Ellen Aguiar v. William Natbony, et al

Filing 3

AFFIDAVIT of SIGRID STONE McCAWLEY. Document filed by Ellen Aguiar. (arc) (Additional attachment(s) added on 8/18/2011: # 1 Ex 1, # 2 Ex 2, # 3 Ex 3 Part 1, # 4 Ex 3 Part 2, # 5 Ex 3 Part 3, # 6 Ex 3 Part 4, # 7 Ex 3 Part 5, # 8 Ex 3 Part 6, # 9 Ex 3 part 7, # 10 Ex 4, # 11 Ex 5, # 12 Ex 6, # 13 ex 7) (arc).

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 11-cv-61314 – ZLOCH/ROSENBAUM

ELLEN AGUIAR,
Plaintiff,
v.
WILLIAM NATBONY, individually and as
trustee of the THOMAS S. KAPLAN 2004
QUALIFIED TEN YEAR ANNUITY
TRUST AGREEMENT and the DAFNA
KAPLAN 2003 EIGHT YEAR ANNUITY
TRUST AGREEMENT, THOMAS
KAPLAN and DAFNA KAPLAN,
Defendants.
/

PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO
DEFENDANTS’ MOTION TO DISMISS

BOIES, SCHILLER & FLEXNER LLP

Carlos M. Sires, Esq.
[e-mail]
Sigrid S. McCawley, Esq.
[e-mail]
Alec H. Schultz, Esq.
[e-mail]
401 E. Las Olas Blvd., Suite 1200
Fort Lauderdale, FL 33301
Telephone: [phone]
Facsimile: [phone]
Attorneys for Plaintiff Ellen Aguiar

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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .......................................................................................................... ii
I.

PRELIMINARY STATEMENT .........................................................................................1

II.

FACTUAL BACKGROUND ..............................................................................................5
A.
B.

Defendants’ Improper Removal of Plaintiff as Beneficiary of the GRATs.............6

C.
III.

Plaintiff’s Interest in the GRATs, and the Trustee’s Conflicted Role .....................5

The GRATs and the Law Do Not Authorize Defendants’ Improper Actions .........7

LEGAL ARGUMENT .........................................................................................................9
A.
B.

Plaintiff States a Valid Claim for Breach of Fiduciary Duty Against
Defendant Natbony Resulting From Plaintiff’s Removal From the GRATs .........10

C.

Plaintiff Adequately States a Claim for Breach of Fiduciary Duty Based
Upon Natbony’s Bad Faith Use of Trust Assets (Count II) ...................................13

D.

Plaintiff States a Claim for Breach of Fiduciary Duty Based Upon the
Unitrust Election (Count III) ..................................................................................15

E.

Plaintiff States a Claim against the Kaplan Defendants for Aiding and
Abetting Natbony’s Breaches of Fiduciary Duty (Count IV) ................................16

F.
IV.

Legal Standard .........................................................................................................9

Plaintiff States a Claim for Removal of Natbony as Trustee .................................17

CONCLUSION ..................................................................................................................18

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TABLE OF AUTHORITIES
Page
Cases
Ashcroft v. Iqbal,
556 U.S. ----, 129 S.Ct. 1937 (2009) ...........................................................................................9
Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007) .....................................................................................................................9
Benedict v. Amaducci,
No. 92 Civ. 5239, 1993 WL 87937 (S.D.N.Y. Mar. 22, 1993) ......................................... passim
Benjamin v. Morgan Guar. Trust Co. of New York,
557 N.Y.S.2d 360 (App. Div. 1st Dept. 1990)...........................................................................14
Birnbaum v. Birnbaum,
541 N.Y.S.2d 746 (1989) .................................................................................................3, 10, 15
Brass v. Am. Film Techs., Inc.,
987 F.2d 142 (2d Cir. 1993).......................................................................................................10
Cimini v. Jaspan Schlesinger Hoffman LLP,
No. 05-CV-5952 (JFB)(AKT), 2007 WL 173893 (E.D.N.Y. Jan. 19, 2007) ............................14
Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals,
282 F.3d 83 (2d Cir. 2002).........................................................................................................10
Fernandez v. Chertoff,
471 F.3d 45 (2d Cir. 2006).........................................................................................................10
In re Durston's Will,
74 N.E.2d 310 (N.Y. 1947) ........................................................................................................10
In re Epstein,
715 N.Y.S.2d 904 (App. Div. 2d Dept. 2000) ...........................................................................14
In re Estate of Wallens,
9 N.Y.3d 117 (N.Y. 2007) .....................................................................................................2, 13
In re Malasky,
736 N.Y.S.2d 151 (App. Div. 2002) ..................................................................................3, 4, 14
In re Mary XX,
860 N.Y.S.2d 656 (App. Div. 3d Dept. 2008) ...........................................................................14

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In re Mergenhagen,
856 N.Y.S.2d 389 (App. Div. 4th Dept. 2008) .................................................................. passim
Kassner v. 2nd Ave. Delicatessen, Inc.,
496 F.3d 229 (2d Cir. 2007)...................................................................................................9, 16
Kaufman v. Cohen,
307 A.D.2d 113 (App. Div. 1st Dept. 2003) ..............................................................................16
Matter of Bruches,
415 N.Y.S.2d 664 (App. Div. 2d Dept. 1979) ................................................................... passim
Matter of Murray's Will,
88 N.Y.S.2d 579 (N.Y. Sur. 1949).............................................................................................15
Mercury Bay Boating Club Inc. v. San Diego Yacht Club,
557 N.E.2d 87 (N.Y. 1990) ........................................................................................................11
Rubinson v. Rubinson,
620 N.E.2d 1271 (Ill. 1993) .......................................................................................................11
Siegel v. Novak,
920 So. 2d 89 (Fla. 4th DCA 2006) ...........................................................................................14
Statutes
N.Y. Est. Powers & Trusts § 11-2.4(e)(1)(B)(ii) (McKinney 2010) .............................................16
Rules
FED. R. CIV. P. 12(b)(6) .............................................................................................................9, 10

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Plaintiff Ellen Aguiar respectfully submits this Memorandum of Law in Opposition to
Defendants’ Motion to Dismiss the Complaint in this action. For all of the reasons set forth
below, this Court should deny defendants’ motion in its entirety.
I.

