 years ago, and one of the plaintiffs filed and settled a related lawsuit more than twenty years ago. In late 2010, however, a series of events caused the plaintiffs to question the actions of their two oldest brothers, who had previously served as co-executors and co-trustees of their parents' estates and trusts in 1985 and 1995, respectively.
According to Judge Bertelsman, the evidence revealed a pattern, spanning decades, of the two oldest brothers exercising their authority over their sisters by only sharing selective information with them; leveraging their roles to discourage and, sometimes, intimidate the sisters from seeking information or from questioning their brothers' decisions; pitting one sister against the others; and staunchly insisting that their actions were in keeping with their parents' wishes, even in the face of estate and trust documents that reflected the contrary.
While defendants' mantra in litigation had been that "Father wanted the boys to get stock and the girls to get a million dollars," none of their parents' estate plans created before the breaches of fiduciary duty herein reflected such an intent. Mr. and Mrs. Griffin's estate plans called for equal treatment of their then-living 11 children. Instead, however, the brothers orchestrated a scheme whereby they would acquire the stock, as well as valuable real estate, from their parents' estates and trusts, to the detriment of their sisters.
As Judge Bertelsman pointed out, the brothers believed and contended that their sisters had no business playing any role in the company's management, no business owning any real property that was important to the company, and certainly no business in owning company stock that would allow them a voice in corporate decisions.
At trial, the defendants' primary argument was that their sisters should have "ferreted out their fiduciary breaches sooner," and that their claims were barred by the statute of limitations and laches. According to the Court, however, the family "dynamics enabled defendants to successfully rebuff their sisters' inquiries over the years, not in a way that would have given the sisters full knowledge that something was legally awry, but simply in a way that reinforced the message that the sisters, who had always been admonished to respect and trust their brothers' authority, had neither the need nor the right to know the details regarding their parents' estates."
Applying Kentucky law, the Court held that it "is the duty of a fiduciary to disclose all of the material facts that would put the beneficiary upon notice that a breach of trust may have been committed." Instead of making these disclosures, Judge Bertelsman noted that "whenever plaintiffs made inquiries over the years, their brothers either brushed them off or simply lied to them." Thus, the fact that the brothers' bad acts occurred in 1985 when their mother died, and 1995 when their father died, did not preclude the sisters from filing suit 2011.
The Court went on to hold that the two oldest brothers must disgorge and repay all profits that they and their side of the family reaped from the misappropriation of the stock and real estate at issue. The Court also found that the sisters were entitled to prejudgment interest at a rate of 8 percent, which accounted for nearly half of the $584 million judgment.
In conclusion, Judge Bertelsman noted that this was a family fight of significant and unfortunate proportions. Indeed, the dispute turned siblings and generations against each another. Even in the family context, however, the principles of equity and fiduciary duty must be applied, as Judge Bertelsman did in this case.