An intrafamily feud landed at the Georgia Supreme Court on Monday, as descendents of the cofounder of a major pest-control conglomerate squabble over the family’s multibillion-dollar fortune.
At issue are trusts established by O. Wayne Rollins, the late patriarch of the family behind Rollins Inc. Four of the nine grandchildren who were to benefit from the trusts are fighting their father and uncle over their shares of the family’s money.
The four grandchildren who brought the lawsuit are Glen W. Rollins, Ruth Ellen Rollins, Nancy Louise Rollins and O. Wayne Rollins II. The defendants are their father, Rollins CEO Gary W. Rollins, and their uncle, R. Randall Rollins, chairman of the board of directors.
The plaintiffs say the defendants have shifted power to themselves and away from the plaintiffs and established unfair distribution systems, all at odds with the terms of the trusts and their grandfather’s intent. The plaintiffs say their father and uncle breached their fiduciary duties as trustees.
Gary and Randall Rollins, who were sued along with a family friend named as a trustee, Henry Tippie, call the lawsuit “misguided.” Their lawyer, James Lamberth of Troutman Sanders, told the justices on Monday that the result of Wayne Rollins’ plan to have his sons manage the family’s assets has been “wildly successful by any measure.” Lamberth noted that the plaintiffs already have received more than $187 million in family money.
Monday’s argument followed back-and-forth litigation in which the defendants first prevailed, only to be reversed by a March decision by a panel of the state Court of Appeals.
The appeals court said a trial judge should have ordered an accounting of family entities held within the trusts at issue. Also before the high court is the Court of Appeals’ ruling that the defendants’ fiduciary duties as trustees—by which they must act in the interests of the trusts’ beneficiaries—extend to their management of family entities under their control held within the trusts.
The defendants say those rulings would make Georgia one of the nation’s least friendly jurisdictions for trustees who have a role in managing entities owned in part by a trust.
As recounted in the Court of Appeals opinion, the case is over five trusts established by Wayne Rollins—the Rollins Children Trust (RCT) and four Subchapter S-Trusts. The beneficiaries to the trusts include the plaintiffs: a portion of the trust principal of the RCT was distributed to all nine grandchildren on their 25th and 30th birthdays. An S-trust set up for each grandchild requires the trustee to give the beneficiary all property remaining in the trust when a beneficiary turns 45. The S-trusts also require the trustee to distribute annually all of the trust income to the beneficiary of each trust, but they give the trustee discretion to determine income from principal.
Gary Rollins, Randall Rollins and Tippie were designated by Wayne Rollins as trustees of the RCT, while Gary Rollins is the sole trustee of his children’s S-trusts. (According to a brief filed by the plaintiffs, Tippie has been cut out of management of the trusts.)
Further complicating the litigation is that several entities within Gary and Randall Rollins’ control hold assets within each of the trusts. According to a defense brief, the complex network of companies and partnerships set up to hold, manage and preserve the family’s assets was established with assistance from King & Spalding and Arthur Andersen.
In their lawsuit, filed in Fulton County Superior Court in 2010, the plaintiffs contend that, after their grandfather died in 1991, their father and uncle made various changes to the structure, leadership, holdings and distribution methods used within the various family entities held within the trusts. For example, they point to a “conduct-based distribution system” imposed by their father and uncle that made distributions from entities held in the trusts based on factors such as the plaintiffs’ attendance at entity shareholder meetings and engagement in “serious pursuits.”
They claim breach of trust and breach of fiduciary duty. They say their father threatened to cut off distributions to them entirely if they sued and that he and their uncle had Glen Rollins fired from his position at the family company, where he had worked for his entire career.
Senior Fulton Superior Court Judge Melvin Westmoreland granted summary judgment to the defendants, but the Court of Appeals reversed last year. In an opinion joined by Judges M. Yvette Miller and Lisa Branch, Judge William Ray II said the plaintiffs could proceed on their claims so that a jury could decide factual disputes. Essentially, the appeals panel said that the defendants’ actions with respect to the entities held by the trusts could be judged by their fiduciary duties as trustees, which require them to act in the interests of the beneficiaries.
Lamberth, the defendants’ lawyer, said the Court of Appeals decision is wrong because it allows a “disgruntled minority” to second-guess decisions of corporate management simply because the minority’s interests are temporarily held in trust. He said it is out of step with decisions by other state supreme courts, saying there were “virtually no cases” that say a trustee’s fiduciary duty extends to the entity level when a trust holds a minority interest in that entity.
Justice David Nahmias asked whether there wasn’t a conflict of interest between the defendants’ dual roles as trustees for the trusts and their obligations to the shareholders of the entities held by the trusts.
Lamberth replied that when someone who establishes a trust puts people in such a dual role, the rule should be—and is in several jurisdictions—for courts to give deference to management decisions made at the level of the nontrust entity and allow those people to manage the entity in the best interest of all of the entity’s shareholders. He emphasized the intent of the plaintiffs’ grandfather.
“He specifically put his sons in control,” he said.
The plaintiffs’ lawyer, H. Lamar “Mickey” Mixson of Bondurant Mixson & Elmore, said that even the cases cited by Lamberth say that a fiduciary duty can apply to managers of corporations who also are trustees. Those decisions simply didn’t find a breach of fiduciary duty on the facts presented, said Mixson.
Nahmias suggested that under the rule advocated by Mixson, it would be impossible for one person to serve as both trustee and manager of an entity for which the majority of the shareholders are outside the trust. The rule is to follow the intent of the person who established the trust if it doesn’t violate public policy, Nahmias added.
Mixson said Gary and Randall Rollins “changed” and “abused” the structure set up by their father. “I believe it is possible for the trustees to not abuse their position,” Mixson added. “Randall and Gary argue that they’re in a conflicted situation. They’re the ones who see the conflict here. We see the conflict because of their actions.”
At the outset of the argument, Chief Justice Hugh Thompson announced without explanation that Justice Harold Melton would not participate in the case. Cobb County Superior Court Judge Robert Leonard sat in for Melton.
The case is Rollins v. Rollins, No. S13G1162.