PRELIMINARY STATEMENT
Defendants’ motion to dismiss (“motion”) ignores the allegations in plaintiff’s complaint,

misstates or mischaracterizes the governing New York law, and improperly asks this Court to
make rulings on numerous questions of fact. Each of these fundamental flaws represents an
independent basis for this Court to deny defendants’ motion in its entirety.
The defendants’ motion argues that plaintiff cannot state a claim for relief because the
governing trust documents provide the trustee with the power to remove beneficiaries in his “sole
and absolute discretion,” and all of the trustee’s actions were permitted by the GRATs’ terms.
(Defs. Mot. at 1-2.) This argument wholly ignores the allegations of plaintiff’s complaint, which
contend the trustee violated his duty to plaintiff precisely because, when the trustee exercised his
trust powers to remove plaintiff, the trustee did not use his “sole and absolute discretion” but
rather took orders from the Kaplan defendants in direct violation of New York law and contrary
to the governing provisions of the GRATs.1
Thus, in citing to these trust provisions, defendants not only ignore the allegations in
plaintiff’s complaint, but they show this Court exactly why defendants are liable on plaintiff’s
claims and why dismissal of the complaint is impossible under the controlling law. Simply put,
plaintiff does not allege in her complaint that the trustee, William Natbony (“Natbony”), was
“acting alone” or in his “sole and absolute discretion” when he removed plaintiff from the two
1

The New York Court already stated at a preliminary conference that it did not believe
defendants’ Motion to Dismiss had merit. Specifically, the court said:
“[S]uch a motion would not be well founded. The defendants argue that because the trustee
had express power to add or delete beneficiaries, the plaintiff has failed to state a cause of
action. The plaintiff argues, however, that even though the trustee had discretion to remove
beneficiaries the trustee was not permitted to abuse his fiduciary duty in doing so. The
plaintiff alleges that here the trustee was so influenced and controlled by the defendants that he
didn’t exercise his independent judgment. Under New York law it appears that a duty of
loyalty does apply to a trustee even under the circumstances we have here. There is law to the
effect that as a fiduciary a trustee bears the unwavering duty of complete loyalty to the
beneficiaries of the trust no matter how broad the settler’s directions allow the trustee free
reign to deal with the trust. The trustee is liable if he or she commits a breach of trust in bad
faith, intentionally or with reckless indifference to the interests of the beneficiaries.” Exhibit 1,
October 27, 2010, Hearing Transcript at 7-8.
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trusts at issue. Instead, plaintiff makes the allegation—which must be accepted as true—that
Natbony removed her from the trusts at the direction of Thomas and Dafna Kaplan and allowed
the Kaplans control over trust assets and management, in direct contravention of the terms of the
trusts, his fiduciary duty, and New York trust law. (See, e.g., Ex. 2, Pl. Compl. at ¶¶ 2, 12, 20,
25, 29, 30, 34, 36, 40, 50, 56.) Therefore, whether New York law allows a trust to grant a trustee
sole discretion to remove beneficiaries--and whether the GRATs allow Natbony to make
decisions that favor the Kaplans to the detriment of beneficiaries--are simply beside the point.
The trustee was influenced and controlled by the Kaplans, and he failed to exercise the
independent judgment required by New York law and serve as a neutral, disinterested trustee.
Here, liability on the part of the defendants exists precisely because the terms of the
GRATs require Natbony to act in his “sole and absolute discretion” with regard to his trust
duties, yet Natbony utterly failed to meet this standard by acting instead at the direction of the
Kaplans. The governing trust documents (and New York law) do not permit Natbony to remove
beneficiaries at the direction of the Kaplans or allow them control over trust management—what
plaintiff alleges occurred here—and therefore, defendants cannot rely upon the trustee’s
discretionary powers or the alleged “purpose” of the trusts as a cognizable basis for dismissal.
Separately, defendants cannot cite as a basis for dismissal what they term the “broad”
grants of discretion given to Natbony by the GRATs. New York law is unequivocal in stating
that a trustee is bound by an overarching fiduciary duty and must act in good faith regardless of
how broad his discretionary powers are under a trust instrument. See In re Estate of Wallens, 9
N.Y.3d 117, 123 (N.Y. 2007) (“even when the trust instrument vests the trustee with broad
discretion… a trustee is still required to act reasonably and in good faith in attempting to carry
out the terms of the trust”). Here, plaintiff alleges that Natbony exercised his discretionary
powers under the trusts in bad faith and in breach of his fiduciary duties. Therefore, regardless
of how broad defendants believe Natbony’s powers under the GRATs are, clear questions of fact
exist as to whether he exercised those powers in good faith and in accord with his fiduciary duty.
Defendants also attempt to immunize their improper actions by arguing that plaintiff
hasn’t alleged self-dealing on Natbony’s part. That is incorrect. Plaintiff’s complaint does
contain allegations of self-dealing on the part of the trustee. Specifically, plaintiff alleges that,
far from acting as an independent and disinterested trustee, Natbony was subject to an ongoing

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conflict of interest, as he derived virtually all of his income from Thomas Kaplan or Kaplanowned entities. (See, e.g., Ex. 2, Pl. Compl. at ¶¶ 15, 24.) New York law is clear that such a
conflict is equivalent to self-dealing for purposes of analyzing whether a trustee has breached his
fiduciary duties. “The rule of undivided loyalty requires that a trustee ‘must not, under any
circumstances, place himself in a position whereby his personal interests will come in conflict
with the interest of his beneficiary.’” Benedict v. Amaducci, No. 92 Civ. 5239, 1993 WL 87937,
at *5 (S.D.N.Y. Mar. 22, 1993) (quoting 61 N.Y. Jur. Trusts § 295, at 491 (1968)).
The court in Benedict then went on to cite the New York Court of Appeals case of
Birnbaum v. Birnbaum, 541 N.Y.S.2d 746 (1989), which held “[t]his is a sensitive and
‘inflexible’ rule of fidelity, barring not only blatant self-dealing, but also requiring avoidance of
situations in which a fiduciary’s personal interest possibly conflicts with the interest of those
owed a fiduciary duty.” Id. at 748. Here, the allegations make clear that Natbony’s personal
interest was directly in conflict with the plaintiff’s due to his complete financial reliance on the
Kaplans, and that Natbony’s financial reliance on the Kaplans tainted his actions as trustee.
Therefore, plaintiff’s complaint unequivocally alleges that Natbony was a conflicted trustee who
engaged in multiple acts of self-dealing.
In addition to ignoring the allegations of plaintiff’s complaint, defendants routinely base
their legal arguments on cases involving revocable trusts, as opposed to the irrevocable trusts at
issue here. As alleged specifically in the complaint, the two Grantor Retained Annuity Trusts
(“GRATs”) at issue are irrevocable trusts which implicate a legal analysis that is distinct from
the analysis governing revocable trusts. As a result, none of the revocable trust cases that
defendants cite can provide a legally cognizable basis for dismissal. For example, defendants
cite In re Malasky, 736 N.Y.S.2d 151 (App. Div. 2002) for the proposition that plaintiff lacks
standing to challenge administration of the GRATs due to her status as a contingent beneficiary.2
(Defs. Mot. at 11). In addition to being an inapplicable revocable trust case, Malasky in fact
demonstrates that plaintiff has standing because the GRATs are irrevocable trusts. The court in
2

