Thea v. Kleinhandler
| Decision Date | 03 November 2015 |
| Docket Number | Docket No. 14–3201. |
| Citation | 807 F.3d 492 |
| Parties | Donald M. THEA, Deborah L. Thea, Plaintiffs–Appellants, v. Neil C. KLEINHANDLER, As Trustee of the Frederica Fisher Thea Revocable Trust, New School University, Eric T. Schneiderman, Attorney General of the State of New York, Defendants–Appellees. |
| Court | U.S. Court of Appeals — Second Circuit |
Anthony J. Viola (Zachary W. Silverman, on the brief), Edwards Wildman Palmer LLP, New York, NY, for Plaintiffs–Appellants.
Bruce J. Turkle (Perry S. Galler, on the brief), Phillips Nizer LLP, New York, NY, for Defendant–Appellee Neil C. Kleinhandler, Individually and as Trustee of the Frederica Fisher Thea Revocable Trust.
Marcy Ressler Harris, Schulte Roth & Zabel LLP, New York, NY, for Defendant–Appellee New School University.
Jason Harrow, Assistant Solicitor General (Barbara D. Underwood, Solicitor General, and Claude S. Platton, Assistant Solicitor General, on the brief), for Eric T. Schneiderman, Attorney General of the State of New York, New york, NY, for Defendant–Appellee Attorney General of the State of New York.
Before: JACOBS and CHIN, Circuit Judges, and WOLFORD, District Judge.*
In this case, Stanley Thea ("Stanley") and Frederica Thea ("Frederica") agreed to and did execute mutual wills providing for each other's assets to pass to the survivor and, upon the death of the survivor, to Stanley's children from a prior marriage, Donald Thea and Deborah Thea (the "Theas"). After Stanley died, however, Frederica transferred substantially all of her assets to a trust (the "Trust"), leaving the remainder interest not to the Theas but to defendant-appellee New School University (the "New School").
The Theas commenced this action against the New School as well as defendants-appellees Neil Kleinhandler, as trustee of the Trust, and Eric Schneiderman, as Attorney General of New York, contending that they were entitled to the Trust's assets and seeking, inter alia, declaratory and equitable relief. On May 12, 2014, the district court dismissed the Theas' claims without prejudice, on the grounds that it was unable to adjudicate the claims because no representative of Frederica's estate (the "Estate") was a party to the action. After being appointed special administrators of the Estate, the Theas sought leave to file a second amended complaint. On August 1, 2014, the district court denied the Theas' motion on grounds of futility, concluding that the claims alleged in the proposed second amended complaint would not withstand a motion to dismiss. The Theas appeal. We affirm.
For the purposes of this appeal, the facts alleged in the proposed second amended complaint are assumed to be true. They may be summarized as follows:
The Theas are the only children of Stanley and his first wife. In 1985, Stanley married his third wife, Frederica. Stanley and Frederica had no children together. On April 13, 1995, Stanley and Frederica entered into an agreement (the "Agreement") to execute mutual wills providing that the surviving spouse would receive the deceased spouse's property and, upon the surviving spouse's death, the surviving spouse's property would pass to the Theas.1 Stanley and Frederica executed wills in accordance with the Agreement. Frederica's will provides that when Stanley died, the Theas would be the sole executors.
Stanley predeceased Frederica in 1998. Thus, in accordance with Stanley's will and the Agreement, Frederica inherited Stanley's assets, including two apartments in New York City—one in Manhattan and one in Astoria. Neil Kleinhandler and his firm represented Frederica in connection with the probate of Stanley's estate.
In December 2002, Frederica created the Trust, which was governed by New York law and was revocable. Frederica and Kleinhandler were designated as co-trustees. The New School, a university based in New York City, was designated as the sole remainder beneficiary of the Trust. On or about December 17, 2002, Frederica transferred the New York City apartments and substantially all of her other property and assets into the Trust. For the remainder of Frederica's life, the Trust managed the assets for her benefit.
In 2007, the Trust sold the Manhattan apartment for approximately $1.65 million. The Astoria apartment was also sold for an undisclosed amount. The proceeds of both apartments remained in the Trust. On or about June 15, 2011, the Trust purchased a residence in Carmel, California for approximately $1.9 million. Frederica moved into the Carmel residence and resided there for the remainder of her life. The Trust also owns securities and capital, located in various bank and brokerage accounts in New York, valued at approximately $500,000.
