Goldberg v. Quattrocchi

• Decision Date: 27 May 2010
• Docket Number: Case No. 08-CV-9514 (KMK).
• Citation: 715 F.Supp.2d 524
• Parties: Katheryn Benenson MARCUS and Sarah Benenson Goldberg, Plaintiffs, v. Lisa QUATTROCCHI, Amy Aronson, Clifford Aronson, George Siegel, and Albert Flieschman, Individually and as Trustees of The Nettie-Edward H. Benenson Family Trust, Defendants.
• Court: U.S. District Court — Southern District of New York

715 F.Supp.2d 524

Katheryn Benenson MARCUS and Sarah Benenson Goldberg, Plaintiffs,

v.Lisa QUATTROCCHI, Amy Aronson, Clifford Aronson, George Siegel, and Albert Flieschman, Individually and as Trustees of The Nettie-Edward H. Benenson Family Trust, Defendants.

Case No. 08-CV-9514 (KMK).

United States District Court,S.D. New York.

May 27, 2010.

Michael Fuller Sirignano, Esq., Law Office Michael F. Sirignano, Cross River, NY, for Plaintiffs.

Arlene Harris, Esq., Kaye Scholer, LLP, New York, NY, for Defendants.

Stuart L. Shapiro, Esq., Yoram Jacob Miller, Esq., Shapiro Forman Allen & Sava LLP, New York, NY, for Defendants.

OPINION AND ORDER

KENNETH M. KARAS, District Judge:

Defendants Lisa Quattrocchi (“Quattrocchi”), Amy Aronson (“Aronson”), Clifford Aronson, George Siegel, and Albert Flieschman (“Flieschman”) removed the present action, Marcus v. Quattrocchi, No. 23723/08 (Sup.Ct.2008), from state court. Plaintiffs Katheryn Marcus (“Marcus”) and Sarah Goldberg (“Goldberg”) move to remand this case back to state court. Specifically, Plaintiffs maintain that this Court lacks subject matter jurisdiction because their claims fall within the probate exception to federal jurisdiction, and because the amount in controversy cannot be ascertained. Plaintiffs also argue, in their Reply Memorandum, that the Court should abstain because of a parallel proceeding in the Surrogate's Court of Kings County. For the reasons stated herein, the Motion to Remand is denied.

I. Background

A. Factual Background

On December 7, 1971, Nettie Benenson created the Nettie-Edward H. Benenson Family Trust (“Trust”) by trust agreement. (Pls.' Mem. of Law in Supp. of Mot. (“Pls.' Mem.”) Ex. A (“Compl.”) ¶ 1.) The Trust agreement named Charles B. Benenson and Defendant Flieschman as Trustees. ( Id. Ex. B, at 1.) During Nettie Benenson's lifetime, the income from the Trust was accumulated and added to the principal, but the Trustees possessed the “uncontrolled discretion” to distribute any portion of the income or principal to Nettie Benenson, even if the payments resulted in the termination of the Trust. (Compl. ¶ 7; Pls.' Mem. Ex. B, at 2.) At Nettie Benenson's death, her son, Edward H. Benenson, became the Second Income Beneficiary, and the Trustees were given the same “uncontrolled discretion” to distribute any portion of the income or principal to Edward Benenson during his lifetime, even if the payments terminated the Trust. (Compl. ¶ 8; Pls.' Mem. Ex. B, at 7-8.) Edward Benenson also was given a special power of appointment that granted him the power to appoint, in his Last Will and Testament, eligible appointees who would receive part or all of the Trust's income or principal. (Pls.' Mem. Ex. B, at 8-9.)

Besides making Edward Benenson the Second Income Beneficiary, Nettie Benenson's death also triggered a division of the Trust into equal parts for the benefit of Edward Benenson's widow and children (Nettie Benenson's grandchildren) who survived Nettie Benenson. (Compl. ¶ 9.) One equal part was designated to the benefit of (i) Gladys Benenson, the wife of Edward Benenson, and their daughter, Defendant Quattrocchi; (ii) James Stewart Benenson; (iii) Defendant Aronson; and (iv) Thomas Harley Benenson, the father of Plaintiffs. ( Id.) Thomas Benenson's share was further subdivided so that one half of the share benefitted Thomas Benenson, one fourth benefitted Plaintiff Goldberg and one fourth benefitted Plaintiff Marcus. ( Id. ¶ 10.) After the death of Edward Benenson, and if he did not exercise his special power of appointment, the Trustees were given the power to distribute part or all of the principal or income to the beneficiaries during their lifetimes according to the above divisions. (Pls.' Mem. Ex. B, at 10-13, 15-16.)

Nettie Benenson died on October 16, 1972. (Pls.' Mem. 3.) Although Plaintiffs claim that Nettie Benenson's Last Will and Testament was “never ... offered for probate in any jurisdiction” ( id.), Nettie Benenson's will was offered for probate without contest in Nassau County on November 20, 1972, (Affirmation of Yoram J. Miller (“Miller Aff.”) Ex. 4). Defendants Quattrocchi and Aronson became Trustees “at some point after creation of the Trust,” with Defendant Flieschman remaining as a Trustee. ¹ (Compl. ¶ 11.) Plaintiffs claim that the Trustees created the Benenson Investment Company (“BIC”) and exchanged the Trust's real estate holdings for an interest in the BIC. ( Id. ¶¶ 17-20.) Plaintiffs also claim that the Trustees remortgaged the Trust's properties and transferred the proceeds “for no apparent adequate consideration” to a different entity, Benenson Funding, “in which most or all of the defendants had pecuniary interests.” ( Id. ¶ 17.) According to Plaintiffs, these actions “deprived the Trust, and hence the Plaintiffs, of substantial portions of the Trust's interest.” ( Id. ¶ 18.) Plaintiffs also accuse Defendants of failing “to provide proper oversight” of the BIC, using the BIC “to remove substantial amounts of cash and other assets from the Trust for their own benefit,” and committing various other breaches of their fiduciary duties as Trustees. ( Id. ¶¶ 20-21.)