Defendants consistently refer to Ms. Aguiar as a “discretionary, contingent future beneficiary”
of the GRATs. (See, e.g., Defs. Mot. at 3). Defendants cite no authority whatsoever in support
of their self-created definition of Ms. Aguiar’s beneficiary status. Indeed, defendants have
invented this term in order to create the misimpression that Ms. Aguiar’s interest in the GRATs
is remote. The fact is that Ms. Aguiar was a contingent beneficiary of the GRATs prior to her
improper removal, which defendants appear to tacitly acknowledge in a footnote. (See Defs.
Mot. at 11, fn 31).
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Malasky found that the revocable status of the trust at issue there resulted in a lack of standing
because “there is no construction of the trust which gives respondents any interest until
decedent’s death, when the trust became irrevocable.” Id. at 153 (emphasis added). Because the
GRATs are irrevocable trusts, plaintiff Aguiar has a current interest in the trusts and, thus,
standing to bring her claims, as Malasky demonstrates. As the Court will see in more detail
below, the Malasky case is just one of many instances where defendants improperly rely upon
decisions involving revocable trusts.
Finally, defendants ask this Court to improperly resolve numerous questions of fact on
their motion to dismiss. First, as stated above, defendants essentially ask this Court to find that
plaintiff’s allegations regarding Natbony acting at the direction of the settlors are untrue, and
instead find that Natbony’s actions were the result of his independent judgment and discretion.
Second, defendants make the strained argument that—despite plaintiff’s allegations that Natbony
acted in bad faith (see, e.g., Ex. 2, Pl. Compl. ¶ 20)—this Court should find that the trustee’s
actions do not constitute bad faith as a matter of law. This, of course, is inappropriate at the
motion to dismiss stage of the proceedings.
Tellingly, in asking this Court to resolve this factual question at the motion to dismiss
stage, defendants appear to tacitly acknowledge that Natbony acted at the settlors’ direction with
regard to administration of the GRATs and Ms. Aguiar’s removal, just as plaintiff alleges.
Specifically, defendants state that, because they had the power to remove Natbony as trustee, “it
would not be unusual or inappropriate for their (the Kaplans’) opinions as to the administration
of the GRATs to be sought out or followed by the Trustee.” (Defs. Mot. at 18). In addition to
the fact that neither GRAT allows the settlor to direct trust administration—or allows the trustee
to take direction from the settlors—defendants’ argument here flatly contradicts their argument
elsewhere in the brief that Natbony acted solely within his discretionary authority. It also plainly
contradicts defendants’ argument that the intention of the settlors is derived solely from the
language of the trust instrument itself and is not subject to a continuing inquiry by the trustee.
(See Defs. Mot. at 9). These inherently conflicting arguments in defendants’ own memorandum
of law perhaps best demonstrate that defendants cannot prevail in their efforts to dismiss
plaintiff’s claims. While defendants liberally quote provisions of the GRATs in an attempt to
muddy the waters and win a dismissal, the only GRAT terms relevant to this motion are those
requiring Natbony to act using his “sole and absolute discretion.” Plaintiff’s complaint

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demonstrates that Natbony failed to adhere to this standard by being improperly influenced by
and by taking improper directions from the Kaplan defendants, and as a result Ms. Aguiar has
stated legally valid claims for relief.
II.

FACTUAL BACKGROUND
Plaintiff Ellen Aguiar brings this action to redress the tortious acts of William Natbony,

Thomas Kaplan (“Kaplan”) and Dafna Kaplan that deprived her of her interest in the Thomas S.
Kaplan 2004 Qualified Ten Year Grantor Retained Annuity Trust (the “Thomas GRAT”) and the
Dafna Kaplan 2003 Eight Year Grantor Retained Annuity Trust (the “Dafna GRAT”).
A.

Plaintiff’s Interest in the GRATs, and the Trustee’s Conflicted Role

The Thomas and Dafna GRATs are irrevocable trusts that plaintiff believes hold over
two billion dollars between them. When creating these irrevocable trusts, the Kaplans obtained
significant tax advantages and forfeited their right to manage or in any way dictate the affairs and
administration of the trusts. Despite receiving these tax benefits and forfeiting their right to
make decisions regarding trust management (including the removal of beneficiaries), the Kaplans
continued to improperly direct the actions of the trustee, and in fact they retained effective
control and ownership over the GRATs. (See Ex. 2, Pl. Compl. at ¶ 12).
Prior to her wrongful removal, plaintiff Aguiar was a beneficiary of both the Thomas
GRAT and the Dafna GRAT. (See id. at ¶13-14). Plaintiff and her issue were named
beneficiaries of the Thomas GRAT from its inception on April 6, 2004. Id. This interest entitled
plaintiff, at the sole discretion of a disinterested trustee, to receive income and principal after the
expiration of the Original Trust3 term and during the lifetimes of Thomas or Dafna Kaplan. Id.
Additionally, plaintiff was a remainder beneficiary in the event the Kaplans and their issue did
not survive the termination of the Thomas GRAT. Id. With regard to the Dafna GRAT, plaintiff
had an interest as a remainder beneficiary. Id. On August 8, 2005, the Dafna Trust was amended
to add plaintiff and her issue as lifetime income and principal beneficiaries entitled to receive
distributions from the Dafna Trust in the sole discretion of a disinterested trustee after the
expiration of the Original Trust term in 2011, and during the lifetime of Dafna or her husband

3

The “Original Trust,” in both the Thomas and Dafna GRATs, holds the trust property for a
period of ten years (in the case of the Thomas GRAT) and eight years (in the case of the Dafna
Trust) during which time annuity payments are made to the settlors. Upon expiration of the
annuity period, the trust property is held by the trustee in a “Family Trust.”
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Kaplan. Id. As with the Thomas GRAT, plaintiff was a remainder beneficiary in the event the
Kaplans and their issue did not survive the termination of the Dafna GRAT. Id.
William Natbony serves as the trustee for both GRATs. (See id. at ¶ 15). Thomas
Kaplan named him trustee of the Thomas GRAT on April 6, 2004, and trustee of the Dafna
GRAT on December 29, 2003. (Id.) At the time he agreed to serve, Natbony had a longstanding relationship with the Kaplan family. Thomas Kaplan and his various business entities
were Natbony’s clients while the trustee served as a partner (then later as counsel) at the Katten
Muchin law firm during the years 2001-2010. In 2007, Natbony stepped down as a partner at
Katten Muchin and became counsel to the firm. He then accepted, in addition to his role as
trustee of the GRATs, the job of president of Tigris Financial Group, Ltd. (“Tigris”), a company
wholly-owned and controlled by Kaplan. (See id.)
Natbony benefited financially from his relationship with the Kaplans from the inception
of the GRATs, and upon stepping down as a partner from Katten Muchin, he became almost
wholly reliant on Thomas Kaplan for his financial livelihood. For example, in addition to his
salary as president of Tigris and the payments he received for his role as trustee, Natbony
received payments from Pardus LLC, a Kaplan entity, including a payment of 2.75 million
dollars. Additionally, in 2008, Natbony received a payment of 3.5 million dollars from JaguarPortland Holdings, another Kaplan entity. (See id. at ¶ 24). Thus, Natbony’s financial reliance
on Kaplan created an irreconcilable conflict of interest, and it resulted in Natbony’s decision to
act in bad faith with regard to his duties as trustee, by allowing the Kaplans to direct
administration and management of the trusts. Simply put, Natbony could not say “no” to any
request from Thomas or Dafna Kaplan related to the GRATs, including their direction that he
drop plaintiff as a beneficiary.
B.

