Historically, there have been several leading trust and estate cases concerning the prudence of investment, liability and damages starting with Matter of Spitzer1 and Rothko,2 then to Matter of Janes3 and Saxson,4 and later to Dumont5 and Hunter I.6 More recent decisions include Knox7 and Hunter II.8 In each of these cases, the fiduciary’s actions were considered under the Prudent Man Rule in the Estate Powers and Trust Law (EPTL) §11-2.2 and then the Prudent Investor Act under EPTL §11-2.3 after 1995, with some cases reviewing both standards where the facts of the case spanned many years.
In more recent years, there has been very limited litigation in this area even though some practitioners anticipated extensive litigation as a result of losses sustained in the stock market downturn of 2008-2009. Indeed, most recent cases have not reviewed whether a portfolio is appropriately diversified—which is generally required under the new Prudent Investor Act—but instead have reviewed the issue of concentration under the Prudent Man Rule.
