Father Flanagan's Boys Home v. Donlon, Case No. 1:18-cv-644

• Court: U.S. District Court — Southern District of Ohio
• Writing for the Court: Timothy S. Black, United States District Judge
• Citation: Father Flanagan's Boys Home v. Donlon, 449 F.Supp.3d 739 (S.D. Ohio 2020)
• Decision Date: 26 March 2020
• Docket Number: Case No. 1:18-cv-644
• Parties: FATHER FLANAGAN'S BOYS HOME, Plaintiff, v. Pamela A. DONLON, Defendant.

449 F.Supp.3d 739

FATHER FLANAGAN'S BOYS HOME, Plaintiff,

v.Pamela A. DONLON, Defendant.

Case No. 1:18-cv-644

United States District Court, S.D. Ohio, Western Division.

Signed March 26, 2020

Donald John Rafferty, Cohen Todd Kite & Stanford, Cincinnati, OH, Mark H. Harris, Pro Hac Vice, Law Office of Mark H. Harris, Sacramento, CA, for Plaintiff.

Pamela A. Donlon, Mason, OH, pro se.

ORDER DENYING DEFENDANT'S MOTION TO DISMISS

Timothy S. Black, United States District Judge

This civil case is before the Court on Defendant Pamela A. Donlon's motion to dismiss (Doc. 13) and the parties' responsive memoranda (Docs. 15, 18).

I. BACKGROUND

For purposes of Defendant's motions to dismiss, the Court must: (1) view the complaint in the light most favorable to Plaintiff, and (2) take all well-pleaded factual allegations as true. Bickerstaff v. Lucarelli , 830 F.3d 388, 396 (6th Cir. 2016).

Plaintiff Father Flanagan's Boys' Home, also known as Boys Town ("Boys Town"), is a non-profit organized and located in Nebraska. (Doc. 1 at ¶ 1). On September 1, 1998, Irene M. Donlon, now deceased, founded the Irene Marie Donlon 8% Charitable Remainder Unitrust ("the Donlon Trust"). (Id. at ¶ 5). Irene Donlon served as the trustee, until her death, on May 30, 2003, at which time her daughter, Defendant Pamela A. Donlon, became the sole successor trustee. (Id. at ¶¶ 5-6). Pursuant to the Donlon Trust, Irene Donlon would take a small annual percentage, with the entire remainder going to Boys Town as the charitable beneficiary upon her death. (Id. at ¶ 5). However, as of the date of the complaint, Pamela Donlon had not conveyed the remainder of approximately $189,000.00 to Boys Town. (Id. at ¶¶ 7, 8). Plaintiff alleges that Pamela Donlon has instead transferred the money to her personal bank account. (Id. ¶ 8).

In January 2018, Boys Town was first informed of the existence of the Donlon Trust by Charles Lineback, the attorney who formed the Trust for Irene Donlon. (Id. ¶ 9; Doc. 13 at 9; Doc. 15 at 1). Attorney Lineback is the former spouse of Defendant Pamela Donlon—they are now divorced. (Doc. 13 at 9, 12).

Based on these facts, Boys Town alleges that Defendant breached the express terms of the Trust (Count 1), engaged in fraudulent concealment by concealing material facts in order to prevent Plaintiff from discovering its interest in the Trust (Count 2), breached her fiduciary duty to failing to inform Plaintiff of the Trust or to convey the remainder (Count 3), and converted Plaintiff's property as her own by depositing the funds in her personal bank account (Count 4). (Doc. 1 at ¶¶ 15-40). Defendant has filed counterclaims against Boys Town for intentional infliction of emotional distress and abuse of process. (Doc. 14).

Defendant, proceeding pro se , filed the instant motion to dismiss asserting that the statute of limitations has run on Plaintiff's breach of fiduciary duty and related claims. (Doc. 13 at 4-13). Defendant alternatively argues that Plaintiff's claims are barred by application of the equitable theories of laches and/or unclean hands. (Id. at 13-21).

II. STANDARD OF REVIEW

At the motion to dismiss stage, a court can dismiss a claim if "the allegations in the complaint affirmatively show that the claim is time-barred." G.G. Marck & Assocs. v. Peng , 762 F. App'x 303, 307 (6th Cir. 2019) (quoting Cataldo v. U.S. Steel Corp. , 676 F.3d 542, 547 (6th Cir. 2012) ). A motion to dismiss based on the statute of limitations, "can be granted only where the defense appears valid from the face of the Complaint alone." Navarro v. The Procter and Gamble Co. , No. 1:17-cv-406, 2019 WL 162638, at *3 (S.D. Ohio Jan. 10, 2019) (quoting Williams v. Dayton Police Dep't , 680 F. Supp. 1075, 1077 (S.D. Ohio 1987) ). "When the allegations show that relief is barred by the applicable statute of limitations, dismissal is proper under Fed. R. Civ. P. 12(b)(6) for failure to state a claim." G.G. Marck & Assocs. , 762 F. App'x at 307.

