Alpert et al v. Riley et al

Filing 480

MEMORANDUM AND ORDER entered : Rileys motion for judgment and a new trial, (Docket Entry No. 468), is denied. The plaintiffs motion for entry of judgment, (Docket Entry No. 467), is granted in part and denied in part. The motion is granted as to th e plaintiffs request that this court enter judgment against Riley and award prejudgment interest beginning180 days after May 28, 2009. The plaintiffs motion is denied as to the requests that this court award additional damages against Riley and enjoin the state probate court against interference with this courts judgment. (Signed by Judge Lee H Rosenthal) Parties notified.(leddins, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ROBERT ALPERT, et al.,
Plaintiffs,
VS.
MARK R. RILEY, et al.,
Defendants.

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CIVIL ACTION NO. H-04-CV-3774

MEMORANDUM AND ORDER
This case arises out of disputes over the alleged depletion of trust funds. The disputes have
played out for more than a decade in the Texas probate and appellate courts and this federal court,
with trials in both the probate court and this court. The defendant, Mark Riley, is a lawyer and an
accountant. He worked for one of the plaintiffs, Robert Alpert, and for entities that Alpert owned
or controlled, from June 1994 to October 1998, and served as trustee for trusts Alpert established for
his sons, Roman Alpert and Daniel Alpert. The trusts at issue were the Roman Alpert Trust (the
“RAT”), the Daniel Alpert Trust (the “DAT”), and the 1996 Children’s Trust (the “Children’s Trust”)
(collectively the “Three Trusts”). Alpert and his sons sued Riley and his former legal assistant, Dixie
G. Meynier, in this court, based on actions relating to Alpert’s finances and businesses, the Three
Trusts, and Riley’s involvement in providing confidential information about Alpert to the IRS in the
hope of being paid.
In February 2011, the parties tried to a jury the plaintiffs’ claims relating to Riley’s actions
as trustee. The jury considered whether Riley breached fiduciary duties owing to the Three Trusts
after June 8, 2005. The jury found that Riley had breached his fiduciary duties and owed Roman and

Daniel Alpert $567,509.14 in damages for the RAT, $213,952.63 in damages for the DAT, and
$50,365.00 in damages for the Children’s Trust. (Docket Entry No. 462). The plaintiffs moved for
entry of judgment, (Docket Entry No. 467), and Riley responded, (Docket Entry No. 476). Riley
moved for judgment as a matter of law and for a new trial, (Docket Entry No. 468), and the plaintiffs
responded, (Docket Entry No. 488).
Based on the motions and responses, the evidence presented at trial, the extensive record, and
the applicable law, Riley’s motion for judgment and a new trial, (Docket Entry No. 468), is denied,
and the plaintiffs’ motion for entry of judgment is granted in part and denied in part. The motion is
granted as to the plaintiffs’ request that this court enter judgment against Riley on the jury’s finding
of breach and award of damages, including prejudgment interest. The motion is denied as to the
plaintiffs’ requests that this court award additional damages against Riley and enjoin the state probate
court’s actions in the related litigation pending before it.
The reasons for these rulings are explained below.
I.

Background
The convoluted and overly long history of this litigation has been described in earlier

opinions by both this court and the thorough and careful opinion of the state appellate court. Only
a brief summary is needed here. This litigation began in 1998 in Probate Court Number Two of
Harris County, Texas, in In re: Roman Alpert Trust, Daniel James Alpert Trust, and the Robert
Alpert 1996 Children's Trust; Mark Riley, Trustee v. Robert Alpert, et al. Riley sued Alpert as
trustee of the RAT and DAT, alleging that he had sold stocks to trigger a tax loss and then caused
the RAT and DAT to buy those stocks, resulting in the overpayment of taxes by the trusts. Riley
alleged that Alpert breached fiduciary duties he owed to the trust beneficiaries. The beneficiaries