Defendants’ Improper Removal of Plaintiff as Beneficiary of the GRATs

Defendants’ wrongful removal of plaintiff as a beneficiary of the GRATs stems from an
unrelated business dispute between defendant Thomas Kaplan and plaintiff’s son, Guma Aguiar
(“Guma”). (See id. at ¶ 16). Guma and Kaplan were the co-founders of Leor Exploration and
Production LLC (“Leor”), which was sold for over 2.5 billion dollars in 2007. (Id.) Following
the Leor sale, Kaplan and Guma had a falling out concerning their respective shares of the
proceeds. When Guma sought an accounting related to the Leor asset sale and questioned the
withholding of bonus payments he was owed, his uncle, Thomas Kaplan, caused Natbony to
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terminate Guma as Chief Executive Officer of Leor. (See id.). Guma subsequently filed a
lawsuit against Pardus LLC, a Kaplan-owned entity with an equity interest in Leor, and Natbony
in Texas state court. (See id. at ¶17).
When plaintiff attempted to mediate the dispute between her brother and son, defendant
Kaplan responded by threatening plaintiff and her family members. Specifically, Kaplan stated
that he would launch an “offensive . . . across the broadest front imaginable.” (See Ex. 2, Pl.
Compl., at Ex. 1). As part of this “offensive,” Kaplan directed Natbony—his employee and
right-hand man—to remove plaintiff and her issue from the Thomas and Dafna GRATs. Due to
his financial dependence upon Kaplan, Natbony complied with this directive and removed
plaintiff from the GRATs, thereby breaching his fiduciary duty to plaintiff. Kaplan also arranged
for the filing of a baseless lawsuit against plaintiff’s daughter, Angelika Aguiar, and her
husband, claiming that the two had defrauded Leor and a related entity while employed by those
companies. (See Ex. 2 at ¶ 19). The plaintiffs in that action were forced to dismiss the case after
the depositions of Kaplan and Natbony revealed there was no merit to the case.
C.

The GRATs and the Law Do Not Authorize Defendants’ Improper Actions

In all his actions as trustee, Natbony was bound by an unwavering fiduciary duty of
undivided loyalty to the trust beneficiaries, requiring him to exercise reasonable care, diligence
and prudence with respect to plaintiff and the administration of the trusts. Contrary to
defendants’ arguments, the GRATs do not absolve him of this duty, nor do they allow the settlors
any control into the administration of the trusts.4
Natbony breached this duty not only by improperly removing plaintiff at the direction of
Kaplan, but also by allowing the settlors to control such things as investment decision-making
within the GRATs. Regardless of the trusts’ broad powers, Natbony was obligated to
independently exercise his fiduciary duty and act in good faith toward the beneficiaries,
including Plaintiff here. Thomas and Dafna Kaplan aided and abetted these breaches of
fiduciary duty by ordering Natbony to take these actions, as the trusts require Natbony to act
independently. The language of both the Thomas and Dafna GRATs makes expressly clear that
4

Defendants’ memorandum of law mischaracterizes plaintiff’s allegation regarding Natbony’s
status as a “disinterested trustee.” (See, e.g., Defs. Mot. at 17, fn 42.) Plaintiff’s allegations
regarding Natbony’s failure to represent a “disinterested trustee” focus on the fact that Natbony’s
financial reliance on the settlors renders him unable to exercise his own independent judgment or
refuse the wishes of the Kaplans.
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Natbony must exercise his powers as trustee, including with regard to addition or removal of
beneficiaries, free from the settlors’ influence. Specifically, the GRATs provide as follows:
[T]he Trustee shall have the power, acting alone, to amend each Trust and/or the
terms and provisions of this Trust Agreement at any time, in any manner, …
including but not limited to, (a) to add or delete beneficiaries, (b) to change the
nature of any or all of the beneficiaries’ beneficial interests therein….
Thomas GRAT at Tenth § (B)(II); Dafna GRAT at Eighth § (B)(II) (emphasis added). Each
GRAT also states that any of Natbony’s enumerated powers as trustee must be exercised in his
“sole and absolute discretion” and without any input from another party.
Each determination which the Trustee is hereby authorized to make shall be made
in the sole and absolute discretion of the Trustee…
Thomas GRAT at Eighth § (J); Dafna GRAT at Sixth § (F) (emphasis added).
The plain terms of the GRATs themselves thus prohibit Natbony from taking the exact
actions that he took in this case, including removing plaintiff as a beneficiary at the direction of
the Kaplans and allowing the Kaplans control over trust administration. The trusts certainly do
not—as defendants claim—authorize any of this tortious conduct. Here, Natbony did not “act
alone” or use his “sole and absolute discretion.” Instead, he acted as a mere conduit for the
wishes of the settlors and breached his fiduciary duties in the process. The GRATs make him
liable to plaintiff for these bad faith breaches of his fiduciary duties. See Dafna GRAT at Sixth
§ (I); Thomas GRAT at Tenth § (M).
Similarly, the GRATs are clear that the Kaplans, as settlors, gave up their right to control
trust administration due to the irrevocable nature of the trusts:
Except as hereinbefore specifically provided and except as otherwise provided by
law, (1) the Trusts may not be terminated or revoked in whole or in part at any
time in any manner whatever and (2) subject to the provisions of parts B and C of
this Article EIGHTH, neither the Trusts nor the terms and provisions of this Trust
Agreement may be amended, modified or altered at any time in any manner
whatever.
Dafna GRAT at Eighth § (A); see also Thomas GRAT at Tenth § (A). By setting up irrevocable
trusts that placed decision-making in the trustee’s “sole discretion,” the Kaplans, in exchange for
the tax benefits of a GRAT, gave up any right to control trust assets or have input into trust
administration. Despite this clear prohibition, the Kaplans proceeded to use their financial

