Court of Appeals of Ohio, First District, Hamilton
HELEN CLARKE HELTON, CATHERINE T. CLARKE, JAMES W. CLARKE, MARY ZIGO, and BRIDGET MURPHY, Plaintiffs-Appellants,
FIFTH THIRD BANK, Defendant-Appellee.
From: Hamilton County No. 2015-003814 Court of Common Pleas,
Schlicter Bogard & Denton, Jerome J. Schlicter, Nelson G.
Wolff and Andrew D. Schlicter, and Christopher R. Heekin Co.
LLC and Christopher R. Heekin, for Plaintiffs-Appellants,
Sater, Seymour and Pease LLP, Victor A. Walton, Jr.,
Nathaniel Lampley, Jr., Jacob D. Mahle, James B. Lind and
Jessica K. Baverman, for Defendant-Appellee.
Plaintiffs-appellants Helen Clarke Helton, Catherine T.
Clarke, James W. Clarke, Mary Zigo, and Bridget Murphy,
(collectively referred to as "the Clarke siblings")
appeal from the trial court's order granting summary
judgment to defendant-appellee Fifth Third Bank on their
complaint asserting various claims regarding Fifth
Third's management of two trusts of which they are
Because the trial court correctly determined that the Clarke
siblings' claim for breach of the duty to diversify was
barred by the applicable statute of limitations, and that
their claims for breach of the duty of impartiality and
breach of trust/fiduciary duty were in essence additional
claims for breach of the duty to diversify that were filed
outside of the limitations period, we affirm its grant of
summary judgment on those claims. But because the Clarke
siblings' claim for unjust enrichment was supported by
different allegations of misconduct than those supporting the
claim for breach of the duty to diversify, we find that the
trial court erred in determining that it stemmed from the
alleged breach of the duty to diversify, and we reverse the
trial court's grant of summary judgment on that claim.
and Procedural Background
The Clarke siblings are current income beneficiaries of two
trusts established by their great uncle William C. Sherman.
In 1939, Sherman created an irrevocable inter vivos trust. As
relevant to this appeal, the income beneficiaries of this
trust were his niece Helen Hook Clarke (the Clarke
siblings' mother) and her descendants, and Sherman's
brother, John Q. Sherman ("JQS"), and his
descendants. While their mother was alive, the Clarke
siblings were remainder beneficiaries of this trust, but they
became income beneficiaries when their mother passed away in
Sherman also established a testamentary trust for the benefit
of his sister Helen Sherman Hook and her descendants, who
were Helen Hook Clarke (her daughter) and the Clarke
siblings. As with the inter vivos trust, the Clarke siblings
were remainder beneficiaries of this trust until their mother
passed away in 2015, at which time they became income
Fifth Third was named in the trust documents as a successor
trustee for both trusts, and in 1980, it became the sole
trustee. Both the inter vivos trust and the testamentary
trust granted the trustee broad discretion over the
trusts' investments and provided that the trustee had
discretion "to retain and continue to hold as a part of
the Trust Estate any property or investment owned by
[Sherman] at the date of [his] death without liability for
depreciation or loss occasioned by doing so."
Sherman funded the trusts with shares from Standard Register,
a paper company that he had founded with JQS. Pursuant to
Standard Register's corporate documents, shares in the
company owned by the trusts or family members of the Sherman
and Clarke families had "super-voting" rights,
which granted them five votes per share. But if the shares
were sold to the general public, they were converted to
common stock, possessing only one vote per share. With these
super-voting rights, the two trusts established by Sherman
controlled approximately 33 percent of the voting power of
Standard Register. A separate trust established by JQS for
the benefit of his descendants, (the "JQS trust"),
also had super-voting rights and controlled approximately 40
percent of Standard Register's voting power. This
percentage of voting power gave both the Sherman trusts and
the JQS trust "negative control" over the company
and allowed them to block certain actions taken by the
Income beneficiaries of the trusts received ongoing
distributions. Between 1981 and her death in 2015, Helen Hook
Clarke received approximately 72 million dollars in
distributions from the two trusts.
After becoming sole trustee, Fifth Third in 1980 was
concerned with the trusts' concentration in Standard
Register stock, and in 1985 it hired Morgan Stanley to
prepare a report on possible ways to diversify the trusts.
Morgan Stanley's report discussed the pros and cons of
diversifying the trust in the following manners: a rule 144
sale; private placement; a leveraged buyout; company
repurchase of trust stock; a secondary offering; a secondary
offering/share repurchase; and a sale of the company. The
report noted that a sale of the company would be unlikely
absent cooperation from the JQS trust.
