Rafert v. Meyer, 290 Neb. 219

Background

Jlee Rafert created an irrevocable trust in 2009 naming attorney Robert J. Meyer as trustee; the trust owned three life-insurance policies totaling $8.5 million for the benefit of Rafert’s four daughters.
Meyer prepared the trust, signed the insurance applications as trustee, and supplied a false South Dakota address to the insurers though he lived in Nebraska.
Initial premiums were paid in 2009; in 2010 the policies lapsed for nonpayment. Insurers sent notices to the false address; beneficiaries and Rafert did not learn of the lapses until August 2012.
After lapse, Rafert paid $252,841.03 in premiums to an insurance agent; those funds were never forwarded to the insurers and the ultimate disposition is unknown.
The beneficiaries sued Meyer for breach of trust, alleging he failed to keep beneficiaries informed, failed to provide required annual statements, and acted in bad faith by supplying a false address. The district court dismissed the second amended complaint. The Supreme Court of Nebraska reversed and remanded.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Meyer breached trustee duties under the Nebraska Uniform Trust Code by providing a false address and failing to inform beneficiaries	Rafert’s beneficiaries: Meyer breached duties to act in good faith and to keep qualified beneficiaries reasonably informed; his conduct caused loss	Meyer: trust terms (Article II) absolve him of duty to monitor/pay/notify; his actions did not cause the lapses	Reversed — plaintiffs pleaded plausible breach: statutory duties (good faith; informing beneficiaries) override trust terms that attempt to eliminate those duties
Whether an exculpatory or limiting clause in the trust protects Meyer from liability	Appellants: clause is unenforceable because Meyer drafted the trust, failed to explain it, and may have acted in bad faith/reckless indifference	Meyer: Article II limits his liability and duties; thus dismissal was appropriate	Clause cannot bar liability for bad faith or reckless indifference; pleadings sufficiently allege bad faith/reckless indifference, and clause may be invalid if not fairly communicated
Whether failure to provide annual statements defeats causation for claimed damages	Appellants: duty to inform arose when insurers sent nonpayment notices; waiting for annual statement would be unreasonable; lack of notice caused the loss	Meyer: lapses occurred before annual reports were due; thus no causal link between his reporting and the damage	Held for Appellants: statutory duty to inform arose upon notices of nonpayment; reasonable to infer that lack of notice prevented beneficiaries from protecting the policies
Whether dismissal under Rule 12(b)(6) was appropriate given plaintiffs’ factual allegations	Appellants: complaint alleges sufficient facts to state a plausible claim that Meyer’s conduct proximately caused damages	Meyer: allegations do not plausibly connect his conduct to the loss; dismissal proper	Reversed: accepting pleaded facts as true, a plausible claim for breach of fiduciary duty and resulting damages was stated

Key Cases Cited

Wahrman v. Wahrman, 243 Neb. 673, 502 N.W.2d 95 (Neb. 1993) (trustee authority governed by trust instrument and common-law duties)
Karpf v. Karpf, 240 Neb. 302, 481 N.W.2d 891 (Neb. 1992) (trustee duty to fully inform beneficiaries of material facts)
Johnson v. Richards, 155 Neb. 552, 52 N.W.2d 737 (Neb. 1952) (breach of duty arises from willful, negligent, or oversight conduct)
Trieweiler v. Sears, 268 Neb. 952, 689 N.W.2d 807 (Neb. 2004) (trustee liable for damages proximately caused by breach)
Doe v. Board of Regents, 280 Neb. 492, 788 N.W.2d 264 (Neb. 2010) (standard of review on motion to dismiss)
State v. Mamer, 289 Neb. 92, 853 N.W.2d 517 (Neb. 2014) (plausibility standard to survive motion to dismiss)
Doe v. Omaha Pub. Sch. Dist., 273 Neb. 79, 727 N.W.2d 447 (Neb. 2007) (construing pleadings favorably on dismissal)