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leverage and control over Natbony to direct his actions, thereby aiding and abetting his breaches
of fiduciary duty.
This action included not only the direction to remove plaintiff as a beneficiary of the
GRATs, but also directing Natbony to make elections pursuant to Estate Powers and Trust Laws
of the State of New York Section 11-2.4 (the “Unitrust Election”). (See Ex. 2, Pl. Compl. ¶ 26).
These elections allowed Natbony to make larger distributions to the Kaplans than were provided
for at the trusts’ creation. As part of the Unitrust Election, Natbony failed to provide plaintiff
with full and appropriate information regarding the effect of the Unitrust Election, thereby
resulting in an absence of informed consent on plaintiff’s part.
The Kaplans also directed Natbony to use trust assets for purchases that were not in the
best interest of the GRATs or the beneficiaries, but rather were for the personal benefit of the
Kaplans. (See id. at ¶ 30). These included the purchase by the GRATs of real property that
benefited the Kaplans and their personal interests, such as non-income earning land in the
Brazilian Pantanal for charitable use by Kaplan’s Panthera Project and millions of dollars in art
bought for Kaplan’s personal use. Dafna Kaplan also directed Natbony to make charitable
donations out of the GRATs to satisfy her personal charitable commitments. All of these acts
were breaches of Natbony’s fiduciary duties, and by directing and ordering them, the Kaplan
defendants aided and abetted those breaches.
III.

LEGAL ARGUMENT
This Court should deny defendants’ motion in its entirety, as plaintiff’s complaint easily

satisfies the pleading standard required to survive a FED. R. CIV. P. 12(b)(6) motion. New York
law places a strict fiduciary duty on Natbony in his role as trustee of the GRATs, and the
allegations of plaintiff’s complaint, together with the language of the trusts, sufficiently alleges
that Natbony violated this duty on multiple occasions, with the Kaplan defendants aiding and
abetting these breaches.
A.

Legal Standard

“To survive a motion to dismiss, a claim must contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. ----,
129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“In considering a motion to dismiss . . . the court is to accept as true all facts alleged in the
complaint.” Kassner v. 2nd Ave. Delicatessen, Inc., 496 F.3d 229, 237 (2d Cir. 2007) (citing
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Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 87 (2d Cir. 2002)).
Additionally, this Court must “draw all reasonable inferences in favor of the plaintiff.” Id.
(citing Fernandez v. Chertoff, 471 F.3d 45, 51 (2d Cir. 2006)).
Furthermore, “[w]hen determining the sufficiency of plaintiffs’ claim for Rule 12(b)(6)
purposes, consideration is limited to the factual allegations in plaintiffs’ . . . complaint, . . . to
documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of
which judicial notice may be taken, or to documents either in plaintiffs’ possession or of which
plaintiffs had knowledge and relied on in bringing suit.” Brass v. Am. Film Techs., Inc., 987
F.2d 142, 150 (2d Cir. 1993).5
B.

Plaintiff States a Valid Claim for Breach of Fiduciary Duty Against
Defendant Natbony Resulting From Plaintiff’s Removal From the GRATs

New York law is clear and unequivocal in stating that trustees owe a fiduciary duty to all
beneficiaries of the trust. In re Mergenhagen, 856 N.Y.S.2d 389, 391 (App. Div. 4th Dept.
2008) (trustee owes “to the trusts a duty of undivided loyalty, which prohibits a trustee from
even placing himself [or herself] in a position of potential conflict with his or her duty to the
trust”) (citation and quotations omitted). The New York Court of Appeals has stated that “[t]his
is a sensitive and ‘inflexible’ rule of fidelity, barring not only blatant self-dealing, but also
requiring avoidance of situations in which a fiduciary’s personal interest possibly conflicts with
the interest of those owed a fiduciary duty.” Birnbaum, 541 N.Y.S.2d at 748. That court has
also held that a trustee cannot evade this duty by relying upon discretionary authority granted to
him by the trust. In re Durston’s Will, 74 N.E.2d 310, 313 (N.Y. 1947) (“Although a power is
conferred upon the trustee, he cannot properly exercise the power under such circumstances or to
such extent or in such manner as will involve a violation of any of his duties to the beneficiary.”)
Plaintiff’s complaint states a claim that Natbony breached his fiduciary duty by removing
her from the GRATs and acting at the direction of the Kaplans instead of exercising his
independent judgment. Contrary to defendants’ argument, nothing in either the Thomas GRAT
or the Dafna GRAT authorizes the trustee to follow the direction of the settlor in adding or
removing beneficiaries from the trusts. Defendants assert that the “trust agreement defines the
power and authority of a trustee to act,” (Defs. Mot. at 9) but fail to acknowledge that regardless
of any broad grants of authority in a trust agreement, the trustees is nevertheless bound to
5

Plaintiff agrees with defendants that this Court can and should refer to the terms of the GRATs
in ruling on the instant motion.
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exercise that authority in accordance with his overarching fiduciary duty. Here the applicable
agreements expressly require Natbony to act independently with regard to removing
beneficiaries, and the trustee is also governed by his common law fiduciary duty to the
beneficiaries irrespective of the language of the trusts. See Benedict, 1993 WL 87937, at *4-5.
In fact, both GRATs specifically state that Natbony must exercise his powers to add or delete
beneficiaries “acting alone.” Thomas GRAT at Tenth § (B)(II); Dafna GRAT at Eighth
§ (B)(II). The trusts also provide that every determination Natbony is authorized to make must
be made in his “sole and absolute discretion,” and free from outside influence. Thomas GRAT at
Eighth § (J); Dafna GRAT at Sixth § (F). Similarly, any reference by defendants to the settlors’
intent is irrelevant, as such intent is determined by examining the language of the trusts, see
Mercury Bay Boating Club Inc. v. San Diego Yacht Club, 557 N.E.2d 87, 93 (N.Y. 1990), and
here that language expressly requires Natbony to act independently, thereby evincing that the
settlors did not intend to retain authority over the GRATs.
Given this clear and unambiguous trust language, in seeking dismissal of this count
defendants simply ignore the central allegations in plaintiff’s complaint stating that Natbony
removed her at the Kaplans’ direction. (See, e.g., Ex. 2, Pl. Compl. at ¶¶ 25, 36.) This is not a
situation in which Natbony simply exercised his authority to remove beneficiaries in an
independent fashion, but rather his conflict of interest and financial reliance on the settlors
caused him to willingly follow their orders in violation of the GRAT terms and New York law.6
For example, in Matter of Bruches, the court held that the “law is clear that if the trustee
acted from improper motives the remaindermen will be made whole.” 415 N.Y.S.2d 664, 667
(App. Div. 2d Dept. 1979). In that case, the trust at issue granted the trustee “absolute
discretion” to essentially terminate the trust by paying the entire principal to the lifetime
beneficiary. Id. The lifetime beneficiary was the settlor’s wife, and the trust also provided that
“in exercising the power granted . . . my said Trustee shall be guided by considerations of need
on the part of my said wife.” Id. Shortly after the settlor’s death, the trustee proceeded to pay
6

