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Anna Downey and Jacob Page Drewry v. Marshall Keltz

January 31, 2012


The opinion of the court was delivered by: Judge Robert M. Dow, Jr.


Plaintiffs Anna Downey and Jacob Page Drewry sued Defendant Marshall Keltz, successor trustee of the William P. Drewry Trust, both individually and in his capacity as trustee. Before the Court is Keltz's motion to dismiss [9] Plaintiffs' complaint. For the reasons below, the Court grants in part and denies in part Keltz's motion [9].

I. Background

William P. Drewry ("William") established the William P. Drewry Trust ("the Trust") on December 20, 1988. William acted as the sole trustee of the Trust until his death on October 19, 2009, when, under the terms of the Trust, Defendant Marshall Keltz became the sole successor trustee. In addition to being the trustee, Keltz, who was William's partner at the time of his death, is also a named beneficiary of the Trust. The Trust provided Keltz an immediate benefit soon after William's death and further provides that during Keltz's lifetime, he is to receive the income and principal necessary for his "health, maintenance and support." Upon Keltz's death, the remainder of the trust estate is to be divided among thirteen beneficiaries, including Plaintiffs Anna Downey and Jacob Page Drewry ("Jacob").

Article V, Section 2 of the Trust states that the successor trustee "shall render an account of his/her receipt and disbursements and a statement of assets to each adult vested beneficiary." Despite that provision, and Jacob's written request for an accounting, Keltz has not provided the beneficiaries with an accounting since he became the successor trustee in 2009.

Believing that as adult vested beneficiaries, they are entitled to an accounting of all of Keltz's receipts and disbursements, as well as a statement of the Trust's assets, Plaintiffs sued Keltz seeking an accounting (Count I). In failing to provide such an accounting, Plaintiffs claim, Keltz has breached his fiduciary duty to the thirteen contingent beneficiaries of the Trust. Plaintiffs also seek the removal of Keltz as trustee (Count II). Plaintiffs allege that Keltz is unfit and unqualified to act as a trustee, and that he has breached his fiduciary duties by failing to turn over estate assets that Plaintiffs claim he is not entitled to hold.

Keltz moves to dismiss Plaintiffs' complaint on three grounds, two of which are based on a related case currently pending in Illinois state probate court. First, Keltz claims that this case falls within the "probate exception" to federal jurisdiction, warranting dismissal under Federal Rule of Civil Procedure 12(b)(1). Second, Keltz argues that even if the Court has jurisdiction, Plaintiffs' complaint must be dismissed under Rule 12(b)(7) because Plaintiffs failed to join the necessary parties under Rule 19 and that, if all necessary parties are joined, this Court would no longer have diversity jurisdiction. In the alternative, Keltz argues that the Court should abstain from exercising its jurisdiction under the Colorado River doctrine. The Court will address each argument in turn.

II. Analysis

A. The Probate Exception

Keltz first contends that this Court does not have subject matter jurisdiction, and thus Plaintiffs' case must be dismissed under Rule 12(b)(1). Federal courts are courts of limited jurisdiction; "they have only the power that is authorized by Article III of the Constitution and the statutes enacted by Congress pursuant thereto." Transit Express, Inc. v. Ettinger, 246 F.3d 1018, 1023 (7th Cir. 2001) (internal quotation marks and citations omitted). Congress has provided that "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between -- (1) citizens of different states * * *." 28 U.S.C. § 1332(a). The plaintiff has the burden of establishing jurisdiction. Transit Express, 246 F.3d at 1023. In evaluating a motion brought pursuant to Rule 12(b)(1), the Court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the plaintiff. Long v. Shorebank Dev. Corp., 182

F.3d 548, 554 (7th Cir. 1999). The Court also has the authority "to look behind the plaintiff's allegations and make factual findings for the purposes of assessing its subject matter jurisdiction." Palay v. United States, 349 F.3d 418, 424-25 (7th Cir. 2003)

Keltz does not dispute that Plaintiffs have met the requirements of § 1332; rather, he argues that this case falls within the probate exception to the Court's subject matter jurisdiction. The probate exception is a "judicially created doctrine[]" that limits, in narrow circumstances, the jurisdiction of federal courts. Marshall v. Marshall, 547 U.S. 293, 299 & 305 (2006). The exception "reserves to state probate courts the probate or annulment of a will and the administration of a decedent's estate; it also precludes federal courts from endeavoring to dispose of property that is in the custody of a state probate court." Id. at 311-12. Nevertheless, the probate exception "does not bar federal courts from adjudicating matters outside those confines and otherwise within federal jurisdiction." Id. at 312. "Thus, an in rem action in federal court involving the same res that a state court is exercising jurisdiction over is inappropriate, but an in personam action in federal court related to the state action may proceed." Taylor v. Feinberg, No. 08-CV-5588, 2009 WL 3156747, at *4 (N.D. Ill. Sept. 28, 2009).

Keltz argues that the probate exception applies because the property in dispute here -- the Trust -- is the subject of litigation before the Probate Division of the Circuit Court of Cook County. In that case, five of William's nieces and nephews who were named beneficiaries in an earlier version of the Trust sued Keltz alleging undue influence and tortuous interference and seeking both the imposition of a constructive trust and Keltz's removal as trustee. Plaintiffs acknowledge in their response to Keltz's motion to dismiss that their request for the removal of Keltz as trustee would affect the administration of the estate and thus falls within the probate exception. See Marshall, 547 U.S. at 311. Accordingly, Plaintiffs have abandoned Count II. They assert, however, that their claim for an accounting falls outside the probate exception.

The Court agrees with Plaintiffs as to Count I. In that count, Plaintiffs allege that Keltz's failure to provide an accounting as required by the plain language of the Trust amounts to a breach of his fiduciary duty. Such a claim does not fall within the probate exception. See, e.g., Jones v. Brennan, 465 F.3d 304, 307-08 (7th Cir. 2006) (holding that a claim by an heir for breach of fiduciary duty falls outside the probate exception); Bleecker v. Krantz, No. 05 C 7309, 2006 WL 2859621, at *3 (N.D. Ill. Sept. 27, 2006) (same); Hoffman v. Sumner, 478 F. Supp. 2d 1024 (N.D. Ill. 2007) (concluding that a monetary judgment against an estate due to a breach of fiduciary duty would not "dispose of property" despite the possibility of the state court having to recognize the claim against the estate); see also, e.g., Chabot v. Chabot, No. 4:11-CV-217-BLW, 2011 WL 5520927, at *7 (D. Idaho Nov. 14, 2011) (denying the Keltz's motion to dismiss as to plaintiff's request for an accounting); Tartak v. Del Palacio, No. 09-1730(DRD), 2010 WL 3960572, at *11 (D.P.R. Sept. 30, 2010) (concluding that "the majority of the relevant jurisprudence holds" that a request for an accounting falls "outside the scope of the probate exception"); Taylor, 2009 WL 3156747, at *4 (finding that a claim for an equitable accounting does not interfere with the res ...

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