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intervened in the suit and sought a declaration that Riley was not the trustee of the RAT or DAT, or
alternatively, an order removing Riley as trustee because of his breaches of fiduciary duties as
trustee. After Riley allegedly intercepted a tax-refund check issued to the Children’s Trust, the
putative trustee of that trust initiated a separate suit, seeking a declaratory judgment that Riley was
not the trustee. The probate court consolidated that suit with the previously filed suit involving the
RAT and DAT.
Cross-motions for summary judgment were filed on the issue of whether Riley was the
properly appointed trustee of the Three Trusts. The probate court granted Riley’s motion and found
that he was properly appointed as the trustee for the RAT and DAT. The probate court initially
denied Riley’s motion as to the Children’s Trust but later ruled that he was the properly appointed
trustee of that trust as well. The probate court also granted Riley’s motion for summary judgment
on Alpert’s liability for breaches of fiduciary duties and the amount of damages suffered by the Three
Trusts. The probate court found that Alpert’s actions on the stock transactions caused $2,000,000
in tax losses to the trusts. A jury trial was held in the probate court on additional allegations by Riley
against Alpert and on Alpert’s and the trust beneficiaries’ claims that Riley should be removed as
trustee for breaching fiduciary duties. On June 8, 2005, the jury found that Riley had breached
fiduciary duties to the Three Trusts but awarded no damages. The jury also found that Alpert had
breached fiduciary duties owing to the trusts’ beneficiaries, but awarded no damages. The jury
awarded Riley’s attorneys $1,517,348 in fees for their work on behalf of the RAT and DAT and
$57,038 for their work on behalf of the Children’s Trust.
After a posttrial hearing, the probate court entered judgment on the jury’s findings against
Alpert, effective as of the date of the verdict. The probate court awarded $1,234,445.50 to Riley for

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the RAT and for the DAT; attorneys’ fees of $656,200.78; prejudgment interest; and additional
attorneys’ fees of $208,688.03 for each trust and for appellate fees in connection with the summary
judgment findings against Alpert on the stock transactions. The probate court disregarded the jury’s
finding that Riley had breached fiduciary duties and its award of attorneys’ fees to the beneficiaries.
The final judgment terminated Riley’s trusteeship for the Three Trusts but immediately reappointed
Riley to serve as trustee pending the appeal. After the probate court’s final judgment, Alpert and the
beneficiaries moved for leave to post security to suspend Riley’s reappointment as trustee pending
appeal. The probate court denied the motion. Alpert appealed.
On July 3, 2006, the First Court of Appeals stayed the probate court judgment. That stay
remained in effect throughout the appeal and was reaffirmed by the appellate court on June 29, 2007,
and again on February 1, 2008. On October 9, 2008, in a thorough opinion, the appellate court
reversed and rendered on most of the issues and reversed and remanded on a few. Alpert v. Riley,
274 S.W.3d 277 (Tex. App.—Houston [1st Dist.] 2008, pet. ref’d). The Texas Supreme Court
declined to review the case.
The appellate court essentially found that the probate court had misapplied the law and
misunderstood the facts, and that Riley’s conduct was improper and unauthorized. The Texas
appellate court:
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reversed the probate court’s ruling that Riley was properly appointed trustee of the
RAT and DAT and remanded to the probate court whether Riley had ever been the
properly appointed trustee of the DAT and the RAT;

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reversed the probate court’s ruling that Riley was properly appointed trustee of the
Children’s Trust and rendered judgment that Riley was not, as a matter of law,
properly appointed as trustee of that trust;

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reversed the probate court’s judgment that Alpert breached fiduciary duties to the
trusts and dismissed the claims for lack of subject-matter jurisdiction;
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reversed the probate court’s judgment disregarding the jury’s finding that Riley
breached fiduciary duties, and rendered judgment consistent with the jury’s verdict;

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reversed the probate court’s judgment setting aside the attorneys’ fees the jury
awarded against Riley and to the beneficiaries and remanded for reconsideration;

