A recent Delaware court decision is making waves in the trusts-and-estates community. In Paradee v. Paradee,1 a trustee was held liable for breach of the fiduciary duty of loyalty for actions he took in reliance on legal counsel. Stranger still, a non-trustee was held jointly and severally liable for this breach. At first glance, Paradee seems to signal that the scope of fiduciary liability is expanding.
A closer look, however, shows that Paradee’s novelty comes not from new law but from its strange facts.
The law is clear that getting and following legal advice on how trustees can act won’t protect them from liability for violating how they should act. And, though practitioners are perhaps less familiar with the idea that non-fiduciaries might be on the hook for a fiduciary’s breach, the court’s decision rests on a well-established principle of law: One who knowingly participates in a breach of duty assumes liability for resulting damages. Paradee is an important case not because it changes the legal terrain, but because it sheds light on parts of the existing landscape that are rarely navigated. It deserves a look to see what kind of fact pattern led to such an unusual result.