Bank of Am. v. Cartwright
| Decision Date | 16 August 2022 |
| Docket Number | 3:21-CV-184 DRL-MGG,3:21-CV-191,3:21-CV-236 |
| Parties | BANK OF AMERICA, N.A., Plaintiff, v. LEVERING RUSSELL CARTWRIGHT et al., Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
When this suit commenced, Bank of America, N.A. (BANA) was the custodian of the Levering Russell Cartwright Trust 1993-2. Levering Russell Cartwright was the settlor and trustee. When Mr. Cartwright requested a transfer of trust assets in a manner that concerned BANA, the bank blocked the transfer under its Investment Services Agreement and sought a declaratory judgment.
After consolidating BANA's action and a separate suit filed by Mr. Cartwright,[1] the court dismissed BANA's claims and retained some of Mr. Cartwright's claims. Needing then to answer the coercive action, BANA did so and counterclaimed for attorney fees under its Investment Services Agreement because it once sought instructions from the court on handling the trust funds. Mr. Cartwright asks the court to dismiss the counterclaim. The court denies this motion.
These facts emerge from the well-pleaded factual allegations in the counterclaim because Mr. Cartwright filed his motion under Federal Rule of Civil Procedure 12(b)(6). The court must accept these allegations as true for purposes of deciding the motion today.
BANA is the custodian of the Levering Russell Cartwright Trust 1993-2 (Cartwright Trust). Mr. Cartwright is the settlor and trustee of the Cartwright Trust. BANA's duties to the Cartwright Trust are outlined in the Investment Services Agreement. Section VI.H of this agreement provides that BANA may recover its attorney fees when the bank seeks instructions from a court because the bank believes “there is a dispute over the control” of an account.
As alleged, on December 11, 2020, during a phone call with BANA Mr. Cartwright expressed his intent to gift assets of the Cartwright Trust to Judge Jason Cichowicz. Judge Cichowicz had grown close to Mr. Cartwright over several years, and Mr Cartwright had allowed him to benefit from and manage much of Mr. Cartwright's assets. BANA encouraged Mr. Cartwright (an elderly man) not to transfer the trust assets, as the trust provided for his living expenses. BANA also advised Mr Cartwright that there could be changes in the tax laws and that Mr. Cartwright had to pay off a loan secured by the trust assets before he could gift assets to Judge Cichowicz.
On December 20, 2020, BANA received a transfer request from another banking institution after that credit union paid off the loan amount. Although Mr. Cartwright requested that BANA transfer the assets before January 1, 2021, BANA declined. Instead, on March 12, 2021, BANA filed suit asking the court for declaratory relief and instructions on its duty to transfer the Cartwright Trust assets due to the bank's concerns about elder abuse. Mr. Cartwright then sued BANA for damages and a mandatory injunction for BANA's alleged bad faith and mismanagement of the trust.
On September 1, 2021, the court dismissed all of BANA's claims and some of Mr. Cartwright's claims, finding that the bank's declaratory judgment action was unnecessarily duplicative of Mr. Cartwright's coercive action. On January 7, 2022, BANA answered Mr. Cartwright's complaint and counterclaimed for attorney fees under the Investment Services Agreement. Today's motion concerns only this counterclaim.
In reviewing a motion to dismiss under Rule 12(b)(6), the court accepts all well-pleaded factual allegations as true and draws all reasonable inferences in the plaintiff's favor. Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th Cir. 2010). A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A “complaint must contain sufficient factual matter accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). It need not plead “detailed factual allegations.” Id. A claim must be plausible, not probable. Indep. Tr. Corp. v. Steward Info. Servs. Corp., 665 F.3d 930, 935 (7th Cir. 2012). Evaluating whether a claim is sufficiently plausible to survive a motion to dismiss is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” McCauley v. City of Chi., 671 F.3d 611, 616 (7th Cir. 2011) (quotations and citation omitted). In conducting this inquiry, the court may “consider documents incorporated by reference in the pleadings.” Orgone Cap. III, LLC v. Daubenspeck, 912 F.3d 1039, 1044 (7th Cir. 2019).
As a federal court sitting in diversity, the court honors a choice-of-law clause unless it would contravene public policy. Life Plans, Inc. v. Sec. Life of Denver Ins Co., 800 F.3d 343, 357 (7th Cir. 2015). The Investment Services Agreement says Indiana law applies (because the account was principally administered here). The parties cite Indiana law. The court sees no reason to depart. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 684 (7th Cir. 2014); Ruiz v. Blentech Corp., 89 F.3d 320, 323 (7th Cir. 1996).
