In 1987, the New York Court of Appeals held in Matter of Janes that a bank was negligent for failing to diversify the trust holdings of Kodak stock.1 Since then, several New York cases, including Matter of Rowe, Matter of Saxton, Matter of Dumont, Matter of Hyde, Matter of Creighton and Matter of Knox,2 examined whether a bank trustee was negligent for failing to diversify investments.
Trusts were created in these cases where a bank was named as either trustee, or co-trustee. The vast majority of the trust assets consisted of one or two stock holdings (i.e., Kodak, IBM, Marine Midland, and Woolworth). The bank initially decided to retain the concentrated holding. The retained stock eventually decreased in value, and the beneficiaries alleged that the bank negligently managed the trust’s investments.
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