Estate of Jorg v. Eiteljorg

• Decision Date: 27 September 2011
• Docket Number: No. 1:09–cv–0726–SEB–DML.,1:09–cv–0726–SEB–DML.
• Citation: 813 F.Supp.2d 1069
• Parties: ESTATE OF Sonja EITELJORG by Roger EITELJORG, as Personal Representative, Plaintiff, v. Harrison EITELJORG II and Jack M. Eiteljorg, Defendants.
• Court: U.S. District Court — Southern District of Indiana

813 F.Supp.2d 1069

ESTATE OF Sonja EITELJORG by Roger EITELJORG, as Personal Representative, Plaintiff,

v.Harrison EITELJORG II and Jack M. Eiteljorg, Defendants.

No. 1:09–cv–0726–SEB–DML.

United States District Court, S.D. Indiana, Indianapolis Division.

Sept. 27, 2011.

Richard A. Smikle, Ice Miller LLP, Indianapolis, IN, for Plaintiff.

Joseph M. Hendel, Mark S. Alderfer, Vicki L. Anderson, Hackman Hulett & Cracraft LLP, Indianapolis, IN, for Defendants.

ORDER DENYING IN PART AND GRANTING IN PART DEFENDANTS' AMENDED MOTION TO DISMISS

SARAH EVANS BARKER, District Judge.

This cause is before the Court on Defendants' Amended Motion to Dismiss Plaintiff's Complaint [Docket No. 42], filed on September 20, 2010, pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 12(b)(7). On June 12, 2009, Plaintiff, the Estate of Sonja Eiteljorg by Roger Eiteljorg, as personal representative (“the Estate”), filed suit against Defendants, Harrison Eiteljorg II and Jack M. Eiteljorg (“the Eiteljorgs”), for breach of contract. The Eiteljorgs have moved to dismiss the Estate's complaint for lack of subject matter jurisdiction, failure to state a claim upon which relief can be granted, and failure to join a necessary party; the Estate opposes this motion. For the reasons detailed below, we DENY Defendants' Amended Motion to Dismiss on Rules 12(b)(1) and 12(b)(7) grounds, and we GRANT the motion WITHOUT PREJUDICE on Rule 12(b)(6) grounds.

Factual Background

Sonja Eiteljorg (“Sonja” ¹), the widow and second wife of Harrison Eiteljorg (“Harrison”), was a citizen of the State of Florida at the time of her death on July 1, 2003. Compl. ¶ 1. The legal representative of her Estate is Roger Eiteljorg (“Roger”), Harrison's stepson and Sonja's biological son. Compl. Ex. D ¶ 3. Because the federal diversity statute treats the legal representative of an estate as a citizen of the same state as the decedent, the Estate is deemed a citizen of the State of Florida. 28 U.S.C. § 1332(c)(2); Gustafson v. zumBrunnen, 546 F.3d 398, 399 (7th Cir.2008). Harrison Eiteljorg II (“Nick”) and Jack M. Eiteljorg (“Jack”) are the biological sons of Harrison Eiteljorg and his first wife. Compl. Ex. D ¶ 2. Nick is a citizen of the Commonwealth of Pennsylvania; Jack is a citizen of the State of Texas. Compl. ¶¶ 2–3.

On September 29, 1994, Harrison established the Harrison Eiteljorg Revocable Trust–JN (the “JN Trust”); he amended the trust on July 28, 1995 and served as its sole trustee until his death in 1997. Compl. ¶ 7; Compl. Ex. A. The JN Trust became a qualified terminable interest property trust upon Harrison's death, with Sonja as its lifetime income beneficiary and Nick and Jack as remaindermen. Id. ¶ 8. Sonja, Nick, Jack, Roger, and John Lienhart (“Lienhart”) were named as successor co-trustees. Id. ¶ 9. Harmony was short-lived among the co-trustees, though, as they subsequently found themselves mired in major disagreements about the proper allocation of trust assets. Id. ¶ 11. To that end, Sonja, Nick, and Jack entered into a settlement agreement setting forth a mutually agreeable allocation plan on December 18, 2001 (the “Settlement Agreement”). Id. ¶ 12; Compl. Ex. B.

Of particular importance to the parties in this case is the provision of their Settlement Agreement that contemplated a mutual release. Paragraph J states, in relevant part:

As of ... (the “Key Date” ²) ... each of the Parties to this Agreement hereby releases and forever discharges each of the other Parties to this Agreement, their agents, representatives, successors, servants, employees, insurers and assigns, from any and all claims, demands, rights, and causes of action of any kind which such releasing Party now has, whether known or unknown, or hereafter may have, against any of the other Parties (whether such other Party was acting in a personal or a fiduciary capacity) relating to actions or omissions occurring on or before the Key Date relating to the administration and/or operation of the Estate, the administration and/or operation of the JN Trust, or any conduct of any type by Sonja, Nick or Jack, in his or her individual capacity, in his or her capacity as a Co–Trustee of the JN Trust, in his or her capacity as a Co–Personal Representative of the Estate, or in any other capacity.

Compl. Ex. B at 3–4.

