Burgess v. Johnson, 19-CV-00232-GKF-JFJ

• Decision Date: 05 August 2021
• Docket Number: 19-CV-00232-GKF-JFJ
• Parties: VICTORIA ANN BURGESS; ELIZABETH F. JOHNSON; CLARK WALKER JOHNSON; and MAYNARD GARDNER MOODY, as Personal Representative of the Estate of PATRICIA JOHNSON PERRY, deceased, Plaintiffs, v. HOWARD MITCHELL JOHNSON, Defendant.
• Court: U.S. District Court — Northern District of Oklahoma

VICTORIA ANN BURGESS; ELIZABETH F. JOHNSON; CLARK WALKER JOHNSON; and MAYNARD GARDNER MOODY, as Personal Representative of the Estate of PATRICIA JOHNSON PERRY, deceased, Plaintiffs, v. HOWARD MITCHELL JOHNSON, Defendant.

No. 19-CV-00232-GKF-JFJ

United States District Court, N.D. Oklahoma

August 5, 2021

OPINION AND ORDER

GREGORY K. FRIZZELL UNITED STATES DISTRICT JUDGE

This matter comes before the court on the Motion to Require Joinder of All Trust Beneficiaries or Alternatively to Dismiss [Doc. 85] of defendant Howard Mitchell Johnson. For the reasons set forth below, the motion is granted. Because joinder is not feasible and the case cannot proceed in equity and good conscience among the existing parties, this matter is dismissed without prejudice.

Background/Procedural History

This case arises from a dispute concerning the administration of an irrevocable trust. In 1974, Erma Ossip Johnson, M.D. (E.O Johnson) created the E. Ossip Johnson, M.D. Trust, which was subsequently amended and restated into its final iteration in 1990 (Trust). E.O. Johnson and his wife, Machiko O. Johnson were the initial co-trustees of the Trust. The Trust provided for two contingent trusts, designated as “Trust A” and “Trust B.” Machiko Johnson was the sole beneficiary to “Trust A.” “Trust B” had ten (10) beneficiaries: defendant Howard Mitchell Johnson, who is E.O. Johnson's adopted son (H M. Johnson); plaintiffs Victoria Ann Burgess, Elizabeth F. Johnson, Clark Walker Johnson, and Patricia Johnson Perry^[1]; and non-parties Mark Everett Johnson, Tyler Wise Johnson, Junko Amano, Harriet Hunt, and Constance Ray Johnson.

Following E.O. Johnson's death in 1996, H. M. Johnson was appointed as E.O. Johnson's successor trustee and co-trustee with Machiko Johnson. In 2018, Machiko Johnson died, rendering H. M. Johnson the Trust's sole trustee.

On May 2, 2019, plaintiffs initiated this litigation as beneficiaries under the Trust by filing the original Complaint. Therein, plaintiffs alleged that, prior to Machiko Johnson's death, she and H. M. Johnson breached their fiduciary duties to the beneficiaries of the Trust by, among other acts, secreting from the beneficiaries the Trust securities, moneys, property, and property rights; wrongfully withdrawing moneys from Trust accounts; expending Trust moneys for their personal benefit; and acquiring, directly or indirectly, in their names, property and property rights with the Trust moneys and transferring the monies to limited liability companies, which they organized and used as vehicles for defrauding the Trust beneficiaries. See generally [Doc. 2].

In response to the Complaint, H.M. Johnson filed a motion to compel arbitration pursuant to § 2 of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq. [Doc. 13]. The court denied the motion [Doc. 28], and Johnson appealed the decision to U.S. Court of Appeals for the Tenth Circuit. [Doc. 30]. The Tenth Circuit affirmed on November 4, 2020. [Doc. 46].

On February 3, 2021, plaintiffs filed the First Amended Complaint, the operative pleading.^[2][Doc. 69]. The Amended Complaint includes the following causes of action: (1) statutory breach of fiduciary duties, Okla. Stat. tit. 60, § 175.57; (2) breach of common law fiduciary duties; (3) common law conversion; (4) embezzlement, Okla. Stat. tit. 21, § 1451; (5) civil theft, Colo. Rev. Stat. § 18-4-405; (6) constructive trust; (7) violation of Colorado Uniform Fraudulent Transfer Act, Colo. Rev. Stat. § 38-8-101, et seq.; (8) violation of Oklahoma Uniform Fraudulent Transfer Act, Okla. Stat. tit. 24, § 112, et seq.; (9) common law fraud; (10) fraud by nondisclosure; (11) accounting, Okla. Stat. tit. 60, § 175.57; and (12) restitution and unjust enrichment. Plaintiffs seek damages, including actual, consequential, exemplary, and treble damages; declaratory relief for constructive trust; and remedies for breach of trust pursuant to Okla. Stat. tit. 60, § 175.57. [Doc. 69, p. 23]. Five of the ten beneficiaries to “Trust B” are not parties to the suit.^[3] [Doc. 69, p. 4, ¶ 18].

