Singer v. Mass. Mut. Life Ins. Co.
Singer v. Mass. Mut. Life Ins. Co.
Opinion of the Court
"All happy families are alike. Each unhappy family is unhappy in its own way."
I. BACKGROUND
In December 2002, Theodore Singer created the Theodore Singer Revocable Trust ("2002 Trust") and executed a will leaving the residue of his estate to that trust. Amended Cross-Complaint ("ACC") ¶ 6-7, ECF No. 52. The will named his wife, Dr. Rochelle Singer, as executor. Id. ¶ 8. Seven years later, Theodore suffered from health problems and was physically weak. Id. ¶ 12. He increasingly relied on two of his and Rochelle's daughters, Deborah Singer and Hope Nolan, for daily assistance and in conducting financial affairs. Id. ¶ 13. Nolan, a Certified Public Accountant, was Theodore's financial advisor and tax preparer, and Deborah assisted with Theodore's banking and finances. Id. ¶ 15.
In 2011, Deborah began to disparage Rochelle to Theodore, falsely criticizing Rochelle for purportedly not understanding *1028finances, not loving Theodore, and for causing family disunity. Id. ¶¶ 17-18. Rochelle, in reality, loved Theodore and was competent and intelligent, holding a Ph.D. in education. Id. ¶¶ 18-19. Deborah convinced Theodore to take a single sum distribution of $865,000 from his Defined Benefit Plan and "roll over" the funds to an individual retirement account at Massachusetts Mutual Life Insurance Co. ("MassMutual"). Id. ¶¶ 21, 25. Although Rochelle's signature was required to take the single sum distribution, Rochelle was not informed of the move and her signature was forged. Id. ¶¶ 23-24. Deborah subsequently persuaded Theodore to use his business attorneys-rather than the estate planning attorney who prepared his earlier will-to create a second estate plan. Id. ¶¶ 26, 31. This estate plan created a new trust ("2011 Trust") with Deborah as successor trustee (after Theodore), Nolan as next successor trustee, and Rochelle as the beneficiary of the trust's income. Id. ¶¶ 26-28. Deborah and Nolan were named as the remainder beneficiaries. Id. ¶ 28. Deborah accompanied Theodore to the business attorneys' offices and separately corresponded with the attorneys regarding the new estate. Id. ¶ 29. Deborah also persuaded Theodore to direct the attorneys to draft a power of attorney in her favor in connection with the second estate, giving her power over, among other things, transactions involving real estate, personal property, and retirement plans. Id. ¶ 32-33.
With the 2011 Trust established, Deborah convinced Theodore to fund it. She persuaded Theodore to name the 2011 Trust as the beneficiary of his 401(k) plan, but that designation was invalid because he never obtained Rochelle's signature (forged or otherwise). Id. ¶¶ 36-37. Deborah also convinced Theodore to name the 2011 Trust as the beneficiary of the MassMutual IRA, which contained the $865,000 single sum distribution. Id. ¶ 38. Theodore died four years later, in September 2015. Id. ¶ 40. Rochelle did not learn of the 2011 Trust until after Theodore's death, when she became executor of his estate. Id. ¶ 41. Had the 2011 Trust not been designated as the beneficiary of the MassMutual IRA, the IRA would have passed to the estate. Id. ¶ 39.
A flurry of litigation followed. Rochelle filed two state court lawsuits against her daughters seeking to recover assets for the estate. The first lawsuit, a citation to recover assets filed in probate court, alleged that Nolan improperly transferred over $2 million in funds from Theodore's accounts to herself and her sisters in the years before Theodore's death. See Probate Citation, ECF No. 54-1. The second lawsuit, filed against Deborah and Nolan, concerned the creation of the 2011 Trust and rights to the MassMutual IRA. See State Court Complaint, ECF. 54-2. Rochelle voluntarily dismissed the second suit on February 26, 2018. See Dismissal Order, ECF No. 78-1.
