HomeMy WebLinkAbout02-06-04JOSEPH D. BRENNER, SR., JOSEPH D. : IN THE COURT OF COMMON PLEAS
BRENNER, JR., and MARGARET B. BUSHEY, : OF CUMBERLAND COUNTY,
: PENNSYLVANIA
Petitioners, :
: ORPHANS' COURT DIVISION
V. :
: No.
MANUFACTURERS AND TRADERS TRUST :
COMPANY, a New York corporation, DAVID C. : JURY TRIAL DEMANDED
GORITY, an individual, and CURT R. :
STAUFFER, an individual, :
:
Respondents. :
:
PETITION FOR CITATION AND RELIEF FOR BREACH OF FIDUCIARY DUTY
AND AIDING AND ABETTING BREACH OF FIDUCIARY DUTY
PARTIES
1.
Petitioner Joseph D. Brenner, Sr. ("Brenner Sr.") is and was, at all material times,
an individual residing in Carlisle, Cumberland County, Pennsylvania. Brenner Sr. is suing in his
capacity as a trustee of three certain trusts described herein.
2.
Petitioner Joseph D. Brenner, Jr. ("Brenner Jr.") is and was, at all material times,
an individual residing in Carlisle, Cumberland County, Pennsylvania. Brenner Jr. is suing in his
capacity as a trustee of a certain trust described herein.
3.
Petitioner Margaret B. Bushey ("Bushey") is and was, at all material times, an
individual residing in Carlisle, Cumberland County, Pennsylvania. Bushey is suing in her
capacity as a trustee of a certain trust described herein.
Upon information and belief, respondent Manufacturers and Traders Trust
Company ("M&T") is and was, at all material times, a New York corporation doing business in
Cumberland County, Pennsylvania. M&T is the successor in interest of Farmers Trust Company.
5.
Upon information and belief, respondent David C. Gority, is and was, at all
material times, an individual residing in Carlisle, Cumberland County, Pennsylvania.
6.
Upon information and belief, respondent Curt R. Stauffer, is and was, at all
material times, an individual residing in Mechanicsburg, Cumberland County, Pennsylvania.
CONCISE STATEMENT OF FACTS
7.
Petitioner Brenner Sr. is the former CEO of Amp, Inc. ("Amp"), an electrical
products company based in Harrisburg, Pennsylvania, that was acquired by Tyco International
Ltd. ("Tyco") in 1998. As an executive of Amp, Brenner Sr. acquired numerous shares of Amp
stock, which were subsequently converted into shares of Tyco stock.
8.
Petitioners Brenner Jr. and Bushey are two of the four children of Brenner Sr. and
his wife Jane Brenner, now deceased. The other two children are Nancy B. Blakely and
Katherine B. Menges.
9.
In the early 1990s, Brenner Sr. and Jane Brenner created several trusts for the
benefit of their children and grandchildren. The sole assets placed into these trusts were shares
of Amp stock.
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10.
On or about November 23, 1994, Brenner Sr. and Jane Brenner executed an
Irrevocable Agreement of Trust, which created a trust for the benefit of their four children and,
upon their children's deaths, their grandchildren (hereinafter "the Grandchildren's Trust"). Under
the terms of the trust instrument, respondent M&T (as successor to Farmers Trust Company),
petitioner Bushey, and petitioner Brenner Jr. have been co-trustees of the Grandchildren's Trust
since Jane Brenner's death on October 24, 1997.
11.
The Grandchildren's Trust is maintained at M&T and is identified by M&T as
account number 43-1075-60-5.
12.
On or about November 23, 1994, Jane Brenner executed an Amendment and
Restatement to Declaration of Trust, which created four trusts, hereinafter referred to as the Jane
Brenner "A" Trust, the Jane Brenner "B" Trust, the Jane Brenner "C" Trust, and the Blakely Trust
(hereinafter, collectively, "the Children's Trusts"). These trusts are for the benefit of Brenner Sr.
and the four Brenner children. Under the terms of the trust instrument, respondent M&T (as
successor to Farmers Trust Company) and petitioner Brenner Sr. have been co-trustees of the
Children's Trusts since Jane Brenner's death on October 24, 1997.
