# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

__ __ __ __ __ __ __ __ __ __ __ __ __ _

No. 1 5- 38 72

__ __ __ __ __ __ __ __ __ __ __ __ __ _

Jo Ann Howar d a nd Ass oc ia te s, P.C., Sp eci al Depu ty Recei ve r of Lin co ln

Mem or ia l Li fe In su ran ce Co m pa ny, Mem or ia l Se rv ic e Life Ins ur an ce Co m pa ny,

an d Nat io na l Pr earr an ge d S erv ic es , Inc .; Nat io na l Org an iz at io n o f Life an d Hea lt h

In su ran ce Gu aran ty A ss oc ia ti on s; Mi ss ou ri Li fe an d Hea lt h In su ran ce Gu aran ty

Ass oc ia ti on ; Tex as Life a nd Heal th Ins ur an ce Gu aran ty A ss oc ia ti on ; Il li no is Life

an d Hea lt h In su ran ce Gu aran ty A ss oc ia ti on ; Kan sa s Li fe an d Hea lt h In su ran ce

Gua ran ty A ss oc ia ti on ; Ok la ho m a Life an d Hea lt h In su ran ce Gu aran ty

Ass oc ia ti on ; Ken tu ck y

Life a nd Heal th Ins ur an ce Gu aran ty A ss oc ia ti on ; Ark an sa s

Life an d Hea lt h In su ran ce Gu aran ty A ss oc ia ti on

,

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff s - Ap pe ll ees

,

v.

J. Do ug la s C as si ty; Ran da ll Su tt on ; Br en t D. Cas si ty; Ty le r J. Ca ss it y ; Rh on da L.

Cas si ty; Kath eri ne P. Scan ne ll ; Ra nd al l J . Sin ge r; Ho ward A. W it tn er; W it tn er,

Sp ewark an d M ay la ck , PC; Davi d R . W ul f; Wul f, Bat es an d M ur ph y , Inc .;

Mi ch ael R. Bu tl er; Lenn ie J. Ca pp le m an ; J am es M. Crawf or d; Larry

Keit h Hal e;

Ton y B. Lum pk in , III; Erin P. Eng le ; Nek ol Pro vi nc e; Ro xa nn e J. Sc hn ie de rs ;

Kell y Tate ; Geo rg e Wise, II I; M ari an ne Jo ne s; Ann e Ch ru n; Nati on al Heri ta ge

Ent erp ris es , Inc .; Fo rev er En te rp ris es , Inc ., form erl y kn own as Li nc ol n Her it ag e

Co rp or at io n; Lin co ln Mem or ia l Se rv ic es , Inc .; Fo rev er Net wor k, In c.; F or ev er

Ill in oi s, In c.; Ho ll y woo d F or ev er, In c.; Tex as Fo rev er, In c.; Nat io na l Pr earr an ge d

Serv ic es Agen cy , Inc .; Leg acy Inte rn at io na l Im po rts , Inc .; Wise , Mit ch el l an d

A s s o c i a t e s

, L T D ; B r

e n t w o o d H e r i t a g e P r o p e r t i e s

, L L C ; B r

e n n e n B a n k a n d T r u s t C o m p a n y

,

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t s,

Nati on al Cit y

Ban k,

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll an t

,Mar sh al l an d Il sl ey Trus t Co m

pa ny, N .A.; So ut hwe st Ban k; U.S. Ban k, N.A.;

Ban k o f Am eri ca, N.A.; Am eri can Sto ck Tran sf er an d Tru st Co m

pa ny; Co m eri ca

Ban k a nd Trus t, N.A.; Br own Sm it h Wall ace, LLC; Jo hn Does , 1-2 5; Rh on da L.

Cas si ty, In c.,

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t s,

PNC Ba nk , N.A.,

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll an t

,

BMO Har ris Ban k, N.A.; Ri ch ard Mark ow; Herb ert Mo ris se

,

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts

,

----- ----- ----- ----- ----- -----

Am eri can Ban ke rs Ass oc ia ti on ; M is so ur i Ba nk ers Ass oc ia ti on

,

ll ll ll ll ll ll ll ll ll ll l

Amici on Beha lf

of App el la nt (s

).

__ __ __ __ __ __ __ __ __ __ __ __ __ _

No . 15 -3 87 8

__ __ __ __ __ __ __ __ __ __ __ __ __ _

Jo Ann Howar d a nd Ass oc ia te s, P.C., Sp eci al Depu ty Recei ve r of Lin co ln

Mem or ia l Li fe In su ran ce Co m pa ny, Mem or ia l Se rv ic e Life Ins ur an ce Co m pa ny,

an d Nat io na l Pr earr an ge d S erv ic es , Inc .; Nat io na l Org an iz at io n o f Life an d Hea lt h

In su ran ce Gu aran ty A ss oc ia ti on s; Mi ss ou ri Li fe an d Hea lt h In su ran ce Gu aran ty

Ass oc ia ti on ; Tex as Life a nd Heal th Ins ur an ce Gu aran ty A ss oc ia ti on ; Il li no is Life

an d Hea lt h In su ran ce Gu aran ty A ss oc ia ti on ; Kan sa s Li fe an d Hea lt h In su ran ce

Gua ran ty A ss oc ia ti on ; Ok la ho m a Life an d Hea lt h In su ran ce Gu aran ty

Ass oc ia ti on ; Ken tu ck y

Life a nd Heal th Ins ur an ce Gu aran ty A ss oc ia ti on ; Ark an sa s

Life an d Hea lt h In su ran ce Gu aran ty A ss oc ia ti on

,

ll ll ll ll ll ll ll ll ll ll l

Pla in ti ff s - Ap pe ll an ts

,

-2

-v.

J. Do ug la s C as si ty; Ran da ll Su tt on ; Br en t D. Cas si ty; Ty le r J. Ca ss it y ; Rh on da L.

Cas si ty; Kath eri ne P. Scan ne ll ; Ra nd al l J . Sin ge r; Ho ward A. W it tn er; W it tn er,

Sp ewark an d M ay la ck , PC; Davi d R . W ul f; Wul f, Bat es an d M ur ph y , Inc .;

Mi ch ael R. Bu tl er; Lenn ie J. Ca pp le m an ; J am es M. Crawf or d; Larry

Keit h Hal e;

Ton y B. Lum pk in , III; Erin P. Eng le ; Nek ol Pro vi nc e; Ro xa nn e J. Sc hn ie de rs ;

Kell y Tate ; Geo rg e Wise, II I; M ari an ne Jo ne s; Ann e Ch ru n; Nati on al Heri ta ge

Ent erp ris es , Inc .; Fo rev er En te rp ris es , Inc ., form erl y kn own as Li nc ol n Her it ag e

Co rp or at io n; Lin co ln Mem or ia l Se rv ic es , Inc .; Fo rev er Net wor k, In c.; F or ev er

Ill in oi s, In c.; Ho ll y woo d F or ev er, In c.; Tex as Fo rev er, In c.; Nat io na l Pr earr an ge d

Serv ic es Agen cy , Inc .; Leg acy Inte rn at io na l Im po rts , Inc .; Wise , Mit ch el l an d

A s s o c i a t e s

, L T D ; B r

e n t w o o d H e r i t a g e P r o p e r t i e s

, L L C ; B r

e n n e n B a n k a n d T r u s t C o m p a n y

,

ll ll ll ll ll ll ll ll ll ll l

Defe nd an ts

,

Nati on al Cit y

Ban k,

ll ll ll ll ll ll ll ll ll ll l

Defe nd an t - Ap pe ll ee,

Mar sh al l an d Il sl ey

Trus t Co m

pa ny, N .A.; So ut hwe st Ban k; U.S. Ban k, N.A.;

Ban k o f Am eri ca, N.A.; Am eri can Sto ck Tran sf er an d Tru st Co m

pa ny; Co m eri ca

Ban k a nd Trus t, N.A.; Br own Sm it h Wall ace, LLC; Jo hn Does , 1-2 5; Rh on da L.

