Opinion ID: 796885
Heading Depth: 1
Heading Rank: 1

Heading: Facts and Posture

Text: 2 The factual and procedural background of this case is detailed in Pictet I, and we recount and supplement that background as follows. On May 1, 1998, the Southeast Timber Leasing Statutory Trust (Trust) was formed as a business trust organized under the Connecticut Statutory Trust Act, see Conn. Gen.Stat. Ann. § § 34-500 et seq., with First Union as trustee. The Trust was formed to purchase First Land and Timber (FLT), an Arkansas corporation, and then, through a series of mergers with other entities, merge the surviving entity into the Trust itself and distribute its assets to the Trust beneficiaries. The trust agreement narrowly circumscribed the trustee's control of trust assets. 3 Pictet, in its capacity as trustee of the Henrietta Y. Jones Trust, held shares of FLT at the time of the merger. Pictet exercised its statutory right to dissent from the merger and recover fair value for its shares by following the procedures enumerated in the Arkansas Business Corporation Act (Arkansas Act). See Ark.Code Ann. § 4-27-1301 et seq. This included notifying First Union of its dissent, tendering its shares, and providing its own estimate of fair value-$5.1 million. 4 First Union set $3.8 million aside in a Golden Gate Bank account, which represented the pro rata value of Pictet's shares under the merger agreement. The remaining merger consideration, including money placed in a holdback escrow account intended to indemnify or reimburse loss parties, was distributed to the non-dissenting shareholders in accordance with the merger agreement and associated exchange agreement. At specified intervals, in accordance with the exchange agreement, the holdback monies were released by the escrow agent to another bank for distribution to former shareholders. The last such distribution occurred in December 1999. 5 In March 1999, First Union filed suit against Pictet in an Arkansas state court to determine the fair value of Pictet's shares. Pictet removed the case to federal court and filed a counterclaim alleging that First Union's untimely lawsuit fixed the value of Pictet's shares at $5.1 million plus interest. On May 8, 2000, by consent order, First Union was required to pay Pictet the $3.8 million held for it in the Golden Gate Bank account. Upon realizing that First Union no longer had sufficient assets to pay the $5.1 million plus interest Pictet sought, Pictet amended its counterclaim to include claims for conversion and breach of fiduciary duty. On February 9, 2001, the district court issued a judgment in the appraisal action in Pictet's favor for $5.1 million. On March 15, 2002, the district court held that First Union also owed 6% interest on the money due to Pictet (Interest Rate Decision). Pictet moved for reconsideration, arguing that the court had not disposed of its breach of fiduciary duty claim. In response to the motion, First Union specifically cited § 34-523(b) of the Connecticut Statutory Trust Act (Connecticut Act) as barring Pictet from holding First Union individually liable for the alleged breach of fiduciary duty. Although the court mentioned in its Interest Rate Decision that First Union owed a duty, in its subsequent order denying Pictet's motion for reconsideration the court stated that it would not reach Pictet's breach of fiduciary duty claim because it did not believe that First Union had been sued in its individual capacity. Following the denial of the motion for reconsideration, Pictet appealed, arguing that First Union in its individual capacity was a proper party to the action. First Union again asserted its Connecticut Act defense in its appellee's brief. We held that First Union had been individually sued on the conversion and breach of fiduciary duty claims and remanded the case for further proceedings. 1 Pictet I, 351 F.3d at 815. 6 On remand, Pictet moved for summary judgment. In its response and renewal of its own summary judgment motion, First Union incorporated by reference its Connecticut Act defense. The district court granted Pictet's motion for summary judgment on the breach of fiduciary duty claim (Fiduciary Duty Decision). It held, inter alia, that it had already ruled that First Union owed Pictet a fiduciary duty, and that it would not reconsider its position because the existence of a fiduciary duty was the law of the case. It further held that because First Union knew that Pictet valued its shares at $5.1 million, First Union breached its fiduciary duty by allowing disbursements that encroached upon that amount. The decision said nothing of the Connecticut Act defense.