The Clarke family was adamantly opposed to diversification.
In 1986, the Clarke siblings, along with their mother and
brother, David Clarke, III, sued Fifth Third to prevent it
from selling any Standard Register stock held by the two
trusts unless the sale was a part of a coordinated sale of
all stock held by both trusts and the JQS trust. The lawsuit
was resolved when the parties entered into a settlement
agreement in 1987.
In 1991, Fifth Third again engaged Morgan Stanley to prepare
a report on the feasibility of diversification. This report
suggested a secondary offering of the stock, as well as a
combination of a secondary offering and a stock repurchase.
Fifth Third did not feel that a secondary offering was a
viable option because the Clarke family would lose the
negative control over Standard Register that it possessed.
The value of Standard Register stock declined over time.
Fifth Third monitored Standard Register's performance and
continued to consider diversification. In 2006, Fifth Third
hired a management consultant to examine Standard Register
and advise Fifth Third on potential diversification options
for the trusts. This consultant advised that the only
feasible way to diversify was a complete sale of Standard
Register. Fifth Third had various discussions regarding
Standard Register's declining performance with members of
the Clarke family, particularly David Clarke, III, who was a
member of the Standard Register Board and was viewed by Fifth
Third to be the Clarke family representative. In 2007,
several Fifth Third representatives met with Helen Hook
Clarke, her husband, and David Clarke, III. At this meeting,
the Fifth Third representatives expressed concern about the
deteriorating values of the trusts and discussed
diversification. Fifth Third records indicate that the
Clarkes seemed to understand their concerns, but were not
particularly troubled by them. Fifth Third had prepared
printed materials expressing the concerns, which they gave to
the Clarkes in attendance. They also gave the Clarkes copies
of these materials to give to the Clarke siblings.
While Fifth Third agreed that a sale of the entire company
was the best way to diversify, no such sale occurred during
this time period, and Fifth Third ultimately never
diversified the trusts. This was due to a variety of
circumstances, including the potential loss of negative
control that would result from certain means of
diversification; the Clarke family's perceived ongoing
opposition to diversification, which was predominately
derived from the parties' history and discussions with
David Clarke, III; the capital structure of Standard
Register, which allowed for internal family control and
resulted in a loss of interest from potential investors;
potential capital gains loss; a requirement in one of the
trusts to act in concert with the JQS trust; and the JQS
trust shareholders' refusal to sell.
In 2008, after learning that Standard Register had rejected a
2007 offer to sell, which would have diversified the trusts,
Fifth Third filed a Schedule 13D with the SEC. This filing
disclosed the number of shares held in the trusts. It also
In the exercise of their fiduciary duties to their clients,
Persons are considering their alternatives with respect to
the holdings of Common Stock in the accounts held by them in
their fiduciary capacity for their clients. Representatives
of the Reporting Persons have met with the management of
Standard Register and expect to maintain a dialogue with
management regarding, among other things, Standard
Register's operations, strategic direction, the extent to
which it is achieving its current business plan, its capital
structure and corporate governance and the Reporting
Persons' expectation that management of Standard Register
will pursue appropriate measures to enhance shareholder
value. In addition, the Reporting Persons may communicate
with other persons regarding Standard Register, including,
without limitations, the board of directors of Standard
Register, other shareholders of Standard Register and
potential strategic partners.
The filing also disclosed that Fifth Third would take an
active role, including proposing a merger, reorganization, or
sale if it thought prudent. And it stated that Fifth Third
would continue to review its Standard Register holdings in
accordance with its fiduciary duties.
Fifth Third also scheduled a conference call in 2008 with all
current and remainder beneficiaries of the Sherman trusts to
discuss the SEC filing and the trusts' concentration in
Standard Register stock, and it mailed the beneficiaries a
copy of the script that was used during the conference call.
As discussed later in this opinion, the lack of
diversification was a topic of conversation.
Due to Standard Register's declining performance, the
dividend issued to Standard Register shareholders was reduced
Standard Register merged with Workflow One in 2013. Workflow
One was the same company that had made an offer to purchase
Standard Register in 2007.
In 2014, Fifth Third sent the Clarke siblings a letter asking
for their input as to whether the trusts should be
diversified. Three of the Clarke siblings were in favor of
diversification, while two siblings indicated that they were
Standard Register filed for bankruptcy in 2015, and it was
subsequently purchased by another company. The values of the
two trusts ...