United States District Court, D. Massachusetts
ASHBY HENDERSON and THOMAS HERSHENSON, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,
THE BANK OF NEW YORK MELLON, N.A., Defendant.
MEMORANDUM AND ORDER
B. Saris Chief United States District Judge.
proposed class action claims that Bank of New York Mellon,
N.A. (“BNY Mellon”), breached its fiduciary duty
to its trust beneficiaries by charging excessive and
undisclosed fees for the preparation of the trusts' tax
returns. The plaintiffs have moved for certification of a
class, and both parties have moved for summary judgment.
After a hearing, the Court ALLOWS IN
PART and DENIES IN
PART the motion for class certification (Dkt.
No. 285). BNY Mellon's motion for summary judgment (Dkt.
No. 315) is ALLOWED IN PART and
DENIED IN PART, as detailed below.
The plaintiffs' motion for partial summary judgment (Dkt.
No. 365) is DENIED.
following facts are drawn from the class-certification and
summary judgment record. They are undisputed except where
Ashby Henderson and Thomas Hershenson both seek to represent
the proposed class. Henderson is a beneficiary of the Walter
H. Wesson Trust (“Wesson Trust”), a trust created
under Massachusetts law. Hershenson is a beneficiary of T/D
of Morris A. Hershenson Trust f/b/o Lee M. Hershenson
(“Hershenson Trust”), a trust created under
Pennsylvania law. Both trusts are irrevocable trusts. The
trustee of both trusts is BNY Mellon.BNY Mellon administers
thousands of trusts, with tens of thousands of trust
BNY Mellon's Tax-Preparation Services
2007, BNY Mellon has contracted with PricewaterhouseCoopers
(“PwC”) to prepare and file tax returns for most,
if not all, BNY Mellon trusts. Since 2008, PwC has prepared
the tax returns for both of the trusts at issue here. Prior
to the arrangement with PwC, BNY Mellon prepared fiduciary
tax returns through its in-house tax department. Two aspects
of the PwC arrangement are hotly contested.
the parties dispute the scope of PwC's work. The
plaintiffs assert that BNY Mellon “completely”
outsourced tax-preparation services to PwC. BNY Mellon
asserts that it retained responsibility for performing a
variety of ancillary functions necessary to the actual filing
of the tax returns -- such as setting internal tax policy,
reviewing PwC's work, and reconciling accounting systems
with PwC's records.
the parties dispute whether PwC was paid on a per-trust or
aggregate basis. The plaintiffs point to language in the
relevant BNY Mellon-PwC contracts that appears to break out
tax-preparation fees on a “per account” basis.
BNY Mellon points to deposition testimony from its own
personnel and PwC officials indicating that the parties
negotiated a total aggregate fee based on anticipated volume,
and that the per-account figures indicated in the contract
documents were calculated after the fact to facilitate a
true-up between the parties.
BNY Mellon's Evolving Fee Structures
2012, BNY Mellon used approximately 1, 500 different fee
schedules for its trust customers; that number has been pared
to around 100 in more recent years. At least three pertinent
to this case were in effect at different time periods: (1) a
discrete line-item fee for tax-preparation services; (2) a
bundled “fiduciary fee” covering tax preparation
and other services; and (3) a bundled “advisory
fee” covering numerous services, including
2008 to 2012, BNY Mellon used the line-item tax-preparation
fee. During this era, the bank generally charged
tax-preparation fees of $400 for grantor trusts, $750 for
revocable trusts, and between $750 and $950 for irrevocable
trusts, depending on complexity. “Simple”
irrevocable trusts paid an annual line-item fee of $750. The
Wesson Trust was one such trust. “Complex”
irrevocable trusts paid a line-item fee of $950. The
Hershenson Trust was in this category.
these general categories, what a particular trust paid for
tax-preparation services could vary from trust to trust and
from year to year. For instance, some trusts paid
tax-preparation fees as low as $25 per year or had the fees
waived. Others paid more than $1, 000 per year for
2010, Dr. Lee Hershenson (the plaintiff Hershenson's
father) raised questions about his tax fee, along with other
fees, to his wealth manager at BNY Mellon. As a result, the
Hershenson Trust was converted to a “service fee”
of 2 percent of market value per year on its first $500, 000,
and 1.75 percent on the next $500, 000 -- with no line-item
fee for taxes. It is not clear on this record whether other
trusts had similar arrangements, or whether this agreement
was unique to the Hershenson Trust. In any event, since 2010,
the Hershenson Trust has not been charged a line-item
in 2012, BNY Mellon changed its fee structure with respect to
tax-preparation fees for most trusts. In 2012, the bank
shifted those trusts that were still charged a line-item
tax-preparation fee to a structure that imposed a bundled
“fiduciary fee” and no tax-preparation line-item
fee. This shift applied to the Wesson Trust, but not the
Hershenson Trust, which remained on the “service
fee” schedule described above. Since 2012, the Wesson
Trust has not paid a line-item tax-preparation fee. The
parties point to nothing in the record indicating how much
the “fiduciary fee” was or what it included.
