Mccracken ex rel. Mccracken Charitable Annuity Trust Dated January 27 v. Thomas Jackson Family Office, Inc., A-14-1107.
| Decision Date | 02 February 2016 |
| Docket Number | No. A-14-1107.,A-14-1107. |
| Parties | MICHAEL D. MCCRACKEN AND SHARON L. MCCRACKEN, ON BEHALF OF THE MCCRACKEN CHARITABLE ANNUITY TRUST DATED JANUARY 27, 2000, AND ITS TRUSTEES AND BENEFICIARIES, AND ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, APPELLANTS, v. THOMAS JACKSON FAMILY OFFICE, INC., ET AL., APPELLEES. |
| Court | Nebraska Court of Appeals |
(Memorandum Web Opinion)
Appeal from the District Court for Douglas County: SHELLY R. STRATMAN, Judge. Affirmed.
Rodney K. Vincent, of Vincent Law Offices, for appellants.
Robert F. Peterson and Kathleen M. Foster of Laughlin, Peterson & Lang, for the Jackson appellees.
Brian S. Sullivan, pro hac vice, and Damien J. Wright and Larry E. Welch, Jr., of Welch Law Firm, P.C., for the Fifth Third appellees.
Michael D. McCracken and Sharon L. McCracken appeal from the order of the district court for Douglas County which entered summary judgment in favor of the defendants in this action concerning the defendants' alleged actions with respect to a charitable annuity trust set up by the McCrackens. Because we agree with the district court that the McCrackens lacked standing to bring this suit, we affirm.
The McCrackens were the trustors and beneficiaries of the McCracken Trust as described more fully below.
Thomas Clyde Jackson (Jackson) is the sole employee, shareholder, and president of Thomas Jackson Family Office, Inc. (Jackson Office), located in Omaha. Jackson was previously employed by Wells Fargo Bank and UMB Bank, both in Omaha, Nebraska. Jackson Office is a Nebraska corporation registered in Nebraska as an investment advisor. We refer to Jackson and the Jackson Office collectively as "the Jackson appellees."
Fifth Third Bancorp is a diversified financial services holding company located in Ohio. Fifth Third Bank has its principal place of business in Cincinnati, Ohio. Fifth Third Bank is also registered to do business in Nebraska and during some period of time was the trustee of the McCracken Trust. Fifth Third Securities, Inc. provides brokerage and investment advisory services, is a member of FINRA, and is an SEC registered broker/dealer and investment advisor. Fifth Third Securities' principal place of business is in Cincinnati. Fifth Third Asset Management, Inc., also located in Cincinnati, is a subsidiary of Fifth Third Bank and provided investment management services to Fifth Third Bank, when it was the trustee of the McCracken Trust. First Third Bancorp was the holding company of the remaining Fifth Third subsidiaries. We refer to these defendants collectively as "the Fifth Third appellees."
McCracken Trust.
On January 27, 2000, the McCrackens entered into a charitable annuity trust (the McCracken Trust) funded with stock valued at approximately $3,000,000. As trustors, the McCrackens reserved a fixed amount distribution to themselves equal to $200,000 each year during their lifetimes with a remainder interest to Children's Hospital Foundation upon the death of the last surviving recipient. At the time the suit was filed, Children's Hospital Foundation was no longer the remainder beneficiary. With respect to the payment of the annuity to the McCrackens, the trust specifically provided:
In each taxable year of the trust, the Trustee shall pay to [the McCrackens] during their joint lifetimes and to the survivor of them, Amount . . . which is a Fixed Amount . . . equal to $200,000. In no event shall the Fixed Amount be less than five percent of the value of the assets contributed to the trust. . . .
Under article 8 of the McCracken Trust, the investment authority within the trust was granted, without liability, to the sole discretion of the trustee.
Under article 13 of the McCracken Trust, the McCrackens had the right to fill vacancies by appointment when a trustee resigned, but they did not have the right to remove a trustee.
Following its creation, the McCracken Trust has had at least six trustees. The McCrackens designated Wells Fargo Bank (formerly Norwest Bank Nebraska) as the initial trustee. In 2002, Wells Fargo Bank resigned and UMB Bank was appointed as successor trustee. In 2003, following the resignation of UMB Bank as trustee, the McCrackens appointed Fifth Third Bank as trustee.Fifth Third Bank served as trustee until February 6, 2009, after which, First State Bank was appointed as successor trustee. Five Points Bank was appointed successor trustee on April 5, 2011. On October 16, 2012, the McCrackens entered into an agreement to sell all of their rights and interests in the McCracken Trust to Cord Resources LLC. At that time, Paul Beckner was appointed to be the independent successor trustee. In his deposition, Michael admitted that after this sale, the McCrackens had no further interest in the trust and no rights to distributions from the trust. Prior to the sale to Cord Resources, the McCrackens received the annual distributions of $200,000 from every trustee that managed the trust.