Immediately following the mutual release clause is Paragraph K, which is captioned “Litigation.” This provision directs the transfer of money, art, or a combination of both to Sonja in the event of the following:

[i]f Nick or Jack or any of their beneficiaries in their individual capacities brings, or ... as a Co–Trustee ... or if Nick in his capacity as Co–Personal Representative of the Estate votes in favor of bringing suit against any of i) Sonja individually, in her capacity as a Co–Trustee ... or in her capacity as a former Co–Personal Representative of the Estate; ii) the Estate or any Co–Personal Representative of the Estate; iii) the JN Trust or any Co–Trustee of the JN Trust; or iv) any descendant or heir of Sonja, which suit relates to the Estate or the actions of Sonja, the Co–Personal Representatives of the Estate or the Co–Trustees of the JN Trust prior to the Key Date....

Compl. Ex. B. at 4.

On January 6, 2005, the Eiteljorgs filed their Verified Petition for Trust Distribution and to Substitute Corporate Trustee in the probate division of the Marion Superior Court. Compl. Ex. C. at 1. They asserted various breaches of fiduciary duty by co-trustees Roger and Lienhart, requested a new independent corporate trustee, and entreated the court to “order ... [Roger and Lienhart] to pay their own attorneys' fees and ... [to forgo] any Trustee fees from the Trust for the final quarter of 2004.” Id. at 2–3. In its June 12, 2007 order, the probate court found that Roger and Lienhart breached only the fiduciary duty to administer the JN Trust according to its terms. Compl. Ex. D. at 27. The court held an evidentiary hearing to determine monetary damages on March 26, 2008 and April 8, 2008. Def.'s Br. Ex. A at 3. Because the presiding judge died before a final ruling could be issued, the final order on damages was not entered until April 12, 2010. Id. The court ultimately awarded $156,701.42 as compensatory damages to Nick, $112,046.77 as compensatory damages to Jack, and $353,612.81 as attorneys' fees to Nick and Jack together. Id. at 31, 32.

Roger and Lienhart appealed the probate court's order. In their May 20, 2010 appellants' case summary, they framed the issue as “[w]hether the trial court properly determined that Roger Eiteljorg and John Lienhart committed a breach of trust and are liable for damages and attorneys['] fees.” Def.'s Br. Ex. B at 6. The Indiana Court of Appeals handed down its decision on June 27, 2011 affirming the probate court's judgment that Roger and Lienhart are liable for breach of their duty to administer the JN Trust according to its terms. In re Eiteljorg, 951 N.E.2d 565, 570 (Ind.Ct.App.2011). However, the appellate court reversed the probate court's calculation of attorneys' fees and found that $150,000 was the more appropriate amount. Id. at 573. The appellate court also remanded the action for a determination of compensatory damages to reflect that “Nick and Jack were ... deprived of $1.2 million for nine months.” Id.

On June 12, 2009, the Estate filed its Complaint against the Eiteljorgs in this court asserting a breach of contract against the Eiteljorgs and requesting damages as detailed in the Settlement Agreement as well as an award of pre-judgment interest, fees, and costs.

Legal Analysis

I. Standards of Review

The Estate has filed its motion to dismiss pursuant to Rules 12(b)(1), 12(b)(6), and 12(b)(7) of the Federal Rules of Civil Procedure. Rule 12(b)(1) requires dismissal if the court lacks subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). Rule 12(b)(6) directs dismissal if the plaintiff's complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Rule 12(b)(7) allows dismissal for failure to join a party under Federal Rule of Civil Procedure 19. Fed.R.Civ.P. 12(b)(7). Under Rule 19, an entity is a required party to an action if the court could not accord complete relief in that entity's absence. Fed.R.Civ.P. 19(a)(1)(A). Alternatively, an entity must be joined under Rule 19 if it claims an interest related to the subject matter of the action and “is so situated that disposing of the action in the person's absence may ... impair or impede the person's ability to protect the interest; or leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations.” Fed.R.Civ.P. 19(a)(1)(B).

In each of these procedural contexts, the court accepts all well-pleaded allegations from the complaint as true and draws all reasonable inferences in the plaintiff's favor. See Moranski v. Gen. Motors Corp., 433 F.3d 537, 539 (7th Cir.2005) (Rule 12(b)(6) standard); Franzoni v. Hartmarx Corp., 300 F.3d 767, 771 (7th Cir.2002) (Rule 12(b)(1) standard); Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 479 n. 2 (7th Cir.2001) ( Rule 12(b)(7) standard). When considering a motion to dismiss under Rule 12(b)(1), the district court “may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.” Capitol Leasing Co. v. F.D.I.C., 999 F.2d 188, 191 (7th Cir.1993). The court may also examine extrinsic evidence when ruling on a motion to dismiss under Rule 12(b)(7). Id.; see also Davis Cos., 268 F.3d at 480 n. 4.

By comparison, a party seeking dismissal under Rule 12(b)(6) bears a greater burden. Courts follow the fairly liberal “notice pleading” standard in considering complaints under Rule 12(b)(6), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P....