Cas si ty, In c.,

ll ll ll ll ll ll ll ll ll ll l

Defe nd an ts

,

PNC Ba nk , N.A.,

ll ll ll ll ll ll ll ll ll ll l

Defe nd an t - Ap pe ll ee,

BMO Har ris Ban k, N.A.; Ri ch ard Mark ow; Herb ert Mo ris se

,

ll ll ll ll ll ll ll ll ll ll l

Defe nd an ts

,

----- ----- ----- ----- ----- -----

-3

-Am eri can Ban ke rs Ass oc ia ti on ; M is so ur i Ba nk ers Ass oc ia ti on

,

ll ll ll ll ll ll ll ll ll ll l

Amici on Beha lf

of App el le e(s

).

__ __ __ __ __ __

App eal s fr om

Uni te d S ta te s Di st ric t Co ur t

fo r th e Eas te rn Dis tri ct of M is so ur i - St . Lou is

__ __ __ __ __ __

Su bm it te d: Sep te m

be r 20 , 20 16

Fil ed : Au gu st 17 , 20 17

__ __ __ __ __ __

Befo re COLLOTON, MELLOY , and SHEPHERD, Circ ui t J ud ge s.

__ __ __ __ __ __

COLLOTON, Ci rcu it Ju dg e.

PNC Ban k ap pe al s a ju r y v e rd ic t in fav or of sp eci al de pu ty rece iv er Jo Ann

How a r d a nd Ass oc ia te s, P.C., an d a gr ou p of st at e gu aran ty as so ci at io ns (to ge th er,

App el le es ). The jury fo un d PNC li ab le fo r ne gl ig en ce an d b reac h o f fi du ci ary du ty

in vi ol at io n of it s du ti es as tru st ee of va ri o u s p ren eed tru st s crea te d by Nati on al

Prea rran ge d Serv ic es , I nc

. On ap pe al , PNC m ak es th ree arg um en ts : (1 ) th e di st ric t

co ur t im pr op erl y co nc lu de d th at App el le es ’ cl ai m s ari se in to rt rat he r th an un de r th e

la w of tru st s; (2 ) App el le es ’ cl ai m s sh ou ld ha ve be en tri ed to th e co ur t rath er tha n a

jury; an d (3 ) th e di st ric t c o u r t i m pr op erl y di sa ll owe d PNC’s de fen se s. App el le es

cro ss -ap pe al

, arg ui ng th at th e di st ric t co ur t erro ne ou sl y di sm is se d th ei r to rt cl ai m s

al le gi ng th at PNC’s pr ed eces so r-i n- in te res t ai de d an d ab et te d frau d an d br each es of

f id uc ia ry du ty. W e co nc lu de th at App el le es ’ cl ai m s ari se un de r tru st la w, th at t h e

cl ai m s are pr op erl y tri ed to th e co ur t, an d th at th e m eas ur e of da m ag es i s li m it ed

acco rd in gl y

. W e fu rth er ho ld th at th e di st ric t co ur t pr op erl y li m it ed PNC’s de fen se s,

-4

-an d co rrec tl y di sm is se d App el le es ’ ai di ng -an d- ab et ti ng cl ai m s. W e th eref or e affi rm

in pa rt, re ve rs e in pa rt, a nd rem an d fo r fu rth er p ro ceed in gs

.

I.

Thi s cas e ari se s ou t of th e na ti on wid e frau d sc he m e of Nati on al P r e a r r a ng ed

Serv ic es

, In c. ( N P S )

, a Mi ss ou ri- ba se d se ll er of pr en eed fu ne ral co nt ract s. The

Cas si ty fam il y own ed an d o pe rat ed NPS. NPS op erat ed acro ss th e co un try, b ut th e

co m pa ny’ s act iv it ie s i n M i s s o u ri are th e su bjec t of th is ap pe al

. The Cas si tys al so

own ed two Tex as -b as ed li fe in su ran ce co m pa ni es

, Lin co ln Mem or ia l Life In su ran ce

Co m pa ny (Linc ol n) an d M em or ia l Se rv ic e Life Ins ur an ce Co m pa ny (Mem or ia l).

Ch ap te r 43 6 of th e Mi ss ou ri Rev is ed St at ut es

, no w r e p e a l e d, go ve rn ed th e

m ak in g of pr en eed fu ne ral co nt ract s in Mi ss ou ri du rin g th e rel ev an t pe rio d. Mo

. Rev

.

St at

. §§ 43 6.0 05 -.07 1 (2 00 8) (rep eal ed 20 09 ). A pr en eed co nt ract was an

arra ng em en t th at req ui red th e cu rren t pa y m en t of m on ey in co ns id erat io n fo r fu ne ral

se rv ic es to be pr ov id ed la t e r a t t h e t im e of a de at h. Id

. § 43 6.0 05 (5 ). NPS so ld

pr en eed fu ne ral co nt ract s th at al l o w e d c o n s um ers to pu rch as e fu ne ral se rv ic es at a

fix ed pr ic e. Und er a pr en eed co nt ract

, a pu rch as er se le ct ed th e m e r c h a n d i se an d

se rv ic es th at th e pu rch as er wan te d fo r th e co nt ract be ne fic ia ry

, whi ch was ei th er th e

pu rch as er or a th ird pa rty. W he n th is co nt ract be ne fic ia ry di ed

, th e pu rch as er’s

ch os en fun eral ho m e p erfo rm ed th e fu ne ral acco rd in g t o t he co nt ract

.

Und er Mi ss ou ri la w, NPS co ul d ret ai n up to twen ty pe rcen t of th e pr oc eed s of

each pr en eed fu ne ral co nt ract

. M o

. R e v

. S ta t. § 43 6.0 27

. NPS was req ui red to

de po si t th e ot he r ei gh ty pe rcen t in to a tru st

. Id

. §§ 43 6.0 21 .1(2 ), 43 6.0 27

, 43 6.0 31 .1.

The st at ut e pr ov id ed th at NP S mu st ap po in t a st at e or fed eral ly ch art ered fin an ci al

i n s t i t ut io n as tru st ee of it s tru st s. Id

. § 43 6.0 31 .1. The tru st ee was to in v e s t a n d

rei nv es t th e ass et s d ep os it ed in th e tr us ts

. Id

. § 43 6.0 31 .2. Bec au se th e NPS tru st s

-5

-he ld fu nd s in ex ces s of $2 50 ,00 0, N P S was al lo wed to ap po in t an in de pe nd en t

qu al ifi ed in ve st m en t ad vi so r to m ak e in ve st m en t de ci si on s fo r th e tru st pr op ert y

. Id

.

Mi ss ou ri la w al so di ct at ed ho w NPS di st rib ut ed pa y m en ts to fu ne ral ho m e s

.

Afte r a co ns um er’s fu ne ral

, th e fu ne ral ho m e su bm it te d a writ te n cert ifi cat io n to NPS

es ta bl is hi ng th at it pr ov id ed th e fu ne ral se rv ic es to th e d e c e a s e d co ns um er. Id

.

§ 43 6.0 45

. Upo n rece ip t of th e cert ifi cat io n, NPS pa id th e fu ne ral ho m e th e am ou nt

sp eci fie d in th e pr en eed co nt ract pl us a “ gr owt h” pa y m en t. The “ gr owt h” pa y m en t

pr ot ect ed fu ne ral ho m es ag ai ns t ris in g fu ne ral co st s. Onc e NPS pa id th e fu ne ral

ho m e, NPS was en ti tl ed to a di st rib ut io n fro m th e tru st eq ua l to al l de po si ts m ad e in to

th e tr us t fo r th e p art ic ul ar p ren eed co nt ract

. Id.

All eg ia nt Ban k be cam e th e tru st e e of NPS’s Mi ss ou ri tru st s in Aug us t 19 98

.

All eg ia nt ’s re s po ns ib il it ie s as tru st ee were se t fo rth in th e NPS tru st ag reem en t, whi ch

was go v e r n e d b y Ch ap te r 43 6. W he n All eg ia nt as su m ed it s ro le as tru st ee, NPS

al read y ha d ap po in te d W ul f Bat es & Mu rp hy (Wulf) as it s in ve st m en t ad vi so r. W ul f

se rv ed th ro ug ho ut All eg ia nt ’s te nu re as tru st ee. Dur in g th is t i m e, W ul f us ed tru st

as se ts to pu rch as e Lin co ln li fe in su ran ce po li ci es

. The po li ci es in su red th e li ve s o f

NPS’s pr en eed co ns um ers in Mi ss ou ri. W he n a co ns um er d i e d, Lin co ln pa id th e

pr oc eed s o f th e p ol ic ie s t o t he NPS tr us ts

.

