Zahnleuter v. Lenhart
| Decision Date | 30 April 2021 |
| Docket Number | No. 2:20-cv-02492-KJM-KJN,2:20-cv-02492-KJM-KJN |
| Parties | Katherine Zahnleuter, Plaintiff, v. Gabriel Lenhart; Law Offices of Gabriel Lenhart; Amy Mueller, an individual; and DOES 1 through 10, inclusive, Defendants. |
| Court | U.S. District Court — Eastern District of California |
This tort action arising in diversity involves an intra-family feud over an inheritance. Defendant Amy Mueller1 moves to dismiss the complaint filed by her sister, plaintiff Katherine Zahnleuter, for failure to state a claim. Alternately, defendant Mueller requests the court stay the action under the Younger abstention doctrine, citing related ongoing litigation in state court. Defendants Gabriel Lenhart and his law offices do not take a position on the motion. The court heard argument via videoconference on April 16, 2021. Christopher Kolkey appeared as lead counsel for plaintiff; A. James Kachmar, Jr. appeared as lead counsel for defendant. The court grants in part the motion to dismiss for the reasons stated below. The court denies the motion to stay.
The court assumes the following factual allegations in the complaint are true and construes them in the light most favorable to the plaintiff, the non-moving party. Richard Mueller (Richard) and Joan Mueller (Joan) were the parents of Katherine Zahnleuter (Katherine) and Amy Mueller (Amy).2 Compl. ¶ 15, ECF No. 1. Katherine and Amy are half-siblings to Richard's child from a previous marriage, Julie Van Patter (Julie). Id. Today, Katherine resides in Michigan, and Amy resides in California. Id. ¶¶ 7, 10. Joan and Richard lived in Nevada County until their deaths in October 2017 and August 2018, respectively. Id. ¶ 17.
In 2004, before their deaths, Richard and Joan created a living trust by agreement. See id. ¶ 18. The 2004 agreement provided that upon the death of both parents, Amy and Katherine "would serve as trustees 'one at a time and in the order listed.'" Id. ¶ 19. The agreement provided for an equal distribution of assets between Amy and Katherine, as well as a specific $10,000 gift to Julie. Id. In 2005, Richard and Joan executed an amendment to the trust (the First Amendment). Id. ¶ 20. This initial amendment left undisturbed the 2004 agreement's provisions for succession of trustees and distribution terms. Id. After Joan died in October 2017, id. ¶ 21, Richard was diagnosed with terminal cancer in December 2017, id. Shortly after his diagnosis, Richard worked with Katherine, Amy, and his attorney Gabriel Lenhart (Lenhart) to amend the trust a second time and make Amy and Katherine both acting trustees (the Second Amendment). Id. ¶ 23. Richard's health deteriorated, and he became clinically depressed, prone to confusion, and slept more than twenty hours a day. Id. ¶ 26. In January 2018, Amy moved into Richard's house in California, and he became dependent on her for bathing, medications, transportation, and other essential care. Id. ¶¶ 24-25.
Two months later, a conflict erupted between Amy and Katherine while Katherine was visiting. See id. ¶¶ 27-29. The conflict spurred Amy to procure a new amendment to the 2004 agreement (the Third Amendment), which significantly increased Amy's inheritance. See id. ¶¶ 29-34. Amy contacted Lenhart to prepare the Third Amendment without Richard's orKatherine's knowledge. See id. ¶¶ 30-32. Specifically, Amy sent Lenhart a forged handwritten letter, purportedly from Richard, expressing Richard's intent to change the distributive terms of the trust. Id. ¶¶ 32, 34.
The new terms of the Third Amendment departed starkly from those of the Second Amendment. First, they granted Amy a life estate in Richard's home and reserved $100,000 for expenses to keep up the property. Id. ¶ 34. Second, the terms provided $10,000 each to Richard's nieces and named Richard's brother, Thomas W. Mueller, Sr. (Tom Sr.), as successor trustee. Id. ¶ 34. Third, Richard's daughters, including Amy and Katherine's half-sister Julie, were to share equally in the residue after the other specified distributions. Id. ¶ 35. Richard executed the Third Amendment on April 18, 2018. Id. ¶¶ 33, 36. The parties refer to this version of the Third Amendment as the "first version" of this amendment.