For her part, Deborah filed this lawsuit against MassMutual, which refused to distribute the IRA to the 2011 Trust after receiving communications from Rochelle asserting that the IRA belonged to the estate. See Complaint, ECF No. 1. MassMutual responded with an interpleader counterclaim naming Deborah and Rochelle, maintaining that it has no interest in the IRA and is merely holding funds for which there are competing claimants. See Amended Interpleader Complaint, ECF No. 32. Rochelle, now part of this lawsuit, responded by filing a cross-complaint (since amended) against Deborah ("the cross-complaint" or "ACC"), also naming Nolan as a third-party defendant. The cross-complaint alleges that Deborah is liable for undue influence and tortious interference with an inheritance expectancy concerning the MassMutual IRA. In the *1029alternative, the cross-complaint avers that Deborah is liable for breach of fiduciary duty in her capacity as trustee of the 2011 Trust and seeks removal of Deborah and Nolan as trustee and successor trustee of the 2011 Trust. Deborah and Nolan now move to dismiss Rochelle's cross-complaint.
II. DISCUSSION
A. Probate Exception
The Court's first inquiry is to determine whether it has subject matter jurisdiction over the cross-complaint. Deborah posits that it does not because the cross-complaint falls within the probate exception to federal jurisdiction. Were the year 2005, she might be correct. In arguing that the Court lacks jurisdiction, Deborah relies extensively on Storm v. Storm ,
Notably, the Seventh Circuit arrived at this conclusion notwithstanding the fact that the plaintiff was challenging an inter vivos trust rather than a will. Pointing to its "practical approach," the court determined that the policies animating the probate exception applied as forcefully to bar the plaintiff's claim, which concerned a will substitute, as they would have to an equivalent claim concerning a will. The court declined to distinguish between wills and inter vivos trusts, noting that it was "loath to throw open the doors of the federal courts to disputes over testamentary intent simply because a decedent chose to use a will substitute rather than a traditional will to dispose of his or her estate."
The Storm framework, however, has given way to the clearer skies of Marshall v. Marshall ,
Courts in this district have recognized that "although the Seventh Circuit has continued, since Marshall , to cite the Storm factors, their importance appears to have diminished in the wake of Marshall 's more straightforward rule that the probate exception is intended to prohibit concurrent jurisdiction over a res." In re Emerald Casino, Inc. ,
It is useful, in conducting this inquiry, to divide Rochelle's counts by the relief they seek. The undue influence count seeks to dissolve the 2011 Trust and direct payment of the MassMutual IRA to Rochelle. The tortious interference and breach of fiduciary duty counts, by contrast, seek compensatory damages as a result of Deborah's allegedly tortious behavior.
Rochelle's undue influence count is slightly trickier because it seeks control over a particular res (the MassMutual IRA). The cross-complaint notes that if the *10312011 Trust had not been named the beneficiary of the MassMutual IRA, the IRA would have passed to Theodore's estate. Rochelle's undue influence count challenges the validity of that beneficiary designation. Rochelle, therefore, asks this Court to determine whether a specific res should become part of the estate. This question is within the Court's jurisdiction. The Seventh Circuit has explained-post- Marshall -that where "[t]he judgment sought would just add assets to the decedent's estate" and "would not reallocate the estate's assets among contending claimants or otherwise interfere with the probate court's control over and administration of the estate," the probate exception is inapplicable. Gustafson v. zumBrunnen ,
B. Undue Influence and Tortious Interference
Deborah next argues that even if the probate exception does not bar Rochelle's claims, Rochelle has nonetheless failed to state a claim for undue influence and tortious interference with an inheritance expectancy. "Undue influence ... is any improper urgency of persuasion whereby the will of a person is over-powered and he is indeed induced to do or forbear an act which he would not do or would if left to act freely." DeHart v. DeHart ,
Under Illinois law, a presumption of undue influence arises under certain circumstances even in the absence of evidence concerning the nature of the purported persuasion. For purposes of this case, the presumption arises "where (1) a fiduciary relationship exists between the testator and a person who receives a substantial benefit from the will, (2) the testator is the dependent and the beneficiary the dominant party, (3) the testator reposes trust and confidence in the beneficiary, and (4) the will is prepared by or its preparation procured by such beneficiary."
