Schwartz v. Wellin
| Decision Date | 17 April 2014 |
| Docket Number | No. 2:13-cv-3595-DCN,2:13-cv-3595-DCN |
| Court | U.S. District Court — District of South Carolina |
| Parties | LESTER S. SCHWARTZ, as Trust Protector of the Wellin Family 2009 Irrevocable Trust, Plaintiff, v. PETER J. WELLIN, et. al., Defendants. |
This matter is before the court on two motions. The first is a motion to dismiss filed by defendants Peter J. Wellin, Cynthia Wellin Plum, Marjorie Wellin King, and Friendship Management LLC (collectively, "the Wellin Defendants").1 The second is a motion to appoint a guardian ad litem filed by plaintiff Lester S. Schwartz. For the reasons stated below, the court denies Schwartz's motion to appoint a guardian ad litem and grants the Wellin Defendants' motion to dismiss.
These facts are drawn almost exclusively from plaintiff's complaint. On November 20, 2013, Keith Wellin appointed attorney Lester S. Schwartz as the trust protector for the Wellin Family 2009 Irrevocable Trust ("the Trust"). On the same day, Schwartz notified all of the Trust's trustees that he was unilaterally making a number of changes to the Trust's governing document pursuant to his trust protector powers.Schwartz also unilaterally removed South Dakota Trust Company as the Trust's corporate trustee and appointed Brown Brothers Harriman Trust Company of Delaware, N.A. as corporate trustee.
On December 1, 2013, Cynthia Wellin Plum, the manager of Friendship Management, LLC, directed the liquidation of Friendship Partners, LP based upon the written consent of all three Wellin children.
On December 5, 2013, Brown Brothers Harriman, the newly-installed corporate trustee for the Wellin Family 2009 Irrevocable Trust ("the Trust"), resigned its position as corporate trustee.
On December 6, 2013, Friendship Partners sold all its assets, including the 896 Class A Berkshire Hathaway common shares that Keith Wellin had contributed to Friendship Partners. About $50 million in proceeds was set aside to pay the balance of the note held by Keith Wellin. The remaining $95 million was split into three equal parts and distributed to the Wellin children.
On December 17, 2013, Schwartz filed the instant complaint in Charleston County Probate Court against Keith Wellin, his three children, Friendship Management, and Friendship Partners. In his complaint, Schwartz asserts that Peter Wellin, Cynthia Plum, and Marjorie King (" the Wellin children") have "frustrated the intent and purposes of the Trust," which was to provide for Keith's grandchildren as well as his children, by liquidating Friendship Partners' assets and putting $95 million of the proceeds into their own bank accounts. Schwartz's complaint asserts the following six causes of action:
On December 27, 2013, the Wellin Defendants removed the case to this court. On December 30, 2013, Schwartz filed an emergency motion to extend the state court's TRO and for a preliminary injunction. The Wellin Defendants responded on December 30, 2013 and the court held an emergency hearing on New Year's Eve. In an order issued on January 7, 2014, the court denied Schwartz's motion.
On January 17, 2014, the Wellin Defendants filed the present motion to dismiss. Schwartz opposed that motion on February 3, 2014, the Wellin Defendants filed a reply on February 13, 2014, and the court had the benefit of the parties' oral argument at a hearing held on February 28, 2014.
On February 12, 2014, Schwartz filed a motion to appoint a guardian or trustee ad litem2 ("GAL") to represent the interests of Keith's grandchildren and other unborn lineal descendants. The Wellin Defendants opposed the motion on February 21, 2014 and Schwartz replied on February 27, 2013. The motion has been fully briefed and the court again had the benefit of the parties' oral argument at a hearing held on March 25, 2014.
In short, these matters have been fully briefed and are ripe for the court's review.
Some courts have found it appropriate to appoint a GAL "to represent interests of unborn and/or otherwise unascertainable beneficiaries . . . ." Hatch v. Riggs Nat'l Bank, 361 F.2d 559, 566 (D.C. Cir. 1966). The appointment of a GAL is discretionary with the court. See Fonner v. Fairfax, 415 F.3d 325, 330 (4th Cir. 2005).
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss for "failure to state a claim upon which relief can be granted." When considering a Rule 12(b)(6) motion to dismiss, the court must accept the plaintiff's factual allegations as true and draw all reasonable inferences in the plaintiff's favor. See E.I. du Pont de Nemours & Co. v. Kolon Indus., 637 F.3d 435, 440 (4th Cir. 2011). But "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
On a motion to dismiss, the court's task is limited to determining whether the complaint states a "plausible claim for relief." Id. at 679. A complaint must contain sufficient factual allegations in addition to legal conclusions. Although Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief," "a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).
The court addresses Schwartz's motion to appoint a guardian ad litem before turning to the Wellin Defendants' motion to dismiss.
Schwartz seeks to have a GAL appointed "to represent the interests of the unrepresented Trust beneficiaries (including the grandchildren of Keith Wellin, the Trust's Grantor) and the Grantor's other 'lineal descendants,' including persons not yet born or ascertained." Pl.'s Mot. to Appoint a Guardian Ad Litem 1. The court addresses Schwartz's arguments in turn.
Schwartz first contends that South Dakota law expressly authorizes the appointment of a GAL to represent the interest of unborn trust beneficiaries.
S.D. Codified Laws § 55-3-32(3).
The Wellin Defendants argue that Section 55-3-32(3) does not apply in this case because there are living, ascertainable people - Keith's adult grandchildren ("the grandchildren") - who have the same interest as Keith's unborn lineal descendants ("the unborn descendants"). Because the grandchildren have the same interest as the unborndescendants, the Wellin Defendants argue, the appointment of a GAL is neither necessary nor authorized by South Dakota law. Schwartz responds that the grandchildren must not have the same interests as the unborn descendants because the grandchildren have not objected to the Wellin Defendants' conduct. Schwartz's response assumes that the unborn descendants would object to the Wellin Defendants' actions. That is a bridge too far. Neither the court nor the parties can predict what the unborn descendants' opinions and actions would be.
As an initial matter, defendants Peter Wellin, Marjorie Wellin King, and Cynthia Wellin Plum are living, ascertained persons who have interest in the Trust. As a result, Section 55-3-32 may be inapplicable to this case, since the provision only applies "[i]f an interest in the estate or trust has been limited [to unborn or unascertained persons]." S.D. Codified Laws § 55-3-32(3). Nevertheless, in an abundance of caution, the court considers whether the grandchildren can be considered proper representatives of the unborn descendants' interests.
Neither the grandchildren nor the unborn descendants are named as beneficiaries of the Trust, but both are the lineal descendants of the Grantor and the named beneficiaries. As such, both the grandchildren and the unborn descendants could be awarded money by the Trust, could be entitled to receive distributions from the Trust if the named beneficiaries were deceased at the time the distributions were made, or could inherit money from the Trust's named beneficiaries. See Trust Art. IV.B.1.a-c, C.1.a-c. As a result, the court finds that the grandchildren and the unborn descendants have the same interests in the Trust.
The grandchildren are competent adults for whom appointment of a GAL would be inappropriate. Because the grandchildren are ascertainable, existing persons who have the same interest in the Trust as...
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