The NPS civil trial has completed its third week, and jurors probably face another four weeks of witness testimony. First from the NPS receiver, and then from the defendant trustees, the jurors are hearing two very contrasting theories of what fiduciary duties were owed by the NPS trustees. Up until a few weeks before the trial began, the defendant trustees defined their fiduciary duties as owed exclusively to the preneed seller (which for the most part was NPS). But the court ruled in favor of the NPS receiver, and found that the consumers and funeral home providers were also trust beneficiaries, and therefore owed fiduciary duties.
Pleadings filed with the court suggest that the SDR’s arguments will be focused exclusively on duties owed to consumers and funeral home providers. The defendant banks will seek to demonstrate that procedures were developed in compliance with the requirements of Chapter 436. The elephant in the courtroom will be the failure of a billion dollar preneed company, and the exposure of tens of thousands of consumer contracts. The receiver will argue to jurors that such a failure had to be the result of fiduciary negligence. To an extent, the court has provided some support to this argument. In an evidentiary ruling, the court held that the defendant banks could not introduce evidence for the purpose of showing that regulators bear some fault for the NPS collapse. However, the court left open whether he will allow the introduction of evidence regarding regulatory actions for other purposes. Consequently, we anticipate that the defendant banks will introduce evidence of regulatory actions for purposes of establishing standards that the trustees subsequently followed. If regulators and bank trustees did all that was required by Chapter 436, preventing the Cassitys’ fraud was not a failure on their part, but rather a failure of Chapter 436.
Missouri trust treatise law was authored in part by Professor Francis Hanna. Professor Hanna was qualified as an expert by the court to testify at the civil trial, and his expert witness report methodically examines the fiduciary duties of the Missouri preneed trustee, and the fiduciary claims made by the NPS receiver. In subsequent posts, we will examine the duties as outlined by Professor Hanna.