Defendants’ citation to Rubinson v. Rubinson, 620 N.E.2d 1271 (Ill. 1993)—a case decided at
the summary judgment stage--is unavailing. Not only did that case apply Illinois law, making it
irrelevant here, but that case involved a co-trustee situation, and the outcome turned on the fact
that the trustees could revoke the trust entirely. “[W]e draw the conclusion that if the
amendatory clause empowered the trustees to revoke the trust, it also empowered them to take
the lesser step of divesting plaintiff of her beneficial interest…” Id. at 1280. Here, Natbony had
no power to revoke the GRATs and no right to remove plaintiff from the GRATs in bad faith.
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the entire principal of the trust to the wife at her request, essentially terminating the trust to the
detriment of the remainder beneficiary. In reversing an award of summary judgment to the
trustee, the court held:
We cannot close our eyes to the fact that when Anna Bruches confronted the
trustee, Nathan Starkschall, with the demand that Miriam Gazinski ‘should not
reap any further benefits’, she was not talking to a trustee who was completely
free to call the shots. If, at the time Mr. Starkschall terminated the trust by
delivery of the $10,000 Res to Mrs. Bruches, he knew (1) that his wife was a
substantial legatee to the tune of more than $100,000 in the will of Mrs. Bruches
(who was then dying of terminal cancer); (2) that his son was also a beneficiary
under that will; and (3) that he was named as executor and trustee under her will,
with the right to considerable commissions (estimated in his accounting to be
$16,949.84), it is clear that he would not want to arouse her ire lest he, his wife
and his son be removed as beneficiaries under her will. Under such circumstances
the Surrogate erred in holding, as a matter of law, that the trustee was not
Improperly motivated in terminating the trust, for ‘a trustee must act in good faith
and will not be permitted to use his trusteeship for his individual advantage,
benefit, or profit.’
Id. at 668 (citations omitted).
The fact pattern in Bruches bears striking similarities to the present action. Here
Natbony—whose entire financial livelihood depends on remaining in the Kaplans’ good
graces—followed their instructions to remove plaintiff from the GRATs to maintain his standing
with the settlors. As the trusts do not authorize Natbony to exercise his discretion at the direction
of the Kaplans, he violated his fiduciary duty by following their instructions and removing the
plaintiff for his own personal benefit.
Similarly, in the case of In re Mergenhagen, 856 N.Y.S.2d 389 (App. Div. 4th Dept.
2008), the court again found that a trustee breaches his fiduciary duties when he adheres to the
wishes of a third party. There, the trustee was the son of the settlor, and the court found that—in
the context of an irrevocable trust—the trustee breached his fiduciary duties by remaining loyal
to the settlor.
David Mergenhagen (trustee) owed to the trusts a duty of undivided loyalty, which
‘prohibits a trustee from even placing himself [or herself] in a position of potential
conflict with his or her duty to the trust.’ The loyalty of David Mergenhagen to his
mother, the surviving grantor of the trusts, placed him in conflict with his duty as trustee,
as evidenced by his administration of the trust for his mother’s benefit despite the express
language of the trust instrument prohibiting such conduct. In addition, his open hostility
toward the other beneficiaries directly conflicts with his duty to the trust where, as here,
that hostility has ‘interfere[d] with the proper administration of the trust.’
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Id. at 391; see also Benedict, 1993 WL 878937, at *6 (finding breach of fiduciary duty where
trustees remained personally loyal to the settlor). The court also found that this conflict was
grounds for removal of the trustee. See Mergenhagen, 856 N.Y.S.2d at 391.
Based upon the holdings in these cases, there is no question that plaintiff has stated a
claim for relief as to Count I of her complaint. New York law unequivocally places a strict
fiduciary duty on Natbony in his role as trustee, the GRATs (and New York law) do not allow
him to take orders from the settlors on the removal of beneficiaries, and he thus violated his
fiduciary duties by disregarding the terms of the trust and removing plaintiff at the direction of
Thomas Kaplan. Finally, contrary to defendants’ arguments, any discretion that the GRATs give
to Natbony regarding the removal of beneficiaries is not a basis for dismissal. Plaintiff alleges
that Natbony acted in bad faith, and controlling case law demonstrates that even broad discretion
under a trust does not absolve a trustee from his fiduciary duties or condone bad faith conduct.
See In re Estate of Wallens, 9 N.Y.3d at 123 (“even when the trust instrument vests the trustee
with broad discretion… a trustee is still required to act reasonably and in good faith in attempting
to carry out the terms of the trust”).
C.

Plaintiff Adequately States a Claim for Breach of Fiduciary Duty Based
Upon Natbony’s Bad Faith Use of Trust Assets (Count II)

In addition to the fiduciary breach associated with the removal of plaintiff from the
GRATs, Natbony breached his fiduciary duties by allowing the Kaplans control over trust assets.
As alleged in the complaint, the Kaplans directed Natbony to use trust assets for purchases that
were not in the best interest of the GRATs or the beneficiaries, but rather were for the personal
benefit of the Kaplans. These included the purchase by the GRATs of real property that
benefited the Kaplans and their personal interests, such as non-income earning land in the
Brazilian Pantanal for charitable use by Kaplan’s Panthera Project and millions of dollars in art
bought for Kaplan’s personal use. Dafna Kaplan also directed Natbony to make charitable
donations out of the GRATs to satisfy her personal charitable commitments. These investments
damaged plaintiff, as they were not in the interests of the trusts and served to deplete trust assets.
Defendants first argue that plaintiff’s claim fails because she lacks standing.7 This
argument is entirely devoid of merit. First, as demonstrated in section (A), supra, Natbony’s
7

Defendants do not—because they cannot—argue that plaintiff lacks standing to pursue count I
for improper removal by Natbony and Count IV for the Kaplan defendants acts of aiding and
abetting that tortious removal.
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removal of plaintiff as a beneficiary was improper, so her removal does not create a standing
issue. Second, plaintiff’s status as a contingent beneficiary does not deprive her of standing to
challenge administration of the trusts. In making this argument, defendants improperly cite to
cases involving revocable—as opposed to irrevocable—trusts. New York law on irrevocable
trusts makes clear that contingent beneficiaries possess standing to challenge improper
administration of a trust. See Benjamin v. Morgan Guar. Trust Co. of New York, 557 N.Y.S.2d
360, 362 (App. Div. 1st Dept. 1990) (“As contingent remaindermen of the testamentary trust
under the original will of Benjamin, plaintiffs continue to have standing to raise the instant
issue.”); see also In re Epstein, 715 N.Y.S.2d 904 (App. Div. 2d Dept. 2000) (holding that a
contingent remainderman with an interest subject to a condition precedent had standing to object
to the accountings filed by an executor and trustee).8, 9
Defendants’ second argument is that the trusts allow Natbony to favor the Kaplans over
plaintiff in managing trust assets. Here again, defendants ignore the actual allegations in
plaintiff’s complaint and the language of the trusts. Plaintiff does not allege that Natbony simply
used his discretionary authority to benefit the Kaplans, rather she alleges that Natbony abdicated
his role as trustee by allowing the Kaplans to actually control and manage trust investments.
(See, e.g., Ex. 2, Pl. Compl. ¶ 40.) The GRATs do not allow Natbony to cede control over trust
assets to the Kaplans--regardless of any stated purpose in the trusts’ terms--as the settlors gave
up all management rights by creating irrevocable trusts. See Dafna GRAT at Eighth § (A); see
also Thomas GRAT at Tenth § (A).

