Surrogate Troy K. Webber
Decided: March 26; 1506/03
In this proceeding in the estate of Robert C. Atkins, Dr. Atkins’ widow Veronica seeks, inter alia, removal of the three individuals who serve with her as trustees of the Marital Trust established under Dr. Atkins’ will and the appointment of a successor corporate co-trustee. Respondents are D. Clive Metz, John J. Mezzanotte, and John P. Corrigan. Presently before the court is Mrs. Atkins’ motion for summary removal pursuant to CPLR §3212.
Dr. Atkins, the renowned physician who created the “Atkins Diet,” died on April 17, 2003, at the age of 72, as the result of a fall on an icy New York City sidewalk. He left an estate valued at several hundred million dollars. His will directed that 90 percent of his residuary estate be placed in a Marital Trust for Veronica Atkins, with the balance to be set aside for the benefit of the Dr. Robert C. Atkins Foundation, Inc. (the Foundation). The will also provided that the Trust remainder at Mrs. Atkins’ own death was to pass to the Foundation after payment of $10 million in specific bequests to various individuals. Mrs. Atkins, then 66 years old, was given a lifetime interest in the Trust income and, along with two other individuals, was named as a cotrustee. The trustees were vested with broad discretion to invade trust principal for Mrs. Atkins’ benefit.
The will was admitted to probate on April 28, 2003. Letters testamentary and of trusteeship were granted to Mrs. Atkins, Scott W. Kabak, and Paul D. Wolff as the named cotrustees under the instrument. Messrs. Kabak and Wolff had been business associates of Dr. Atkins and had been involved for some years in Dr. Atkins’ medical weight loss center. Mr. Kabak and Mr. Wolff were, respectively, chief operating officer and chief executive officer of Atkins Nutritional, Inc. (“ANI”), a corporation founded by Dr. Atkins. Within nine months of taking office as Mrs. Atkins’ co-fiduciaries, however, both Mr. Kabak and Mr. Wolff resigned and were succeeded by the three respondents. The circumstances under which respondents came to occupy their fiduciary positions merit some description.
Some five years before the death of Dr. Atkins, he and Mrs. Atkins had made Mr. Metz’s acquaintance while the couple was vacationing at a Caribbean hotel which was owned by Mr. Metz’s father-in-law and where Mr. Metz was employed as the company’s President. The nature and frequency of the Atkins’ contacts with the much younger Mr. Metz are now matters of dispute. It is not disputed, however, that, within two weeks after Dr. Atkins’ death, Mr. Metz invited Mrs. Atkins to dinner, an invitation that she accepted. Sometime, in the beginning of May 2003, she met with Mr. Metz and his wife for dinner. During the dinner, Mrs. Atkins mentioned to Mr. Metz that, shortly before her husband’s accident, Dr. Atkins had received an offer to buy ANI from an investment group and that she had some concerns about the offer. It appears that (either then or at some point shortly thereafter) Mrs. Atkins also confided to him her concerns about the two individuals whom her husband had chosen to serve as fiduciaries under his will. Mr. Metz responded by referring Mrs. Atkins to Mr. Mezzanotte, a certified public accountant (“CPA”). Mr. Mezzanote in turn referred Mrs. Atkins to Mr. Corrigan, another CPA who was also a lawyer.
On May 15, 2003, Mrs. Atkins entered into an oral $50,000-per-month retainer agreement with Messrs. Mezzanotte and Corrigan for accounting and legal services to her as co-executor and beneficiary. Pursuant to this oral agreement, Mr. Corrigan began to revise Mrs. Atkins’ estate planning documents, assist with the sale of ANI, and provide some services with regard to Dr. Atkins’ estate. A written retainer agreement followed, executed on July 29, 2003, but made effective as of May 15, 2003. Pursuant to this later written agreement, Messrs. Corrigan and Mezzanotte collectively were paid more than $1 million in fees, much of it for work which had been performed in the first six months of the relationship.