At the pleading stage, the cross-complaint must "contain allegations that state a claim to relief that is plausible on its face." McCauley v. City of Chicago ,
The facts alleged concerning Deborah's efforts to persuade Theodore to create and fund the 2011 Trust are insufficient to permit an inference of undue influence. Overwhelmingly, the cross-complaint's allegations are boilerplate assertions that Deborah convinced or coerced Theodore to take particular courses of action. Aside from a bare contention that Deborah and Nolan threatened to withdraw their love and affection for Theodore, the cross-complaint contains no facts detailing how or when the supposed coercion occurred. The cross-complaint does posit, at several points, that Deborah lied to Theodore about Rochelle: it notes, for example, that Deborah falsely criticized Rochelle "for supposedly not understanding finances, not loving [Theodore], and causing disunity in the family." But these broad allegations, presented without further detail, fail to meet the strict contours of Federal Rule of Civil Procedure 9(b), which requires plaintiffs to plead fraud with particularity. And at their core, the cross-complaint's allegations regarding Deborah's disparagement of Rochelle are accusations of fraud: the cross-complaint maintains that Deborah intentionally told lies to Theodore to induce him to act in a way that would benefit Deborah, and that Theodore in fact did so. These allegations therefore require particular details wholly absent from the complaint. See Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust v. Walgreen Co. ,
Nor do the circumstances surrounding the creation and funding of the 2011 Trust alleged in the cross-complaint permit the Court to infer that a presumption of undue influence will arise. The first element required to establish a presumption of undue influence is a fiduciary duty between the testator and a person who receives a substantial benefit from the will. Illinois courts have explained that "substantial benefit" means a substantial *1033benefit "compared to other persons who have an equal claim to the testator's bounty." See DeHart ,
For the same reason, Rochelle's tortious interference with an inheritance expectancy count is dismissed. This theory requires Rochelle to allege that (1) she had an inheritance expectancy; (2) Deborah intentionally interfered with that expectancy; (3) the interference involved tortious conduct; (4) there is a reasonable certainty that the devise to Rochelle would have been received but for Deborah's interference; and (5) damages. Bjork v. O'Meara ,
*1034B. Breach of Fiduciary Duty
In the alternative, Rochelle's cross-complaint seeks to hold Deborah liable for a breach of her fiduciary duty as trustee of the 2011 Trust. This theory also fails to support her claim. To state a cause of action for breach of a fiduciary duty, "it must be alleged that a fiduciary duty exists, that the fiduciary duty was breached, and that such breach proximately caused the injury of which the plaintiff complains." Neade v. Portes ,
Rochelle also posits that Deborah breached her fiduciary duty by failing to provide Rochelle with an accounting of the 2011 Trust. This theory fails for the same reason: the cross-complaint does not allege that there were any funds in the Trust to account for. It is true enough that Illinois law requires trustees to "at least annually ... furnish to the beneficiaries then entitled to receive or receiving the *1035income from the trust estate ... a current account showing the receipts, disbursements and inventory of the trust estate." 760 ILCS 5/11(a). And the complaint alleges that despite Rochelle's repeated demands for a statutorily required accounting, Deborah has never provided one. But the complaint does not plausibly plead that there were any "receipts, disbursements, or inventory" in the Trust to account for, so it fails to adequately plead that a duty to report that information arose.
Because the cross-complaint fails to plausibly allege that the 2011 Trust ever contained any funds that Deborah could have accounted for or distributed, Rochelle's breach of fiduciary duty count is dismissed. Although the dismissal is without prejudice, Rochelle is forewarned that to sustain a breach of fiduciary duty claim against Deborah, she must be able to plead, in a manner consistent with Federal Rule of Civil Procedure 11(b), that the 2011 Trust actually contains assets (i.e. , that MassMutual distributed the IRA funds to the 2011 Trust). Failing that, this claim should not be reasserted.
C. Removal/Substitution of Trustee
Also in the alternative, Rochelle seeks removal of Deborah as trustee and Nolan as successor trustee of the 2011 Trust. As an initial matter, Nolan posits that the Court lacks supplemental jurisdiction over the count against her.
