Town of Colorado City v. United Effort Plan Trust

• Decision Date: 04 January 2012
• Docket Number: No. CV11-08037-PHX-DGC,CV11-08037-PHX-DGC
• Parties: Town of Colorado City, an Arizona municipality, Plaintiff, v. United Effort Plan Trust, et al., Defendants.
• Court: U.S. District Court — District of Arizona

Town of Colorado City, an Arizona municipality, Plaintiff,

v.United Effort Plan Trust, et al., Defendants.

No. CV11-08037-PHX-DGC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Dated: January 4, 2012

ORDER

Defendants United Effort Plan Trust ("UEP Trust") and Bruce Wisan as Special Fiduciary of the UEP Trust (collectively, the "Trust Defendants") move to dismiss the First Amended Complaint (Doc. 16) pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The motion is fully briefed.¹ Docs. 32, 37, 40. Defendants Ronald and Jinjer Cooke ("the Cookes") have filed a separate motion dismiss and joinder in Trust Defendants' motion to dismiss. Doc. 41. The Court accepts the Cookes' joinder in Trust Defendants' motion to dismiss. The Court will deny the motion to dismiss for the following reasons.

I. Background.

In 1942, members of the Fundamentalist Church of Jesus Christ of Latter-Day Saints ("FLDS") established the UEP Trust under Utah law. Doc. 16, at 3. From itsestablishment in 1942 until 1998, the UEP Trust was considered a charitable, religious trust. Id. In 1998, the Utah Supreme Court issued a decision in Jeffs v. Stubbs, 970 P.2d 1234 (Utah 1998), holding that the UEP Trust was not a charitable trust because it specifically named identifiable beneficiaries. Id. at 4. The Jeffs court reformed the UEP Trust. Id. The UEP Trustees then restated the Trust and redefined its beneficiary class. Id.

On May 26, 2005, the Utah Attorney General brought an action for breach of trust (the "trust litigation") against the UEP Trustees in the Fifth Judicial District Court for the State of Utah. Id. The Utah Attorney General brought the action as a probate matter pursuant to Utah's Uniform Trust Code and sought an order suspending the authority and power of the Trustees and appointing an interim special fiduciary to preserve the assets of the Trust. Id. at 4-5. Judge Denise Lindberg, who presided over the trust litigation, granted the motion for a temporary restraining order, removed the trustees, and appointed Bruce Wisan to act as UEP Trust's special fiduciary. Id. at 5. On October 13, 2005, Judge Lindberg issued a memorandum decision holding that the Constitution forbade her from reforming the Trust on the basis of religious doctrine, and consequently sought to apply neutral principles of law to the reformation. Id. On October 25, 2006, Judge Lindberg created the reformed UEP Trust and expanded the special fiduciary's powers, vesting Wisan with extensive authority to manage Trust property, including identifying and providing homes to UEP Trust beneficiaries. Id. at 6.

On October 6, 2008, the FLDS filed a lawsuit in Utah federal district court against Wisan, the Utah and Arizona attorneys general, and Judge Lindberg, claiming that the Utah state court's reformation of the UEP Trust, specifically divorcing the Trust's operation from its religious underpinnings, and subsequent administration of the trust through the special fiduciary, violated their First Amendment rights (the "FLDS Lawsuit"). Doc. 16, at 6. On February 24, 2011, Judge Dee Benson granted a preliminary injunction in favor of the FLDS, which has been stayed and is currently pending before the Tenth Circuit. Doc. 32, at 4.

In 2008, Wisan issued an occupancy agreement to Ronald and Jinjer Cooke on property located at 420 East Academy, Colorado City, Arizona (the "Property"). Id. The Property did not have a culinary water connection, and a dispute arose between the Cookes and various municipal bodies as to whether a new water connection should be established. Doc. 16, at 11-12. In June 2010, the State of Arizona filed a lawsuit against Colorado City in Maricopa County Superior Court. Id. at 13. The Cookes filed a corresponding lawsuit alleging discriminatory and unlawful housing practices in Arizona federal district court (the "Cooke Litigation"). Id. The State intervened in the Cooke Litigation, and that case is now proceeding as a single action in this Court before Judge Teilborg. No. CV10-08105-JAT.

Prior to 2007 and Wisan's appointment as special fiduciary, Robert Black occupied the Property. Doc. 16, at 13. In 2001, Black obtained a building permit from Colorado City to construct a home on the property. Id. at 14. UEP Trust and Wisan have since declared that Black abandoned the Property, but did not take any action to extinguish Black's right to occupy the Property as required under Arizona law. Id. UEP Trust and Wisan assigned the Property to the Cookes, as discussed above. Id. Black has asserted an ongoing right to occupy the Property, including applying for another building permit. Id. at 15.