After Richard signed the first version of the Third Amendment, Lenhart and Amy noticed that it erroneously gave half-sister Julie an equal share in the residue. Id. ¶ 37. Lenhart and Amy then created what the parties dub the "second version" of the Third Amendment to correct this error. Id. ¶ 39. Lenhart modified the Third Amendment at Amy's direction, altering the distributive terms and adding extra carriage returns to append the previously executed signature block in a way that looked as if it supported the second version. Id. ¶¶ 43-44. One day after Richard's death, Amy sent Tom Sr. a copy of the second version of the Third Amendment agreement. Id. ¶ 47. Tom Sr. shared this version with Katherine two days later. Id. ¶ 48. Katherine did not receive the first version of the Third Amendment and did not know it existed until later. See id. ¶¶ 46-48, 53.
Katherine then filed a petition in Nevada County Superior Court to invalidate the Third Amendment, namely the second version as the only version she knew about at the time; Katherine alleged Richard had not complied with required trust procedures because the Third Amendment was not delivered to her before his death. Id. ¶ 49. The validity of the second version of the Third Amendment was heavily litigated leading up to a trial date of June 17, 2020. Id. ¶ 51. On the eve of trial, Katherine's attorney noticed inconsistencies between the trust documents, discovered there were in fact two versions of the Third Amendment, and confronted Lenhartabout the fraud he then suspected during direct examination. Id. ¶¶ 53-54. Lenhart denied that he had committed fraud. Id. ¶ 54. After Lenhart's testimony, Amy's counsel raised the issue with the court by saying, "we have a suspicion of fraud on the Court"; the judge then suspended trial. Id. ¶¶ 55-56. During the suspension, Amy reversed course, took the position that the Third Amendment was invalid in total, and filed a petition to invalidate it; Katherine did not oppose as she had been seeking that very relief for eighteen months. Id. ¶ 56. The state court invalidated both versions of the Third Amendment, effectively restoring the trust to its pre-dispute status in the form of the Second Amendment. Id.
While the trust action was still pending in Nevada County Superior Court, Katherine initiated another action against Amy in the same state court, alleging Amy had committed elder abuse against Richard. Motion to Dismiss (MTD) at 6; Opp'n at 14; see also Zahnleuter v. Mueller, No. CU19-083601 (Cal. Sup. Ct. Nevada Ct. filed Feb. 5, 2019).3 On December 16, 2020, Katherine filed this separate federal action, seeking damages in the form of her attorneys' fees and other expenses incurred during the state court trust litigation over the validity of the Third Amendment. She asserts three claims: (1) tort of another; (2) fraudulent concealment; and (3) constructive fraud. Compl. ¶¶ 61-84. Amy moves to dismiss Katherine's first claim for failing to join all the alleged joint tortfeasors as required by California law in actions claiming tort of another. MTD at 5-6. She moves to dismiss the second and third claims as improper attempts to recover attorneys' fees and litigation costs. Id. at 6-7. In the alternative, if the complaint is not dismissed, Amy moves for a stay under the abstention doctrine recognized in Younger v. Harris, 401 U.S. 37 (1971), until the elder abuse litigation in state court concludes. MTD at 7-8.
A party may move to dismiss for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The motion may be granted only if the complaint lacks a "cognizable legal theory" or if its factual allegations do not support a cognizable legal theory. Hartmann v. Cal. Dep't of Corr. & Rehab., 707 F.3d 1114, 1122 (9th Cir. 2013). The court assumes all factual allegations are true and construes "them in the light most favorable to the nonmoving party." Steinle v. City & Cty. of San Francisco, 919 F.3d 1154, 1160 (9th Cir. 2019). If the complaint's allegations do not "plausibly give rise to an entitlement to relief," the motion must be granted. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
A complaint need contain only a "short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), not "detailed factual allegations," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). But this rule demands more than unadorned accusations; "sufficient factual matter" must make the claim at least plausible. Iqbal, 556 U.S. at 678. In the same vein, conclusory or formulaic recitations elements do not alone suffice. Id. (quoting Twombly, 550 U.S. at 555). This evaluation of plausibility is a context-specific task drawing on "judicial experience and common sense." Id. at 679.
This rule does not apply to "'a legal conclusion couched as a factual allegation,'" Papasan v. Allain, 478 U.S. 265, 286 (1986) quoted in Twombly, 550 U.S. at 555, nor to "allegations that contradict matters properly subject to judicial notice" or to material attached to or incorporated by reference into the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001). A court's consideration of documents attached to a complaint or incorporated by reference or matter of judicial notice will not convert a motion to dismiss into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995); compare Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002) ().
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