*1036As for Rochelle's efforts to substitute herself for Deborah, "removal of a trustee is an extreme remedy, and neither the court not any party should lightly disregard the testator's choice of trustee." Laubner v. JP Morgan Chase Bank, N.A. ,
Rochelle has successfully pled only that there is animosity between her and Deborah; as previously explained, she has failed to adequately allege that Deborah engaged in tortious behavior or breached a fiduciary duty. Aside from bare conclusions about tax liability, wholly devoid of supporting facts, the cross-complaint contains no allegations suggesting that the trust property is at risk if it remains under Deborah's stewardship. Rochelle has failed to identify extraordinary circumstances that demand Deborah's removal, or any facts from which those circumstances can be reasonably inferred. Her count seeking to remove Deborah as trustee of the 2011 Trust is therefore dismissed.
* * *
For the foregoing reasons, the motion to dismiss is granted. Rochelle's claim against Hope Nolan is dismissed without prejudice but may not be reasserted in this action. Rochelle's counts against Deborah are dismissed without prejudice.
Leo Tolstoy , Anna Karenina (1878).
As this is a motion to dismiss, the Court accepts all well-pleaded facts as true and construes all inferences in favor of the plaintiff. Zemeckis v. Global Credit & Collection Corp. ,
It is hardly surprising that Deborah makes no argument about the role of the Storm framework in the wake of Marshall given that her counsel failed to cite Marshall in her opening brief. It is difficult to imagine that the failure to do so was an oversight, but whether that is the case or not, the omission does not reflect well on counsel.
The request for a trust accounting does not implicate the probate exception either. Downey v. Keltz , No. 11-CV-1323,
Rochelle's alternative count seeking removal and substitution of Deborah and Nolan as trustee and successor trustee of the 2011 Trust is also not barred by the probate exception. Indeed, the entire premise of the count assumes that the MassMutual IRA did not become part of the estate.
As a matter of policy, this rule is sound. It would make little sense to presume undue influence occurred from the creation of a will that was equitable and fair to all those with equal claims to the estate's assets. The stench of undue influence is much stronger if the resulting will wholly or overwhelmingly disinherits certain stakeholders while enriching others with equal claims. The problem with the cross-complaint, as pled, is that it contains no facts from which the Court could conclude that Deborah was to receive substantially more than others similarly situated.
Even if the Court infers that Theodore meant the proceeds of the 401(k) to go to the 2011 Trust instead of to Rochelle, the complaint contains no allegations concerning the value of the estate assets that went to Rochelle or any other individual with a claim equal to Deborah's.
Deborah also makes two related-and unpersuasive-arguments in pushing for dismissal of Rochelle's undue influence and tortious interference claims. Deborah first argues that Rochelle has not suffered any damages due to Deborah's purported misconduct because Rochelle is the beneficiary of the 2011 Trust. Because of that, Deborah asserts, Rochelle cannot establish that her inheritance expectancy has been diminished as a result of the transfer of the MassMutual IRA funds to the 2011 Trust. But the complaint alleges that if the transfer had not occurred, the MassMutual IRA funds would have passed to the estate, and subsequently to the 2002 Trust, of which Rochelle is trustee. As trustee, Rochelle-and not Deborah-would control the size and frequency of distributions made to herself as beneficiary. The complaint further alleges that Rochelle would have had the right to determine who would receive the MassMutual IRA funds upon her death if the funds had passed to Theodore's estate. Deborah identifies no reason why these concrete harms are insufficient to constitute damages and diminishment of expectancy.
Deborah also argues that the Court should abstain from adjudicating Rochelle's entire complaint because Rochelle filed a substantially identical lawsuit in Illinois state court, which Deborah believes is the proper forum. Since briefing on this motion was completed, the Court has taken judicial notice that Rochelle voluntarily dismissed the overlapping state court case. ECF No. 79. There are, consequently, no longer grounds for abstention on the basis of parallel proceedings.
Reference
- Full Case Name
- Deborah L. SINGER, trustee under Ted Singer Declaration of Trust Dated September 1, 2011, Plaintiff/Counter-Defendant v. MASSACHUSETTS MUTUAL LIFE INSURANCE CO., Defendant/Counter-Plaintiff. Rochelle K. Singer, Third Party Defendant/Cross-Plaintiff/Third Party v. Deborah L. Singer, individually and as trustee, and Hope Nolan, individually and as successor trustee of the Ted Singer Declaration of Trust dated September 1, 2011, Cross-Defendant/Third Party
- Cited By
- 5 cases
- Status
- Published