Stevenson v. Severs

Citation158 F.3d 1332
Decision Date27 October 1998
Docket NumberNo. 97-7157,97-7157
Parties, 82 A.F.T.R.2d 98-6912 Ferdinan B. STEVENSON, Appellant, v. Charles A. SEVERS, III, et al., Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeal from the United States District Court for the District of Columbia (No. 95cv02327).

Robert L. Widener argued the cause for appellant. With him on the brief was Chrys D. Lemon.

Jack Kaufmann argued the cause for appellees. With him on the brief were Myles V. Lynk and Ralph G. Blasey, III.

Before: WALD, WILLIAMS and TATEL, Circuit Judges.

PER CURIAM:

In 1986, appellant Ferdinan B. Stevenson retained a lawyer, appellee Charles Severs and an insurance agent, appellee Sam Radin of National Madison Group, Inc., to set up a life insurance trust to benefit her four children upon her death. In order to avoid estate and gift tax liability for her yearly contributions to the trust, Severs advised Stevenson that the trust itself, instead of Stevenson's estate, should be the owner and beneficiary of two life insurance policies, each worth half a million dollars. Nine years later, a different lawyer retained by Stevenson noticed that the life insurance policies listed her estate, not the trust, as the policies' beneficiary. After the new lawyer directed the insurance agent to transfer the policies to the trust and after she paid $61,451 in gift taxes, Stevenson sued Severs, Radin, and National Madison Group in the United States District Court for the District of Columbia seeking recovery of those gift taxes, $550,000 in possible future estate tax liability that her estate would incur pursuant to26 U.S.C. § 2035(a) if she were to die within three years after the transfer, and $25,000 she had paid to the lawyer who discovered the problem.

The district court granted summary judgment for all three appellees. The court found that Stevenson had not incurred any additional gift tax liabilities since she had already used her $10,000 per year exemption by giving yearly gifts to her children, the trust's beneficiaries. Even if the trust had been set up correctly, contributions to it would therefore have been subject to gift taxes. Moreover, the interpolated terminal reserve value of the policies at the date of the ultimate gift, $165,260, was less than the $170,901 that Stevenson would have had to pay had the trust been set up correctly. (Stevenson would have been liable for gift taxes on $161,256 in premium payments paid from 1990 to 1994 plus $9,645 for gifts given from 1986 to 1988 above and beyond her $10,000 per year exemption.) The court also found that none of the appellees had a duty to advise Stevenson on the potential gift tax liabilities of the trust arrangement, and that even if they had such a duty, they had not breached it. The district court found that the estate tax claim was unripe. Relying on the "American Rule" that each party pay the costs of its own litigation, the court also rejected Stevenson's claim for attorneys' fees.

We affirm the district court's ruling that Stevenson has failed to prove actual injury. We agree that no evidence appears in the record suggesting that even if appellees had properly established the trust, Stevenson would have paid less in gift taxes than she eventually did. Stevenson fails to point to anything in the record suggesting that she would have altered her gift-giving practices had the trust been properly established. Indeed, Stevenson's own estate tax expert states in his affidavit: "There is absolutely no way of knowing whether the plaintiff would have maintained the same pattern of gift giving if she were using her annual exclusion for the payment of insurance premiums." Affidavit of Sanford J. Schlesinger, p 8. We also agree with the district court that the estate tax claim was unripe for adjudication. Indeed, assuming Stevenson has survived beyond September 29, 1998--three years after the date of transfer--the estate tax claim is now moot.

We find, however, that the district court misinterpreted Stevenson's claim for attorneys' fees. The district court viewed Stevenson's claim as one for litigation costs. However, she sought these fees not as litigation costs, but as damages for costs incurred to correct negligence. See Appellant's Amended Complaint at pp 23-25, 35, 39, 44, 48. Viewed this way, her claim is not barred by the "American Rule." But Stevenson can only recover the fees paid to the lawyer who discovered the problem if appellees had, in fact, breached a duty they owed her. Specifically, she must show that Severs' "neglect of a reasonable duty ... resulted in and was the proximate cause of loss to the client," M & S Building Supplies v. Keiler, 738 F.2d 467, 472 (D.C.Cir.1984) (internal quotation omitted), and/or that the facts of Radin and National Madison Group's relationship with her warrant a finding of liability, see Aetna Casualty & Surety Co. v. Walter Ogus, Inc., 396 F.2d 667, 669-70 (D.C.Cir.1967); 16A John Allen Appleman & Jean Appleman, Insurance Law and Practice 65-66 (1981) ("[W]here an agent also holds himself out as a consultant and a counselor, he does have a...

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19 cases
  • Delaney v. District of Columbia
    • United States
    • U.S. District Court — District of Columbia
    • October 6, 2009
    ...courts. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n. 7, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988); see also Stevenson v. Severs, 158 F.3d 1332, 1334 (D.C.Cir.1998). Congress essentially codified Gibbs in 28 U.S.C. § 1367. Edmondson & Gallagher v. Alban Towers Tenants Ass'n, 48 F.3d 1260......
  • Naegele v. Albers
    • United States
    • U.S. District Court — District of Columbia
    • January 3, 2005
    ...1332(a); DeBerry v. First Gov't Mortgage & Investors Corp., 170 F.3d 1105, 1106 n. 1 (D.C.Cir.1999); see also Stevenson v. Severs, 158 F.3d 1332, 1334 (D.C.Cir.1998) (per curiam) (identifying the $75,000 amount-in-controversy requirement for federal diversity jurisdiction under 28 U.S.C. § ......
  • U.S. ex rel. Roby v. Boeing Co.
    • United States
    • U.S. District Court — Southern District of Ohio
    • March 24, 2000
    ...court, in its discretion, may instead continue to exercise supplemental jurisdiction over the remaining claims. See Stevenson v. Severs, 158 F.3d 1332, 1334 (D.C.Cir.1998). Therefore, Plaintiffs argue that, to the extent this Court may have the occasion to exercise this discretion, it shoul......
  • Barefield v. HSBC Holdings PLC
    • United States
    • U.S. District Court — Eastern District of California
    • December 7, 2018
    ...that inform decisions in the supplemental jurisdiction context when the federal basis of a case disappears."); Stevenson v. Severs , 158 F.3d 1332, 1334 (D.C. Cir. 1998) (holding that following grant of summary judgment on two of the three claims, the case "consists entirely of a claim over......
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1 books & journal articles
  • Supplemental jurisdiction and section 1367: the case for a sympathetic textualism.
    • United States
    • University of Pennsylvania Law Review Vol. 148 No. 1, November 1999
    • November 1, 1999
    ...court must then decide in its discretion whether to retain jurisdiction over the remainder of the case"). See also Stevenson v. Severs, 158 F.3d 1332, 1334 (D.C. Cir. 1998) (holding that when dismissal of claims reduces the amount in controversy below the statutory minimum, "the district co......

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