All e g i an t se rv ed as tru st ee un ti l May 20 04

, whe n it res ig ne d aft er be in g

acq ui red by Nati on al Ci ty Ban k. Bec au se Nati on al Ci ty Ban k di d no t wan t to as su m e

All eg ia nt ’s ro le as tru st ee, All eg ia nt tra ns ferr ed th e tru st as se ts to Brem en Ban k,

whi ch be cam e th e tru st ee. W he n A l l e g i a n t res ig ne d, NPS’s Mi ss ou ri tru st s he ld

$1 22 .9 m il li on in de po si ts an d $1 59 .8 m il li on in Lin co ln li fe in su ran ce co ve rag e. In

20 09

, PNC acq ui red Nati on al Ci ty Ban k. PNC’s po te nt ia l li ab il it y i n t h i s c as e,

th eref or e, de r i v e s s o le ly fro m it s acq ui si ti on of Nati on al Ci ty Ban k, All eg ia nt ’s

su cces so r-i n- in te res t.

-6

-In 20 07

, in su r a n ce reg ul at or s di sc ov ered th at NPS ha d en ga ge d in m as si ve

frau d fo r y ears

. At th e di rect io n of NPS, Lin co ln ro ut in el y is su ed po li cy lo an s to NPS

ag ai ns t Lin co ln li fe in su ran ce po li ci es own ed by th e Mi ss ou ri tru st s wit ho ut th e

tru st ee’s writ te n ap pr ov al

. NPS cau se d th e lo an s to is su e ev en th ou gh th e tru st ee was

t h e on ly pa rty pe rm it te d to ta ke su ch a lo an

. Thi s pr act ic e de pl et ed tru st as se ts

. Sep arat el y

, an d ou ts id e of Mi ss ou ri, NPS m an ip ul at ed th e pa y m en t am ou nt s refl ect ed

on li fe in s u ran ce po li cy ap pl ic at io ns

, al lo win g it to ret ai n m os t of th e m on ey th at

sh ou ld ha ve be en se nt to th e is su in g li fe in su ran ce co m pa n y

. Fo r ex am

pl e, if a

co ns um er pa id fif

te en hu nd red do ll ars fo r an in su ran ce po li cy

, NPS wou ld ch an ge th e

am ou nt pa id to fiv e do ll ar s

, s e n d f i v e do ll ars to Lin co ln

, an d ke ep th e res t of th e

m on ey

.

As a res ul t of th is frau d, a Tex as rece iv ers hi p co ur t pl aced NPS, Lin co ln

, an d

Mem or ia l in t o r ecei ve rs hi p, an d th e co ur t ap po in te d th e sp eci al de pu ty rece iv er.

Bec au se Lin co ln an d Mem or ia l were li f e i n s ur an ce co m

pa ni es

, th ei r rece iv ers hi p

tri gg ered co ve rag e by th e st at e gu aran ty as so ci at io ns

. St at e gu aran ty as so ci at io ns are

no n- pr of it or ga ni zat io ns th at pr ot ect co ns um ers by ho no rin g th e ob l i g at io ns in

co ns um ers ’ po li ci es whe n in su ran ce co m pa ni es fai l. In th is cas e, th e as so ci at io ns are

m ak in g pa y m en ts on th e po li ci es is su ed by Lin co ln an d Mem or ia l. The se pa y m en ts

en su re th at co ns um ers ’ f

u n e r a ls are pa id fo r up on de at h ev en th ou gh th e in su ran ce

co m pa ni es are i n re cei ve rs hi p.

Afte r th e th ree en ti ti es were pl aced in to rece iv ers hi p, t he rece iv er an d th e

as so ci at io ns ag reed to a li qu id at io n pl an f o r t he en ti ti es

. Und er th e pl an

, th e

a s so ci at io ns ag reed th at an y de at h be ne fit s th at wou ld ot he rwis e be du e or pa y ab le

to NPS or it s tru st s u nd er t he po li ci es wou ld be pa id to fun eral ho m es . The fu ne ral

ho m es an d co ns um ers

, in tu rn

, ag reed to as si gn to th e as so ci at io ns an y rig ht s un de r,

an d c au se s o f act io n re la ti ng to , th e p ol ic ie s.

-7

-In Aug us t 20 0 9

, App el le es co m m en ced th is act io n. The y su ed on be ha lf of

NPS, fu ne ral ho m es

, an d co ns um ers

. The co m pl ai nt al le ge d t h a t All eg ia nt

, PNC’s

pr ed eces so r, br each ed it s fid uc ia ry du ti es as tru st ee, was ne gl ig en t, an d a i d e d an d

ab et te d frau d an d br each of f i du ci ary du ty. App el le es as se rte d th at All eg ia nt

br each ed it s fi du ci ary du ti es an d was ne gl ig en t whe n it all owe d NPS to tak e p ol ic y

lo an s on th e tru st -o wne d in su ran ce po li ci es

, fai le d to en su re th at th e lo an s were

ad eq ua te ly se cu red

, ne gl ect ed to acco un t ad eq ua te ly fo r th e fu nd s in th e NPS pr en eed

tru st s, fai le d to ke ep an d rev ie w ad eq ua te reco rd s of tru st tra ns act io ns

, an d fai le d to

ve rif y tru st acco un t reco rd s. As a res ul t of th es e br each es of du ty an d ne gl ig en t act s,

th e co m pl ai nt al le ge d, All eg ia nt al lo wed NPS ag en ts to m an ip ul at e tr us t as se ts an d

si ph on m il li on s of do ll ars fro m th e NPS tru st s. In se pa rat e ai di ng -an d- ab et ti ng

cl ai m s, th e co m

pl ai nt al le ge d th at All eg ia nt kn ew of in de pe nd en t br each es o f

fid uc ia r y du ty by W ul f an d act s of frau d by NPS, an d su bs ta nt ia ll y as si st ed or

en co ur ag ed th em

.

Befo re tri al

, PNC m ov ed to st rik e App el le es ’ jury tri al de m an d, arg ui ng th a t

al th ou gh th ei r cl ai m s were pr es en te d as to rt cl ai m s, th e cl ai m s were act ua ll y a si ng le

eq ui ta bl e cl ai m fo r br each of tru st

. The di st ric t c o u r t d e ni ed th e m ot io n be cau se it

de te rm in ed th at App el le es ’ cl ai m s aro se u n d e r t o r t la w a nd were act io na bl e at la w.

PNC la te r m ov ed fo r pa rti al su m m ary jud gm en t, arg ui ng th at tru st la w de fin es

App el le es ’ av ai la bl e m on et ary rem ed y fo r br each es of tru st

. The di st ric t co ur t ag ai n

co nc lu de d th at App el le es ’ cl ai m s were no t su bjec t t o th e tru st -la w m eas ur e of

da m ag es be cau se th e su it was a n a ct io n a t l aw.

In it s m ot io n for su m

m ary jud gm en t, PNC al so arg ue d th at NPS was th e on ly

tru st be ne fic ia ry

, an d th at PNC wa s th eref or e en ti tl ed to rai se de fen se s of

au th o r i z a t i o n a nd in pa ri de li ct o

. The co ur t de te rm in ed th at PNC co ul d no t rai se

th es e de fen se s ag ai ns t ei th er th e as so ci at io ns or th e rece iv er. The co ur t al so reject ed

PNC’s co nt en ti on th at un de r Mo

. Rev

. St at

. § 43 6.0 31 .2, All eg ia nt co ul d no t be li ab le

fo r W ul f’s in ve st m en t de ci si on s. The di st ric t co ur t gr an te d PNC’s m ot io n to di sm is s

-8

-A p pe ll ees ’ ai di ng -an d- ab et ti ng cl ai m s on th e gr ou nd s th at App el le es fai le d to

ad eq ua te ly pl ead th ei r cl ai m an d th at Mi ss ou ri do es no t reco gn iz e su ch cl ai m s in an y

ev en t.

