Linda Holt v. John Griffin
865 F.3d 417
6th Cir.2017Background
- Siblings dispute: four sisters (Plaintiffs) sued two brothers (Dennis and John M. “Griffy” Griffin) and Martom Properties for self-dealing that concentrated family business stock and real estate in the brothers’ hands and excluded the sisters.
- Key assets: Griffin Industries stock, real estate purchased by John L. Griffin, and Craig Protein stock; many contested transfers occurred in mid-1980s–1990s after the parents’ estate plans were prepared.
- Procedural posture: bench trial in federal district court (supplemental jurisdiction over state fiduciary claims after dismissal of RICO). District court found fiduciary breaches, equitable disentitlement/concealment tolled limitations, and ordered disgorgement plus prejudgment interest (~$584M). Defendants appealed.
- District court findings: brothers used trustee/executor powers and related entities to effect self-dealing; they concealed conduct from sisters and manipulated their incapacitated father to ratify transactions; Martom was controlled by brothers and not a bona fide purchaser.
- Remedy and damages: court awarded equitable disgorgement of wrongful profits (calculated by plaintiffs’ expert) and 8% compounded prejudgment interest; defendants were held jointly and severally liable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction / probate exception | Federal court may decide in-personam fiduciary claims and disgorgement of profits taken from estate assets removed during decedent’s life | Probate exception required dismissal because relief relates to probated estate assets and ratified stock transactions | Affirmed: probate exception inapplicable; claims were in personam and sought disgorgement of profits from assets removed pre-death or post-probate profits, not setting aside will (Marshall/Wisecarver guidance). |
| Statute of limitations / equitable tolling | Tolling applies because brothers concealed wrongdoing and a confidential fiduciary relationship existed; limitations run from actual discovery (2010) | Limitations ran from when sisters should have discovered claims (early 1990s) and claims are time-barred | Affirmed: Kentucky equitable tolling applies where confidential relationship and concealment existed; actual discovery standard applies. |
| Liability for self-dealing transfers (stock, Craig Protein, Martom real estate) | Brothers breached fiduciary duties; beneficiaries could sue where trustees fail to act; transfers were self-dealing and unfair | Brothers argue no fiduciary duty (Ohio trust law choice-of-law), ratification by father, or that third-party transferees (Martom) are bona fide purchasers | Affirmed: Kentucky law governs; fiduciary duties existed to contingent beneficiaries and by confidential family relationship; purported ratifications invalid given father’s incapacity and concealment; Martom not protected as bona fide purchaser. |
| Remedy: disgorgement, calculation, prejudgment interest, jury right | Plaintiffs sought equitable disgorgement; expert methodology reliable; prejudgment interest appropriate to make whole | Defendants challenge expert, tax offsets, inclusion of funds passed to third parties, size/rate of prejudgment interest, and Seventh Amendment jury right | Affirmed: disgorgement is equitable; court did not abuse discretion admitting expert or awarding disgorgement (including funds passed to third parties); tax-offset argument rejected (tax consequences are between victims and gov’t); prejudgment interest (8% compounded) permissible under Kentucky law; no right to jury trial on equitable disgorgement or equitable tolling defenses. |
Key Cases Cited
- Marshall v. Marshall, 547 U.S. 293 (2006) (probate exception is narrow; federal courts may adjudicate in personam claims not seeking to probate or annul a will)
- Wisecarver v. Moore, 489 F.3d 747 (6th Cir. 2007) (breach-of-fiduciary-duty claims and disgorgement of assets removed during settlor’s life generally outside probate exception)
- Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558 (1990) (legal/equitable distinction analysis for Seventh Amendment jury right)
- Tull v. United States, 481 U.S. 412 (1987) (disgorgement/accounting characterized as equitable relief)
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) (distinguishing restitution aimed at specific funds from other equitable remedies)
- S.E.C. v. Cavanagh, 445 F.3d 105 (2d Cir. 2006) (equitable disgorgement forces wrongdoer to account for all profits and may exceed actual victim losses)
- Burdett v. Miller, 957 F.2d 1375 (7th Cir. 1992) (damages awards should not be reduced to reflect tax benefits the defendant argues plaintiff realized)
- Fleischhauer v. Feltner, 879 F.2d 1290 (6th Cir. 1989) (similar rule rejecting tax-offset reductions in equitable remedies)
- Harris Trust & Sav. Bank v. Salomon Smith Barney, 530 U.S. 238 (2000) (transferees of trust property take subject to constructive trust unless bona fide purchaser for value without notice)