Deceased Trustee Not Liable for Punitive Damages in Kansas Case

NOVEMBER 21, 2016 VOLUME 23 NUMBER 44
When Alain Ellis died in 2007, she left about $2 million dollars in a trust. Her husband Harvey was the trustee of the trust, and entitled to receive all of the trust’s income. Upon his death the remaining trust assets would be distributed among her two sons and her granddaughter. That’s not how it turned out, however.

After Alain’s death Harvey removed almost all of the trust’s assets and put them into his own trust. He hired a new attorney in his hometown of Wichita, Kansas; with the help of that new attorney, he modified his trust four more times. When he died in 2011, he was worth about $10 million, and his trust distributed to religious and educational charities.

A court-ordered investigation into the history of the two trusts quickly led to a transfer of assets from Harvey’s trust back into his late wife’s trust. The successor trustees agreed that Harvey had improperly taken at least $1,431,143,45 from Alain’s trust, and that amount was returned.

The remainder beneficiaries of Alain’s trust then filed a lawsuit against Harvey’s estate, his trust, his successor trustee and the attorney who helped him set up his estate plan. The lawsuit claimed that Harvey’s behavior had been particularly egregious, that his attorney had helped him in his scheme to convert assets, and that the trust had been mismanaged after Alain’s death.

Alain’s heirs sought an imposition of double damages against Harvey (and his trust), citing Kansas law permitting the extra penalty. The trial judge, though, ruled that the claim was essentially one for “punitive damages,” and that a punitive damages claim could not be asserted against a dead man.

At trial, a jury awarded an additional $126,820.94 against Harvey’s estate and trust. The jurors decided that Harvey’s lawyer (while acting as successor trustee of Alain’s trust) had also committed breaches of her fiduciary duty, but they did not award any damages against her. The jurors exonerated Harvey’s successor trustee, a local bank. Alain’s heirs appealed, arguing that they should have been able to assert the claim for double damages, and that Harvey’s outrageous behavior should be punished.

The Kansas Court of Appeals upheld the trial court. In their opinion, the appellate judges acknowledged that “there is no doubt” that Harvey “acted toward plaintiffs with willful conduct and fraud that would have supported a claim against him for punitive damages had he still been alive at the time of the litigation.” Still, they reasoned, there is no real benefit to society permitting punishment of a deceased defendant. The Court of Appeals did uphold the trial courts award of attorneys fees against Harvey’s trust (although one claimant’s fees were ordered to be paid from Alain’s trust).

In reaching its conclusion that punitive damages could not be levied against a deceased defendant, the Kansas court discussed the holdings in other jurisdictions on similar questions. Most states addressing the question have agreed with the holding in Harvey’s case, according to a 2016 Akron Law Review article extensively cited in the opinion. A substantial minority of states (including at least thirteen states and the District of Columbia) would allow the claim to proceed against the estate of a deceased tortfeasor. Alain Ellis Living Trust v. Harvey D. Ellis Living Trust, November 18, 2016.

Does a claim for punitive damages survive against a deceased defendant in Arizona? Generally, yes. Arizona would likely reach the opposite conclusion in similar circumstances, though the principal Arizona appellate decision (Haralson v. Fisher Engineering, a 2011 Supreme Court opinion) is based on very different facts. In that case, the estate of a driver who behaved egregiously was liable for punitive damages claimed by an accident victim — despite the fact that the driver died in the accident.

Arizona law on attorney’s fees might also lead to a different result in similar facts. Recall that Harvey’s trust paid most of the fees of the various attorneys (though not those of one of the heirs — his fees were paid by his mother’s trust instead). In Arizona it might actually be more difficult to secure payment of those fees from the tortfeasor’s trust — even though the punitive damages claim might be easier to assert. In other words, the classic legal principle applies: facts matter, and so does the jurisdiction where the facts are litigated.

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One Response

  1. Mark

     /  November 21, 2016

    Good post. I expect that the punishment aspects might extend to the attorney, through the attorney discipline process. It’s not Ok to assist a client in furthering improper goals.

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