The cl ai m s al le gi ng br each of fid uc ia ry du ty an d ne gl ig en ce pr oc eed ed to tri al

. App el le es cl ai m ed $3 55 .5 m il li on in co m pe ns at or y da m ag es

. Thi s am ou nt in cl ud ed

lo ss es on po li ci es th at oc cu rred in si de an d ou ts id e of Mi ss ou ri bo th be fo re an d aft er

All eg ia nt ’s te nu re as tru st ee, un pa id “ gr owt h” pa y m en ts to fu ne ral ho m es bo th in si de

an d ou ts id e of Mi ss ou ri, an d ob li ga ti on s on pr en eed c o n t r a c ts th at were no t

as so ci at ed wit h Lin co ln or Mem or ia l li fe in su ran ce po li ci es

. Of th e $3 55 .5 m il li on

,

ro ug hl y $6 6 m il li on was at tri bu ta bl e to lo ss es on pr en e e d co nt ract s writ te n in

Mi ss ou ri d ur in g Al le gi an t’s t en ur e.

At t he cl os e of App el le es ’ cas e-i n- ch ie f an d fo ll owi ng th e cl os e o f ev id en ce,

PNC m ov e d f

o r ju d g m en t as a m at te r of la w. PNC arg ue d th at App el le es di d no t

pr ov e cau sa ti on an d cert ai n su bc at eg or ie s of it s all eg ed da m ag es

. The co ur t de ni ed

th e m ot io ns

. The jury award ed App el le es $3 55 .5 m il li on in co m pe ns at or y da m ag es

an d $ 35 .55 m il li on in pu ni ti ve da m ag es

.

PNC fil ed th ree po st -tr ia l m ot io ns : (1 ) a re n e w e d m ot io n fo r jud gm en t as a

m at te r of la w or

, in th e al te rn at iv e, fo r a ne w tri al or rem it ti tu r; (2 ) a m ot io n fo r a ne w

tri al ba se d on le ga l an d ev id en ti ary erro rs ; an d (3 ) a m ot io n t o a m en d t he jud gm en t

to acco un t fo r s e t t l e men t am ou nt s pa id by ot he r de fen da nt s. The di st ric t co ur t

ad he red to it s pr io r ru li ng s an d de ni ed th e m ot io ns fo r jud gm en t as a m at te r of la w

an d fo r a ne w tri a l

, bu t gr an te d PNC’s m ot io n to am en d th e jud gm en t ba se d on

se tt le m en ts

. PNC ap pe al s, an d App el le es c r o s s

- a p pe al

. W e rev ie w de no vo th e

di st ric t co ur t’s i nt erp ret at io ns of M is so ur i l aw. Sl ig o, In c. v. Nev oi s

, 84 F.3 d 10 14

,

10 19 (8t h C ir. 1 99 6)

.

-9

-II.

PNC arg ue s th at App el le es ’ cl ai m s a r i s e u n de r tru st la w r at he r th an to rt la w,

an d th at App el le es are th us en ti tl ed on ly to th e da m ag es affo rd ed un de r tru st la w. W e

co nc lu de th at PNC is co rrec t. Und er tru st la w, a tru st ee owe s fid uc ia ry du ti es to tru st

be ne fic ia rie s. Res ta te m en t (Thi rd ) of Trus ts § 70 (b ) (2 00 7)

. If a tru st ee vi ol at es an y

o f th es e du ti es

, th en it is li ab le to th e be ne fic ia rie s fo r br each of tru s t

. Wi t m e r v

.

Bla ir

, 58 8 S.W .2d 22 2, 22 4 (Mo

. Ct

. App

. 19 79 ); Res ta te m en t (Thi rd ) of Trus ts § 93

(2 01 2)

. The cl ai m is fo r br each of tru st reg ard le ss of whe th er th e br each is “ wro ng fu l

an d frau du le nt or do ne th ro ug h ne gl ig en ce or ari s [ e s ] th ro ug h m ere ov ers ig ht an d

fo rg et fu ln es s.” C o v e

y v. Pier ce

, 82 S.W .2d 59 2, 59 8 (Mo

. Ct

. App

. 19 35 ) (p er

c u r i a m)

. Tort cl ai m s are no t cat eg or ic al ly di sa ll owe d ag ai ns t tru st ees

. Bo th th i r d

pa rti es an d be ne fic ia rie s can br in g a to rt cl ai m ag ai ns t a tru st ee fo r a to rt co m m it te d

in th e co ur se of th e ad m in is tra ti on of th e tru st

, bu t th e tru st ee’s al le ge d to rt m us t ari se

fro m a vi ol at io n of a du ty th at is no t im po se d by tru st la w. Se e Res ta te m en t (Sec on d)

of Trus ts § 26 4 & cm t. a, il lu s. 1- 2 (1 95 9) ; 4 Sco tt & Asc he r on Trus ts § 26 .3 (5 th ed

.

20 06 ).

App el le es al le ge th at All eg ia nt

, as tru st ee, was req ui red to co nt ro l tru st as se ts

,

pr ot ect tru st as se ts

, an d ke ep ad eq ua te reco rd s of tru st fu nd s. Trus t la w, no t to rt la w,

im po se d th es e du ti es on All eg ia nt

. Res ta te m en t (Thi rd ) of Trus ts §§ 7 6

, 8 3

, 84

(2 00 7)

. If All eg ia nt br each e d a n y of th es e du ti es

, th en PNC is li ab le to on ly tru st

be ne fic ia rie s an d fo r on ly th os e da m ag es pr ov i d e d f o r u n d er tru st la w. Se e

Res ta te m en t (Thi rd ) of Trus t s § 94 (2 01 2) ; Res ta te m en t (Sec on d) of Trus ts § 20 5

(1 95 9)

.

Trus t la w pr ov id es th at if a tru st ee co m m it s a br each of tru st

, “ he is ch arg eab le

wit h (a) an y lo ss or de pr eci at io n in va lu e of th e tru st es ta te res ul ti ng fro m th e br each

o f t ru st ; or (b ) an y pr of

it m ad e by h im th ro ug h th e br each of tru st ; or (c) a n y p r o f i t

whi ch wou ld ha ve accr ue d to th e tru st es ta t e i f th ere ha d be en no br each of tru st .”

-1 0-Est at e of

Lu yt ie s v. Sc ud

de r

, 43 2 S.W .2d 21 0, 21 6 (Mo

. 19 68 ) (q uo ti ng Res ta te m en t

(Sec on d) of Trus ts § 20 5)

. * The refo re, to th e ex te nt PNC is li ab le to App el le es fo r

br each of All eg ia nt ’s du ti es un de r tr us t l aw, th e ap pr op ria te m eas ur e of da m ag es is

se t fo rth in § 20 5. As All eg ia nt was a tru st ee ov er NPS tru st s in Mi ss ou ri fro m 19 98

t o 20 04

, App el le es can reco ve r fo r lo ss es to th e tru st s in Mi ss ou ri c a u s e d b y

All eg ia nt ’s br each es du rin g th is ti m e

. D a mag e s to th e Mi ss ou ri tru st s aft er

All eg ia nt ’s tru st ees hi p or ou ts id e of th e Mi ss ou ri tru st s are no t reco ve rab le fro m PNC

as All eg ia nt ’s su cces so r.

III.

The pa rti es di sa gr ee ab ou t who were th e be ne fic ia rie s of th e pr en eed tru st s at

is su e. PNC m ai nt ai ns th at NPS was th e so le be ne fic ia ry of th e Mi ss ou ri tru st s,

be cau se NPS was th e on ly en ti ty en ti tl ed to rece iv e di st rib ut io ns of tru st in co m e an d

pr in ci pa l in th e or di na ry co ur se un de r th e st at ut e an d tru st ag reem en t. Se e Mo

. Rev

.

St at

. §§ 43 6.0 31 .3, 43 6.0 45 ; Res ta te m en t (Thi rd ) of Trus ts § 4 8 (2 00 3)

. App el le es

res po nd th at ev en if NPS was a be ne fic ia ry

, th en so to o were th e fu ne ral ho m es an d

th e co ns um ers

, be cau se th e tru st s ex is te d to en su re th at th e ho m es an d co ns um ers ha d

fu nd s to pe rfo rm fu ne ral se rv ic es

. W e co nc lu de th at th e tru st be ne fic ia rie s are NPS,

co ns um ers in Mi ss ou ri, an d th e fu ne ral ho m es th at were to pr ov id e se rv ic es to th os e

co ns um ers pu rs ua nt to th e co ns um ers ’ pr en eed co nt ract s.