On March 11, 2021, defendant H.M. Johnson filed the Motion to Require Joinder of All Trust Beneficiaries or Alternatively to Dismiss [Doc. 85], seeking to join the five absentee beneficiaries or, in the alternative, dismissal. Plaintiffs responded in opposition [Doc. 87; Doc. 88], and defendant filed a reply [Doc. 89].

In a June 4, 2021 Opinion and Order, this court concluded that the absentee beneficiaries were required to be joined under Fed.R.Civ.P. 19(a). [Doc. 90, p. 7]. However, insufficient information had been provided for the court to determine the feasibility of joining the absentee beneficiaries. Accordingly, the court directed the parties to submit supplemental evidence and argument. [Id. at pp. 8-9].

On June 17, 2021, H.M. Johnson submitted a Brief and Evidence in Response to Court Opinion and Order, which included the Affidavit of Constance Ray Johnson. [Doc. 91]. On July 1, 2021, plaintiffs submit a Brief and Evidence In Response to Court Opinion and Order, which included the Affidavit and Declaration of Tyler Wise Johnson, II; the Affidavit and Declaration of Harriet Ann Burk; a checking summary for Chase Bank account no. XXXXXXXXXXX9556; the Articles of Organization of HMJMOJ L.L.C.; a Deed of Trust, dated October 13, 2016, for Lot 23, Abeyta Creek Acres, Huerfano County, Colorado; the Affidavit of Mark E. B. Johnson, M.D.; and the Affidavit of Dale Ossip Johnson. [Doc. 92]. Accordingly, the court now considers H.M. Johnson's motion in light of the additional materials.

Standard

Federal Rule of Civil Procedure 12(b)(7) provides for dismissal of an action for “failure to join a party under Rule 19.” The Tenth Circuit has recognized that “Rule 19 provides a three-step process for determining whether an action should be dismissed for failure to join a purportedly indispensable party.” Citizen Potawatomi Nation v. Norton, 248 F.3d 993, 997 (10th Cir. 2001). The moving party bears the burden at each step. See Davis v. United States, 192 F.3d 951, 958 (10th Cir. 1999). “The proponent's burden can be satisfied by providing affidavits of persons having knowledge of these interests as well as other relevant extra-pleading evidence.” Citizen Band of Potawatomi Indian Tribe of Okla. v. Collier, 17 F.3d 1292, 1293 (10th Cir. 1994) (internal quotations omitted).

First, “the court must find that a prospective party is ‘required to be joined' under Rule 19(a).” N. Arapaho Tribe v. Harnsberger, 697 F.3d 1272, 1278 (10th Cir. 2012). Rule 19(a) states:

(a) Persons Required to Be Joined if Feasible

(1) Required Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if:

(A) in that person's absence, the court cannot accord complete relief among existing parties; or

(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may:

(i) as a practical matter impair or impede the person's ability to protect the interest; or

(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Fed. R. Civ. P. 19(a).

Second, if the absent person or entity was required to be joined, “the court must then determine whether joinder is ‘feasible.'” Norton, 248 F.3d at 997. “If joinder is feasible, the court must order it; the court has no discretion at this point because of the mandatory language of the rule.” 7 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1611 (3d ed. Apr. 2021 update) (internal footnote omitted).

Third and finally, if the required person or entity cannot be feasibly joined, “the court must determine, under Rule 19(b), whether the required-but-not-feasibly-joined party is so important to the action that the action cannot ‘in equity and good conscience' proceed in that person's absence.” Harnsberger, 697 F.3d at 1278-79. The factors for the court to consider include:

(1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties;

(2) the extent to which any prejudice could be lessened or avoided by:

(A) protective provisions in the judgment;

(B) shaping the relief; or

(C) other measures;

(3) whether a judgment rendered in the person's absence would be adequate; and

(4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.

Fed. R. Civ. P. 19(b). If the action cannot “in equity and good conscience” proceed without the absent person or entity, the action “should be dismissed.” Id. “Because Rule 19(b) does not state the weight to be given each factor, the district court in its discretion must determine the importance of each in the context of the particular case.” Thunder Basin Coal Co. v. Sw. Pub. Serv. Co., 104 F.3d 1205, 1211 (10th Cir. 1997).

Analysis

As stated above, the court previously concluded that the absentee beneficiaries were required to be joined under Rule 19(a). [Doc. 90, p. 7]. The court directed the parties to submit additional evidence and argument only as to Constance Ray Johnson's citizenship and the proper procedure for joinder and/or alignment of the parties. [Id. at p. 9]. Nevertheless, plaintiffs direct three of the eight substantive pages in their brief to argument that the absentee beneficiaries are not necessary parties. See generally [Doc. 92, pp. 3-6]. Despite having already discussed the matter at length and determined the issue, the court will nevertheless briefly discuss the arguments raised by plaintiffs in their recent brief as to whether the absentee beneficiaries are necessary parties.

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