On July 11, 1994, Thomas Benenson filed suit against Defendant Flieschman and others in the United States District Court for the Southern District of New York, alleging, inter alia, that the Trustees improperly transferred assets to Edward Benenson during his lifetime in violation of their fiduciary duties. (Defs.' Mem. of Law in Opp'n to Pls.' Mot. to Remand (“Defs.' Mem.”) 3.) This lawsuit was eventually settled in an agreement dated May 15, 1996 (“the 1996 Settlement”), in which Thomas Benenson received $1.5 million dollars and agreed not to institute any litigation against Defendants Flieschman, Quattrocchi, and Aronson, Edward Benenson, or other parties regarding the subject matter of the lawsuit. (Defs.' Mem. 3-4; Miller Aff. Ex. 9.) ²

On August 25, 1994, the then-Trustees, Defendants Flieschman, Quattrocchi, and Aronson, agreed to distribute “all of the income and principal” of the Trust to Edward Benenson and to terminate the Trust. (Miller Aff. Ex. 5.) Plaintiffs characterize this action as an “improper scheme with Edward Benenson” in which the “Trustees completely and unnecessarily depleted all assets in the Trust by spending and/or distributing all Trust principal to Edward Benenson during his life.” (Compl. ¶ 38.) Plaintiffs claim that Edward Benenson, in furtherance of the alleged scheme, bequeathed “virtually his entire estate, including principal improperly transferred to him from the Trust” to Defendants Aronson, Quattrocchi, and Flieschman. ( Id. ¶¶ 40-45.) As a result, according to Plaintiffs, Defendants violated their fiduciary duties by tunneling money out of the Trust, “leaving no money at all in the Trust despite the grantor's clear intent to leave substantial monies to Plaintiffs....” ( Id. ¶¶ 48-49.) Plaintiffs also claim that Defendants committed various other breaches of fiduciary duty and acts of deception including, inter alia, terminating the Trust without seeking the ratification of all of the beneficiaries and concealing the existence of the Trust from Plaintiffs. ( Id. ¶¶ 52, 61.)

Edward Benenson died on July 24, 2005. (Pls.' Mem. 3.) His Last Will and Testament, dated April 26, 2005, left the bulk of his estate to his daughters, Defendants Aronson and Quattrocchi, and stated that he was exercising the “power to appoint” given to him under the Trust to appoint the principal of the Trust to his daughters or their descendants who survived him. (Miller Aff. Ex. 7, at 3-4.) Edward Benenson's will was admitted for probate in Florida on September 4, 2005. ( Id. Ex. 8.) On March 3, 2006, Plaintiffs and Thomas Benenson filed statements of claims with the Florida probate court “believed to be in excess of $2,000,000,” based on allegations of misappropriation of trust assets. ( Id. Ex. 10.) It is unclear what happened to Plaintiffs' Florida probate claims, but Defendants Quattrocchi, Aronson, and Clifford Aronson, the personal representatives of Edward Benenson's estate, objected to Thomas Benenson's claim. ( Id. Ex. 13, Ex. B.) Thomas Benenson later brought an independent suit in the 15th Judicial Circuit of Florida regarding the claim pursuant to Fla. Stat. § 733.705(5). ( Id. Ex. 13.) On November 21, 2006, Thomas Benenson brought a separate suit, in the Probate Division of the 15th Judicial Circuit of Florida, seeking to revoke the probate of Edward Benenson's will. ( Id. Ex. 14.) Thomas Benenson later withdrew both of these lawsuits after being threatened with sanctions. ( Id. ¶ 16; id. Exs. 15, 16.)

On December 7, 2008, Thomas Benenson filed a new action in the Surrogate's Court of Kings County (“2008 New York Suit”) seeking to compel Defendant Flieschman and the personal representatives of Edward Benenson's estate “to account for their administration” of the Trust. Matter of the Intervivos Trust u/a/o Nettie Benenson, No. 4882/08, at 6 (Sur.Ct. Oct. 14, 2009). This lawsuit requested an accounting and alleged that the Trust's income and principal was distributed to Edward Benenson in contravention of the Trust's stated purpose. Id. at 6-7. The Surrogate's Court dismissed Thomas Benenson's claims on October 14, 2009, explaining that the 1996 Settlement and accompanying documents waived any claims Thomas Benenson had against the defendants named in the 2008 New York Suit. Id. at 16-20. ³

B. Procedural Background

Plaintiffs' Summons and Verified Complaint were filed in the Supreme Court of Westchester County on October 20, 2008. (Pls.' Mem. Ex. A.) Defendants removed the case to this Court on November 5, 2008 based on diversity jurisdiction. (Miller Aff. Ex. 2.) Plaintiffs filed the instant motion to remand the case back to state court on March 18, 2009. (Pls.' Mem. 12.) Although, at his request, Thomas Benenson was given permission by this Court to file a motion seeking to intervene and to remand...