2013 and into 2014, BNY Mellon changed its fee structures
again, moving trusts, on a rolling basis, to a schedule based
on “advisory fees.” It is not clear on this
record whether or to what extent the “advisory
fees” resembled the “fiduciary fees” just
discussed. In any event, in 2014, the bank moved both the
Wesson and Hershenson Trusts to the AD-75 fee schedule, which
is an “advisory fee” schedule. Under this
structure, the “advisory fee” covers numerous
“front- and back- office services, ” including
asset allocation, account administration, portfolio
monitoring, performance reporting --and, of course, tax
preparation. The “advisory fee” typically ranges
from 0.75 percent per year on a trust's first $3 million
down to 0.20 percent on anything over $25 million.
2007, shortly after BNY Mellon hired PwC, the bank crafted a
letter to alert customers to the change. It stated:
“Reflective of the service, the tax preparation fee
will be $400 for grantor trusts, $750 for revocable trusts,
and between $750 and $950 for irrevocable trusts, depending
on complexity.” The parties dispute to whom, if anyone,
this letter was sent.
2012, when the bank shifted to a “fiduciary fee,
” many customers received a letter stating that the new
fee “replaces” the former “base fee”
and “tax preparation fee.” However, the parties
point to nothing in the record explaining in more detail what
the “fiduciary fee” covered or how much it cost
in 2013 and into 2014, BNY Mellon began alerting customers to
its new “advisory fee” system via another letter.
This letter described the new system as “a new, more
straightforward way of determining fees, ” but the
letter did not include any detail on what specific services
the fee covered. A separate fee schedule discloses the amount
of the fee and what it covers, but it is not clear to whom,
if anyone, this fee schedule was provided.
February 2015, Henderson filed the original complaint, which
raised class action claims that the defendant breached its
fiduciary duty when it made imprudent investments of trust
assets into affiliated funds. In March 2016, Henderson filed
the First Amended Complaint, which added the class claims
relating to the tax-preparation fees. After some procedural
skirmishing, a Second Amended Complaint (“SAC”)
was filed in November 2016, adding Hershenson as a named
plaintiff with respect to the tax-preparation claims. The SAC
is the operative complaint.
2017 and early 2018, the parties attempted to settle the
case. However, in February 2018, Henderson on her own sent
the Court a letter objecting to her own attorneys'
proposed settlement. She later withdrew that objection. After
a hearing on the proposed settlement, the Court found
Henderson's objections compelling and rejected the
has since moved to withdraw her individual and class claims
alleging the imprudent investment of trust funds so that she
may pursue them in a separate case in Pittsburgh. After an ex
parte hearing just with Henderson (but not her warring
attorneys) in August 2018 to assess the voluntariness of her
decision, the Court dismissed those claims without prejudice.
Because of this withdrawal, only Counts IV and V of the SAC
remain; both pertain solely to the tax-preparation theory.
Count IV asserts a breach of fiduciary duty claim, and Count
V seeks an accounting.
Henderson and Hershenson seek to represent the following
class to pursue those claims:
The Unlawful Fees Class: From 2008 to the present,
all personal trusts: (1) for which BNY Mellon served or
serves as trustee, and charged a “tax preparation
fee” or “fiduciary” fee for one or more of
the covered years, and (2) the paid preparer of the fiduciary
return covered by the “tax preparation fee” or
“fiduciary” fee was PricewaterhouseCoopers for
one or more of the covered years.
motions for class certification and summary judgment are
fully joined. The Court held separate hearings on each.
may be certified pursuant to Rule 23 of the Federal Rules of
Civil Procedure only if:
(1) the class is so numerous that joinder of all members is
impracticable; (2) there are questions of law or fact common
to the class; (3) the claims or defenses of the
representative parties are typical of the claims or defenses
of the class; and (4) the representative parties will fairly
and adequately protect the interests of the class.
Fed. R. Civ. P. 23(a). In addition to these four
prerequisites, the class must also satisfy at least one
requirement of Rule 23(b). Smilow v. Sw. Bell Mobile
Sys., Inc., 323 F.3d 32, 38 (1st Cir. 2003).
the plaintiffs invoke Rule 23(b)(3), which requires the Court
to find “that the questions of law or fact common to
class members predominate over any questions affecting only
individual members, and that a class action is superior to
other available methods for fairly and efficiently
adjudicating the controversy.” Fed.R.Civ.P. 23(b). The
considerations relevant to these findings include:
(A) the class members' interests in individually
controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the
controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the
litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(3)(A)-(D).
the First Circuit adds an extra-textual ascertainability
requirement to the class certification analysis. “[T]he
definition of the class must be ‘definite,' that
is, the standards must allow the class members to be
ascertainable.” In re Nexium Antitrust Litig.,
777 F.3d 9, 19 (1st Cir. 2015); Matamoros v. Starbucks
Corp., 699 F.3d 129, 139 (1st Cir. 2012) (holding that a
class was not ...