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reversed the probate court’s award of attorneys’ fees to Riley and remanded for
further proceedings on attorneys’ fees in light of the court’s determination of whether
Riley was ever properly appointed trustee of the RAT and DAT;

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reversed the probate court’s judgment approving trustee compensation for Riley and
rendered judgment that Riley could recover no compensation for any work as trustee;

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affirmed the probate court’s recognition that it had released Riley as trustee of any
trusteeship, but reversed the appointment of Riley as successor trustee and rendered
judgment “that any successor trustees for the RAT, DAT, and [Children’s] trust are
to be selected in accordance with the terms of the applicable trust instrument, after
identification of the valid trustee for each trust”; and

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affirmed the probate court’s denial of Alpert’s request that he be permitted to post
security to suspend Riley’s reappointment as trustee pending appeal.

The appellate court also rendered judgment that Riley was not entitled to reimbursement for
any attorneys’ fees or expenses he incurred after April 21, 2006 in connection with prosecuting
claims against Alpert. The court based this ruling on section 113.028 of the Texas Property Code,
which provides:
A trustee may not prosecute or assert a claim for damages in a cause
of action against a party who is not a beneficiary of trust if each
beneficiary of the trust provides written notice to the trustee of the
beneficiary’s opposition to the trustee’s prosecuting or asserting the
claim in the cause of action.
The beneficiaries had provided notice of their opposition to Riley’s lawsuit on April 21, 2006, after
section 113.028’s June 17, 2005 effective date.
Alpert’s claims before this court are limited to acts by Riley related to the Three Trusts after
June 8, 2005, the date the probate court issued its final judgment. This court held a jury trial on

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whether Riley breached fiduciary duties owing to the Three Trusts in February 2011. (Docket Entry
No. 453). The jury found that Riley failed to prove by a preponderance of the evidence that he
complied with the fiduciary duties he owed to the Three Trusts’ beneficiaries, Roman and Daniel
Alpert.
The plaintiffs presented evidence at trial that after the entry of final judgment by the probate
court, Riley made trust disbursements totaling $327,057.05 from the Children’s Trust; disbursements
totaling $860,936.28 from the RAT; and disbursements totaling $527,379.77 from the DAT. (Docket
Entry No. 467, Ex. 1, Plaintiffs’ Trial Ex. 72). The disbursements from the Three Trusts included
disbursements to attorneys Riley hired to pursue his claims against Alpert in the probate court,
including to collect the judgment he had obtained against Alpert and to defend against the claims the
beneficiaries asserted; disbursements Riley made to attorneys representing him in this litigation;
disbursements to Riley both for trustee compensation and for professional services he allegedly
provided to the Three Trusts; disbursements to companies Riley had a personal interest in, including
T-3 Partners and Bishop Rock, L.P.; and disbursements to Patriot Managed Care Solutions
(“PMCS”), a company with which Riley was associated. (Id.). At trial, the plaintiffs argued that all
these disbursements were blatant self-dealing transactions that breached fiduciary duties Riley owed
to the Three Trusts when he purported to act as trustee. Riley argued that the trust instruments
authorized self-interested transactions and disbursements and the use of trust funds to pursue the
claims and judgment against Alpert. At trial, the parties agreed to provide the jury with a stipulation
describing the relevant events occurring in the state probate court and the Texas appellate court. The
stipulation is attached as Exhibit A to this opinion.

