On January 23, 2025, Philip Kirk Jones and Kelly Scalise secured a significant appellate victory for two charitable foundations, The Marshall Heritage Foundation and Marshall Legacy Foundation (“Foundations”), in a trust litigation brought by a co-trustee of the Foundations against a co-trustee of the Peroxisome Trust, the funding trust of the Foundations. The Foundations had sought removal of the co-trustee based on breaches of trust and fiduciary duty and the award of damages personally against the co-trustee under the Louisiana Trust Code.
In a precedential opinion, the Court of Appeals for the Fifth Circuit affirmed the judgment of the district court (E.D. La. (Fallon, J.)), removing the co-trustee of the Peroxisome Trust and awarding over $11 million dollars in damages to the Foundations borne personally by the Peroxisome Trust co-trustee. First, the Fifth Circuit held that there was complete diversity of citizenship, rejecting the co-trustee’s argument that the citizenship of non-party trustees of the Foundations must be considered. The appellate court was quite clear that only the citizenship of the named trustee who filed suit on behalf of the Foundations mattered for purposes of diversity. The appellate court looked to Doermer v. Oxford Financial Group, Ltd., 884 F.3d 643 (7th Cir. 2018) as support, and determined that its decision was fully in line with Supreme Court precedents of Navarro Savings Association v. Lee, 446 U.S. 458 (1980), and Americold Realty Trust v. Conagra Foods, Inc., 577 U.S. 378 (2016). Second, the Fifth Circuit found that there was no abuse of discretion in the district court’s decision that the unnamed co-trustees of the Foundations were not necessary or indispensable parties under Federal Rule of Civil Procedure 19. Third, the Fifth Circuit rejected the co-trustee’s argument that res judicata barred the suit. The appellate court held that the litigation arose from post-judgment actions by the co-trustee and thus the cause of action did not exist at the time of a previous litigation. The Fifth Circuit also found that the parties appeared in different capacities; thus, res judicata again did not apply. Finally, the Fifth Circuit summarily dismissed the co-trustee’s argument that summary judgment should not have been granted due to evidence of comparative fault. Like the district court, the Fifth Circuit found that argument to be “unconvincing” and “meritless.”
If you have any questions about this case, please contact Philip Kirk Jones and Kelly Scalise and visit our Appellate practice page.
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