The st an da rd de fin it io n of a tru st be ne fic ia ry is “ [a] pe rs on fo r who se be ne fit

pr op ert y is he ld in tru st .” Res ta te m en t (Thi rd ) of Trus ts § 3 (20 03 ). “ A per so n i s a

be ne fic ia ry of a tru st if th e se tt lo r m an ife st s an in te nt io n to gi v e t he pe rs on a

be ne fic ia l in te res t.” Id

. § 48

. A be ne f i c i a l i n t e r e s t is a “ rig ht or ex pe ct an cy in

* The Mi ss ou ri Uni fo rm Trus t Co d e

, w h i c h co di fie d a tru st -la w m eas ur e of

da m ag es su bs ta nt ia ll y si m il ar to th at fo un d in th e Res ta te m en t (Sec on d) of Trus ts

§ 20 5, do es no t app ly he re, becau se it to ok effe ct aft er All eg ia nt ’s te nu re as tru st ee.

Se e Mo . Rev . Sta t. § 45 6.1 0- 10 02 (20 05 ).

-1 1-so m et hi ng (s uc h as a tru st or an es ta te ), as op po se d to le ga l ti t l e to th at th in g.”

Ben ef ic ia l In te re st , Bla ck ’s Law Dict io na ry (10 th ed . 20 14 ).

Und er th e st at ut or y sc he m e, NPS was en ti tl ed to rece iv e tru st pr in ci pa l in th e

or di na ry co ur se aft er NPS rei m bu rs ed fu ne ra l h o m es fo r th e co st of se rv ic es

pu rch as ed by Mi ss ou ri co ns um ers

. Bu t th e who le pu rp os e of th e pr en eed tru st s was

to en su re fu nd in g fo r fu ne ral se rv ic es fo r th e be ne fit of th e co ns um ers

. The st at ut e’s

req ui rem en t th at NPS, as th e se ll er of a pr en eed co nt ract

, de po si t ei gh ty pe rcen t of th e

pr en eed co nt ract am ou nt in to a tru st was in te nd ed t o be ne fit co ns um ers by

gu aran te ei ng th at m on ey wou ld be av ai la bl e to pa y fo r fu ne ral s. Fu ne ral ho m es li ke ly

wou ld no t ha ve ag r eed to pe rfo rm fu ne ral se rv ic es wit ho ut a gu aran te e th at th ey

wou ld be rei m

bu rs ed for

th os e se rv ic es

, so th e tru st s were in te nd ed to be ne fit th em

to o.

To b e su re, t he st at ut e cal le d fo r NPS t o re cei ve tru st ass et s d ire ct ly from th e

tru st in th e or di na ry co u r s e

. B u t if NPS fai le d to m ak e rei m bu rs em en ts

, th en

co ns um ers an d fu ne ral ho m es were en ti tl ed to a di st rib ut io n di rect ly fro m th e tru st in

“ an am ou nt eq ua l to al l de po si ts m ad e in to th e tru st fo r th e [p ren eed ] co nt ract .” Mo

.

Rev

. St at

. § 43 6.0 48

. The co ns um ers an d f u n e r al ho m es were no t m ere in ci de nt al

be ne fic ia rie s of th e tru st li ke a cred it or of an in te nd ed be ne fic ia ry

. Cf

. Res ta te m en t

(Thi rd ) of Trus ts § 48 cm t. a, il lu s. 3. The cen tra l pu rp os e of th e pr en eed tru st s was

to e n s u r e t he av ai la bi li ty of fu nd s to pa y fu ne ral ho m es fo r pe rfo rm in g fu ne ral

se rv ic es th at be ne fit te d c on su m ers

.

If NPS were de em ed th e so le be ne fic ia ry

, th en th e pu rp os e of th e pr en eed tru st s

wou ld be fru st rat ed

. NPS was th e se tt lo r o f th e tru st

, Mo

. Rev

. St at

. § 43 6.0 05 (6 ),

an d if NPS were al so th e so l e b e n e f i c ia ry , t he n it co ul d “ co m pe l th e te rm in at io n of

th e tr u s t

, a l t h ou gh th e pu rp os es of th e tru st ha ve no t be en acco m pl is he d.”

Res ta te m en t (Sec on d) o f Tr u s t s § 33 9 (1 95 9)

. The pr en eed tru st s were no t crea te d

wit h th e in te nt th at NPS co ul d di ss ol ve th e tru st s at an y ti m e—b efo re th e fu nd s were

-1 2-us ed to rei m b u r s e f u n e r a l ho m es th at ag reed to pr ov id e se rv ic es fo r th e co ns um ers

who su pp li ed th e fu nd s fo r th e tr us ts

.

Id en ti fy in g th e tru st be ne fic ia rie s is im po rta nt

, b e c a u s e P NC rai se s de fen se s

ba se d on an as su m

pt io n th at NPS was th e so le be ne fic ia ry

. PNC co nt en ds t h a t th e

di st ric t co ur t erro ne ou sl y st ru ck it s au th or iz at io n an d in pa ri de li ct o de fen se s be fo re

tri al

. The au th or iz at io n de fen se ap pl ie s wh en a be ne fic ia ry co nc ur s in or as se nt s to

a br each of tru st ; su ch a be ne fic ia ry is sa id to ha ve au th or iz ed th e br each an d can no t

co m pl ai n ab ou t it in a la wsu it

. W al k e r v. Ja mes

, 85 S.W .2d 87 6, 88 5 (Mo

. 19 35 ).

The in pa ri de li ct o de fen se pr ov id es th at “ a pe rs on can no t m ai nt ai n an act io n if, in

or de r to es ta bl is h hi s cau se of act io n, he m us t re ly, in who le or in pa rt, on an il le ga l

or im m or al act or tra ns act io n to whi ch he is a pa rty.” Dob bs v. Dob bs Ti r e & Aut o

Ct rs

., In c.

, 96 9 S.W .2d 89 4, 89 7 (Mo

. Ct

. App

. 19 98 ). The se de fen se s do no t ap pl y

to in no cen t Mi ss ou ri co ns um ers who were to rece iv e fu ne ral se rv ic es un de r a pr en eed

co nt ract

, or to fu ne ral ho m es who wer e t o p ro vi de th os e se rv ic es

. Bec au se th e

co ns um ers an d fu ne ra l h o mes were be ne fic ia rie s of th e pr en eed tru st s, th e di st ric t

co ur t d id no t er r in st rik in g t he de fen se s.

PNC al so as se rts th at t h e d i s t ric t co ur t erro ne ou sl y st ru ck it s in ve st m en t

ad vi so r de fen se un de r Mo

. Rev

. St a t

. § 4 3 6

. 03 1.2

. The st at ut e pr ov id ed th at a

pr en eed tru st ag reem en t m ay pr ov id e th at whe n tru st fu nd s ex ceed $2 5 0

, 00 0,

in v es tm en t de ci si on s m ay be m ad e by an in de pe nd en t qu al ifi ed in ve st m en t ad vi so r

de si gn at ed by th e se ll er. Mo

. Rev

. St at

. § 43 6.0 31 .2. The la w co nt in ue d: “ In no cas e

sh al l co nt ro l of sa id as se ts be di ve st ed fro m th e tru st ee no r sh al l sa id as se ts be pl aced

in an y in ve st m en t whi ch w o u l d b e be y on d th e au th or it y of a reas on ab ly pr ud en t

tru st ee t o i nv es t i n.” Id

.

PNC arg ue s th at on ce NPS hi red an in ve st m en t ad vi so r, All eg ia nt was rel ie ve d

of al l li ab il it y rel at in g to in ve st m en t de ci si on s o f t r u s t pr op ert y

. W e reject th at

co nt en ti on be cau se it gi ve s no effe ct to th e req ui rem en t th at as se ts rem ai n in ve st ed

-1 3-in a m an ne r th at is wit hi n th e au th or it y of a rea s o n a b l y p r u d en t tru st ee. A tru st ee

al way s ha s a du ty to e n s ur e th at tru st as se ts are in ve st ed pr ud en tl y

, whe th er th e

tru st ee is in ve st in g th e as se ts hi m se lf or m on it or in g t h e i n ve st m en t de ci si on s of an

in ve st m en t ad vi so r. Res ta te m en t (Thi rd ) o f Trus ts §§ 90

, 91 (2 00 7)

. The st at ut e

reco gn iz ed th is on go in g du ty by pr ov id in g th at “ in no cas e” whe re as se ts are in ve st ed

im pr ud en tl y —i nv es tm en t ad vi so r or no —m ay th e tru st ee be re l i e v e d o f li ab il it y

.