8

Indeed, defendants’ own standing case reveals that plaintiff possesses standing here due to the
irrevocable nature of the GRATs. See In re Malasky, 736 N.Y.S.2d at 153 (“[T]here is no
construction of the trust which gives respondents any interest until decedent’s death, when the
trust became irrevocable.” (emphasis added)). Here, the GRATs were irrevocable upon their
creation, and plaintiff had immediate standing as a result. Cf. Siegel v. Novak, 920 So. 2d 89, 9495 (Fla. 4th DCA 2006) (applying New York law and holding that Malasky’s standing finding is
limited to revocable trusts).  
9

The cases defendants cite for their standing argument, including Malasky, involve revocable as
opposed to irrevocable trusts. See In re Mary XX, 860 N.Y.S.2d 656, 657 (App. Div. 3d Dept.
2008) (referring to the “1989 Mary XX revocable intervivos trust”). Defendants’ citation to
Cimini v. Jaspan Schlesinger Hoffman LLP, No. 05-CV-5952 (JFB)(AKT), 2007 WL 173893
(E.D.N.Y. Jan. 19, 2007) is equally unavailing. There the plaintiff in question was directly
seeking lost proceeds from a life insurance policy on an individual who was still alive, not
challenging the administration of a trust as Ms. Aguiar does here.
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Natbony allowed the Kaplans to manage trust assets as a result of his financial reliance
on them and inherent conflict of interest, as bending to the whims of the settlors served his
personal financial interests. As a result of these actions he breached his fiduciary duty to
plaintiff by favoring his own interests over those of the beneficiaries. See Benedict, 1993 WL
87937, at *5 (trustee must not “place himself in a position whereby his personal interests will
come in conflict with the interest of his beneficiary.”); see also Birnbaum, 541 N.Y.S.2d at 748
(“This is a sensitive and ‘inflexible’ rule of fidelity, barring not only blatant self-dealing, but also
requiring avoidance of situations in which a fiduciary’s personal interest possibly conflicts with
the interest of those owed a fiduciary duty.”); Matter of Bruches, 415 N.Y.S.2d at 668 (finding
question of fact as to trustee’s breach of fiduciary duty when his actions benefited his own
financial interests).
D.

Plaintiff States a Claim for Breach of Fiduciary Duty Based Upon the
Unitrust Election (Count III)

Natbony breached his fiduciary duty to plaintiff by failing to obtain her informed consent
regarding the Unitrust Elections and by making the elections at the direction of the Kaplans.
While defendants argue that Natbony was not required to obtain plaintiff’s consent to the
Unitrust Elections, their argument is belied by the fact that he did, in fact, seek to obtain
plaintiff’s consent. Once he undertook that obligation as a fiduciary, the consent had to be
informed. See Matter of Murray’s Will, 88 N.Y.S.2d 579, 581 (N.Y. Sur. 1949) (court holding
that “there could be no doubt that a trustee owes the duty of full disclosure to the trust
beneficiary”).
Natbony failed to obtain informed consent from plaintiff regarding the Unitrust Elections
and instead materially misled plaintiff regarding the effect of the elections on her interest in the
GRATs. This is evidenced by the fact—acknowledged by defendants’ counsel—that Natbony
failed to even provide plaintiff with a copy of the relevant GRAT documents in seeking her
consent to the Unitrust Elections. (See Ronzetti Dec. at ¶ 3) (“[P]rior to the . . . Florida litigation
. . . neither Ellen Aguiar nor any member of her family had possession of copies of the GRATs at
issue in this case.”) (attached hereto as Ex. 3). Additionally, Natbony did not seek to have the
Surrogate’s Court appoint guardians for the minor children among plaintiff’s issue and instead
requested that plaintiff sign on their behalf. Cf. In re Mergenhagen, 856 N.Y.S.2d at 391
(holding that minor children cannot provide consent to request revocation of trust). As a result
of these acts, the trustee breached his fiduciary duty to Ms. Aguiar.
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Additionally, Natbony breached his fiduciary duty with regard to the Unitrust Elections
by making the elections not in his own discretion, but rather at the direction of the settlors. (See
Ex. 2, Pl. Compl. at ¶ 50.) While Natbony may be vested as trustee with the discretion to make a
unitrust election, if done within the two-year period,10 (see N.Y. Est. Powers & Trusts § 112.4(e)(1)(B)(ii) (McKinney 2010)), he is not empowered to make such an election at the
direction of the settlors. Therefore, plaintiff’s allegation that Natbony made the Unitrust
Elections at the direction of the settlors presents an issue of fact inappropriate for resolution at
the motion to dismiss stage. Cf. Kassner, 496 F.3d at 237.
E.

Plaintiff States a Claim against the Kaplan Defendants for Aiding and
Abetting Natbony’s Breaches of Fiduciary Duty (Count IV)

Under New York law, the elements of an aiding and abetting breach of fiduciary duty
claim are “(1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly
induced or participated in the breach, and (3) that [the] plaintiff suffered damage as a result of
the breach.” Kaufman v. Cohen, 307 A.D.2d 113, 125 (App. Div. 1st Dept. 2003). Plaintiff
easily satisfies each of those elements here.
As demonstrated supra, plaintiff has adequately alleged 1) that Natbony owed her a
fiduciary duty in his role as trustee of the GRATs, and 2) that he breached that duty on multiple
occasions. Therefore, the underlying breach of fiduciary duty clearly has been pled here.
Plaintiff has also clearly alleged that the Kaplan defendants, with full knowledge of Natbony’s
fiduciary duties as trustee, proceeded to induce and participate in his breaches of fiduciary duty
through their directives to Natbony regarding trust decision making and administration. (See,
e.g., Ex. 2, Pl. Compl. ¶¶ 56, 57.) It is equally clear that plaintiff suffered damages as a result of
these breaches, as she was removed from the GRATs and trust assets were depleted.
In their attempts to obtain dismissal of this count, defendants make the specious argument
that their power to remove the trustee equates to an ability to control management of the trusts.
(See Defs. Mot. at 18.) This is flatly untrue and turns on its head the notion of an irrevocable
trust. In creating both GRATs, the Kaplan defendants expressly gave up their rights to revoke or
amend the trusts at any time. Dafna GRAT at Eighth § (A); see also Thomas GRAT at Tenth
§ (A). It is wholly illogical to assume—despite giving up all control to revoke or amend their
10

