Fromm v. Duffy
| Decision Date | 09 January 2020 |
| Docket Number | Civ. No. 19-1124 (EGS),Civ. No. 19-1121 (EGS) |
| Parties | ALLISON FROMM as Qualified Beneficiary, et al., Plaintiffs, v. JAMES P. DUFFY, III as Trustee of the Gary Fromm Family Trust Defendant. |
| Court | U.S. District Court — District of Columbia |
Plaintiffs Allison Fromm, Elizabeth Fromm, and K.I.F., Ms. Allison Fromm's minor daughter, bring this lawsuit against James P. Duffy, III, Independent Trustee of the Allison Fromm Family Trust. Plaintiffs seek to remove Mr. Duffy as Independent Trustee pursuant to the Uniform Trust Code § 19-1301, et seq. ("UTC") which grants a court the authority to remove a trustee when, among other things, the trustee has committed a serious breach of trust. D.C. Code § 19-1307.06.
Pending before the Court are plaintiffs' motion to remand for lack of subject matter jurisdiction, or, in the alternative, to strike defendant's notice of removal and to remand back to the Superior Court of the District of Columbia; and defendant's motion to dismiss, or, in the alternative, to transfer venue to the Eastern District of New York. Upon consideration of the motions, the responses and replies thereto, the applicable law, and the entire record, the Court will GRANT IN PART plaintiffs' motion for remand, and DENY defendant's motion to dismiss or in the alternative to transfer venue.
Defendant James P. Duffy is the sole Independent Trustee of the Allison Fromm Family Trust ("Trust"). Compl., ECF No. 1-1 ¶ 11.1 Plaintiff Allison Fromm is the Individual Trustee of the Trust and has served in that capacity since March 22, 1985. Id. ¶ 8. Ms. Fromm, and her daughter K.I.F., are the lifetime discretionary beneficiaries of the Trust. Id. ¶ 7. The purpose of the Trust is to provide for the welfare of Ms. Fromm during her lifetime, future members of her family following her death, and to "provide a vehicle whereby all monies coming to [Ms. Fromm] by and through her family are, to the fullest extent practicable, preserved intact and transmitted to future generations of [Ms. Fromm's] family." Id. ¶ 12. The Trust assets are managed by BNY Mellon Wealth Management ("BNY"), which provides services such as investment, day-to-day management of the Trust's assets, and information management. Id. ¶ 13.
Mr. Duffy also provides "professional services" in connection to the Trust for which he charges fees in excess of $24,000 per year. Id. ¶ 14. These services include review and consideration of the Trust's month end statements from BNY, and review and consideration of various communications received from BNY. Id. In 2010, BNY advised Mr. Duffy that the Fromm family wanted him to resign because his fees were excessive. Id. ¶ 15. Mr. Duffy refused, citing among other reasons, the lack of a suitable replacement as Independent trustee. Id.
The Trust was drafted by Mr. Duffy in the mid-1980's, who, at the time, was a licensed attorney admitted to practice law in New York State. Id. ¶ 6. For reasons unrelated to the pending motions, Mr. Duffy was disbarred from the practice of law in April of 2014. Id. ¶ 16. In May and June 2014, BNY and the Fromm family resumed discussions related to appointing a different Independent Trustee. Id. ¶ 17. Four years later, in the last quarter of 2018, BNY discovered that Mr. Duffy was disbarred. Id. ¶ 20. In a letter dated January 16, 2019, BNY informed Mr. Duffy that its policies required him to either resign as Independent Trustee or remove the Trust account from BNY's management. Id. On that same date, plaintiffs, through their attorney Mr. Peter D. Randolph, wrote to Mr. Duffy requesting that he resign as Independent Trustee and that he appoint Mr. Randolph as his successor. Id. ¶ 24. Approximately three weekslater, plaintiffs' attorney emailed Mr. Duffy and again requested his resignation and the appointment of Mr. Randolph. Id. ¶ 26. Mr. Duffy did not respond to the two January 16 letters or to the February 8 email, nor did he communicate to Ms. Fromm or her attorneys since receipt of the January 16 letters. Id. ¶¶ 21, 25-26.
Unable to come to a resolution with Mr. Duffy, plaintiffs filed suit in the Superior Court of the District of Columbia, Probate Division on March 12, 2019. See Not. Of Removal, ECF No. 1 ¶ 1. Seeking to remove Mr. Duffy as Independent Trustee, plaintiffs brought suit under the Uniform Trust Code which provides a Court with the authority to remove a trustee where (1) "[t]he trustee has committed a serious breach of trust;" (2) "[l]ack of cooperation among cotrustees substantially impairs the administration of the trust;" (3) "[b]ecause of unfitness . . . the court determines that removal of the trustee best serves the interests of the beneficiaries;" or (4) "removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable co-trustee or successor trustee is available." District of Columbia Code § 19-1307.06(b).