13.
The Jane Brenner "A" Trust was never funded and is not at issue in this litigation.
14.
The Jane Brenner "B" Trust is maintained at M&T and is identified by M&T as
account number 32-1056-60-8.
15.
The Jane Brenner "C" Trust is maintained at M&T and is identified by M&T as
account number 32-1057-60-6.
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16.
The Blakely Trust is maintained at M&T and is identified by M&T as account
number 41-7090-60-2.
17.
Since his wife Jane Brenner's death on October 24, 1997, Brenner Sr.'s health and
business acumen have both declined significantly. This fact is and was well known to M&T.
Petitioners have a long-standing business relationship with M&T Vice President and Trust
Officer David Gority ("Gority"). Gority has been the M&T officer principally responsible for
fulfilling M&T's fiduciary obligations in regards to the Children's Trusts and the Grandchildren's
Trust since the trusts' creation. Among other things, Gority knows that Brenner Sr. is 86 years
old, suffers profound heating loss, and has significantly impaired vision due to cataracts. On
several occasions since Jane Brenner's death, Gority has communicated to petitioner Bushey his
perception that Brenner Sr. is easily confused about financial details, requires information to be
repeated multiple times (often over a period of days), and generally seems to be slowing down
and losing confidence in his ability to make business decisions.
18.
Because of the decline in Brenner Sr.'s health and abilities, and given Brenner Jr.
and Bushey's status as co-trustees of the Grandchildren's Trust, Gority has consistently invited
Brenner Jr. and Bushey to attend meetings involving the discussion or decision of substantive
financial issues for the Children's Trusts since 1997. In fact, in or about the summer of 1998,
Gority told Bushey that he believed she and/or her brother should attend any meetings at which
decisions would be made about the Children's Trusts in light of Brenner Sr.'s reduced capacity.
Bushey agreed. She and her brother, either or both, attended all subsequent meetings regarding
the Children's Trusts to which Gority invited them. On at least one occasion, Brenner Sr.'s
accountant also attended a meeting to assist him.
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19.
In fall 2001, Curt Stauffer, an Assistant Vice President and Portfolio Manager at
M&T, began assisting Gority with the exercise of M&T's fiduciary obligations regarding the
Children's Trusts and the Grandchildren's Trust.
20.
On or about January 23, 2002, Gority and Stauffer recommended to petitioners on
M&T's behalf that they diversify the investments held in the various trusts. Petitioners agreed to
a plan to liquidate approximately 20% of the Tyco stock held in the trusts. Gority indicated in a
letter dated February 1, 2002, that 20% liquidation was "well within the parameters we are
comfortable with."
21.
As a result of the discussion with M&T, the trustees of the Grandchildren's Trust
ultimately sold 40% of the Tyco stock held in that trust during the first half of 2002. No Tyco
stock was sold from the Children's Trusts, however.
22.
On or about March 6, 2002, acting on behalf of M&T, Stauffer sent a letter to
Brenner Sr. recommending that, in light of various negative market events that had reduced the
value of Tyco stock, the investments in the Children's Trusts should be diversified. Stauffer
recommended that a "liquidation plan should be in place and carded out in a disciplined and
timely manner;" stated that "market prices...need not dictate the progress of the liquidation
plan;" and concluded that Tyco stock appeared to "represent a good investment opportunity as
part of a diversified portfolio." Stauffer also indicated that M&T believed the contemporaneous
"panic" surrounding Tyco stock was largely unwarranted. Thus, Stauffer encouraged Brenner Sr.
to agree to sell some, but not all, of the Tyco stock in the trusts. This letter was copied to
Brenner Jr., Bushey, and Gority.
23.
Brenner Sr. believed firmly in Tyco's fundamental financial soundness and, as a
result, believed that it was wise to continue holding Tyco stock both personally and in the
Children's Trusts. He therefore continued to resist selling Tyco stock from the Children's Trusts.