When assessing a motion to dismiss under Rule 12(b)(6), the court "construes the complaint in the light most favorable to the plaintiff, accepts the plaintiff's factual allegations as true, and determines whether the complaint ‘contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’ " Heinrich v. Waiting Angels Adoption Servs. , 668 F.3d 393, 403 (6th Cir. 2012) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). A claim is plausible where a "plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Plausibility "is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief,’ " and the case shall be dismissed. Id. (citing Fed. R. Civ. P. 8(a)(2) ).

III. CHOICE OF LAW

A threshold question is which state's law applies in this case. Boys Town filed the complaint in federal court on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332, as Boys Town is organized and does business in Nebraska and Pamela Donlon is a resident of Ohio. (Doc. 1 at ¶¶ 1-2). In addition, the lawsuit concerns Plaintiff's entitlement to the remainder of the Donlon Trust, consisting of an estimated $189,000; exceeding the $75,000 jurisdictional threshold. (Id. at ¶ 8).

A federal court sitting in diversity must apply the choice-of-law rules of the forum state—in this case Ohio. Stone Surgical, LLC v. Stryker Corp. , 858 F.3d 383 (6th Cir. 2017) (citing Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ). Both parties assume that Ohio law governs Plaintiff's claims. The complaint alleges that the Trust was formed in Ohio, where Defendant resides. Based on this information and the parties' application of Ohio law, the Court concludes that the parties are correct in applying Ohio law. See Asp v. Toshiba Am. Consumer Prods., LLC , 616 F. Supp.2d 721, 726 (S.D. Ohio 2008) ("When parties acquiesce to the application of a particular state's law, courts need not address choice of law questions.").

IV. ANALYSIS

A. Plaintiff's breach of fiduciary duty claim is not time-barred

Defendant has moved to dismiss Plaintiff's breach of fiduciary duty "and related claims" as time-barred. Defendant specifically argues that the four-year statute of limitations for breach of fiduciary duty claims under Ohio Revised Code ("R.C.") § 2305.09 accrued at the time of Irene Donlon's death on May 30, 2003, expiring May 31, 2007. (Doc. 13 at 5). In response, Plaintiff argues that the statute of limitations has not run, since Plaintiff did not discover the Donlon Trust or become aware of Defendant's failure to convey the remainder until January 2018. (Doc. 15 at 3).

Under R.C. § 2305.09, the statute of limitations for breach of fiduciary duty claims is four years. Caghan v. Caghan , Ohio App., No. 2014 CA 00095, 2015 WL 2194199, at *6 (Ohio Ct. App. May 11, 2015). Ohio courts have held that the "discovery rule"—meaning the statute of limitations is tolled until the misconduct is discovered with reasonable diligence—does not apply to breach of fiduciary duty claims. Id. (collecting cases). However, the Supreme Court of Ohio has extended the discovery rule to claims for breach of fiduciary duty that are "based on fraud." Meehan v. Mardis , No. C-180406, 146 N.E.3d 1266, 1274-75 (Ohio Ct. App. Oct. 4, 2019) (citing Cundall v. U.S. Bank , 122 Ohio St.3d 188, 909 N.E.2d 1244, 1249 (2009) ); Cohen v. Dulay , 94 N.E.3d 1167, 1173-74 (Ohio Ct. App. 2017) (analyzing whether breach of fiduciary duty claim was based on fraud for purposes of the discovery rule); see also Antioch Co. Litig. Trust v. Morgan , 644 F. App'x 579, 582 (6th Cir. 2016) ("[C]laims ‘for fraud and breach of fiduciary duty based on fraud’ are governed by § 2305.09(D)'s four-year statute of limitations ‘unless the claim is not discovered despite reasonable diligence.’ ") (quoting Cundall , 909 N.E.2d at 1249 ).

Thus, the Court must assess whether Plaintiff has sufficiently alleged that its breach of fiduciary duty claim is "based on fraud." The elements of a fraud claim under Ohio law are as follows:

(a) a representation or, where there is a duty to disclose, concealment of a fact, (b) which is material to the transaction at hand, (c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, (d) with the intent of misleading another into relying upon it, (e) justifiable reliance upon the representation or concealment, and (f) a resulting injury proximately caused by the reliance.

Meehan , at 1271-72 (quoting Cohen v. Lamko, Inc. , 10 Ohio St.3d 167, 462 N.E.2d 407, 409 (1984) ). Further, pursuant to the heightened pleading requirement of Federal Rule of Civil Procedure Rule 9(b), a party must allege the circumstances constituting fraud, including "the time, place, and content of the alleged misrepresentation on which he or she relied." United States ex rel. Bledsoe v. Cmty. Health Sys. , 501 F.3d 493, 509 (6th Cir. 2007) ; Coffey v. Foamex L.P. , 2 F.3d 157, 161-62 (6th Cir. 1993).

The complaint alleges that "Defendant concealed material facts, in order to prevent Plaintiff from discovering Plaintiff's interest in the Donlon [Trust], and to prevent Plaintiff from receiving those remaining Funds as expressly called for in the Donlon [Trust]." (Doc. 1 at ¶ 26). Plaintiff further alleges that Pamela Donlon had a duty to disclose the existence of the Trust, that she "fraudulently and knowingly" failed to do so, and that because of this concealment, Plaintiff had no way of knowing about its...