Dumont StandsDumont Stands
New York's highest court let the decision in Matter of Dumont stand, creating a bit of a mess in New York and adding to the cacophony of recent state court decisions on large stock concentrations. Despite the noise, the decisions are adding up to some important lessons for fiduciaries: Stock concentrations are risky, regardless of governing instrument provisions. Surcharge actions based on diversification
Dana G. Fitzsimons, Jr., associate, McGuireWoods LLP, Richmond, Va.
New York's highest court let the decision in Matter of Dumont stand, creating a bit of a mess in New York and adding to the cacophony of recent state court decisions on large stock concentrations. Despite the noise, the decisions are adding up to some important lessons for fiduciaries:
Stock concentrations are risky, regardless of governing instrument provisions. Surcharge actions based on diversification will remain popular with plaintiff's lawyers as they're relatively easy to plead and prove, and damages are readily measured.
Real or perceived conflicts of interest will shape courts' views of trustee actions.
Process matters. Trustees are not guarantors of investment results; they are guarantors of process. Prudent process includes meaningful investment review of stock concentrations, obtaining legal or judicial interpretation of governing instruments, maintaining proper records, and staying aware of beneficiary circumstances.
Not all stock retention clauses are created equal. Careless drafting or unique trust terms create fiduciary risks.
DUMONT
On April 28, New York's highest state court denied the petition for appeal of the appellate division's decision in Dumont.
Charles G. Dumont died in 1956, and under his will the residue of his estate was retained in trust for his descendants, which was funded almost entirely with Eastman Kodak Company stock. The will included a retention clause restricting the sale of the Kodak stoc...
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