Shortly after Mrs. Atkins entered into the oral retainer agreement with Messrs. Corrigan and Mezzanotte, they began negotiations with Messrs. Kabak and Wolff (presumably at Mrs. Atkins’ request) to persuade Dr. Atkins’ chosen fiduciaries to resign as co-trustees of the Marital Trust. By August 2003, both had agreed to do so. Although the will designated a successor trustee if Mrs. Atkins ever became unavailable to serve, it contained no provision for any successor to Mr. Kabak or Mr. Wolff. On November 6, 2003, Mrs. Atkins and her then cofiduciaries joined in a petition to this court seeking the appointment of Messrs. Metz, Mezzanotte, and Corrigan to succeed Messrs. Kabak and Wolff as Mrs. Atkins’ co-fiduciaries. On January 14, 2004, that petition was granted.
Dr. Atkins’ will had not specifically addressed the subject of trustee commissions. It did, however, expressly allow his fiduciaries “additional reasonable compensation” from the estate and trust for any services that they were called upon to provide beyond the usual because of the special demands of Dr. Atkins’ business. The petition for successor letters had acknowledged, however, that, as to commissions, the four co-fiduciaries would be limited to sharing two statutory commissions (SCPA §2313). Two days after the appointment of respondents as her co-fiduciaries, however, Mrs. Atkins signed a “Trustee Fee Allocation Agreement” in which she waived her own share in such commissions, thus leaving a larger share for the remaining three co-trustees. In addition, on the same date, Mrs. Atkins signed a contract entitled the “Royalty Services Agreement” with MMC Royalty Services, a Florida limited liability company set up by Messrs. Metz, Mezzanotte, and Corrigan, effective January 1, 2004.1 Under the Royalty Services Agreement, Mrs. Atkins’ three co-trustees undertook to oversee the publishing and royalty interests held in Dr. Atkins’ estate (most or all of which would ultimately be distributable to the Marital Trust). By its terms, which were made subject to Florida law, the Agreement had an initial 10-year term, renewable for additional five-year terms unless Mrs. Atkins canceled it. Among such terms was the provision that Mrs. Atkins individually was bound to pay respondents (via MMC) at the beginning of each month a monthly minimum of $100,000. While negotiating and executing both the Royalty Services Agreement and the Trustee Fee Allocation Agreement, Mrs. Atkins was not represented by independent counsel.
Mrs. Atkins, however, was represented by separate counsel, Jeffrey M. Herman, Esq., when in 2004 and 2006 she created two trusts, i.e., The Veronica Atkins 2004 Legacy Trust and the Atkins Legacy Preservation Trust, that included respondents among the beneficiaries. How Mr. Herman had come to be retained is somewhat unclear. It appears that prior to his retainer he had been an acquaintance of both Mrs. Atkins and Mr. Metz. Whether at the time of the retainer, or thereafter, Mr. Herman had been closer to the one or the other is also not entirely clear. In any event, the 2004 instrument (styled, “The Veronica Atkins 2004 Legacy Trust),” as amended in early 2006, established a revocable trust of which Mrs. Atkins was both trustee and lifetime beneficiary. Under its terms, the remainder at her death was distributable to the Foundation and a number of individuals, including respondents, in specified percentages. The instrument contemplated that the trust assets might have a value in excess of $60 million. Each of the respondents was slated to receive 6.25 percent of the first $60 million of the remainder (i.e., as much as $3,750,000) and 5 percent of any portion of the remainder exceeding $60 million. A will executed by Mrs. Atkins in 2004 (also drafted by Mr. Herman) provided for her residuary estate to pour over to her 2004 Legacy Trust.2
Under still another revocable instrument, styled the “Atkins Legacy Preservation Trust,” each of Messrs. Metz, Mezzanote, and Corrigan was slated to receive after Mrs. Atkins’ death, an annual sum of $250,000 per year for ten years “so long as [he]…is living and is continuing to provide valuable services for the benefit of…the Foundation and/or The Veronica Atkins Foundation, thus further continuing the work of the Settlor.” At Mrs. Atkins’ death, Mr. Metz (or Mr. Mezzanote or Mr. Corrigan as successor trustee) and Mrs. Atkins’ sister were to be the arbiters of whether or not the condition to such payment had been met.
