Asset Concentrations And The Duty To
Diversify
David F. Johnson
Winstead PC
300 Throckmorton, Suite 1700
Fort Worth, TX 76102
(817) 420-8223
dfjohnson@winstead.com
2017 Texas Bankers Association Real Estate and
Oil & Gas Conference
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DAVID FOWLER JOHNSON
DFJOHNSON@WINSTEAD.COM
Managing Shareholder of Winstead PC’s Fort Worth Office
300 Throckmorton, Suite 1700
Fort Worth, TX 76102
(817) 420-8223
dfjohnson@winstead.com
David maintains an active trial and appellate practice for the financial services
industry. David’s financial institution experience includes (but is not limited to):
breach of contract, special servicer litigation, foreclosure litigation, lender liability,
receivership and injunction remedies upon default, non-recourse and other real
estate lending, class action, RICO actions, usury, various tort causes of action,
preference, and other related claims.
David has specialized in fiduciary litigation including: breach of fiduciary duty
claims, aiding-and-abetting breach of fiduciary duty claims, trustee
resignation/removal, will contests, mental competency issues, undue influence,
trust modification/clarification, and accountings. David is the primary author of a
blog that reports on recent developments in the fiduciary field in Texas:
txfiduciarylitigator.com.
David is one of twenty attorneys in the state (of the 84,000 licensed) that has the
triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury
Trial Law by the Texas Board of Legal Specialization.
David is a graduate of Baylor University School of Law, Magna Cum Laude, and
Baylor University, B.B.A. in Accounting.
David has published over twenty (20) law review articles on various litigation
topics. David’s articles have been cited as authority by federal courts, the Texas
Supreme Court (three times), the Texas courts of appeals located in Waco,
Texarkana, Tyler, Beaumont, and Houston, and cited by McDonald and Carlson in
their Texas Civil Practice treatise, William V. Dorsaneo in the Texas Litigation
Guide, as well as in the Baylor Law Review, South Texas Law Review, and the
Tennessee Law Review. David has presented and/or prepared written materials for
over hundred and twenty-five (125) continuing legal education courses.
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TABLE OF CONTENTS
I. Introduction .............................................................................................................. 1
II. History Of The Duty To Diversify ........................................................................... 1
III. What Is Diversification? ........................................................................................... 2
IV. Common-Law Duty To Diversify ............................................................................ 5
V. Statutory Duty To Diversify ..................................................................................... 7
A. Trust Code Adopts Common Law ................................................................ 7
B. Uniform Prudent Investor Act ....................................................................... 8
C. “Special Circumstances” That Allow Non-Diversification ........................ 10
VI. Non-Diversification Due To The Terms of The Trust ........................................... 13
A. Texas Law ................................................................................................... 13
B. Mandatory Versus Permissive Language For A Trust Clause
Eliminating The Duty To Diversify ............................................................ 16
C. Courts May Find An Implied Waiver Of The Duty To Diversify .............. 22
D. Courts May Give Less Deference To Retention Clauses When
Trustee Has Self-Dealing Investments ........................................................ 23
E. Trust Language That Generally Limits Liability: The Exculpatory
Clause .......................................................................................................... 24
VII. Methods To Limit Trustee Liability For Not Diversifying .................................... 29
A. Non-Judicial Methods ................................................................................. 29
1. Retention/Waiver Clause ...................................................................... 29
2. Exculpatory Clause ............................................................................... 29
3. Statement on Special Circumstances .................................................... 29
4. Other Related Documents ..................................................................... 29
5. Directed Trust Provisions ..................................................................... 30
