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Simon Bernstein Irrevocable Insurance Trust Dtd 6/21/95 v. Heritage Union Life Insurance Company

United States District Court, N.D. Illinois, Eastern Division

January 30, 2016

SIMON BERNSTEIN IRREVOCABLE INSURANCE TRUST DTD 6/21/95, et al., Plaintiffs,
v.
HERITAGE UNION LIFE INSURANCE CO., Defendant. HERITAGE UNION LIFE INSURANCE COMPANY, Counter-Plaintiff,
v.
SIMON BERNSTEIN IRREVOCABLE INSURANCE TRUST DTD 6/21/95, Counter-Defendant, and FIRST ARLINGTON NATIONAL BANK, et al., Third-Party Defendants. ELIOT IVAN BERNSTEIN, Cross-Plaintiff,
v.
TED BERNSTEIN, et al., Cross-Defendants, and PAMELA B. SIMON, et al., Third-Party Defendants.

          MEMORANDUM OPINION AND ORDER

          John Robert Blakey United States District Judge

         This action concerns the distribution of proceeds from a life insurance policy (the “Policy Proceeds”) previously held by decedent Simon Bernstein. The principal parties remaining in the case are: (1) Plaintiff Simon Bernstein Irrevocable Insurance Trust Dated 6/21/95 (the “1995 Trust”); (2) the four Bernstein siblings who believe the Policy Proceeds should be distributed to the 1995 Trust (Ted Bernstein, Lisa Friedstein, Jill Iantoni and Pam Simon; collectively, the “Agreed Siblings”); (3) the fifth Bernstein sibling, Eliot Bernstein, a pro se third-party Plaintiff who disputes that approach (“Eliot”); and (4) the intervenor estate of Simon Bernstein (the “Estate”), which contends that the 1995 Trust was never actually created, such that the Policy Proceeds should default to the Estate.

         Before the Court are two motions for summary judgment. In the first, [239] at 1-4, the 1995 Trust and the Agreed Siblings seek judgment on Eliot's third-party claims. In the second, [245] at 1-6, the Estate seeks judgment against the 1995 Trust and the Agreed Siblings on their claims in the Second Amended Complaint, [73], and entry of judgment in the Estate's favor on its Complaint for Declaratory Judgment. [112] at 1-17. For the reasons explained below, the former is granted while the latter is denied.

         I. Background[1]

         A. Procedural Posture

         Following Simon Bernstein's death on September 13, 2012, the 1995 Trust submitted a death claim to Heritage pursuant to Simon Bernstein's life insurance policy. [150] at 15; [240] at 13. After Heritage failed to pay, the 1995 Trust initiated this lawsuit in the Circuit Court of Cook County, alleging that Heritage had breached its contractual obligations. [1-1] at 1-3. On May 20, 2013, Jackson National Life Insurance Company (“Jackson”), as successor in interest to Heritage, removed the case to this Court. [1] at 1-2.

         On June 26, 2013, Heritage, through Jackson, filed a Third-Party Complaint and Counter-Claim for Interpleader pursuant to 28 U.S.C. § 1335(a) and Federal Rule of Civil Procedure 14, seeking a declaration of rights under the life insurance policy. [17] at 1-10. Heritage was eventually dismissed in February of 2014 after interpleading the Policy Proceeds. [101] at 2.

         On September 22, 2013, Eliot, a third-party Defendant to Jackson's interpleader claim, filed a 177-page Answer, Cross-Claim and Counter-Claim. [35] at 1-117. Eliot brought claims against the 1995 Trust, the Agreed Siblings, and multiple third-party Defendants (including the law firm of Tescher & Spallina, P.A., The Simon Law Firm, Donald Tescher, Robert Spallina, David Simon, Adam Simon, S.B. Lexington, Inc., S.B. Lexington, Inc. Employee Death Benefit Trust, and S.T.P. Enterprises, Inc.). Id.

         On January 13, 2014, the Agreed Siblings and the 1995 Trust filed their First Amended Complaint. [73] at 1-11. Plaintiffs alleged that: (1) the 1995 Trust was a common law trust established in Chicago by Simon Bernstein; (2) Ted Bernstein is the trustee of the 1995 Trust; and (3) the 1995 Trust was the beneficiary of Simon Bernstein's life insurance policy. Id. In addition, Plaintiffs alleged that all of Simon Bernstein's children, including Eliot, are equal beneficiaries to the Trust. Id.