As respondents explain it, the purpose of the estate planning instruments executed in 2004 and 2006 was to assure that, if Mrs. Atkins died prematurely, thus terminating the Marital Trust sooner than expected, they would not suffer financially from the loss of their commissions. According to the three, Mrs. Atkins fully shared their concern that they not be left financially disadvantaged by their exclusive devotion to her needs in her last years.3 They acknowledge, however, that they had already purchased a $15 million term insurance policy on Mrs. Atkins’ life which would also compensate them in the event of her death.
However devoted Mrs. Atkins may have been to respondents from the very early stages of their relationship, it is clear that by some point in the latter half of 2006 she had become disenchanted with them. Thus, although by its terms the Royalty Services Agreement was to be in effect until at least December 31, 2013, in September 2006, Mrs. Atkins stopped making payments under the Agreement. By way of explanation, she asserted the belief that respondents had abused their position as fiduciaries to further their own individual interests and had taken advantage of the memory and cognition problems that she claimed to have suffered from the time her husband died. In reaction, on or about December 19, 2006, her three co-trustees commenced an action in Florida against her for breach of contract, seeking to enforce the terms of the Royalty Services Agreement, and against her soon-to-be husband, Kal Alexis Mersentes4, for defamation and tortious interference with their contract.5
Among the averments contained in the 51-page complaint filed by respondents in Florida, as amended, were charges that Mrs. Atkins had been the victim of “opportunis[m]” in the person of her co-defendant, Mr. Mersentes, who by “ strateg[em]” had “ convince[d]…[her]…that [he] loves her”; that Mrs. Atkins herself “was extremely proud of the fact that she essentially ‘owned’ three highly competent professionals in their mid-40′s…”; that Mr. Mersentes had found in her a ready target who had been willing to pay his way on a trip abroad with him early in their relationship; and that she had “fraudulently induced” respondents to enter into the Royalty Services Agreement.
In their Florida complaint, respondents explained that they had taken out the $15 million term insurance policy on Mrs. Atkins’ life because she “insisted” that they be protected since she “may die prematurely before she had built a significant net worth to cover all her beneficiaries and further,…the MMC Members had also not built a sufficient net worth from receiving annual trustee commissions from the Marital Trust and Monthly Fees under the Agreement.” Indeed, their complaint added that Mrs. Atkins was not only aware of the munificent benefits that she had bestowed upon them, but proud of them. As their complaint put it, “Defendant Atkins was always aware how much she was paying [respondents] and on occasions where she was entertaining friends or families would have a tendency to gossip and intentionally divulge personal financial information, including boasting about the fact that she paid her beloved Three Musketeers over $1.2 million each per year, notwithstanding such statement was partially inaccurate to the extent that the Marital Trust paid part of that amount.”
On April 18, 2007, Mrs. Atkins commenced the instant proceeding. Her petition set forth two basic grounds for removing respondents under SCPA section 711. First, she alleged that respondents had in various ways seriously overreached at her expense and at the potential expense of the Foundation as well, and that respondents’ lack of fidelity rendered them unfit as fiduciaries. Second, she averred, in effect, that the heated litigation commenced by respondents in Florida had engendered such hostility between her and them as to disable them from serving the trust well. That averment was likely reinforced for her when, during her deposition in the Florida litigation, respondents’ counsel proceeded to ask her about the controversial condition of Dr. Atkins’ corpse shortly after his death.
