United States District Court, E.D. Louisiana
STEPHEN D. COOK
PRESTON L. MARSHALL
ORDER AND REASONS
the Court is Defendant's motion to stay judgment pending
appeal (R. Doc. 137). Plaintiff opposes. Having considered
the parties' briefs and the applicable law, the Court now
issues this Order and Reasons.
Dr. Stephen Cook brought this action in his capacity as
trustee of The Marshall Heritage Foundation
(“TMHF”), against Preston Marshall in his
capacity as trustee of the Peroxisome Trust, to recover sums
that the Peroxisome Trust owed TMHF as its beneficiary.
Peroxisome Trust is a Louisiana Nongrantor Lead Annuity Trust
with two co-trustees: siblings Preston and Pierce Marshall.
Originally, the Peroxisome Trust had one beneficiary: the
“Marshall Heritage Foundation.” The instrument
creating the Peroxisome Trust requires the
“Trustee” (Preston and Pierce, jointly) to pay
the Marshall Heritage Foundation an annuity amount equal to
6.647126% of the initial fair net market value of all
property transferred to the trust, in quarterly installments
for twenty years. In December 2013, that entity (the Marshall
Heritage Foundation) was split into two separate trusts -
TMHF and the Marshall Legacy Foundation.
Cook contends that, as a result of the split, the Peroxisome
Trust became obligated to pay half the total original annuity
amount (3.323563%) to TMHF and the other half to the Marshall
Legacy Foundation. Preston disagrees. Since 2016, he has
refused to execute the documents required to effect the
quarterly payments by the Peroxisome Trust to TMHF. Preston
contends that (1) the Peroxisome Trust Agreement was never
amended to name any entity other than the original Marshall
Heritage Foundation - which no longer exists - as
beneficiary, and (2) his refusal to authorize distributions
is justified by potential adverse tax consequences.
Court granted summary judgment in favor of Dr. Cook, finding
that (1) TMHF succeeded to one half of the original Marshall
Heritage Foundation's beneficial interest in the
Peroxisome Trust when it was divided, and (2) Preston's
failure to authorize distributions from the Peroxisome Trust
to its beneficiary constitute a breach of his fiduciary
duties and a breach of the Peroxisome Trust Agreement.
Preston is appealing this decision. Because the Court's
judgment orders Preston to assure distributions, it is not
automatically stayed. Accordingly, Preston now asks the Court
to stay execution of the judgment pending appeal.
LAW AND ANALYSIS
Court considers four factors in determining whether to grant
a stay pending appeal: “(1) whether the stay applicant
has made a strong showing that he is likely to succeed on the
merits; (2) whether the applicant will be irreparably injured
absent a stay; (3) whether issuance of the stay will
substantially injure the other parties interested in the
proceeding; and (4) where the public interest lies.”
Planned Parenthood of Greater Tex. Surgical Health Servs.
V. Abbot, 734 F.3d 406, 410 (5th Cir. 2013) (quoting
Nken v. Holder, 556 U.S. 418, 425-26 (2009)). Of
these factors, the first two - likelihood of success on the
merits and irreparable harm - are “the most
critical.” Nken, 556 U.S. at 434. But
“where there is a serious legal question involved and
the balance of the equities heavily favors a stay …
the movant only needs to present a substantial case on the
merits.” In re Deepwater Horizon, 732 F.3d
326, 345 (5th Cir. 2013) (quoting Weingarten Realty
Investors v. Miller, 661 F.3d 904, 910 (5th Cir. 2011)).
Finally, a stay is “an exercise of judicial discretion,
” and is not a matter of right, even if irreparable
injury might otherwise result.” Nken, 556 U.S.
argues that all four factors are met: there is a serious
legal question as to whether TMHF became a beneficiary of the
Peroxisome Trust by virtue of succeeding to half of the
original Marshall Heritage Foundation's assets;
compliance with the judgment may result in significant tax
consequences; and a stay would cause no harm to Dr. Cook,
since the funds are being held in trust and accruing
interest. In response, Dr. Cook argues that Preston has
failed to demonstrate either a likelihood of success on the
merits or irreparable harm absent a stay, and that the
charitable beneficiaries of TMHF and the Peroxisome Trust
will be harmed if the payments are not made.
case presents unsettled questions of Louisiana trust law. The
Peroxisome Trust instrument designates the original Marshall
Heritage Foundation as its sole beneficiary. It also states
that, should the original Marshall Heritage Foundation cease
to be “an organization defined in §§ 170(c),
2055(a), and 2522(a)” of the Internal Revenue Code at
any time payment is due to be made to it, the
“Trustee” (Preston and Pierce, jointly) must
agree to distribute the payment to one or more qualified
entity. Because the original Marshall Heritage Foundation no
longer exists, and the Peroxisome Trust instrument has not
been amended, Preston contends that TMHF is not a beneficiary
as a matter of law, and he owes no duty to it.
Cook does not dispute the fact that the entity designated as
the beneficiary of the Peroxisome Trust no longer exists. He
argues, however, that TMHF and the Marshall Legacy Foundation
succeeded to the beneficial interest of the original Marshall
Heritage Foundation when it was decanted, as permitted by the
Louisiana Trust Code. That is, the co-trustees of the original
Marshall Heritage Foundation divided its assets - including
its beneficial interest in the Peroxisome Trust - equally
between TMHF and the Marshall Legacy Foundation, and no
amendment was needed under these circumstances.
Court stands by its analysis of the applicable provisions of
the Louisiana Trust Code and the consequences of the original
Marshall Heritage Foundation's division - but it
“recognizes that this appeal raises a significant legal
question, ” and that Preston “presents a
substantial case in support” of his position.
Castleton Commodities Shipping Co. PTE Ltd v. HSL
Shipping & Logistics NA, Inc., No. 16-6619, 2016 WL
5231844, at *6 (E.D. La. Sept. 22, 2016). See also, e.g.,
Cruson v. Jackson Nat'l Life Ins. Co., 2018 WL
2937471, at *4 (E.D. Tex. ...