Mr. Duffy, appearing pro se, removed the Superior Court action to this Court. See Not. of Removal, ECF No. 1 ¶ 1. Hisalleged basis for removal was 28 U.S.C. § 1332(a) which provides a federal court with jurisdiction when the parties are from different states and the amount in controversy exceeds $75,000. Id. ¶ 3. Soon after removing the case, Mr. Duffy filed a motion to dismiss, or in the alternative, transfer venue. Def.'s Mot., ECF No. 5. Plaintiffs have opposed Mr. Duffy's motion and have also filed a motion to remand for lack of subject matter jurisdiction, or, in the alternative, motion to strike the notice of removal. Pls.' Mots., ECF Nos. 4, 6. Both parties' motions are opposed and ripe for disposition.
A case filed in state court may be removed to a federal court if the case could have originally been brought there. 28 U.S.C. § 1441(a). The subject matter jurisdiction of federal district courts is limited and is set forth generally at 28 U.S.C. §§ 1331 and 1332. Absent a federal question, diversity jurisdiction is required to establish that the case could have originally been filed in federal court. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). A federal court has diversity jurisdiction when: (1) there is complete diversity of citizenship among the parties--meaning no plaintiff is a citizen of the same state as any defendant; and (2) the "amount in controversy" is greater than $75,000. See 28 U.S.C. § 1332(a).
"The party opposing a motion to remand bears the burden of establishing that subject matter jurisdiction exists in federal court." Int'l Union of Bricklayers & Allied Craftworkers v. Ins. Co. of the W., 366 F. Supp. 2d 33, 36 (D.D.C. 2005)(citations omitted). Because the removal statue is to be strictly construed, any ambiguities "concerning the propriety of removal" shall be construed in favor of remand. Cefarrati v. JBG Properties, Inc., 75 F. Supp. 3d 58, 63 (D.D.C. 2014).
Plaintiffs move to remand this case for lack of subject matter jurisdiction, arguing that Mr. Duffy fails to meet the requirements of 28 U.S.C. § 1332. Specifically, plaintiffs argue that the amount in controversy in this case does not exceed $75,000 as required under the statute. Pls.' Mot., ECF No. 4 at 6.2 A court typically may dismiss a case for lack of jurisdiction based on an insufficient amount in controversy only if it "appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount." Bronner v. Duggan, 249 F. Supp. 3d 27, 37 (D.D.C. 2017)(citation omitted). However, when a case has been removed to federal court, the Court must resolveany ambiguities as to whether the jurisdictional requirement is met in favor of remand. Cefarrati, 75 F. Supp. 3d at 63.
Plaintiffs seek to remove Mr. Duffy as trustee pursuant to D.C. Code § 19-1301, and therefore this case concerns injunctive relief. The value of injunctive relief for determining the amount in controversy can be calculated as either the benefit to the plaintiff "or the cost to the defendant." Wexler v. United Air Lines, Inc., 496 F. Supp. 2d 150, 154 (D.D.C. 2007)(citing Comm. For GI Rights v. Callaway, 518 F.2d 466, 472-73 (D.C. Cir. 1975)("the amount in controversy may be measured either by the 'value of the right sought to be gained by the plaintiff or the cost of enforcing that right to the defendant.")).
Plaintiffs point out that the basis for the jurisdictional amount in the Notice of Removal is Mr. Duffy's statement that "the assets of the Allision Fromm Family Trust are substantially in excess of [$75,000]." Pls.' Mot., ECF No. 4 at 6. Plaintiffs argue that because the amount of the Trust is not at issue in this case, the Trust amount is not an appropriate measure for determining the amount in controversy. Id. Mr. Duffy's response is not entirely clear, but he points to the fact that Ms. Fromm in her Complaint stated that she feared that Mr. Duffy would leave the country with the assets in the Trust. Def.'s Opp'n, ECF No. 8 at 2 (citing Compl., ECF No. 1-1 ¶ 41.). Because of this allegation, Mr. Duffy argues, plaintiffs have"acknowledge[d] there is substantially more than $75,000 at issue" in this case. Id. Mr. Duffy also points to the $24,000 per annum commission he receives for his services vis-à-vis the Trust, which he stands to lose should plaintiffs' claims be resolved against him, as an alternative reason for why this suit clears the $75,000 hurdle. Id. at 2-3.
The Court agrees with plaintiffs that the amount in the Trust is not an adequate measure for the jurisdictional amount. An entitlement to the amount in the Trust is not disputed in this case, rather this case concerns solely Mr. Duffy's legal title as Independent Trustee. In other words, "[since] the equitable ownership of trust property is not at issue . . . plaintiffs' injunctive request does not...
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