Such is the background against which Mrs. Atkins’ motion for summary judgment must be measured. The applicable legal principles on such a motion are well established. Summary relief is appropriate only if the evidence, viewed in the light most favorable to the non-moving party, shows that the moving party is entitled to judgment as a matter of law (Zuckerman v. City of New York, 49 NY2d 557 ). The remedy of summary judgment is a drastic measure and should not be made available where any triable issue of fact may exist (Andre v. Pomeroy, 35 NY2d 361; Phillips v. Kantor & Co., 31 NY2d 307 ). As a threshold matter, the movant must make a prima facie case for the relief requested (see Alvarez v. Prospect Hospital, 68 NY2d 320 ; Winegrad v. New York Univ. Med. Center, 64 NY2d 851 ). If she does so, the burden then shifts to the opposing parties, who must come forward with sufficient evidence to raise a genuine question as to any of the material facts. If the opposing parties’ proofs leave doubt as to the existence of a triable issue, the motion must be denied (Hantz v. Fishman, 155 AD2d 415 [2d Dept 1989]).
As indicated above, it is Mrs. Atkins’ burden to establish a prima facie case for removal. In a related connection, it has been observed that “normally, the determination of whether the conduct of a trustee measures up to the appropriate standards of prudence, vigilance and care, is a fact to be found…” Nevertheless, there are cases in which such a determination can be made as a matter of law (Matter of Hubbell, 302 NY 246, 258 ).
The overriding substantive principle in a proceeding such as this is that a fiduciary must act in the best interests of the estate and is therefore required to be among other things sensitive to the needs of the beneficiaries (Matter of Arnold C. Gunther, NYLJ, Feb. 28, 2000, at 37, col 4, citing Matter of Leibowitz, NYLJ, July 19, 1991, at 28, col 1). By statute (SCPA §711), removal of a fiduciary is appropriate where, inter alia,
“4)…the grant of his letters was obtained by a false suggestion of a material fact.
8)…he or she does not possess the qualifications required of a fiduciary by reason of substance abuse, dishonesty, improvidence, want of understanding, or who is otherwise unfit for the execution of the office.
10) [i]n the case of a testamentary trustee,…he has violated or threatens to violate his trust…or is for any other cause deemed an unsuitable person to execute the trust.”
The removal of a fiduciary is a matter within the discretion of the court. Stolz v. New York Central R.R. Co., 7 NY2d 269 . Courts exercise this discretion only rarely, especially where they are called upon to remove a fiduciary chosen by the testator. In general, courts are reluctant to interfere with a testator’s choice. Thus, a court may “judicial[ly] nullif[y]” the testator’s choice of fiduciary “ only upon a clear showing of serious misconduct that endangers the welfare of the estate; it is not every breach of fiduciary duty that will warrant removal [of an executor],” (Matter of Duke, 87 NY2d 465, 474  citing Matter of Israel, 64 Misc.2d 1035 [Sur Court, Nassau County 1970]; Matter of Leland, 219 NY 387, 392 ; Matter of Braloff, 3 AD2d 912 [2d Dept 1957], aff’d 4 NY2d 847 ). Courts are also loathe to indulge a beneficiary’s wish to dictate, at will or at whim, who the fiduciary should or will be. After all, where there is a clash between beneficiary and fiduciary, it is the latter who faces the potential for liability; it may be presumed therefore that the prospect of a surcharge will chasten the fiduciary to try to do right on an issue as to which the beneficiary him/herself is free to be wrong. As a corollary, a beneficiary should not be allowed to bootstrap his or her way to a new fiduciary by intentionally antagonizing the current fiduciary (see Matter of Graves, 110 NYS2d 763 [Sur Court, Monroe County 1952]).
Here, the testator’s choice is no longer implicated. In other words, judicial reluctance to ignore the testator’s wishes or discount the testator’s judgment is not a factor here. Additionally, Mrs. Atkins is not only a beneficiary, but also, herself a co-trustee. Nevertheless, it remains true in this case as well as all others that the administration of an estate or trust should be spared the risks of disruption, if practicable. Moreover, the stigma of removal is serious enough that a court should decline to subject a fiduciary to it– unless and until there is no genuine factual issue to prevent the conclusion that the stigma is either warranted or unavoidable for the sake of the trust.
