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Trustee in Fee Dispute Must Repay a Share of Bank Profits

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JUNE 3, 2002 VOLUME 9, NUMBER 49

When a trustee charges fees in excess of what is due, how much should it have to repay to the trusts? That was the question posed and decided recently by the U.S. Court of Appeals for the Ninth Circuit, sitting in California.

Security Pacific National Bank merged into Bank of America in 1992. Before the merger, Security Pacific operated a trust department which was handled thousands of trusts. In over 2500 of those trusts, the bank had signed fee agreements with the individuals whose funds had established the trusts.

In each of the trusts in question, Security Pacific’s fee agreement set out a percentage fee and committed the bank not to raise that percentage unless the trusts’ settlors agreed or the probate court ordered the higher fee. Despite those agreements, the bank raised its fees a total of nine times between 1975 and 1990.

When Bank of America took over Security Pacific’s trust department it discovered that fees had been collected illegally. The improper fees amounted to more than small change—Bank of America calculated the overcharge at $24 million, which it refunded in 1994. It also calculated that it owed interest totaling $17.8 million, and refunded that amount as well.

Late in 1994 Carol F. Nickel sued the Bank of America on behalf of one of the trusts and asked that her lawsuit be certified as a class action. She argued that the bank should at least have compounded the interest it paid when it reimbursed the trusts, and that it really should have paid a portion of bank earnings during each of the years of the overcharges. The case ended up in federal court and ultimately in the Circuit Court of Appeals.

California law expressly provides the remedy for a breach of a trustee’s fiduciary duty, but the statute gives the court several options as to how to calculate the damages. One way—the one chosen by the District Court—is to calculate the damage plus simple interest at the legal rate. Another would have been to calculate the amount that each trust would have earned had it been allowed to retain the fees wrongfully collected, but the District Court found that approach to be impossible to implement in 2500 individual cases, and the Court of Appeals agreed.

The third method of calculating damages, rejected by the District Court, was the Court of Appeals’ favorite, however. Saying that “the elementary rule of restitution is that if you take my money and make money with it, your profit belongs to me,” the Court of Appeals ruled (by a 2-1 vote) that the proper measure of damages was to calculate the share of the bank’s profit in each year attributable to the overcharges, and to have that amount paid to the trusts. Nickel v. Bank of America National Trust and Savings Association, May 17, 2002.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.