24.
On Monday, June 3, 2002, Tyco's CEO was arrested and charged with tax evasion.
This event had a negative impact on the stock price.
25.
On Friday, June 7, 2002, Stauffer called petitioner Bushey in a panic. Stauffer
told Bushey that Gority was on vacation so he was taking it upon himself to call her, Brenner Jr.,
and Brenner Sr. regarding the Tyco situation. Stauffer told Bushey that M&T was "eliminating
its position in Tyco immediately" and advised petitioners to do the same. Stauffer breathlessly
described his concerns about Tyco and indicated that he would call Bushey later to set up a time
to meet the following week once Gority returned from vacation. Stauffer made a similar call to
Brenner Jr.
26.
On or about Tuesday, June 11, 2002, Stauffer telephoned Brenner Sr. and asked
him to come by M&T's Carlisle office on Wednesday, June 12, at which time Gority would be
back from vacation. Brenner Sr. agreed to come to the bank for a brief informational meeting
about the Tyco situation.
27.
When Brenner Sr. arrived at M&T on June 12, 2002, Stauffer and Gority were
already on a conference call with a senior M&T representative in Buffalo, New York. In contrast
to the informational meeting Brenner Sr. expected, Gority and Stauffer's actual purpose in calling
the meeting was to convince Brenner Sr. to liquidate one-third of the Tyco stock in the Children's
Trusts immediately and to quickly liquidate the remainder if the stock price fell further. Indeed,
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Stauffer and Gority had already prepared documents for Brenner Sr. to sign allowing immediate
liquidation of one-third of the Tyco shares in each of the Children's Trusts, and placement of a
"stop loss order" at $9.00 on all remaining Tyco shares in those trusts.
28.
Gority and Stauffer were intent upon getting Brenner Sr. to agree to their
liquidation plan and sign the documents. However, Brenner Sr. did not want to sell any Tyco
stock, and Gority and Stauffer knew the strength of Brenner's belief in Tyco's fundamental
financial soundness. Convinced of the correctness of their own desired course of action,
however, Gority and Stauffer did not adequately explain their liquidation plan to Brenner Sr. and
took advantage of his reduced capacity to pressure him into signing the documents. Ultimately,
under pressure from his co-trustees, Brenner Sr. agreed to sell one-third of the Tyco stock held in
the Children's Trusts if it reached $10.50. The documents Gority and Stauffer had Brenner Sr.
sign, however, did not provide for the disposition Brenner Sr. understood he was agreeing to.
Rather, they provided for immediate liquidation of one-third of the Tyco stock in the Children's
Trusts, and placed a "stop loss order" at $9.00 for the remaining two-thirds of the Tyco shares.
Brenner Sr. did not understand or agree to this plan.
29.
Neither Brenner Jr. nor Bushey was present at the meeting on June 12, 2002.
M&T never notified either of them of the meeting, and they were both unaware it was taking
place. Thus, M&T extracted Brenner Sr.'s "agreement" to liquidate the only assets in the
Children's Trusts without anyone present to help him understand M&T's proposal or the
documents M&T told him to sign. M&T's actions were in direct contravention of Gority's
agreement with Bushey and Brenner Jr. about substantive meetings, the established course of
practice for substantive meetings since summer 1998, and M&T's fiduciary duties regarding the
Children's Trusts.
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30.
Immediately upon Brenner Sr.'s departure from M&T, Gority and Stauffer
executed their liquidation plan. At 11:33 a.m., M&T caused 4,533 shares of Tyco stock in the
Jane Brenner "B" Trust (one-third of the total) to be sold at $10.23 per share. At the same time,
M&T caused 13,866 shares of Tyco stock in the Jane Brenner "C" Trust (one-third of the total) to
be sold at $10.23 per share. At 11:36 a.m., M&T caused 24,274 shares of Tyco stock in the
Blakely Trust (one-third of the total) to be sold at $10.23 per share. At 12:05 p.m., M&T caused
11,134 shares of Tyco stock in the Grandchildren's Trust (one-third of the total) to be sold at
$10.23 per share. M&T also entered "stop loss" orders for all of the remaining Tyco shares in all
of the trusts.