Pleadings.
On January 18, 2013, the McCrackens filed a complaint in the district court on behalf of the McCracken Trust, its trustors and beneficiaries, and on behalf of themselves and "All Others Similarly Situated." They filed suit against Jackson, the Jackson Office, Fifth Third Bancorp, Fifth Third Bank, Fifth Third Securities, and Fifth Third Asset Management. They alleged that "the Defendants used their discretionary powers to materially change the investment policy and investment objective of the McCracken Trust to a materially riskier and more aggressive investment policy" without the McCrackens' permission, resulting in a decline in value of the trust's assets. Specifically, with respect to this decline, the McCrackens alleged that the value of the trust assets was approximately $2,394,800 by the end of June 2007 and only $1,397,818.45 by late February 2009.
In their 30-page complaint, the McCrackens' set forth 11 theories of recovery. Specifically, they alleged theories of breach of trust, breach of contract, various failures of defendants to supervise other defendants, breach of fiduciary duty, negligence, violation of the anti-fraud provisions of the securities laws of Nebraska, and common law fraud. They requested damages of $3,403,250 "for losses and damages experienced by the Plaintiffs in their accounts and through the withdrawals" of the trust, together with prejudgment interest, costs, attorney fees, and other just and equitable relief.
In the appellees' respective answers, they asserted, among other things, that the McCrackens lacked standing to bring their complaint.
Summary Judgment.
The Jackson appellees and the Fifth Third appellees filed motions for summary judgment on April 14 and May 14, 2014, respectively.
On June 26, 2014, the McCrackens filed a motion to continue the summary judgment hearing which had been scheduled for July 14. They alleged that they needed additional time to complete the discovery necessary to respond to the motions for summary judgment. Specifically, they alleged that they were still in the process of scheduling deposition dates for eight employees of the Fifth Third appellees and that the memorandum served by the Fifth Third appellees on June 23 in support of its motion for summary judgment raised numerous factual issues and legal issues which required additional discovery before the McCrackens could respond. The record on appeal does not contain an explicit ruling on the motion for continuance, but the parties agree that themotion was denied and the record shows that the summary judgment hearing proceeded on July 14 as scheduled.
On July 14, 2014, the district court heard the appellees' motions for summary judgment. The court received numerous exhibits into evidence, including depositions of both McCrackens, the deposition of Jackson, various discovery requests and responses, a copy of the McCracken Trust document, documentation of the sale to Cord Resources, a 3-volume exhibit containing all of the exhibits to the depositions, and an affidavit from Michael. When the McCrackens offered exhibit 26, Michael's affidavit, the Jackson appellees made a hearsay objection to paragraphs 36 and 37 of the affidavit. The Fifth Third appellees made the "same objection" but also objected to the entire affidavit on the basis that it "contradict[ed] or change[d] the sworn deposition testimony of [Michael]." The court took the objections under advisement.
On September 23, 2014, the district court entered an order granting the motions for summary judgment. The court sustained Fifth Third's objection to exhibit 26, "as to those portions of Exhibit 26 which directly conflict with Plaintiffs' prior sworn testimony." In granting the motions for summary judgment, the court found that the McCrackens lacked standing to pursue their claims on behalf of the McCracken Trust because they had not met their burden of showing that the current trustee, Beckner, could not or would not pursue the claims on behalf of the trust. The court also found the McCrackens lacked standing to pursue their claims as beneficiaries because they were no longer beneficiaries of the trust at the time their complaint was filed. The court stated further:
Moreover, even if [the McCrackens] were still beneficiaries to the McCracken Trust, they cannot couch their claims as being on their own behalf because, up until the time of sale, [the McCrackens] received the annual $200,000.00 distributions from every Trustee that managed the McCracken Trust without fail. As a result, any claims they attempt to assert on their own behalf are actually based on alleged damages to the McCracken Trust and therefore had to have been brought by the current Trustee.
Finally, the court found that the McCrackens lacked standing...
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