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This court’s instructions to the jury noted that based on the Texas court rulings, Riley was
not properly appointed trustee of the Children’s Trust at any time and was not properly appointed
as trustee of the DAT and the RAT after June 8, 2005. This court instructed the jury that Riley had
held himself out and acted as a “trustee in fact” of the Three Trusts and asked the jury to determine
whether Riley breached fiduciary duties owed to the Three Trusts as a trustee in fact. This court
instructed the jury that it was to decide whether Riley “complied with his fiduciary duties . . . by his
conduct with respect to the Trusts after June 8, 2005.” This court’s instructions stated that Riley’s
conduct at issue included: (1) making investments and loans and handling the funds received from
investments and loans; (2) paying attorneys after April 21, 2006 (the date the trust beneficiaries sent
notice to Riley instructing him not to pursue claims against Alpert); (3) paying himself out of the
trusts for his work as trustee; (4) using trust funds to pay his office rent and overhead; (5) reporting
or not reporting to the beneficiaries about transactions related to the Three Trusts; and (6) failing to
make any disbursements to the trust beneficiaries. As to the trust funds disbursed to attorneys after
April 21, 2006, the date the beneficiaries sent notice to Riley not to pursue claims against Alpert, this
court instructed the jury that Riley “had no authority to use Trust funds to pay attorneys to continue
defending Robert Alpert’s appeal of the monetary award against him in probate court” and that
“filing an abstract of judgment or otherwise securing the parts of the probate court’s final judgment
that awarded a monetary judgment against Robert Alpert was prosecuting claims for damages against
Robert Alpert.” (Docket Entry No. 456, Ex. 1, Jury Instructions, 7–8).
The jury found that Riley owed Roman and Daniel Alpert $567,509.14 in damages related
to the RAT, $213,952.63 in damages related to the DAT, and $50,365.00 in damages related to the
Children’s Trust. (Docket Entry No. 462). The plaintiffs and Riley both filed posttrial motions. The

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plaintiffs asked this court to enter judgment consistent with the jury’s findings, including
prejudgment interest. The plaintiffs also asked this court to award damages against Riley for all
disbursements made from the Three Trusts during the period the appellate court found that Riley was
not authorized to act as trustee. The plaintiffs also asked this court to enter judgment that Riley was
without authority to pay himself attorneys’ fees from the RAT and DAT because neither trust
instrument authorized the payment of such fees and to enter judgment against Riley for any trust
funds he withdrew after April 21, 2006. (Docket Entry No. 467). Finally, the plaintiffs have asked
this court to enjoin the state probate court from “interfering with” this court’s judgment.
Riley moved for judgment, or, in the alternative, for a new trial.1 Riley’s motion asserts
numerous challenges to the jury instructions and also argues that the plaintiffs presented insufficient
evidence showing that Riley breached fiduciary duties owed to the Three Trusts and that these
breaches caused damage. (Docket Entry No. 468).
The parties’ motions and arguments are discussed below.
II.

The Legal Standards
A.

Rule 50(a) Motion for Judgment

A motion for judgment as a matter of law is appropriate when a party has been fully heard
on an issue and reviewing the entire record shows no legally sufficient evidentiary basis for a
reasonable jury to find for the nonmoving party on that issue. FED. R. CIV. P. 50(a); DP Solutions,
Inc. v. Rollins, Inc., 353 F.3d 421, 427 (5th Cir. 2003). In evaluating the record, the court must make

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Riley also argues that this court should refuse to exercise subject-matter jurisdiction and not enter judgment
under the Rooker–Feldman doctrine, the probate exception to federal court jurisdiction, and “Younger,
Colorado River, and Princess Lida” abstention doctrines. Riley previously moved for summary judgment
on this issue and this court denied his motion, stating its reasons in an opinion. (Docket Entry No. 449).
Riley’s subject-matter jurisdiction arguments are denied for the same reasons stated in that opinion.

