A Strong Offense
A Stronger Defense
I understand why someone would want co-executors, co-trustees, co-attorneys-in-fact, etc. Maybe it’s because they’re afraid of having too much power in one person’s hand. Maybe it’s because they don’t want to offend a friend, child, or relative. Maybe it’s because it may just be easier to have a few people with that power in case the other is indisposed. I get it. But, going in, they should also know it’s a recipe for litigation.
Co-fiduciaries often have to work unanimously – either by statute or by the underlying instrument. Lack of unanimity leads to lawsuits. Moreover, when, for example, one attorney-in-fact lives in the same state as the principal, the co-attorney-in-fact residing in another state may be cut out of the process. Whether perceived or actual shenanigans exist, litigation may result.
In Rosenkrantz v. Feit, a Florida Court of Appeals considered whether one attorney-in-fact could pursue a lawsuit against her co-attorney-in-fact. The trial court had dismissed the case on the grounds that the attorney-in-fact filing the suit had failed to state a claim against her co-attorney-in-fact. The appellate court, however, disagreed.Gertrude Feit had experienced some memory loss, so she executed a durable power of attorney naming her daughter, Marjorie Rosenkrantz, and her son, James Feit, as attorneys-in-fact to oversee her finances. Rosenkrantz lived in New York, while Feit lived in Florida near the mother.
Rosenkrantz claimed that Feit refused to fully account for the mother’s assets and was preventing Rosenkrantz from going directly to the financial institutions to obtain that information. As a result, Rosenkrantz claimed that she was prevented from carrying out her fiduciary duties as co-attorney-in-fact. So, Rosenkrantz filed a declaratory judgment action against Feit seeking a declaration of her rights under the power of attorney and seeking an order compelling Feit to provide an accounting. The trial court dismissed Rosenkrantz’s case with prejudice on the grounds that she failed to state a cause of action.
The court of appeals reversed. Under Florida law applicable at the time (in 2011, the Florida legislature substantially revised, rewrote, and renumbered the applicable statutes), co-attorneys-in-fact under a durable power of attorney are liable “for failure either to participate in the administration of assets subject to the power or for failure to attempt to prevent a breach of fiduciary obligations thereunder.” Furthermore, under Florida law “concurrence of both is required on all acts in the exercise of power.” Further still, those acting as co-attorneys-in-fact must be guided by the same fiduciary principles applicable to co-trustees. Rosenkrantz’s complaint alleged conduct by Feit that, if true, would be a violation of his duties and, therefore, she was entitled to bring a declaratory judgment action against Feit.
We don’t know why, exactly, the trial court dismissed the complaint. A declaratory judgment action between co-fiduciaries is a common – and perhaps necessary – tool when a co-fiduciary has reason to believe that the other co-fiduciary has – or will – breach a fiduciary duty.