Defendants try to gloss over the fact that the trustee did not have discretionary authority to
make the unitrust election absent the informed consent of Plaintiff for the Dafna GRAT because
the trustee was outside the two-year statutory window. (See Defendants’ Motion at 14.)
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trusts—that the power to remove the trustee somehow gave the Kaplans carte blanche authority
to manage the GRATs and dictate Natbony’s actions. Not surprisingly, defendants can cite to no
case supporting this position. Incredibly, defendants try to argue that the case of In re Gould’s
Trust is “directly on point,” when their own citation to that case demonstrates that it involved a
revocable trust. (Defs. Mot. at 19.) Additionally, in reaching to make their arguments for
dismissal of this count, defendants appear to acknowledge that plaintiff’s allegations regarding
the Kaplans’ control over Natbony are correct, as they state “it would not be unusual or
inappropriate for their (the Kaplans’) opinions as to the administration of the GRATs to be
sought out or followed by the Trustee.” (Defs. Mot. at 18.)
Of course, as trustee of an irrevocable trust, Natbony cannot “follow” the settlors’
directives either under governing New York law or the terms of the GRATs themselves, which
require him to carry out his trust administration duties in his “sole and absolute discretion.”
Thomas GRAT at Eighth § (J); Dafna GRAT at Sixth § (F); see also Benedict, 1993 WL 878937,
at *6; Matter of Bruches, 415 N.Y.S.2d at 668.
F.

Plaintiff States a Claim for Removal of Natbony as Trustee

Natbony’s conflict of interest and repeated breaches of his fiduciary duty make him unfit
to continue in his role as trustee of the GRATs. Natbony removed the plaintiff based on the
direction of the settlors who were in a ferocious battle with plaintiff’s son over the two and a half
billion dollars of family business proceeds that rolled into the GRATs. As stated in the
Complaint, the defendant Thomas Kaplan proclaimed that he would launch an “offensive …
across the broadest front imaginable” and used his wrongful control over the trustee to effectuate
that offensive. There is clear precedent in New York case law for removing a trustee when, as
here, the trustee has breached his fiduciary duties, is conflicted, exhibits a hostility to certain
beneficiaries, and has mismanaged trust assets.
We further conclude that the Surrogate abused her discretion in failing to remove
David Mergenhagen as trustee of both the 1991 and 1994 trusts. David
Mergenhagen owed to the trusts a duty of undivided loyalty, which prohibits a
trustee from even placing himself [or herself] in a position of potential conflict
with his or her duty to the trust. The loyalty of David Mergenhagen to his mother,
the surviving grantor of the trusts, placed him in conflict with his duty as trustee,
as evidenced by his administration of the trust for his mother’s benefit despite the
express language of the trust instrument prohibiting such conduct. In addition, his
open hostility toward the other beneficiaries directly conflicts with his duty to the
trust where, as here, that hostility has “interfere[d] with the proper administration
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of the trust.” Indeed, the Surrogate found that David Mergenhagen acted in
derogation of his duties to the 1994 trust by, inter alia, allowing one of the
grantors to manage the trust until the grantor's death in 2002, failing to keep
formal trust books, and failing to issue the semiannual reports required by the
trust, and the record establishes that David Mergenhagen and his mother admitted
that non-trust money was commingled with trust funds through the trust account.
In re Mergenhagen, 856 N.Y.S.2d at 391 (internal citations and quotations omitted).
All of the grounds for removal in Mergenhagen exist here, as Natbony has repeatedly
breached his fiduciary duties to plaintiff, has an inherent conflict of interest due to his financial
reliance on the Kaplans, has exhibited a hostility to plaintiff and her issue (including
orchestrating the filing of a baseless lawsuit against plaintiff’s daughter), and has consistently
mismanaged the GRATs by allowing the Kaplans to make personal purchases with trust assets.
This conduct is ongoing to this date, and under existing New York precedent, Natbony is unfit to
continue to serve as trustee of the GRATs.
IV.

CONCLUSION
For all of the foregoing reasons, plaintiff respectfully requests that this Court deny

defendants’ motion to dismiss in its entirety.11
Dated: July 18, 2011

Respectfully submitted,
BOIES, SCHILLER & FLEXNER LLP
By: s / Sigrid S. McCawley
Carlos M. Sires, Esq.
[e-mail]
Sigrid S. McCawley, Esq.
[e-mail]
Alec H. Schultz, Esq.
[e-mail]
401 East Las Olas Boulevard, Suite 1200
Fort Lauderdale, Florida 33301
Telephone: [phone]
Facsimile: [phone]
Attorneys for Plaintiff Ellen Aguiar

11

Defendants’ motion does not appear to challenge Counts V, VI and VII in plaintiff’s
complaint. To the extent the Court construes defendants’ motion as challenging those counts,
plaintiff incorporates by reference all arguments made herein, and defendants’ motion fails for
the same reasons as set forth above.
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on July 18, 2011, I electronically filed the foregoing
document with the Clerk of the Court by using the CM/ECF system and that the foregoing
document is being served this day on all counsel of record identified below via transmission of
Notice of Electronic Filing generated by CM/ECF.
Harley S. Tropin
[e-mail]
Thomas A. Tucker Ronzetti
[e-mail]
KOZYAK TROPIN & THROCKMORTON, P.A.
2525 Ponce de Leon Boulevard, 9th Floor
Coral Gables, Florida 33134
Tel. [phone]
Fax. [phone]
Stephen M. Rathkopf
([e-mail]
Marisa A. Leto
([e-mail])
HERRICK FEINSTEIN LLP

2 Park Avenue
New York, NY 10016
[phone]
Fx: [phone]
Attorneys for Thomas Kaplan and Dafna Kaplan
Richard M. Dunn
([e-mail])
Raquel Fernandez
[e-mail]
Cozen O’Connor
200 South Biscayne Boulevard, Ste. 4410
Miami, Florida 33131
[phone]
Fx: [phone]
Co-Counsel for Dafna Kaplan

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Brian J. Stack, Esq.
[e-mail]
STACK FERNANDEZ ANDERSON & HARRIS, P.A.

1200 Brickell Avenue, Suite 950
Miami, Florida 33131
Tel. [phone]
Fax. [phone]
Attorneys for Defendant William Natbony,
individually and as trustee of the Thomas S.
Kaplan 2004 Qualified Ten Year Annuity
Trust and the Dafna Kaplan 2003 Eight Year
Annuity Trust Agreement

By: s/ Sigrid S. McCawley______
Sigrid S. McCawley

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