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all reasonable inferences for the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530
U.S. 133, 150 (2000). Credibility determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are for the jury. DP Solutions, 353 F.3d at 427 (citing Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). “[T]he standard for granting summary judgment
‘mirrors’ the standard for judgment as a matter of law, such that ‘the inquiry under each is the
same.’” Reeves, 530 U.S. at 150 (quoting Anderson, 477 U.S. at 250–51). A court may grant a
motion for judgment as a matter of law “only when the facts and reasonable inferences are such that
a reasonable juror could not reach a contrary verdict.” Baltazor v. Holmes, 162 F.3d 368, 373 (5th
Cir. 1998); see also Tex. Farm Bureau v. United States, 53 F.3d 120, 123 (5th Cir. 1995). Although
resolving disputed issues that turn on credibility determinations is for a jury, a court may render
judgment as a matter of law when no reasonable jury could find the evidence credible. Anderson v.
City of Bessemer, 470 U.S. 564, 575 (1985); see also Bridgmon v. Array Sys. Corp., 325 F.3d 572,
577 (5th Cir. 2003); Hugh Symons Group v. Motorola, Inc., 292 F.3d 466, 470 (5th Cir. 2002); In
re Chavin, 150 F.3d 726, 728 (7th Cir. 1998).
B.

Rule 59 Motion for New Trial

Rule 59 of the Federal Rules of Civil Procedure provides that “[t]he court may, on motion,
grant a new trial on all or some of the issues . . . after a jury trial, for any reason for which a new trial
has heretofore been granted in an action at law in federal court.” FED. R. CIV. P. 59(a). “A new trial
may be granted, for example, if the district court finds the verdict is against the weight of the
evidence, the damages awarded are excessive, the trial was unfair, or prejudicial error was committed
in its course.” Beckham v. La. Dock Co., 124 F. App’x 268, 270 (5th Cir. 2005) (per curiam)
(quoting Smith v. Transworld Drilling Co., 773 F.2d 610, 612 (5th Cir. 1985)). A new trial may also

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be granted when there is “uncertainty or contingency to the finality of the jury’s determination,” see
Cook v. United States, 379 F.2d 966, 970 (5th Cir. 1967), or when the jury’s inconsistent verdict
cannot be reconciled, see Crossland v. Canteen Corp., 711 F.2d 714, 726 (5th Cir. 1983).
III.

Analysis
A.

The Jury Instructions

Riley argues that this court erred by: (1) instructing the jury that he had the burden of proof
as to the alleged fiduciary duty breaches; (2) refusing to instruct the jury that a trust instrument may
relieve a trustee from “duties, liabilities, and restrictions imposed upon a trustee by the Texas Trust
Code, including those related to self-dealing and that the trust instrument may authorize the trustee
to exercise powers in addition to those provided by the Texas Trust Code, including the specifically
enumerated powers set forth in the trust indentures”; (3) submitting different types of conduct in a
single jury question without placing the burden of proof on the proper party; (4) “refusing to inquire
of the jury as to whether [Riley] acted in good faith as trustee” of the RAT, DAT, and the Children’s
Trust; (5) instructing the jury that Riley did not have authority after April 21, 2006 to use trust funds
to pursue claims against Robert Alpert and to defend against claims by the beneficiaries; (6)
instructing the jury that they could consider Riley’s refusal or failure to pay the beneficiaries money
from the trusts; and (7) failing to instruct on calculating damages. None of these objections supports
modifying the jury verdict or granting Riley’s motion for a new trial.
This court’s instructions to the jury and the jury questions do not support the relief Riley
seeks. The plaintiffs alleged that Riley disbursed funds from the Three Trusts: (1) to pay attorneys
to pursue claims against Alpert over the beneficiaries’ objections and without considering the
beneficiaries’ interests; (2) to pay attorneys for defending against the beneficiaries’ counterclaims