         On March 3, 2014, the Court dismissed Eliot's claims against Tescher & Spallina, P.A., Donald Tescher, and Robert Spallina. [106] at 1-4. The Court explained that Eliot, as a third-party Defendant to an interpleader claim, was “not facing any liability” in this action, and he was accordingly not authorized to seek relief against other third parties. Id.

         On June 5, 2014, the Estate filed its Complaint for Declaratory Judgment, [112] at 1-16, and on July 28, 2014, the Court granted the Estate's motion to intervene. [121] at 3-4.

         Fact discovery closed on January 9, 2015, [123], and on March 15, 2016 the Court denied Plaintiffs' motion for summary judgment. [220] at 1-6. The Court found, inter alia, that while Plaintiffs were able to adduce “some evidence that the [1995] Trust was created, ” this evidence was “far from dispositive.” Id. at 4.

         B. Probate Actions

         The Probate Division of the Palm Beach County Circuit Court recently resolved two other cases related to the disposition of Simon Bernstein's assets: In re Estate of Simon L. Bernstein, No. 502012CP004391XXXNBIH (Fla. Cir. Ct.) and Ted Bernstein, as Trustee of the Shirley Bernstein Trust Agreement dtd 5/20/2008 v. Alexandra Bernstein, et al., No. 502014CP003698XXXXNBIJ (Fla. Cir. Ct.) (collectively, the “Probate Actions”).

         Judge John L. Phillips presided over a joint trial of the Probate Actions in December of 2015. A full recitation of Judge Phillips' findings is unnecessary here, but relevant portions of his finals orders include:

• The testamentary document identified as the “Will of Simon Bernstein” was “genuine and authentic, ” and “valid and enforceable according to [its] terms.”
• Ted Bernstein “was not involved in the preparation or creation of” the Will of Simon Bernstein, “played no role in any questioned activities of the law firm of Tescher & Spallina, P.A., ” there was “no evidence to support the assertions of Eliot Bernstein that Ted Bernstein forged or fabricated” the Will of Simon Bernstein, and, in fact, “Ted Bernstein played no role in the preparation of any improper documents, the presentation of any improper documents to the Court, or any other improper act, contrary to the allegations of Eliot Bernstein.”
• The beneficiaries of the testamentary trust identified in the Will of Simon Bernstein are “Simon Bernstein's then living grandchildren, ” while “Simon's children - including Eliot Bernstein - are not beneficiaries.”
• Eliot “should not be permitted to continue representing the interests of his minor children, because his actions have been adverse and destructive to his children's interest, ” such that it became necessary to appoint a guardian ad litem.

[240-11] at 2-5; [240-12] at 2-3.

         II. Legal Standard

         Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir. 2014). A genuine dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In determining whether a genuine issue of material fact exists, this Court must construe all facts and reasonable inferences in the light most favorable to the nonmoving party. See CTL ex rel. Trebatoski v. Ashland Sch. Dist., 743 F.3d 524, 528 (7th Cir. 2014).

         III. Analysis

         A. Motion for Summary Judgment on Eliot's Claims

         Eliot currently has seven claims pending against the 1995 Trust, the Agreed Siblings, David Simon, Adam Simon, The Simon Law Firm, S.B. Lexington, Inc., S.B. Lexington, Inc. Employee Death Benefit Trust, and S.T.P. Enterprises, Inc.[2] [35] at 61-117. Eliot's causes of action sound in fraud, negligence, breach of fiduciary duty, conversion, abuse of legal process, legal malpractice, and civil conspiracy.[3]

         1. Fraud, Negligence, Breach of Fiduciary Duty & Legal Malpractice

         Plaintiffs argue that Eliot's claims for fraud, negligence, breach of fiduciary duty, and legal malpractice fail because Eliot “cannot show that he sustained damages or that he has standing to assert damages on behalf of his children or the Estate.” [241] at 14; see also Damato v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 878 F.Supp. 1156, 1162 (N.D. Ill. 1995) (damages are a requisite element of a claim for fraud); Elliot v. Chicago Hous. Auth., No. 98-cv-6307, 1999 WL 519200, at *9 (N.D. Ill. July 14, 1999) (damages are a requisite element of a claim for negligence); Pearson v. Garrett-Evangelical Theological Seminary, Inc., 790 F.Supp.2d 759, 768 (N.D. Ill. 2011) (damages are ...


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