PNC is no t rel ie ve d of li ab il it y un le ss All eg ia nt en su red th at W ul f was in ve st in g tru st

as se ts wit hi n t he au th or it y of a reas on ab ly pru de nt tru st ee.

IV.

PNC ne xt co nt en ds th at App el le es ’ tru st -la w cla im sh ou ld ha ve be en tri ed to

th e co ur t, rat he r th an to a jury. W e se e m eri t in th is po in t. “ Co ur ts of eq ui ty

ge ne ral ly ha ve ex cl us iv e juri sd ic ti on ov er act io ns ag ai ns t a tru st ee fo r br each of tru st

,

as th ey are eq ui ta bl e act io ns .” Bro wn v. Uni te d Mo. Ban k, N

. A.

, 7 8 F

. 3 d 38 2, 38 7

(8 th Ci r. 1 99 6)

. It fo ll ows

, th eref or e, th at App el le es ’ tru st -la w cl ai m sh ou ld ha ve

be en tri ed to th e co ur t u nd er t he ge ne ral rul e.

The re is on e ex cep ti on to th e ru le fo r cl ai m s fo r in de bt ed ne ss

. Se e id

. at 38 8;

Res ta te m en t (Sec on d) of Trus ts §§ 19 7, 19 8 (1 95 9)

. A cl ai m fo r in de bt ed ne ss ari se s

whe n a tru st ee ha s a du ty to pa y mo n e y o r tra ns fer tru st pr op ert y im m ed ia te ly an d

un co nd it io na ll y to th e be ne fic ia ry

, an d th e tru st ee fai ls to do so

. Id

. § 19 8. So lo ng

as “ th ere ha s be en a fi na l s et tl em en t o f acc ou nt s an d n ot hi ng rem ai ns on th e p art of

th e tru st ee bu t to pa y ov er th e am o u n t f o u n d to be du e,” th e be ne fic ia ry ha s a le ga l

cl ai m to reco ve r a sp eci fic su m o f mo ne y

. How ar d’ s Est at e v. How e

, 13 1 S.W .2d

51 7, 52 0 (Mo

. 19 39 ). Bu t whe n th ere ha s be en no acco un ti ng m ad e an d no se tt le m en t

du e, “ th e on ly rem ed y of th e [b en efi ci ary is ] by a bi ll in eq ui ty an d no t by an act io n

at law.” Id.

-1 4-Ci ti ng Jef fe rs on Na ti on al Ban k of Mia mi Bea ch v. Cen tr al Na ti on al Ban k in

Ch ic ag o

, 70 0 F.2 d 11 43 (7 th Ci r. 19 83 ), App el le es arg ue th at th ey br in g a cl ai m fo r

in de bt ed ne ss

. In th at cas e, a tru st gr an to r rev ok ed a tr us t an d t ran sf erre d t he as se ts

to a ba nk

. Tha t ba nk su ed a fo rm er t r u s t ee, al le gi ng th at th e tru st ee ha d act ed wit h

a co nf li ct of in te res t th a t le d to a di m in ut io n of th e tru st

. The Sev en th Ci rcu it

de te rm in ed th at be cau se th e tr us t was te rm in at ed

, th e cl ai m was ne ces sa ril y a cla im

at law fo r in de bt ed ne ss

. Id

. at 1 15 0.

W e are no t co nv in ced by th e reas on in g of Jef fe rs on Na ti on al Ban k

. A br each

of -t r u s t cl ai m fo r da m ag es do es no t be co m e an in de bt ed ne ss cl ai m m erel y be cau se

th e tru st is te rm in at ed

. Se e Ka it z v. Dis t. Ct

. , 65 0 P.2 d 55 3, 55 5 (Co lo

. 19 82 ); Ko hl er

v. Flet ch er

, 44 2 N.W .2d 16 9, 17 2 (Mi nn

. Ct

. App

. 19 89 ). Ben efi ci ari es can br in g an

in de bt ed ne ss cl ai m on ly whe n th ey al le ge a br each by th e tru st ee of an ex pr es s du ty

to pa y a s u m c e r t a i n or to tra ns fer a pa rti cu la r ch at te l. Ka it z

, 65 0 P.2 d at 55 5;

Res ta te m en t (Sec on d) of Tr us ts § 19 8. As on e co ur t ob se rv ed

, Jef fe rs on Na ti on al

Ban k pr es en te d a “ tra di ti on al ly eq u i t a b l e qu es ti on of whe th er or no t th e al le ge d

‘com m on la w tru st ee’ br each e d it s fid uc ia ry du ty. Unl es s an d un ti l th at eq ui ta bl e

qu es ti on is res ol ve d in pl ai nt iff s’ fav or

, th e al le ge d tru st ee is un de r no du ty to m ak e

an y pa y m en t wha ts oe v e r

. ” No bi le v. Pen si on Co mm. o f Pen si on Pla n fo r Emps . o f

New Roc he ll e Hos

p.

, 61 1 F. Su pp

. 72 5, 72 9 (S.D.N.Y. 19 85 ). Trus t-l aw cl ai m s can

be br ou gh t at la w on ly whe n “ th ere is no po ss ib le ne ed fo r th e in te rv en ti on of eq ui ty,

th e o n l y q u e s ti on be in g whe th er th e tru st ee fai le d to pe rfo rm a m in is te ria l act

ex pr es sl y m an da te d by

th e tr us t i ns tru m en t.” Id

. ; se e al so Res ta te m en t (Seco nd ) of

Trus ts § 1 98 (1 ) cm t. b

.

Thi s cas e pr es en ts th e “ tra di ti on al ly eq ui ta bl e q ue st io n of whe th er or no t th e

al le ge d ‘co m

m on law t ru st ee’ bre ach ed it s fi du ci ary du ty.” No bi le

, 61 1 F. Sup p. at

7 2 9

. Liab il it y ha d no t be en es ta bl is he d whe n App el le es br ou gh t th ei r cl ai m ; no

acco un ti ng ha d b e e n mad e, an d no se tt le m en t was du e. Se e How ar d’ s Est at e

, 13 1

S.W .2d at 52 0. App el le es do no t al l e g e th at All eg ia nt m erel y fai le d “ to pe rfo rm a

-1 5-m in is te ria l act ex pr es sl y m an da te d by th e tru st in st ru m en t.” No bi le

, 61 1 F. Su pp

. at

72 9

. Nor do th ey al le ge th at All eg ia nt fai le d “ to tra ns fer [tr us t] ch at te l or pa y [tr us t]

m on ey to [th em ]. ” Res ta te m en t (Thi rd ) of Trus ts § 95 cm t. a (2 01 2)

. The refo re, th ei r

cl ai m is no t a cl ai m fo r in de bt ed ne ss ari si ng ou t of br each of tru st th at wou ld be he ard

by a j ur y

.

App el le es fu rth er con te nd th at if th ei r cl ai m is no t on e fo r in de bt ed ne ss

, th en

Mi ss ou ri la w st il l al lo ws th em to br in g a cl ai m at la w fo r da m ag es ag ai ns t All eg ia nt

.

The y rel y on th e p res en ce o f da m ag es cla im s in Sh er wo od v. Sa xt on

, 63 Mo

. 78

, 82

(1 87 6)

, bu t t h e t r u s t at is su e in Sh er wo od was a de ed of tru st

. “ A d eed of tru st is a

fo rm of m or tg ag e,” Bob DeGeo rg e Ass oc s., In c. v. Haw th or n Ban k

, 37 7 S.W .3d 59 2,

5 97 (Mo

. 20 12 ), an d a “ m or tg ag e is no t a tru st ,” Res ta te m en t (Thi rd ) of Tr u s t s § 5

cm t. k (2 00 3)

. Trus t la w is ge ne ral ly no t ap pl ic ab le to a tru st ee of a de ed of tru st

, se e

id

. , so Sh er wo od

do es no t in fo rm whe th er th e cl ai m s he re sh ou ld pr oc eed in law o r

in eq ui ty. S

h e r w o o d s t a n d s on ly fo r th e li m it ed pr op os it io n th at in so m e cas es

, a

de bt or can su e a m or tg ag e tr us te e in a co ur t o f la w for da m ag es

.

