A trust beneficiary sued Mitchell, Silberberg & Knapp, the attorneys representing the trustee of the trust. The complaint alleged the attorneys (a) performed legal services intended to prevent the beneficiary from discovering dissipation of trust assets and the trustee’s inappropriate investments; (b) advised the beneficiary to waive his rights to on-going accountings that would have revealed the trustee’s wrongful conduct; and (c) made material misrepresentations concerning the trust. The complaint also alleged the attorneys concealed the trustee’s misconduct from the beneficiaries to receive additional attorney fees.
Ordinarily, in a cause of action brought on behalf of the trust, the trustee is the real party in interest. As a result, a trust beneficiary generally has no standing to bring such a cause of action. The Wolf court held, however, that the trust beneficiary had standing to sue the attorneys under a common law exception: A trust beneficiary may sue third parties who actively participate in a trustee’s breach of trust. The allegations in the complaint were sufficient to invoke the exception.