Master Recommends Denial of Trust Company’s Interim Fee Motion

First State Fiduciaries LLC v. Morgan Stanley Smith Barney LLC and Margaret E. Day and Morgan Stanley Smith Barney, LLC v. First State Fiduciaries, LLC & Margaret E. Day C.A. No. 9472-MA (July 11, 2016)

The factual background of this matter is complicated and unique, but the keys facts are that the Movant, a trust company, was named as trustee of a trust by one of the factions in this dispute. The naming of the trustee and the creation of the trust itself are both being challenged by the other faction. No direct claims have been made against the Movant, and the Movant only became a party because it was named as a third party defendant by the faction opposing its naming as trustee and arguing that the trust was void ab initio.  Ultimately, a Connecticut trial court ruled that the trust was void ab initio. That decision is on appeal. Movant’s position was that it was named as a necessary party by the faction opposing the interim fee motion, and that its fees should be paid from the interpleaded assets as a result. While willing to take and manage the trust assets, the Movant was never afforded the opportunity to do so. The faction opposing the motion argued that the Movant was not entitled to its fees because, among other reasons, the Connecticut appeal is still pending, the appointment of the Movant as trustee may not be valid, and because the trust was declared void ab initio.

The Master explained that “generally, an award of attorney’s fees out of the trust corpus is proper where the attorney’s services are necessary for the proper administration of the trust or where the legal services create a benefit to the trust.” But here, the Master found that as Movant has never had control over the trust corpus, it cannot be said that the legal fees incurred by Movant were necessary for the proper administration of the trust. The Master then recommended that the motion be denied without prejudice and stated that it may be renewed after the stay of this Delaware case (which was entered in order to allow the Connecticut proceedings to first conclude) is lifted.

Note: This firm represents the Movant in this matter.