App el le es al so r e l y on Hal la da y v. Vers ch oo r , 3 81 F.2 d 10 0 (8 th Ci r. 19 67 ),

bu t th at cas e in vo lv ed frau d an d un jus t-e nr ic hm en t cl ai m s by a su cc e s s o r

- t r us te e

ag ai ns t a th ird pa rty fo r frau du le nt co nd uc t in it s de al in gs wit h a pr ed eces so r-t ru st ee.

Id

. at 10 2- 03

. The co ur t’s de te rm in at io n th at no n- tru st -b as ed cl ai m s by a su cces so rtru st ee ag ai ns t a th ird pa rty are le ga l cl ai m s th at m ay be tri ed to a jury ha s no

ap pl ic at io n h ere.

Fo r th e reas on s di sc us se d, App e l l e e s br in g a cl ai m on be ha lf of tru st

be ne fic ia rie s fo r br each of t ru st . That type o f cl ai m is pro pe rly tri ed to th e co ur t.

-1 6-V.

App el le es cro s s -ap pe al th e di st ric t co ur t’s di sm is sa l of th ei r cl ai m s al le gi ng

th at All eg ia nt an d ot he rs ai de d an d ab et t e d f r a ud an d br each es of fid uc ia ry du ty.

The y arg ue th at ev en if th ey are li m it ed to a tru st -la w cl ai m ag ai ns t PNC ba se d on th e

act io ns of All eg ia nt

, th ey can al so br in g to rt cl ai m s ag ai ns t PNC fo r act s of All eg ia nt

an d ot he r tru st ees th at th ey be li ev e ai d e d a n d ab et te d NPS an d W ul f. The di st ric t

co ur t co nc lu de d th at Mi ss ou ri do es no t reco gn i z e t h e as se rte d cau se s of act io n fo r

ai di ng an d ab et ti ng

, an d th at th e co m p la in t di d no t ad eq ua te ly pl ead th em in an y

ev en t.

“ Aid in g an d abe tt in g” is a cri m in al law co nc ep t t ha t g av e ri se in to rt law to a

th eo ry kn own as “ co nc ert of act io n.” The Res ta te m e n t ( S e co nd ) of Tort s § 87 6

ad dr es se s “ Pers on s Act in g i n C on cert ” as fol lo ws:

Fo r ha rm res ul ti ng to a th ird pe rs on fro m th e to rti ou s con du ct of

an ot he r, on e is su bjec t t o l ia bi li ty if he

(a) do es a to rti ou s act in co nc ert wit h th e ot he r or pu r s u a n t t o a

co m m on de si gn wit h h im , or

(b ) kn ows th at th e ot he r’s co nd uc t co ns ti tu te s a br each of du ty

an d gi ve s su bs ta nt ia l as si st an c e o r e nc ou rag em en t to th e ot he r so to

co nd uc t h im se lf, o r

(c) gi ve s su bs ta nt ia l as si st an ce t o t h e ot he r in acco m pl is hi ng a

to rti ou s res ul t a n d h i s own co nd uc t, se pa rat el y co ns id ered , c on st it ut es

a b reac h o f du ty to t he th ird pe rs on

.

App el le es al le ge d th at All eg ia nt Ban k an d ot he r tru st ees ai de d an d ab et te d

NPS’ s frau d an d W ul f’s br each es of fid uc ia ry du ty. The y rel ie d on a th eo ry of

li ab il it y th at co rres po nd s to § 87 6( b) or (c) of th e Res ta te m en t. App el le es ’ cl ai m fo r

a i d in g an d ab et ti ng frau d was si m il ar to th ei r tru st -la w cl ai m : th ey co nt en de d th a t

All eg ia nt an d ot he rs fai le d to m ai nt ai n co nt ro l of tru st as se ts

, ret ai n an d ke ep ti tl e to

al l tru st as se ts

, pr es erv e tru st as se ts

, an d en su re th at t ru st di st rib ut io ns were la wfu l

-1 7-an d pr op erl y reco rd ed

. A ppe lle es a ll eg ed th at th es e act s en co ur ag ed an d su bs ta nt ia ll y

as si st ed NPS an d o th ers to pe rp et ua te th ei r frau d s ch em e.

App el le es al so cl ai m ed th at All eg ia nt an d ot he r t r u s t e es ai de d an d ab et te d

se ve ral br each es of fid uc ia ry du ty by W ul f. The t ru st ees al le ge dl y di d so by (1 )

al lo win g W ul f to se rv e as in ve st m en t ad vi so r, ev en th ou gh th ey kn ew th at W ul f was

no t in de pe nd en t an d was m ak in g p o o r i n ve st m en t m an ag em en t de ci si on s, (2 )

al lo win g m em

be rs of th e Cas si ty fam il y to di ct at e in ve st m e n t de ci si on s, an d (3 )

fai li ng to warn st ak eh ol de rs of W ul f’s act io ns

. App el le es al so co m pl a i n ed th at

All eg ia nt ai de d an d ab et te d W ul f’s br each es by si gn in g ag reem en ts wit h W ul f to gi ve

up cu st od y ov er tru st as se ts an d by he lp in g to dr aft le tt er s s i g n e d b y W ul f th at

di rect ed All eg ia nt to tak e d ire ct io n fr om NPS an d o th ers reg ard in g t ru st ass et s.

The di st ric t co ur t pr ed ic te d th at th e Mi ss ou ri Su pr em e Co ur t wou ld de cl in e to

ad op t th e th eo ry of li ab il it y pr es en te d by § 87 6( b) an d (c )

. O u r juri sd ic ti on is

pr em is ed on di ve rs it y of ci ti zen sh ip

, so we ap pl y s t a t e la w an d m us t fo ll ow

co nt ro ll in g d eci si on s o f th e Su pr em e Co ur t of Mi ss ou ri. Se e Ann ex Pro ps ., L LC v.

TNS Rese ar ch In t’l

, 71 2 F.3 d 38 1, 38 4 (8 th Ci r. 20 13 ) (p er cu ria m ). Tha t co ur t’s on ly

de ci si on co nc ern in g § 87 6 of th e Res ta te m en t is Za ff t v. Eli Li ll

y & Co

. , 67 6 S.W .2d

24 1 (Mo

. 19 84 ). Za

ff t co nc ern ed a c o n c e rt- of -act io n cl ai m in a ph arm aceu ti cal

pr od uc t-l ia bi li ty act io n un de r th e th eo ry of § 87 6( a). The co ur t reject ed th e cl ai m

, bu t

th e d eci si on is m

ur ky, and it ha s p ro du ced co nf li ct in g i nt erp ret at io ns

.

The Za ff t co ur t fir st ex pl ai ne d th e co nc ert -o f-ac ti on th eo r y d e r iv ed fro m

§ 87 6( a) an d t h e n co nc lu de d th at “ [t]he el em en t of ag reem en t or co op erat io n

ne ces sa ry to ap pl ic at io n o f th is th eo ry is la ck in g in th is cas e.” Id

. at 24 5. One

Mi ss ou ri co ur t to ok th is an a l y si s to m ean th at Za ff t en do rs ed § 87 6( a) an d reject ed

th e cl ai m on ly be cau se th e pl ai nt iff pr es en te d in su ffi ci en t ev id en ce. Sh el te r Mut

. In s.

Co

. v. W hi te

, 93 0 S.W .2d 1, 3- 4 (Mo

. Ct

. App

. 19 96 ). Za ff t la te r co nc lu de d, ho wev er,

th at “ th e th eo rie s ad va nc ed by pl ai n t i f f s d o no t pe rs ua de th e Co ur t to ab an do n th e

-1 8-Mi ss ou ri to rt la w whi ch req ui res th at th ey es ta bl is h a cau sa l rel at io ns hi p be twee n th e

de fen da nt s an d th e in

jury-pro du ci ng ag en t as a pr eco nd it io n to m ai nt en an ce of th ei r

cau se s of act io n.” 67 6 S.W .2d at 24 7. Giv en th e Za ff t co ur t’s earl ie r ci ta ti on of Abe l

v. Eli Li ll y & Co

. , 34 3 N.W .2d 16 4 (Mi ch

. 19 84 ), whi ch ob se rv ed th at th e co nc ert -o fact io n th eo ry m ay ha ve eas ed th e pl ai nt iff ’s tra di ti on al bu rd en of pr oo f of cau sa ti on

,

id

. at 17 6 & n.1 9, Za

ff t ’s refu sa l to “ ab an do n th e Mi ss ou ri to rt la w” co ul d be read as

a reject io n of § 8 7 6 ( a )

. One Mi ss ou ri co ur t se em s to ha ve so co ns tru ed Za ff t in

sa y in g th at § 87 6( c) has no t been ad op te d in Mi ss ou ri. Rich ar ds on v. Hol la nd

, 74 1

S.W .2d 75 1, 7 54 (Mo . Ct. Ap p. 1 98 7)

.

