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Schmidt v. Newland

United States Court of Appeals, Eighth Circuit

June 26, 2019

Paula Christy L. Schmidt; Holly Woprice Plaintiffs - Appellants
v.
Richard Newland, Trustee of the Michael Allen Lasiter Trust, Amended and Restated February 19, 2016; John Doe, as Personal Representative of the Estate of Michael Allen Lasiter, Deceased Defendants Newland & Associates PLLC, Trustee of the Michael Allen Lasiter Revocable Trust, Amended and Restated February 19, 2016; Relyance Bank N.A., as Personal Representative of the Estate of Michael Allen Lasiter, Deceased Defendants - Appellees

          Submitted: April 16, 2019

          Appeal from United States District Court for the Eastern District of Arkansas - Little Rock

          Before SHEPHERD, MELLOY, and GRASZ, Circuit Judges.

          SHEPHERD, CIRCUIT JUDGE.

         Christy Schmidt and Holly Woprice filed an action in United States District Court for fraud and breach of fiduciary duty against Newland & Associates, PLLC, trustee of the Michael Allen Lasiter Revocable Trust, and Relyance Bank, N.A., personal representative of Michael Lasiter's estate. The district court, [1] sitting in diversity pursuant to 28 U.S.C. § 1332, dismissed Christy and Holly's claims as barred by the applicable Arkansas statute of limitations. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

         I.

         Mannie Lasiter founded and was the chief operating officer of Lasiter Construction, Inc. (formerly Lasiter Asphalt Maintenance Company) from the Company's incorporation in 1985 until 2000. While Mannie originally held all of the 1, 000 outstanding shares of stock in the Company, he transferred 176 of his shares to his son Michael between 1985 and 1992. Mannie's 1999 Federal Gift Tax Return, signed by the preparer on October 16, 2002, shows that Mannie gave Michael 314 more shares of the Company in 1999.

         On September 15, 2000, Mannie and Michael entered into a succession agreement that determined the fate of the Company once Mannie retired as COO. The agreement laid out terms for Mannie's continued employment with the Company; provided for transfer of all Mannie's stock to Michael through gifts, sale, and inheritance; and ensured Mannie would be released from liability on certain loans. On October 19, 2000, pursuant to the succession agreement, Mannie and Michael signed a stock purchase agreement by which Mannie agreed to sell Michael "controlling interest" in the Company for $50, 000. Michael also agreed to purchase the remainder of Mannie's Company stock when Mannie retired. That same day, Mannie purportedly transferred 410 shares of Company stock to Michael.

         Mannie and Michael also signed an employment agreement, which guaranteed Mannie employment with the Company until July 31, 2005 at a salary of $110, 000 annually. The employment agreement additionally guaranteed Mannie five further years of employment at $65, 000 annually. Mannie continued to work for the Company until a few months before his death in 2004. His income tax returns for the relevant period consistently show annual compensation from the Company that falls short of the promised $110, 000.

         On September 17, 2002, Mannie created the Mannie Lasiter Trust, for which he served as trustee until his death. The Trust provided that, after Mannie's death, all his stock in the Company would go to Michael. The remainder of Mannie's estate would be split between Michael, Mannie's grandchildren, and Mannie's daughters, Christy and Holly. Mannie also executed a will, which left his entire estate to the Trust and named Michael as trustee.

         Mannie died on June 28, 2004. On July 2, Mannie's attorney, Richard Newland, met with Holly, Christy, and Michael for a reading of the will. Holly and Christy were provided with an abridged version of the Trust and a list of Trust property. Mannie's will was never admitted to probate.

         On July 15, 2004, Holly emailed Newland requesting a copy of Mannie's will and a complete copy of the Trust. Newland provided Christy and Holly with the requested copies and told them that all legal fees for the estate would be paid from the Trust. Newland also informed Christy and Holly that he was Mannie's attorney and that it was his job to carry out Mannie's wishes, but he assured them that he could answer questions for them as long as those questions would not harm any other beneficiary of the Trust. Christy and Holly responded by asking specific questions about the Trust, the employment agreement, and the will, and by expressing concern that Michael had a conflict of interest by acting as trustee when he was a beneficiary of the Trust. Despite their concerns, Christy and Holly never hired independent counsel or took any legal action.

         In February 2016, Michael transferred 824 shares of his Company stock to his own trust, the Michael Allen Lasiter Trust (the MALT). Michael died on May 31, 2016, and the MALT contracted to convey away 750 shares of Company stock the next month.

         Holly and Christy allege they discovered the employment agreement, succession agreement, and stock purchase agreement at some unspecified point after Michael's death. In October 2017, they filed suit against Michael's estate and the MALT. They later amended their Complaint, identifying the defendants as Newland & Associates, trustee of the MALT, and Relyance Bank, personal representative of Michael's estate. Holly and Christy alleged Michael had breached his fiduciary duty as trustee of Mannie's trust by misrepresenting trust assets and intentionally failing to disclose those assets to them. They further claimed that Michael received 724 shares of Company stock from Mannie through fraudulent transfers, [2] that these shares actually belonged to Mannie's estate, and that Mannie died intestate. Because Mannie owned ...


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