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Wood v. U.S. Bank, N.A. | 828 N.E.2d 1072 (2005)
Under the Uniform Prudent Investor Act, or the UPIA, a trustee has a fiduciary duty to manage trust assets as a prudent investor would, which includes diversifying investments.1 In the 2005 case Wood versus U.S. Bank, the Ohio Court of Appeals considered whether a trustee breached its duty to diversify investments when the trust’s language authorized the retention of stock.
John Wood the second, a prominent attorney in Cincinnati with experience in estate planning, created a trust worth over $8 million in which he named Dana Barth Wood as beneficiary. John served as the trustee of the trust during his lifetime and named Star Bank as the successor trustee. Star Bank, formerly known as First National Bank of Cincinnati, later became known as Firstar Bank. Also, U.S. Bank became the successor-in-interest to Star, First National, and Firstar.
Nearly 80 percent of the trust’s assets were in Firstar stock with the rest being mostly in Cincinnati Financial Corporation stock. Pursuant to the terms of the trust, Firstar trustees were to retain, manage, and invest the stock, quote, “as they deem advisable or proper,” unquote. Further, Firstar was given the power, quote, “to retain any securities in the same form as when received, including shares of a corporate Trustee . . ., even though all of such securities are not of the class of investments a trustee may be permitted by law to make and to hold,” unquote.
Shortly after John’s death, Firstar’s trust officers sold approximately half of the Cincinnati Financial stock and 10 percent of the Firstar stock to pay the estates debts and expenses. This sale resulted in an even higher concentration of trust investments being held in Firstar stock.
Firstar’s stock increased to almost $35 per share in early 1999. Wood then made requests to Firstar to diversify the trust’s investments, but Firstar didn’t do so. By mid-2000, Firstar’s stock had dropped to $16 per share, resulting in Wood losing more than $771,000 of her inheritance.
Subsequently, Wood sued Firstar in the court of common pleas for breach of fiduciary duty. Specifically, Wood claimed that Firstar violated the UPIA by failing to diversify investments. In response, Firstar claimed that the duty to diversify didn’t apply because the trust authorized it to retain the stock. Following trial, the court instructed the jury that Firstar was only liable if it abused its discretion in not diversifying because the trust authorized it to retain stock. The jury returned a verdict for Firstar. Wood appealed the instruction to the Ohio Court of Appeals.
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