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Eastern District of Kentucky Court Awards More Than $500 Million in Compensatory Damages for the Fraud of Defendants in Breach of Fiduciary Duty Cases


On March 21, 2016, Bingham Greenebaum Doll LLP received an opinion from the U.S. District Court Eastern District of Kentucky granting a collective judgment of nearly $550 million to four plaintiffs, including a firm client, following a hard fought ten-day bench trial last September, after which the parties submitted proposed findings of fact, conclusions of law, and post-trial briefs that were carefully studied by the Court. The cases, Osborn vs. Griffin, et. al, Case No. 2011-89 and Holt vs. Griffin et. al, Case No. 2013-32, spanned several decades and involved numerous witnesses and complex trust and estate issues. The nearly 30-year high stakes multi-million dollar family dispute that has been playing out in federal court in Covington has finally drawn to a close.

Case History

In a previous ruling, U.S. District Court Judge William O. Bertelsman found that two brothers breached their fiduciary responsibilities to their sisters with a series of stock and estate and trust transactions that put the men in complete control of the family's business. Griffin Industries Inc., started by their father John L. Griffin in 1943, converted animal carcasses into poultry meal and biodiesel fuel. Before Darling International bought it for $840 million in 2010, it was one of the state’s largest private companies.

Estate Assets Dispute

According to Judge Bertelsman, these cases presented a dispute over the disposition of assets in the estates and trusts of the plaintiffs’ parents, including the stock of the company founded more than seventy years ago by their father. Some of the challenged transactions occurred more than 30 years ago, and one of the plaintiffs brought and settled a related lawsuit more than twenty years ago. In late 2010, however, a series of events caused the plaintiffs to raise questions the actions of about their two oldest brothers, who served as co-executors and co-trustees of their parents’ estates and trusts years before.

According to Judge Bertelsman, the evidence revealed a pattern, spanning decades, of the two oldest brothers exercising their authority over their sisters by only sharing selective information with them; leveraging their roles to discourage and, sometimes, intimidate, the sisters from seeking information or from questioning their brothers’ decisions; pitting one sister against the others; and staunchly insisting that their actions were in keeping with their parents’ wishes, even in the face of estate and trust documents that reflected the contrary:

While defendants’ mantra in litigation had been that “Father wanted the boys to get stock and the girls to get a million dollars,” none of their parents’ estate plans created before the breaches of fiduciary duty herein reflected such an intent.  Mr. and Mrs. Griffin’s estate plans called for equal treatment of their then-living eleven children.

It appears that the family dynamic gave rise to a fervent belief in the sons that their sisters had no business playing any role in the company’s management, no business owning any property that was important to the company, and certainly no business in owning company stock that would allow them a voice in corporate decisions. Again, however, this belief was not in keeping with their parents’ testamentary documents.

Case Outcome

Following is a brief overview of the Court’s opinion; please see “Findings of Fact Conclusion of Law and Order” for details and specifics.

The Court rejected the two oldest brothers’ argument “that their sisters were remiss for not ferreting out the fiduciary breaches sooner.”  According to the Court, the family “dynamics enabled defendants to successfully rebuff their sisters’ inquiries over the years, not in a way that would have given the sisters full knowledge that something was legally awry, but simply in a way that reinforced the message that the sisters, who had always been admonished to respect and trust their brothers’ authority, had neither the need nor the right to know the details regarding their parents’ estates.” 

“It is the duty of a fiduciary to disclose all of the material facts that would put the beneficiary upon notice that a breach of trust may have been committed.” Hutchings v. Louisville Trust Co., 276 S.W.2d 461, 465 (Ky. 1995.)”  And where concealment or obstruction occurs in the context of a fiduciary relationship, as here, there is no duty on the injured party to exercise due diligence to discover the fraud.

Thus, the fact that the brothers’ bad acts occurred in 1985 when their mother died, and 1995 when their father died, did not cut off the sisters right to bring suit against her brothers in 2011 because they had concealed their wrongdoing from the sisters. Judge Bertelsman noted that “whenever plaintiffs made inquiries over the years, their brothers either brushed them off or simply lied to them.” 

In concluding that the Plaintiffs’ request for disgorgement of profit was the appropriate remedy for the defendants’ breaches, the Court held that the brothers could be held accountable for not only the profits from their wrongdoing, but also the profits that flowed to third parties, such as their youngest brothers.

The Court found that the plaintiffs were therefore entitled to prejudgment interest at the Kentucky statutory rate of 8 percent, and are collectively entitled to disgorgement from their two oldest brothers in the amount of $547,874,943.

Judge Bertelsman noted that this is a family fight of significant and unfortunate proportions. The dispute turned siblings and generations against each another. Even in the family context, however, well settled principles of equity and fiduciary law must be applied.

Firm attorneys Janet P. Jakubowicz and Benjamin J. Lewis served as leads on the client’s trial team, along with W. Scott Croft. Firm paralegal Dianna Moore, Litigation Support Analyst Michelle Clark, and Administrative Assistants Julie Clemons, Jeanette Henson and Lisa Sponcel also assisted on the case.

To learn more about Janet P. Jakubowicz and her practice, please visit her profile.

To learn more about Benjamin J. Lewis and his practice, please visit his profile.

To learn more about W. Scott Croft and his practice, please visit his profile.

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