Giv en th at Za

ff t sq ua rel y reject ed th e co nc ert -o f-ac ti on cl ai m in th at cas e for

in su ffi ci en t ev id en ce of ag reem en t o r c oo pe rat io n, it was un ne ces sa ry fo r th e co ur t

to acce pt or reject § 87 6( a) as an av ai la bl e th eo ry in Mi ss ou ri. W e di sa gr ee wit h th e

in te rm ed ia te ap pe ll at e co ur t in W hi te th at Za

ff t ’s fo cu s on su ffi ci en cy of th e ev id en ce

m ean s th at th e st at e su pr em e co ur t ad op te d § 87 6( a)

. C o ur ts of te n ta ke th e pa th of

le as t res is ta nc e, an d if th e ev id en ce was pl ai nl y in su ff i c i e n t o n on e el em en t, th en

th ere was no ne ed to ad dr es s a po ss ib ly m or e di ffi cu lt qu es ti on ab ou t th e vi ab il it y of

th e th eo ry ov eral l. The co ur t’s co nc lu di ng co nc ern ab ou t pr oo f of c a u s a t i o n rai se s

do ub t ab ou t whe th er Mi ss ou ri wou ld acce pt § 87 6( a). Bu t be cau se th e co ur t’s m or e

fo cu se d di sc us si on of § 87 6( a) res ol ve d th e cl ai m ba se d on in su ffi ci en t ev id en ce, we

can no t b e su re t ha t t he co ur t al so m ean t t o a dd res s t he th eo ry m or e b ro ad ly.

W ha te ve r cl ue s th at Za

ff t pr ov id es ab ou t a cau se of act i o n u n d er § 87 6( a) in

Mi ss ou ri, th e de ci si on do es n o t a d d r es s ai di ng -an d- ab et ti ng li ab il it y un de r th e

su bs ect io ns at is su e he re, § 87 6( b) an d (c). Se e Bra dl ey v. Ray

, 90 4 S.W .2d 30 2, 31 5

& n.1 1 (Mo

. Ct

. App

. 19 95 ). An in te rm ed ia te Mi ss ou ri co ur t in W hi te reco gn iz ed a

cau se of act io n un de r § 87 6( b)

, bu t we th in k th at de ci si o n w a s ba se d on an

ov erre ad in g of Za

ff t

. Ano th er in te rm ed ia te co ur t reject ed § 87 6( c) in Rich ar ds on

, bu t

th at de ci si on , to o, p ro ba bl y read s m or e in to Za

ff t th an is warran te d.

-1 9-We a r e l eft wit h li tt le gu id an ce in an un cert ai n area

. The Su pr em e C o u r t

ob se rv ed in 19 94 th at “ in so m e St at es

, it is st il l u nc le ar whe th er th ere is ai di ng an d

ab et ti ng to rt li ab il it y of th e ki nd se t fo rth in § 87 6( b) of th e Res ta te m en t.” Cen t. Ban k

of Denv er , N.A. v. Fir

st In te rs ta te Ban k of Den ver

, N.A. , 51 1 U.S. 1 64 , 18 1 (1 99 4)

.

Tha t co nd it io n pe rs is ts to da y in si gn ifi can t St at es

. In 20 12

, th e Ohi o Su pr em e Co ur t

an swe red a cert ifi ed qu es ti on by s a yi n g th at it ha d ne ve r reco gn iz ed a cl ai m un de r

§ 87 6. DeVri es Dai ry

, L.L.C. v. W hi te Eag le C o o

p

. A ss ’n

, 97 4 N.E.2d 11 94

, 11 94

( Ohi o 20 12 ). The la w in Virg in ia ap pe ars un se tt le d. Jo rd an v. O s m u n

, N o

.

1: 16 -CV-5 01 , 20 16 W L 71 73 78 4, at *4 (E.D. Va. Dec. 8, 20 16 ).

A fed eral di st ric t jud ge in 19 91 , wi th th e be ne fit of Z a f f t

, w as no t co nv in ced

t h a t Mi ss ou ri co ur ts wou ld reco gn iz e a cau se of act io n fo r ai di ng an d a b e t t i n g a

br each of fid uc ia ry du ty. Omah a In de m. Co

. v

. Ro y a l Am. Man ag er

s, In c.

, 75 5 F.

Su pp

. 14 51

, 14 59 (W. D. Mo

. 19 91 ). Ano th er di st ric t jud ge in 20 13 —ci ti ng de ci si on s

co nc ern in g t res pa ss an d as sa ul t fro m th e ni ne te en th an d earl y twen ti et h

cen tu rie s— co nc lu de d t ha t M is so ur i d oe s re co gn iz e li ab il it y fo r ai di ng an d ab et ti ng

a to rt. Lo ne rg an v. Ban k of Am., N.A.

, No. 2: 12 -CV-0 42 26

, 20 13 W L 17 60 24

, at *1 1-

12 (W. D. Mo

. Ja n. 16

, 20 13 ). The di st ric t jud ge in th is cas e, aft er a th or ou gh rev ie w

of th e rel ev an t au th or it ie s, pr ed ic te d th at Mi ss ou ri wou ld no t reco gn iz e a c a u s e of

act io n u nd er § 87 6( b) or ( c).

Thi s co ur t ha s ex erci se d cau ti on in ex pa nd in g st at e-l aw th eo ri es of lia bi li ty th at

are no t fo res ha do wed by st at e pr eced en t. Ki ng man v. Dil la rd ’s

, In c.

, 64 3 F.3 d 60 7,

61 5, 61 7 (8 th Ci r

. 2 0 1 1 )

. U nd er th e ci rcu m st an ces he re, App el le es se ek to us e

ai di ng -an d- ab et ti n g li ab il it y to ci rcu m ve nt th e li m it at io ns of tru st la w by ho ld in g

PNC li ab le in to rt fo r es se nt ia ll y th e sa m e co nd uc t th at co ns ti tu te s a br each of tru st

.

W e are no t pr ep ared to pr ed ic t th at th e Su pr em e Co ur t of Mi ss ou ri wou ld reco gn iz e

a ne w cau se of act io n ba se d on § 87 6( b) or (c) on th e fact s of th is cas e. W e th eref or e

reject App el le es ’ cro ss -ap pe al

.

-2 0-* * *

I n s u mm a r y

, we affi rm th e jud gm en t in pa rt, rev ers e in pa rt, an d rem an d fo r

fu rth er pr oc eed in gs

. W e co nc lu de th at App el le es br ou gh t a tru st -la w cl ai m in eq ui ty

th at sh ou ld ha ve be en tri ed to th e co ur t. The be ne fic ia rie s of th e pr en eed tru st s were

NPS, Mi ss ou ri co ns um ers

, an d th e fu ne ral ho m es th at were to pr ov id e se rv ic es fo r th e

co ns um ers

. The m eas ur e of da m ag es fo r th e tru st cl ai m is de fin ed b y § 20 5 of th e

R e st at em en t (Sec on d) of Trus ts

. The di st ric t co ur t pr op erl y di sm is se d App el l e e s ’

cl ai m s fo r ai di ng an d ab et ti ng in to rt. Alt ho ug h th e cas e was tri ed to a jury on a to rtla w th eo ry

, we do no t di ct at e th at th e cas e be ret rie d in it s en ti ret y

. The di st ric t co ur t

is fam il ia r wit h th e ev id en ce an d m ay pr oc eed ba se d on th e ex is ti ng tri al reco rd as it

se es fit , wit h re cei pt of a dd it io na l ev id en ce as th e co ur t d eem s ap pr op ria te

.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

-2 1-