31.
Upon information and belief, only after taking the actions described in paragraph
30 did M&T belatedly realize the potential implications of their failure to include Brenner Jr. and
Bushey in the decision on the Children's Trusts, as well as the fact that Brenner Jr. and Bushey
had not given approval as co-trustees of the Grandchildren's Trust. Gority and Stauffer knew
they had to get Brenner Jr. and Bushey to "agree" to M&T's improper actions in order to avoid
potential disaster.
32.
Pretending they had not yet acted, Gority quickly called petitioner Bushey shortly
after 12:00 p.m. on June 12, 2002, and informed her that her father had agreed to sell one-third of
the stock in the Children's Trusts at $10.50 and to put a $9.00 "stop loss" order on the remaining
stock. Gority told Bushey that the decision had been made, but that he wanted to make sure he
had Bushey and Brenner Jr.'s "consent." Bushey was surprised and confused that her father
would ever agree to the course of action M&T was representing he had. M&T was desperate to
get her approval, however, so Gority improperly pressured Bushey until she "agreed" to the
course of action her father had allegedly taken on the Children's Trusts.
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33.
Immediately after speaking to Bushey, Gority next telephoned Brenner Jr. Gority
told him that Brenner Sr. had already agreed to the liquidation plan for the Children's Trusts and
that Bushey had agreed to the liquidation plan for the Grandchildren's Trust. Like Bushey,
Brenner Jr. was surprised and confused by what M&T was telling him. However, Gority
characterized the plan as "a done deal" and pressured Brenner Jr. to go along with his father's and
sister's purported wishes. Brenner Jr. ultimately "agreed" under this improper pressure to sell
one-third of the stock at $10.50. However, he was uncomfortable with the stop loss order and
told Gority he would get back to M&T on that issue.
34.
In a subsequent conversation with her brother, Bushey learned that she had
allegedly agreed to allow M&T's liquidation plan to be applied not only to the Children's Trusts
over which her father was named co-trustee, but also to the Grandchildren's Trust over which she
was co-trustee. In M&T's rush to get approval from Bushey, Gority had not adequately informed
Bushey that he was seeking her agreement as to the disposition of assets in the Grandchildren's
Trust as well as the Children's Trusts. Bushey never agreed or intended to agree to liquidate the
Tyco shares in the Grandchildren's Trust.
35.
In the early afternoon of June 12; 2002, Tyco's stock price fell below $9.00 for a
short period of time.
36.
In the early afternoon of June 12, 2002, as a result of the "stop loss orders" entered
by M&T earlier that morning, all remaining Tyco shares were sold out of the various trusts at
$8.75 per share. Specifically, M&T caused the sale of 9,067 shares held in the Jane Brenner "B"
Trust; 27,734 shares held in the Jane Brenner "C" Trust; 48,468 shares held in the Blakely Trust;
and 22,266 shares held in the Grandchildren's Trust.
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37.
After M&T had executed the sale of all Tyco stock from the Children's Trusts and
the Grandchildren's Trust, David Gority sent a letter to Brenner Jr. and Bushey, dated June 12,
2002. Gority requested Brenner Jr. and Bushey sign the letter to confirm their alleged
authorization of M&T's actions. Petitioners refused to sign.
38.
Subsequent to the events of June 12, 2002, M&T terminated Stauffer's
employment.
39.
Under the terms of the trust agreements governing the Grandchildren's Trust and
the Children's Trusts, petitioners have the express authority to remove M&T as trustee of the four
trusts and appoint a successor trustee. Since this dispute arose, petitioners have exercised this'
authority to remove M&T and appoint Orrstown Bank as successor co-trustee of all four trusts.
