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A state district judge in Kerrville, Texas, signed a judgment on Wednesday ordering Baker Botts and Wells Fargo Bank Texas to pay $71 million in damages to former estate-planning client Kathleen C. Cailloux, a wealthy widow in Kerrville. In the judgment, 198th District Judge Karl Emil Prohl ordered the defendants to pay the money into a new trust, the Kathleen C. Cailloux Equitable Trust. The judge ruled that Cailloux can use the interest from the trust and can withdraw up to 5 percent of the principal yearly. The firm and the bank will appeal the judgment Prohl signed in Kathleen C. Cailloux v. Baker Botts, et al. “We feel pretty strongly that this is not legally sustainable and is incorrect,” says Joseph Cheavens, a trial partner in Baker Botts who is the firm’s general counsel. A defense attorney for Wells Fargo, Dean Fleming, a partner in Fulbright & Jaworski in San Antonio, also contends the verdict does not support the award, which does not divide the damages between the two defendants. “As far as I can tell, it’s unprecedented in Texas law for a judge just to create a trust out of whole cloth,” Fleming says of Prohl’s decision to use his “equitable powers” to establish the Kathleen C. Cailloux Equitable Trust. In February, a jury found Baker Botts breached its fiduciary duty for failing to disclose “all important information” when doing estate-planning work for Cailloux after the death of her husband, Floyd, in January 1997. The jury also found Wells Fargo breached its fiduciary duty to Cailloux. Cailloux alleged in the Sixth Amended Petition that the defendants conspired to persuade her, right after her husband’s death, to disclaim her rights to her husband’s estate and to transfer more than $60 million to the Floyd A. Cailloux and Kathleen C. Cailloux Foundation — ostensibly to save more than $30 million in taxes — without informing her of other estate-planning options. The jury returned a $65.5 million verdict, but Prohl added $5.6 million in prejudgment interest, post-judgment interest and $61,000 in court costs.

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