In light of all of the foregoing, it is concluded that the evidence submitted by Mrs. Atkins on this motion presents a prima facie case for removal. Such evidence is comprised of the affidavits and supporting documents concerning (1) contractual transactions between Mrs. Atkins and respondents in their individual capacity and (2) the highly poisoned relationship between Mrs. Atkins and respondents as evinced by their respective submissions in this proceeding and in the Florida litigation. As will be discussed below, the Royalty Services Agreement is a testament to respondents’ willingness to have their own self-interest compete with Mrs. Atkins’; the same can be said about their posture in relation to her estate planning instruments, which indirectly compromised their position as trustees; and court records here and in Florida further attest to a degree of hostility between Mrs. Atkins and respondents that is inimical to a relationship of trust.
Respondents, for their part, have failed to resist summary judgment in that they have failed to raise a material issue of fact that would require an evidentiary hearing on the question of removal. To be sure, as suggested above, respondents’ submissions on this motion raise a number of open factual questions that cannot be resolved on the papers alone. But such disputed matters relate to charges against respondents on which their removal need not depend. Thus, for example, there no need to determine whether Mrs. Atkins was, as she contends, so mentally vulnerable or infirm following Dr. Atkins’ death that her transactions with respondents (including her endorsement of their appointment to succeed Dr. Atkins’ chosen fiduciaries) were voidable for undue influence or lack of capacity. Nor for that matter is there a need to determine whether the Royalty Services Agreement – which respondents’ Florida pleading tells us was aimed at, among other things, assuring “that each [of respondents] received the economic equivalent of one trustee commission” – was merely an attempt to avoid section 2313 of the SCPA and arguably impermissible as a matter of law. Similarly, the court need not determine whether Mr. Corrigan violated certain Disciplinary Rules governing lawyers’ conduct much less whether any such violation would constitute a per se basis for at least his removal as co-trustee.6
Rather, for purposes of this motion for summary judgment it is enough to note that, while Mrs. Atkins was their client and while the petition for their letters was working its way to decree, respondents proceeded to “negotiate” with her directly for a contract (the Royalty Services Agreement) that conferred upon them clearly questionable compensation at her expense. That is, the services for which the contract bound Mrs. Atkins to make substantial payments from her own pocket related mostly, if not entirely, to estate and trust assets. Accordingly, such payments would necessarily be duplicative of the compensation respondents were projected to receive from the estate and trust as executors and trustees. Indeed, in view of the will’s provision for payment of a premium (above commissions) from the estate or trust for specially valuable services, the Agreement (executed after respondents had become co-trustees) in effect allowed respondents the possibility of “triple-dipping” for the same service.
Moreover, Mrs. Atkins consented to personal liability for such payments without first having been afforded the safeguard of formal, disinterested counsel. This is not to overlook respondents’ assertions on this motion that they had urged Mrs. Atkins to retain her own counsel at this point and that, at least informally, she had received the benefit of a discussion or discussions with Mr. Herman, although he had not formally represented her. Indeed, respondents dispute an affidavit in which Mr. Herman averred that he had no recollection of ever having discussed the Agreement with Mrs. Atkins even informally. Respondents propose that their position could be aided by a deposition at which they might jog Mr. Herman’s memory of such discussions as he might have had with Mrs. Atkins in this connection. But a combination of factors points to the conclusion that as a matter of law such discovery could not entirely legitimize respondents’ dealings with Mrs. Atkins in this connection. Those factors include the high-value stakes of the subject matter of the contract; the availability of respondents’ own legal counsel (in the person of Mr. Corrigan) to point out to them (if need be) that their “negotiating” with Mrs. Atkins directly was unseemly under the circumstances; and respondents’ failure to secure a written waiver from Mrs. Atkins to show that she was knowingly dispensing with the protections of legal representation.
However passive or active they were in the planning for Mrs. Atkins’ inter vivos trusts, respondents do not deny that they were aware of such plans. Nor do they claim that they declined nor even discouraged those arrangements as a threat to their ability to serve the competing beneficial interests in the Marital Trust impartially, as a fiduciary must. Yet such a threat was patent: respondents’ stake in the 2004 Legacy Trust alone gave them an incentive to divert Marital Trust assets to Mrs. Atkins, via principal invasions, at the expense of the Marital Trust remainder.