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in state court and their claims against Riley in this court; (3) to loan money to companies with which
Riley was associated or had a personal interest including Bishop Rock, T3 Partners, and PMCS; and
(4) to pay himself for trustee and other services. Under Texas law, “when a plaintiff alleges selfdealing by the fiduciary as a part of a breach-of-fiduciary-duty claim, a presumption of unfairness
automatically arises, which the fiduciary bears the burden to rebut.” Cluck v. Mecom, --- S.W.3d ---, 2011 WL 883781, at *2 (Tex. App.—Houston [14th Dist.] Mar. 15, 2011, pet. denied); see also
Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 22 (Tex. App.—Tyler 2000, pet. denied) (citing
Stephens County Museum, Inc. v. Swenson, 517 S.W.2d 257, 261 (Tex. 1974); Int’l Bankers Life Ins.
Co. v. Holloway, 368 S.W.2d 567, 576 (Tex. 1963)). “Self-dealing means the trustee used the
advantage of its position to gain any benefit for the trustee, other than reasonable compensation, or
any benefit for any third person, firm, corporation, or entity, at the expense of the trust and its
beneficiaries.” Grizzle v. Tex. Commerce Bank, 38 S.W.3d 265, 281 (Tex. App.—Dallas 2001),
overruled on other grounds by Tex. Commerce Bank v. Grizzle, 96 S.W.3d 240 (Tex. 2002). The
allegations that Riley used trust funds to litigate against the trust beneficiaries’ instructions and to
defend claims asserted by the trust beneficiaries, to pay himself without authorization to do so, and
to benefit his current and former business associates and himself, are all allegations of self-dealing.
It was not necessary to separate each of the challenged actions into separate jury questions or give
separate instructions for each because the same legal standard applied. The jury instructions were
not improper.
Riley also argues that the jury instructions were erroneous because they did not include or
reflect certain language in the trust instruments. The Supreme Court of Texas has found that it is
reversible error not to instruct the jury of limitations to a trustee’s fiduciary duties within a trust

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instrument. See Sterling Trust Co. v. Adderley, 168 S.W.3d 835, 846–47 (Tex. 2005) (reversing a
breach of fiduciary duty finding because the jury instructions did not describe the “contractual
limitation[s] of [the trustee’s] fiduciary duties”). Riley sought instructions on the specific investment
authorizations2 in the trust instruments for the Three Trusts. These provisions authorized Riley to
make certain investments and disbursements otherwise barred by the Texas Trust Code. But these
provisions did not relieve the Three Trusts’ trustee of all fiduciary duties to the trusts.
The trust instruments did limit the trustee’s fiduciary duties by limiting liability to “bad
faith.” Riley argues that for each trust, this court should have asked the jury whether he acted in
good faith and without gross negligence. Riley emphasizes that the Texas Property Code allows the
trust’s settlor to limit the fiduciary duties owed by a trustee so that the trustee is only liable for bad
faith or gross negligence. See Tex. Commerce Bank, 96 S.W.3d at 249 (“While the Trust Code
imposes certain obligations on a trustee—including all duties imposed by the common law—the
Trust Code also permits the settlor to modify those obligations in the trust instrument. Indeed, Trust
Code section 113.059 broadly states that a settlor may relieve a corporate trustee from a ‘duty,
liability, or restriction imposed by this subtitle,’ except for those contained in sections 113.052 and
113.053.”). But these exculpatory clauses “do not relieve a trustee from liability for self-dealing as
proscribed by applicable statues.” Cote v. bank One, Tex., No. 4:03-CV-296-A, 2004 WL 594114,
at *4 (N.D. Tex. Mar. 16, 2004) (citing Grizzle, 96 S.W.3d at 249). The applicable statues, TEX.
PROP. CODE § 113.052 and TEX. PROP. CODE § 113.053, bar a trustee from: lending trust funds to “(1)
the trustee or an affiliate; (2) a director, officer, or employee of the trustee or an affiliate; (3) a
relative of the trustee; or (4) the trustee’s employer, employee, partner, or other business associate”

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(Docket Entry No. 468, Ex. 1, 4–7) lists these authorizations.

