In a recent Mississippi Supreme Court case, trust beneficiaries were not bound by a clause in an agreement between the trustee and an investment advisor. The trustee and an investment advisor entered into a Wealth Management Agreement (WMA) requiring mediation and then arbitration of disputes between them. The WMA contains a clause expressly excluding the conferring of rights or remedies on persons other than the signatories. The beneficiaries filed suit against the trustee and investment advisor alleging breach of duty to manage prudently the trust assets. The trustee and advisor moved to stay, pending arbitration.
In Pinnacle Trust Co., L.L.C. v. McTaggart, the trial court denied the motion and the Mississippi Supreme Court affirmed on appeal, holding that the WMA expressly excluded non-signatories and that the trust beneficiaries could not be beneficiaries of the WMA which they neither signed nor knew existed. In addition, their rights arise not from the WMA but from the trust terms themselves.
Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.