In sum, the factual issues raised by the respondents do not preclude the conclusion that there was some divided loyalty on the part of the fiduciaries that is ground for their removal (Matter of Rothko, 43 NY2d 305 ).
Furthermore, the record is replete with incontrovertible evidence of a level of vitriol between petitioner and respondents that would inevitably burden respondents’ decision-making abilities qua fiduciaries and would just as inevitably make them subject to their beneficiary’s second-guessing at every turn (see Matter of Duell, 258 AD2d 382 [1st Dept 1999] [antagonisms between respondent trustee and his co-trustee and between respondent trustee and the beneficiary demonstrated "that future cooperation were unlikely" and therefore removal appropriate]). Precedent establishes that litigation not directly related to the trust may foster such antagonism between fiduciary and beneficiary that the former is eventually rendered unfit to continue in office (see e.g. Matter of Palma, 40 AD3d 1157 [3d Dept 2007]; Matter of Jurzykowski, 36 AD2d 488 [1st Dept 1971], aff’d 30 NY2d 510; Matter of Brody, NYLJ, October 17, 2008, at 31, col 3 [Sur Ct, Nassau County]).
Had testator himself chosen respondents to protect Mrs. Atkins, even from (for example) herself, and had their fidelity to such mission been the source of the rift between them and her, their embattled relations might well have been ground for commendation rather than removal. But respondents cannot claim such a mission. Instead, in the face of Mrs. Atkins’ vehement efforts to loosen respondents’ grip from the letters that they would not have been issued but for her prior good graces, respondents’ insistence on retaining their hold only reinforces the suggestion of self-seeking on their part. It is mind-boggling that respondents would want to continue as trustees given the deterioration of the relationship and Mrs. Atkins’ claims of manipulation, as well as their own allegations of false statements and fraud and belligerence on the part of Mrs. Atkins.7 In view of the graceful exit open to them under the will’s provision for fiduciary resignations, the trustees’ choice to remain in combat with their beneficiary can only be explained by their own financial self-interest.
The respondents’ contention that Mrs. Atkins has failed to demonstrate any concrete harm that they have visited upon the trust and that their removal is therefore unwarranted has been considered. It should be noted, however, that the recurrence of the heavy litigation expenses to which the trust has already been subjected is itself a future harm to be averted in view of the parties’ mutual antipathy and Mrs. Atkins’ distrust of the respondents. Moreover, as evidenced by the correspondence filed in this court, even the scheduling of administrative meetings has by now become an occasion for recriminations among the co-trustees – just one further indication that their co-trusteeship, if allowed to continue, would be an unnecessarily troubled one.
For the foregoing reasons, it is concluded that the circumstances warrant each respondent’s removal under SCPA section 711(10) as unsuitable to execute the trust. Therefore, petitioner’s motion for summary judgment is to such extent granted, and respondents’ letters of co-trusteeship are revoked.
This decision constitutes the order of the court.
1. This “effective date” was during the pendency of the application for their letters of successor trusteeship.
2. The 2004 Legacy Trust has since been revoked by Mrs. Atkins.
3. The record on this motion does not identify the level of annual earnings that their respective skills had commanded prior to undertaking their role in relation to the Atkins’ affairs.
4. Veronica Atkins married Kal Alexis Mersentes in a private ceremony in March 2007.
5. On February 5, 2007, respondents amended their complaint. The Florida litigation is in the discovery phase.
6. Disciplinary Rule 5-104(A) of the New York Lawyer’s Code of Professional Responsibility, governing transactions between a lawyer and client are set forth in 22 NYCRR §1200.23 which states:
(a) A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise professional judgment therein for the protection of the client, unless:
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client;
(2) the lawyer advises the client to seek the advice of independent counsel in the transaction; and
(3) the client consents in writing, after full disclosure, to the terms of the transaction and to the lawyer’s inherent conflict of interest in the transaction.
7. It is noted, however, that respondents continue to be in a position to accrue commissions as long as the removal issue remains open (see SCPA §2309).