However, M&T has refused to release the trust assets to Orrstown Bank. M&T continues to hold
the trust assets, largely in the form of cash (received from the sale of Tyco stock) earning a very
low interest rate.
FIRST CLAIM FOR RELIEF
(Against Respondent M&T)
(Breach of Fiduciary Duty)
(Children's Trusts)
40.
Petitioners restate the allegations in paragraphs 1 through 39.
41.
M&T had an obligation to deal honestly with its co-trustee, Brenner Sr., in the
management of the Children's Trusts.
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42.
M&T had an obligation to act in the best interests of the beneficiaries of the
Children's Trusts.
43.
In light of Brenner Sr.'s failing health and reduced capacity, and pursuant to the
agreement reached between Gority and Bushey, M&T had an obligation to take appropriate and
necessary measures to protect the assets and beneficiaries of the Children's Trusts, including,
inter alia, involving Bushey and/or Brenner Jr. in any substantive decisions regarding the
Children's Trusts.
44.
M&T breached its fiduciary duties to the Children's Trusts by capitalizing on its
co-trustee Brenner Sr.'s reduced physical and mental condition in order to accomplish its
unilateral plan to liquidate all Tyco stock held by the trusts. M&T disposed of the entirety of the
assets in the Children's Trusts without the informed consent and agreement of its co-trustee.
45.
M&T breached its fiduciary duty by failing to include either Bushey or Brenner Jr.
in the meeting of June 12, 2002, which was in fact the most important, most substantive meeting
ever held regarding the Children's Trusts. If either Brenner Jr. or Bushey had been present to
explain what M&T wanted to their father, Brenner Sr. would not have "agreed" to M&T's
liquidation plan or signed M&T's documents.
46.
M&T's panicked decision to liquidate the entirety of the Tyco stock held in the
Children's Trusts on June 12, 2002, was not in the best interests of the beneficiaries, and
therefore a breach of M&T's fiduciary duty to the beneficiaries.
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47.
As a result of M&T's actions in connection with the sale of Tyco stock, the
Children's Trusts have been damaged in the approximate amount of $764,573, with the exact
amount to be proven at trial.
48.
Petitioners are also entitled to punitive damages as a result of M&T's conduct,
since M&T acted with intent or reckless indifference.
SECOND CLAIM FOR RELIEF
(Against Respondent M&T)
(Breach of Fiduciary Duty)
(Grandchildren's Trust)
49.
Petitioners restate thc allegations in paragraphs 1 through 39.
50.
M&T had an obligation to deal honestly with its co-trustees, Bushey and Brenner
Jr., in the management of the Grandchildren's Trust.
51.
M&T had an obligation to act in the best interests of thc beneficiaries of the
Grandchildren's Trust.
52.
M&T breached its fiduciary duties to the Grandchildren's Trust by misleading and
coercing its co-trustees Brenner Jr. and Bushey to accede to its unilateral decision to liquidate all
Tyco stock held by the trust. M&T disposed of the entirety of thc assets in thc Grandchildren's
Trust without thc informed consent and agreement of its co-trustees.
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53.
M&T's panicked decision to liquidate the entirety of the Tyco stock held in the
Grandchildren's Trust on June 12, 2002, was not in the best interests of the beneficiaries, and
therefore a breach of M&T's fiduciary duty to the beneficiaries.
54.
As a result of M&T's actions in connection with the sale of Tyco stock, the
Grandchildren's Trust has been damaged in the approximate amount of $199,605, with the exact
amount to be proven at trial.
55.
Petitioners are also entitled to punitive damages as a result of M&T's conduct,
since M&T acted with intent or reckless indifference.
THIRD CLAIM FOR RELIEF
(Against Respondent M&T)
(Breach of Fiduciary Duty)
(Children's Trusts)
56.
Petitioners restate the allegations in paragraphs 1 through 55.
57.
M&T has breached and is breaching its fiduciary duties by refusing to release the
trust assets to Orrstown Bank as petitioners' chosen successor trustee, in contravention of the
express terms of the trust agreements. As a result of M&T's actions, the Children's Trusts have
been damaged in an amount to be proven at trial.
