Dixon v. Northwestern National Bank of Minneapolis, 4-66 Civ. 65.

• Decision Date: 19 March 1969
• Docket Number: No. 4-66 Civ. 65.,4-66 Civ. 65.
• Citation: 297 F. Supp. 485
• Parties: Howard G. DIXON, Homer Denno, Albino Zanchettin, Fred R. Harris, Joseph F. Walker, Arthur W. Rankin, Lehman H. Mengel, Karl G. Strickler, Plaintiffs, v. NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS, Defendant and Third-Party Plaintiff, v. John B. DRAKE et al., Third-Party Defendants.
• Court: U.S. District Court — District of Minnesota

297 F. Supp. 485

Howard G. DIXON, Homer Denno, Albino Zanchettin, Fred R. Harris, Joseph F. Walker, Arthur W. Rankin, Lehman H. Mengel, Karl G. Strickler, Plaintiffs, v. NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS, Defendant and Third-Party Plaintiff, v. John B. DRAKE et al., Third-Party Defendants.

No. 4-66 Civ. 65.

United States District Court D. Minnesota, Fourth Division.

March 19, 1969.

Ronald D. Olson, Carlsen, Greiner & Law, Minneapolis, Minn., for plaintiffs.

Faegre & Benson, by Wright W. Brooks and George E. Harding, Minneapolis, Minn., for defendant and third-party plaintiff.

Dorsey, Marquart, Windhorst, West & Halladay, by Horace Hitch, Minneapolis, Minn., for defendants Drakes.

Rider, Bennett, Egan & Johnson, by Stuart W. Rider, Jr., Minneapolis, Minn., for D. P. Jesson, Venita O'Shaughnessy and E. R. Gallagher.

Henson & Webb, by Robert F. Henson, Minneapolis, Minn., for Bayard.

Robert L. Van Fossen, Minneapolis, Minn., for defendants Cuffel, Nordstrom, Bixby, Borden, Victorson & Burroughs.

NEVILLE, District Judge.

Presently before the court is defendant's pretrial motion to quash plaintiffs' demand for a jury trial in this action on the grounds that the issues raised herein are exclusively equitable in nature. The third-party defendants join in supporting defendant's motion.

The complaint in the action asserts that defendant bank, the trustee under an employees' profit sharing trust, improperly used the trust funds to buy and invest in worthless preferred stock of the allegedly insolvent employer, Johnson, Drake & Piper, Inc. Defendant bank has answered denying any wrongful action on its part. It claims further that any and all investments and distributions to the plaintiffs were done under the mandatory direction and authorization of a "Profit Sharing Committee" composed of some seven employees of the employer-trustor; that as trustee it had no discretion either in the investments or distributions; and that by the very terms of the trust instrument it was exculpated in advance. Members of the "Profit Sharing Committee" have been made third-party defendants on the bank's claim for indemnification.

Plaintiffs are past employees of the employer-trustor, Johnson, Drake & Piper, Inc., and participants in the company's "Employees' Profit Sharing Trust Agreement." On differing dates between December 30, 1963 and January 19, 1965, the various plaintiffs left the employ of Johnson, Drake & Piper, Inc. As beneficiaries of the trust on termination of employment each received certain cash and stock distributions, claimed to be pursuant to the terms of the trust instrument and directions from the profit sharing committee. The stock distributions consisted of shares of $100 par value, 4% preferred stock of the employer Johnson, Drake & Piper, Inc. Plaintiffs allege that the above stock as distributed is presently owned by them as its recipients. Plaintiffs contend that the defendant bank as trustee purchased the Johnson, Drake & Piper preferred stock knowing it was valueless or nearly so due to the insolvency of that corporation with an intent to benefit directly from such purchase through the use of the funds by the corporation to reduce its outstanding loans to defendant bank which it had previously made to the insolvent firm through its Commercial department. The subsequent proportional distributions of the stock allegedly were conducted with like bad faith, maliciously and in reckless indifference of the rights of the recipients. Plaintiffs demand judgment against the defendant in two lump sums of $45,800.00 compensatory and $250,000.00 punitive damages. No individual prayers for relief are set forth in the complaint.

In an earlier order, this court denied defendant's motion to dismiss the action as to seven of the eight plaintiffs on the grounds that these eight plaintiffs have a "common and joint" right or interest in this action and that since at least one of the plaintiff's claims exceeded the jurisdictional amount of this court and diversity exists aggregation of the damage claims to achieve the lump sum of $45,800.00 compensatory damages was permissible. See Dixon v. Northwestern Nat'l Bank of Mpls., 276 F.Supp. 96 (D. Minn.1967).

Defendant argues that an action brought by beneficiaries of a trust fund against the trustee for alleged breach of trust is historically and inherently an equitable action, and therefore one in which there is no right to a jury trial. Plaintiffs argue that they are entitled to a jury trial as this is merely an action for damages, general and punitive, arising out of certain acts of the defendant. Plaintiffs claim they are not seeking an injunction, accounting, reformation, cancellation, specific performance or any other form of equitable relief.

The Seventh Amendment and Rule 38(a) of the Federal Rules of Civil Procedure have not altered the distinction between equitable and legal remedies. Despite the merger of law and equity accomplished by the Federal Rules, the right to a jury trial still applies only to actions which historically could have been brought at law. See Ross v. Bernhard, 403 F.2d 909 (2nd Cir. 1968); Ettelson v. Metropolitan Life Ins. Co., 137 F.2d 62 (2nd Cir. 1943), cert. denied, 320 U.S. 777, 64 S.Ct. 92, 88 L.Ed. 467 (1943); and 5 Moore, Federal Practice ¶38.08 5 at 70 et seq. In addition, the issue of the right to a jury trial in federal diversity actions is to be determined as a matter of federal law. Simler v. Conner, 372 U.S. 221, 222, 83 S.Ct. 609, 9 L.Ed.2d 691 (1963).

In recent years the Supreme Court has emphasized that the right to trial by jury should be protected and has indicated that "the constitutional right to trial by jury cannot be made to depend upon the choice of words used in the pleadings." Dairy Queen, Inc. v. Wood, 369 U.S. 469, 477-478, 82 S.Ct. 894, 900, 8 L.Ed.2d 44 (1962). See also Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959). Moreover in order to obtain equitable relief it is necessary to show an inadequate remedy at law. Dairy Queen, Inc., supra at 478, 82 S.Ct. 894....