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and from “directly or indirectly buy[ing] or sell[ing] trust property from or to: (1) the trustee or an
affiliate; (2) a director, officer or employee of the trustee or an affiliate; (3) a relative of the trustee;
or (4) the trustee’s employer, partner, or other business associated” respectively. The plaintiffs
alleged and produced evidence that all the disbursements from the Three Trusts to Riley or at his
direction were within the categories of self-dealing proscribed by sections 113.052 and 113.053. The
jury instructions were not improper.
Riley also objects that this court erred in instructing the jury that it could consider Riley’s
“failure to pay the beneficiaries from the Trusts.” Riley emphasizes that the Three Trusts were
discretionary trusts and argues that it was improper to instruct the jury to consider whether Riley
refused or failed to make any disbursements, including at the beneficiaries’ specific requests. Even
in a discretionary trust, however, a trustee may be liable for abusing his discretion. See duPont v.
Southern Nat. Bank of Houston, 771 F.2d 874, 887 (5th Cir. 1985) (“Because the Trust instrument
does not contain explicit rules for allocating expenses between income and principal, but instead
leaves allocations to the discretion of the Trustees, we review the Trustees’ actions only for an abuse
of discretion.”). This court did not instruct the jury that if it found that Riley should have made
disbursements to the trust beneficiaries, it should find that he breached fiduciary duties. This court
did instruct that in analyzing whether Riley complied with his fiduciary duties, the jury could
“consider” his failure to make any disbursements in determining whether the transactions he
authorized as trustee breached his fiduciary duties. The objection is overruled.
Riley also argues that this court erred in instructing the jury that after “April 21, 2006, Mark
Riley had no authority to use trust funds to pay attorneys to continue defending Robert Alpert’s
appeal of the monetary award against him in the probate court.” This instruction is consistent with

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the state appellate court’s decision that under section 113.028 of the Texas Property Code, Riley was
without authority to pursue litigation against them or Alpert after the Three Trusts’ beneficiaries
instructed him not to do so. Under Texas law, a trustee breaches fiduciary duties owed to trust
beneficiaries when he uses trust funds “that do not confer a benefit upon the trust estate,” including
to pursue litigation that is adverse to the beneficiaries or contrary to their instructions. Stone v. King,
No. 13-98-022-CV, 2000 WL 35729200, at *8 (Tex. App.—Corpus Christi Nov. 30, 2000, pet.
denied). The instruction does not provide a basis to grant Riley’s motion.
Finally, Riley argues that this court misinstructed the jury on calculating damages. Riley
argues that this court’s instructions that the jury could “consider the amounts of Trust expenditures
made by Mark Riley, including investments or loans and funds received from them, that you have
found breached his fiduciary duties, if any” should have instead stated a “legal measure of actual
damages, such as the difference between expenditures made and expenditures that should have been
made or the difference between the amount earned on an investment and the amount that could have
otherwise been earned.” (Docket Entry No. 468, at 10). In the only case Riley cites, Wells Fargo
Bank v. Crocker, the Texas appellate court noted in a footnote only that a plaintiff must prove that
breaches of a fiduciary duty caused injury. No. 13-07-00732-CV, 2009 WL 5135176, at *6 n.8 (Tex.
App.—Corpus Christi, Dec. 29, 2009, pet. denied). This court instructed the jury that it could “award
compensatory damages only for injuries that the Trust beneficiaries proved by a preponderance of
the evidence were proximately caused by Mark Riley’s allegedly wrongful conduct.” (Docket Entry
No. 456, Ex. 1, at 9). Under the authority Riley cites, this court’s instruction was not improper.
B.

Evidence Sufficiency

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Riley argues that there was insufficient evidence to support the finding that he breached
fiduciary duties owed to the Three Trusts’ beneficiaries or that the alleged breaches damaged the
trusts or the beneficiaries. The evidence presented at trial showed that after the probate court entered
final judgment, Riley disbursed $193,996.17 to himself and $100,222.84 to his attorneys from the
Children’s Trust, after transferring $150,000.00 from each of the RAT and the DAT to the Children’s
Trust because only this trust allowed for trustee compensation.