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FOURTH CLAIM FOR RELIEF
(Against Respondent M&T)
(Breach of Fiduciary Duty)
(Grandchildren's Trust)
58.
Petitioners restate the allegations in paragraphs 1 through 55.
59.
M&T has breached and is breaching its fiduciary duties by refusing to release the
trust assets to Orrstown Bank as petitioners' chosen successor trustee, in contravention of the
express terms of the trust agreements. As a result of M&T's actions, the Grandchildren's Trust
has been damaged in an amount to be proven at trial.
FIFTH CLAIM FOR RELIEF
(Against Respondents Gority and Stauffer)
(Aiding and Abetting Breach of Fiduciary Duty)
(Children's Trusts)
60.
Petitioners restate the allegations in paragraphs 1 through 59.
61.
By their actions, Gority and Stauffer aided and abetted M&T's breach of fiduciary
in connection with the sale of Tyco stock from the Children's Trusts.
62.
As a result of Gority and Stauffer's actions, the Children's Trusts have been
damaged in the approximate amount of $764,573, with the exact amount to be proven at trial.
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SIXTH CLAIM FOR RELIEF
(Against Respondents Gority and Stauffer)
(Aiding and Abetting Breach of Fiduciary Duty)
(Grandchildren's Trust)
63.
Petitioners restate the allegations in paragraphs 1 through 59.
64.
By their actions, Gority and Stauffer aided and abetted M&T's breach of fiduciary
duty in connection with the sale of Tyco stock from the Grandchildren's Trust.
65.
As a result of Gority and Stuaffer's actions, the Grandchildren's Trusts have been
damaged in the approximate amount of $199,605, with the exact amount to be proven at trial.
PRAYER FOR RELIEF
WHEREFORE, petitioners Joseph D. Brenner, Sr., Joseph D. Brenner, Jr., and
Margaret B. Bushey, pray that a citation be issued directed to respondents to show cause why the
relief requested in this Petition should not be granted and that judgment be entered against
respondents Manufacturers and Traders Trust Company, David C. Gority, and Curt R. Stauffer
for compensatory damages against all respondents on all claims in an amount to be proven at
trial, including approximately $964,178 damages in connection with the sale of Tyco stock and
additional damages in connection with M&T's refusal to release trust assets to the successor
trustee; for punitive damages against respondent M&T on the first and second claims; for interest
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at the statutory rate of 6% from June 12, 2002, until paid, against all respondents on all claims,
and for such other relief as the court deems just and equitable.
DATED this day of February, 2004.
SNELBAKER, BRENNEMAN & SPARE, P.C.
Keith O. Brenneman
Richard C. Snelbaker
Attomeys for Petitioners
TONKON TORP LLP
William F/Martson, Jr., OSB No. 72163
Robyn E. Ridler, OSB No. 00016
Attorneys for Petitioners
031590\0000 IL554045 V001
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VERIFICATION
I verify that the statements made in the foregoing Petition are true and correct
based upon personal knowledge, information, and/or belief. I understand that false statements
herein are made subject to the penalties of 18 Pa.C.S. § 1409 relating to unsw0m falsification to
authorities.
jo~91~hSl~.t~r~n~r,~.~w.2,x~ ~ .~ --
Date:
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VERIFICATION
I verify that the statements made in the foregoing Petition are true and correct
based upon personal knowledge, information, and/or belief. I understand that false statements
herein are made subject to the penalties of 18 Pa.C.S. § 1409 relating to unswom falsification to
authorities.
D~te: ~/(3'~/0~
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VERIFICATION
I verify that the statements made in the foregoing Petition are true and correct
based upon personal knowledge, information, and/or belief. I understand that false statements
herein are made subject to the penalties of 18 Pa.C.S. § 1409 relating to unsworn falsification to
authorities.
Margj/a~e~ ~ushey ~~
Date: e9 _,:9_ - tg~q- tgi/ (
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