Introduction. Preston Marshall, Appellant V. Ribosome L.P, is an interesting trust and limited partnership dispute involving the descendants of Texas oilman J. Howard Marshall II. 01-18-00108-CV, 2019 WL 2041062 (Tex. App.—Houston [1st Dist.] May 9, 2019, no pet. h.). The trial court granted a summary judgment against Preston Marshall on his claims against Ribosome for aiding and abetting breach of trustee’s fiduciary duty; breach of oral contract to distribute trust proceeds directly to Preston; promissory estoppel and demand for an accounting. The Houston Court of Appeals affirmed.
Background: According to the record in the court of appeals decision:
“The Marshall family, one of the wealthiest in the country, manages its wealth through a network of partnerships, trusts, and other entities, many of which are located outside the United States. Elaine Marshall, Preston’s mother, has played instrumental roles in the entities involved in this dispute. MarOpCo, a management company, provides administrative services, including accounting, bookkeeping, record maintenance, and tax preparation, for the Marshall entities.”
One of these limited partnerships was Ribosome, of which Elaine served as sole manager of Ribosome’s general partner. Ribosome had multiple limited partners including Preston, his brother and the Falcon and Harrier Trusts. Elaine was Trustee and Preston was a beneficiary of these trusts.
These Trust agreements provided that “[t]he Trustee in her sole discretion may accumulate or distribute income accruing for the benefit of the beneficiary(ies) until expiration of the trust. The Trustee shall have discretion in determining the time or frequency of any distributions. “
Apparently, in 2006, Elaine, as President of MarOpCo, hired Preston to serve as MarOPCo’s Vice President. “In a 2007 family meeting, Preston, his brother, Pierce, Jr., and Elaine entered into an oral agreement, under which Ribosome would bypass the Trusts and pay the Trusts’ shares directly to Preston as their beneficiary. Preston and MarOpCo’s then-controller implemented this distribution agreement, and it remained in place through June 2015, when Elaine terminated Preston’s employment.”
In addition to terminating Preston’s employment Elaine also ended the distribution agreement so that going forward distributions would be made to the Trust bank accounts. These accounts accumulated income but no trust benefits were subsequently paid to Preston.
Subsequently, litigation ensued which included claims made by Preston against Ribosome who filed a motion for summary judgment. The trial court granted Ribosome’s motion disposing of Preston’s claims, resulting in this appeal.
Court’s findings. In regard to the alleged breach of the oral distribution agreement, the court of appeals found that it was a contract of indefinite duration. “As a contract of indefinite duration that contemplated continuing or successive performance, it was terminable at the will of either party.” Thus, there was no breach for terminating the oral agreement and Ribosome resuming making distributions directly to the Trust bank accounts rather than directly to Preston. The court found that Preston’s promissory estoppel claims failed for similar reasons.
In regard to Preston’s claim that Ribosome aided and abetted Elaine in breaching fiduciary duties she owed as Trustee to the Trusts, the court found that “[u]nder the Trusts’ language the Trustee has absolute, unfettered discretion over the decision to accumulate or distribute the Trust income.” The court went on to hold that no evidence was presented raising a fact issue as to whether Elaine abused her discretionary authority under the Trust agreements. Thus, there was no underlying breach of fiduciary duty by Elaine to support Preston’s aiding and abetting of breach of fiduciary duty claim against Ribosome.
Lastly, in regard to the claim that an accounting must be given by the limited partnership Ribosome to Preston, this claim failed because Ribosome had provided Preston with all the financial information that was required by the limited partnership agreement. Although the agreement gave the limited partners the right to inspect Ribosome’s books and records, it did not include any additional right to an accounting. Therefore, the court found that as a matter of law Preston was not entitled to an accounting.
Lessons learned. This case shows the importance of carefully drafting the language in family trust and limited partnership documents. The trust documents apparently gave the trustee broad discretion in managing the trusts and the limited partnership documents specified the rights of the limited partners to review and receive limited partnership financial information. As a result, the court was able to look to the language of these documents to decide this matter through summary proceedings rather than a long and protracted trial.