Riley also disbursed over

$500,000.00 to his attorneys, $265,000.00 to Bishop Rock and T3 Partners, and over $60,000.00 to
PMCS from the RAT, and disbursed over $300,000.00 to his attorneys, over $200,000.00 to Bishop
Rock and T3 Partners, and over $15,000.00 to himself from the DAT. The plaintiffs alleged that
each of these transactions constituted impermissible self-dealing or was contrary to the beneficiaries’
directions. The jury was entitled to find that Riley’s explanations for the disbursements were not
credible. The jury was also entitled to find that these disbursements did not benefit the trusts and
instead drained the trusts of assets to pay legal fees that did not generate income for the trusts and
to make loans without security or to provide funds to companies or entities in which Riley had an
interest. The evidence amply supported the jury’s findings.
Riley’s posttrial motions are denied.
C.

The Plaintiffs’ Motion for Entry of Judgment

The plaintiffs ask this court to: (1) render judgment that Riley must repay the trusts for
disbursements he made from the trusts during the period in which he was not trustee under the
appellate court’s decision; (2) issue a preliminary injunction to the state probate court ordering it not
to interfere in this court’s judgment; and (3) render judgment that plaintiffs are entitled to
prejudgment interest.

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The plaintiffs’ first two requests are denied. The plaintiffs argue that because the appellate
court held that Riley acted as trustee when he was not properly appointed, he should be ordered to
repay any amount he disbursed from the Three Trusts during that period. The plaintiffs also argue
that this court should order the state probate court not to “interfere” with this court’s rulings.
Whether Riley was properly appointed as trustee under the trust instruments when he made the
disbursements was not at issue in the federal court trial. The issue the jury tried was whether Riley
breached fiduciary duties after June 8, 2005 in his administration of the Three Trusts. The state
probate court was tasked on remand to determine whether Riley was properly authorized to act as
trustee of the RAT and DAT at any time before June 8, 2005. The parties have informed this court
that they are currently litigating in the state probate court Riley’s authority to act as trustee and his
accounting for the trust assets. The plaintiffs have submitted excerpts of a transcript from the state
probate court showing that the probate court intends to wait for this court’s judgment before
completing the accounting. (Docket Entry No. 467, Ex. 3). Because the trial and rulings in this court
relate only to the alleged fiduciary duty breaches by Riley when he acted as if he was the trustee —
the trustee in fact — and do not relate to his authority under the trust instruments or probate-court
rulings to act as trustee, there is no basis to award damages based on the disbursements Riley made
because they were “unauthorized” or to enjoin the state court from some undefined and speculative
“interference” with this court’s judgment.
The plaintiffs are entitled to prejudgment interest. “Prejudgment interest begins to accrue
on the earlier of: (1) 180 days after the date the defendant receives written notice of a claim; or (2)
the date suit is filed.” State Farm Mut. Auto. Ins. Co. v. Norris, 216 S.W.3d 819, 822 (Tex. 2006)
(citing TEX. FIN. CODE § 304.104; Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962

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S.W.2d 507, 529 (Tex. 1998)). The parties agree that because the acts giving rise to this trial
occurred before the complaint was filed in this case, the interest began to accrue after the filing of
the complaint. Under Texas law, prejudgment begins to accrue on “the earliest date in the record
showing that [the defendant] had written notice” of the claims. Id. The earliest date in the record
showing that Riley had written notice of the plaintiffs’ allegations that were tried to the jury is the
plaintiffs’ Second Supplement to Third Amended Complaint. That was filed May 28, 2009. Under
State Farm, interest began to accrue 180 days after May 28, 2009.
IV.

Conclusion
Riley’s motion for judgment and a new trial, (Docket Entry No. 468), is denied. The

plaintiffs’ motion for entry of judgment, (Docket Entry No. 467), is granted in part and denied in
part. The motion is granted as to the plaintiffs’ request that this court enter judgment against Riley
and award prejudgment interest beginning180 days after May 28, 2009. The plaintiffs’ motion is
denied as to the requests that this court award additional damages against Riley and enjoin the state
probate court against interference with this court’s judgment.
SIGNED on August 2, 2011, at Houston, Texas.
______________________________________
Lee H. Rosenthal
United States District Judge

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