On February 4, 2012, Frederica died of an apparent suicide. Law enforcement officials discovered a suicide note with instructions to contact Kleinhandler, her real estate agent, and her accountant. After Kleinhandler was notified of Frederica's death, he represented to law enforcement officials that he was authorized to act on behalf of the Estate.
Kleinhandler did not inform the Theas of their stepmother's death, nor did he publish an obituary or otherwise publicize her passing.2 Within a week of Frederica's death, the Carmel residence was listed for sale with a real estate broker, but it has not been sold. The Theas have not received any Trust assets.
On July 15, 2013, the Theas, in their individual capacities, commenced this action against Kleinhandler, as the sole trustee of the Trust.3 The Theas alleged that Frederica had defeated the intent of the Agreement by transferring her assets to the Trust.
On August 27, 2013, after limited discovery, the Theas served an amended complaint, naming two new defendants: the New School, as the Trust's remainder beneficiary, and the Office of the New York State Attorney General.4 The amended complaint also included a claim for breach of fiduciary duty against Kleinhandler, both individually and as trustee of the Trust.
On October 7, 2013, Kleinhandler and the New School moved to dismiss the amended complaint pursuant to Fed.R.Civ.P. 12(b)(6). On May 13, 2014, the district court granted, without prejudice, the motions on the grounds that it was unable to fully adjudicate the Theas' claims until a representative of the Estate was appointed and joined as a necessary party. The district court held that an administrator or executor of the Estate could seek leave to amend within 21 days of the May 13 order.
The Theas immediately initiated probate proceedings in the Superior Court of California, County of Monterey, seeking to be appointed representatives of the Estate. The Theas filed an expedited petition for "Letters of Special Administration" so that their application could be heard prior to the 21–day deadline imposed by the district court in this case. On May 28 and May 30, 2014, the California court granted the Theas' request, issuing Letters of Special Administration to both of them. The California court also admitted Frederica's will to probate.
On June 2, 2014, the Theas sought leave to file a second amended complaint, in their individual capacities, as creditors of the Estate, and as special administrators of the Estate. The Theas asserted claims in: (1) their individual capacity; (2) their capacity as creditors of the Estate; and (3) their capacity as special administrators of the Estate.
On August 1, 2014, the district court denied the Theas' motion for leave to amend on grounds of futility, concluding that the claims alleged in the proposed second amended complaint would not withstand a motion to dismiss. First, the district court rejected the Theas' individual claims for lack of standing. Second, the district court applied New York's borrowing statute, N.Y. C.P.L.R. 202, to the Theas' claims as special administrators. It concluded that California law applied to these claims, and then held that all of the Theas' claims on behalf of the Estate were time-barred because they were governed by a one-year statute of limitations pursuant to § 366.3 of the California Code of Civil Procedure. The district court also held that the Theas did not allege sufficient facts to conclude that equitable estoppel could toll their time to file. Last, the district court held that because the underlying claims against Kleinhandler and the Trust were untimely, the Theas remaining claims would not withstand a motion to dismiss. Thus, the district court held that allowing the Theas to amend to add these remaining claims would also be futile. Judgment was entered in favor of defendants on August 4, 2014.
This appeal followed.
We generally review a district court's denial of leave to amend for abuse of discretion, "keeping in mind that leave to amend should be freely granted when ‘justice so requires.’ " Sista v. CDC Ixis N. Am., Inc., 445 F.3d 161, 177 (2d Cir.2006) (quoting Pangburn v. Culbertson, 200 F.3d 65, 70 (2d Cir.1999) ). A district court abuses its discretion if it bases its ruling on "an erroneous view of the law, a clearly erroneous assessment of the facts, or a decision that cannot be located within the range of permissible decisions." Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 185 (2d Cir.2012). Where the denial of leave to amend is based on the resolution of legal questions, however, "a reviewing court conducts a de novo review." Hutchison v. Deutsche Bank Sec. Inc., 647 F.3d 479, 490 (2d Cir.2011).
The district court denied leave to the Theas to file the proposed second amended complaint on grounds of futility, concluding that it would not withstand a motion to dismiss. Thea v. Kleinhandler, No. 13–CV–4895 (PKC), 2014 WL 3812231, at *6, *9 (S.D.N.Y. Aug. 1, 2014) ; see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (...
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