On July 7, 2011, Plaintiff Colorado City filed its First Amended Complaint in this case. Doc. 16. In Count One, Colorado City asks this Court for a declaration regarding whether Wisan's actions as special fiduciary following the UEP Trust reformation were unconstitutional. Doc. 16, at 15. In Count Two, Colorado City seeks a declaration from this Court regarding whether the Cookes or Black have the right to occupy the Property. Id. Judge Teilborg has denied Colorado City's motion to transfer and consolidate this case with the Cooke Litigation. Doc. 42.

II. Rules 12(b)(1) and (6).

Dismissal is appropriate pursuant to Rule 12(b)(1) where the court lacks subject matter jurisdiction over a claim. Fed. R. Civ. P. 12(b)(1). The court presumes that aclaim lies outside the jurisdiction of federal courts unless proven otherwise. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). The plaintiff bears the burden of establishing that jurisdiction exists. Indus. Techtonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990). A Rule 12(b)(1) jurisdictional attack may be facial or factual. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). "In a facial attack, the challenger asserts that the allegations contained in the complaint are insufficient on their face to invoke federal jurisdiction. By contrast, in a factual attack, the challenger disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Safe Air, 373 F.3d at 1039. In resolving a facial attack, the court must accept the factual allegations of the complaint as true and draw all reasonable inferences in the plaintiff's favor. Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009). In resolving a factual attack, the court "may review evidence beyond the complaint without converting the motion to dismiss to a motion for summary judgment." Safe Air, 373 F.3d at 1039. The court may not resolve genuine factual disputes if the jurisdictional issue and substantive issues are intertwined. See id.; Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). Where such issues are intertwined, the court must find that jurisdiction exists and address the motion to dismiss as a motion for summary judgment attacking the merits of plaintiff's case. Safe Air, 373 F.3d at 1039-40, n.3.

Dismissal is appropriate pursuant to Rule 12(b)(6) where the plaintiff fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When reviewing a complaint under Rule 12(b)(6), all allegations of material fact "are taken as true and construed in the light most favorable to the non-moving party." Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, the complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007). Dismissal is appropriate where the complaint lacks a cognizable legal theory, lacks sufficient facts alleged under a cognizable legal theory, or contains allegations disclosing some absolute defense or bar to recovery. See Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988).

III. Discussion.

Trust Defendants move to dismiss the Amended Complaint on the following grounds: (1) Plaintiff does not and cannot allege sufficient facts to show that it has standing to seek declaratory relief, (2) the Court does not have subject matter jurisdiction, (3) the Court does not have jurisdiction under the Rooker-Feldman doctrine, (4) Plaintiff's claims are barred by res judicata, (5) Plaintiff's claims are barred by quasi-judicial immunity, and (6) the Court should abstain from exercising subject matter jurisdiction.

A. Standing.

Trust Defendants make a facial attack on Colorado City's standing to seek declaratory judgment on both counts because "Colorado City does not and cannot allege facts showing that it has suffered or is threatened with a concrete and particularized legal harm that is actual and imminent." Doc. 32, at 6. The Declaratory Judgment Act permits a federal court to "declare the rights and other legal relations" of parties to "a case of actual controversy." 28 U.S.C. § 2201. "The 'actual controversy' requirement of the Act is the same as the 'case or controversy' requirement of Article III of the United States Constitution." Societe de Conditionnement en Aluminium v. Hunter Eng'g Co., Inc., 655 F.2d 938, 942 (9th Cir. 1981). To have standing, a plaintiff "must have suffered, or be threatened with, an actual injury traceable to the defendant and likely to be redressed by a favorable judicial decision." Lewis v. Continental Bank Corp., 494 U.S.472, 477 (1990).

The Court agrees with Colorado City that Trust Defendants' reliance on a related case, Cooke v. Wisan, CV09-8152-PCT-JAT, 2010 WL 1641015 (D. Ariz. April 22, 2010), is misplaced. In that case, Judge Teilborg held that the plaintiff, Roland Cooke, lacked standing to enforce a charitable trust administered by the Utah court, that he could not assert the legal rights of others, and that his general attacks on Wisan's authority as manager of the UEP Trust's property were insufficient to establish standing. These are not the considerations before this Court.

First, contrary to Trust Defendants' assertion (Doc. 32, at 6), Colorado City has...