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Category: Fees in Trust & Estates

$43M Trust Not on the Hook for Attorney Fees in Georgia

March 12, 2024

A recent Law 360 story by Emily Johnson, “Ga. Panel Finds $43M Trust Not On Hook For Legal Fees”, reports that the Georgia Court of Appeals rejected a request from beneficiaries of a $43 million furniture fortune, finding that the trust's ex-trustees should not be saddled with attorney fees and litigation costs while the trust's beneficiaries sued them for allegedly mishandling the trust and overpaying themselves.

At the same time, an appellate panel said that former trustees Phillip Faircloth and Ted Sexton were not faced with a threat of irreparable injury, so the lower court erred in granting the interlocutory injunction that ordered the trust to pay for Faircloth and Sexton's attorney fees while the trust sues them.  The lower court's interlocutory injunction required the current trustees to take up the cost of the former trustees' legal battle, including attorney fees and litigation costs.  "In sum, the record lacks evidence to support a finding that the interlocutory injunction is necessary to prevent an irreparable harm having no adequate legal remedy," the appellate panel said.

Beneficiaries of a trust tied to furniture tycoon Sherwin Glass, who founded Farmers Furniture Co., sued Faircloth and Sexton in 2017.  The appellate court panel found that because the trust has been lending money to Faircloth and Sexton for their legal costs, they were not harmed, a requirement for an interlocutory injunction.  "Due to the loan by Farmers, they have not been harmed by going unrepresented, and any monetary harm can be remedied by repayment of interest paid pursuant to the loan," the appellate panel said.

The appellate panel left in place a lower court's rejection of the request that the former trustees reimburse the trust about $4.6 million in legal fees that had already been paid.  This is the third time the case has been before the state's Court of Appeals, according to the decision.

Counsel for the Glass Dynasty Trust told the panel in September that the injunction required the trust to pay 50% of attorney fees and costs incurred by two of the firms representing Faircloth and Sexton, as well as 100% of the fees incurred by another, within 14 days of receiving an invoice.

Representing Faircloth and Sexton, J. Randolph Evans, partner at Squire Patton Boggs LLP, told Law360 Pulse on Monday that the court's decision is one of the biggest decisions this year in the state, saying this has "turned indemnity/insurance law on its head."

"The whole purpose of us having [a] duty to defend is so we don't have to front money to the lawyer," Evans said. "They pay the lawyer. Now they're saying, you pay the lawyer, and sue the insurance company and get back the money."  Evans said that the decision means that the former trustees and others won't be able to enforce a duty to defend from insurance carriers or indemnitors unless you can't pay for your defense.

The implications of the panel's decision for Georgia are enormous, he said.  "They went one step further, which made people really react," Evans said. "It's not just that you don't have the money; if you can borrow the money, you can't enforce the duty to defend."