March 1, 2017

Trustee Awarded $2.6 Million From Beneficiaries Who Sued For $1.2 Billion

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John W. Bilby
Member, Stoll Keenon Ogden PLLC

A Kentucky court has ruled in favor of a trustee with respect to claims brought against it by a minority of the beneficiaries alleging that the trust had been mismanaged, awarding the trustee $2.6 million in attorneys’ fees.

At the center of the matter is Three Rivers Quarry in western Kentucky. It is one of the largest limestone quarries in the US, owned by trusts established by Charles and Eula Jones. The quarry is leased by the trust to a quarry operator. The Bank of Oklahoma has served as trustee since 2005.

The Vander Boegh family, minority beneficiaries of the trust, requested that the Bank of Oklahoma terminate the lease agreement, in hopes of negotiating higher royalties from the operator. The bank did not believe it was in the best interest of the beneficiaries to terminate the lease, which included a “perimeter lands” feature requiring the operator to pay full royalties for limestone mined from the operator’s land within one mile of Three Rivers Quarry. The “perimeter lands” feature was potentially worth millions of dollars to the Three Rivers Quarry trusts.

On behalf of Bank of Oklahoma, Stoll Keenon Ogden PLLC brought an action requesting instructions from the McCracken Circuit Court. The Vander Boegh family counterclaimed, alleging the bank allowed the operator to steal 1.5 million tons of limestone from the quarry. The Vander Boeghs also sought the bank’s removal as the trustee and $1.2 billion in damages.

The court ruled in favor of the Bank of Oklahoma on all 36 claims brought by the Vander Boeghs. The court was one of the first to render an award using the fee shifting provision of the Kentucky Uniform Trust Code, awarding the bank $2.6 million against the Vander Boeghs for legal fees and expenses.

“This case shows the potential liability that trustees can face, and why a thorough and vigorous defense is needed when beneficiaries bring claims,” said John W. Bilby, co-chair of SKO’s Trust & Estate Litigation practice. “The Uniform Trust Code now provides Kentucky trustees with a good way to control their litigation costs through fee shifting.”

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