Indiana follows the American rule for attorney fees: each party must pay its own fees absent statutory or contractual allowance. Loparex, LLC v. MPI Release Techs., LLC, 964 N.E.2d 806, 816 (Ind. 2012); Osler Inst., Inc. v. Forde, 386 F.3d 816, 818 (7th Cir. 2004). The court will enforce a contractual fee-shifting clause unless it violates public policy, Reuille v. E.E. Brandenberger Constr., Inc., 888 N.E.2d 770, 771 (Ind. 2008), albeit limiting recovery only to those fees expressly allowed by the contract and no more, see Chi. Southshore & S. Bend R.R. v. Itel Rail Corp., 658 N.E.2d 624, 634 (Ind.Ct.App. 1995).
A contract's interpretation is generally a question of law, Song v. Iatarola, 76 N.E.3d 926, 933 (Ind.Ct.App. 2017), controlled by the parties' intent as expressed by clear contractual language, City of Jeffersonville v. Env't Mgmt. Corp., 954 N.E.2d 1000, 1008 (Ind.Ct.App. 2011). “[W]hen the terms of a contract are drafted in clear and unambiguous language, [the court] will apply the plain and ordinary meaning of that language and enforce the contract according to [its] terms.” Haegert v. Univ. of Evansville, 977 N.E.2d 924, 937 (Ind. 2012). The court won't rewrite it. See id.
The court thus starts with the contractual provision (Section VI.H) today:
If the Bank believes there is a dispute over the control or ownership of the Account Assets or the Account, the Bank may without liability suspend or terminate any actions under this Agreement until such disputes are resolved to the Bank's satisfaction. The Bank may petition any court for instructions or other relief at the expense of the Account and the Owner, including the Bank's attorney's fees and expenses.
No one argues an ambiguity that would introduce extrinsic evidence or factual disputes. See Song, 76 N.E.3d at 933. Per this provision's plain language, it applies when BANA petitions a court for instructions believing that the control or ownership of an account or its assets is in dispute.
No one genuinely contests that BANA sought in its opening complaint instructions from the court about the trust's control or ownership. Instead, Mr. Cartwright argues that BANA doesn't have a contractual right to attorney fees because his claim today concerns something other than ownership or control of the trust account, so the general provision requiring each party to pay its attorney fees in Section XII should apply.[2] BANA counters that the litigation has been and remains a dispute over the control of the Cartwright Trust.
The court might well agree, since its dismissal of BANA's declaratory judgment action, that the bank's right to recover attorney fees has ceased under Section VI.H going forward-given it has no longer petitioned the court for instructions about account control-but today's prologue isn't history. Whether the litigation as framed today under Mr. Cartwright's claims falls under Section VI.H rather than Section XII, see Ryan v. Laws. Title Ins. Corp., 959 N.E.2d 870, 875 (Ind.Ct.App. 2011) (), an issue that the court need not now decide, BANA's original complaint sought the requisite instructions from the court under the Investment Services Agreement to seek attorney fees. That provides one plausible basis to permit this claim to proceed and, under the circumstances, prevents a piecemeal dismissal. See Bilek v. Fed. Ins. Co., 8 F.4th 581, 587 (7th Cir. 2021); BBL, Inc. v. City of Angola, 809 F.3d 317, 325 (7th Cir. 2015).
BANA may file a counterclaim that “arises out of the transaction or occurrence that is the subject matter of [Mr Cartwright's] claim,” Fed.R.Civ.P. 13(a)(1)(A), and no one has argued that the bank should have proceeded by way of motion rather than claim, see Fed.R.Civ.P. 54(d)(2)(A). The court dismissed BANA's complaint because it proved moot in one respect, unripe in another respect, but otherwise materially duplicative of Mr. Cartwright's coercive action-namely, a dispute about the control of the trust account and assets that remained live. Given the court's discretion under the Declaratory Judgment Act, see, e.g., 28 U.S.C. § 2201(a); Envision Healthcare, Inc. v. PreferredOne Ins. Co., 604 F.3d 983, 986 (7th Cir. 2010), the court favored the coercive action rather...
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