Opinion
No. 3:19-cv-01779-HZ
06-18-2020
CURT L. JENSEN, Plaintiff, v. KAREN A. BENOIT, Defendant.
OPINION & ORDER :
Plaintiff Curt Jensen brings this action alleging breach of fiduciary duty and accounting against Defendant Karen Benoit. Before the Court is Defendant's motion to dismiss. For the reasons that follow, the motion is granted.
BACKGROUND
The Court has attempted to parse a complicated and convoluted complaint. Briefly, the allegations appear to be as follows: on March 27, 1996, Irene and Leonhart Jensen executed the Jensen Family Revocable Living Trust ("1996 Trust"). Compl. ¶ 1. Under the terms of this trust, Irene and Leonhart Jensen were not only the trust's settlors, but its co-trustees and sole distributees. Def. Mot. Ex. 1. Plaintiff Curt Jensen and his sister, Defendant Karen Benoit, were named as qualified beneficiaries, entitled to certain distributions upon the passing of their parents. Id. ¶¶ 7, 25-27.
"'Settlor' means a person, including a testator, who creates a trust or contributes property to a trust. If more than one person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to that person's contribution and of the portion as to which that person has the power to revoke or withdraw. Should more than one person contribute to a trust, all of the contributors will ordinarily be treated as settlors in proportion to their respective contributions and of the portion as to which that person has the power to revoke or withdraw, regardless of which one signed the trust instrument." Or. Rev. Stat. § ("O.R.S.") 130.010(16).
A distributee or "'[p]ermissible distributee' means a beneficiary who is currently eligible to receive distributions of trust income or principal, whether the distribution is mandatory or discretionary." O.R.S. 130.010(10).
Over time, a number of changes were made to the original trust. For example, Defendant was, at some point, named—and became—a successor trustee. Compl. ¶ 39. Plaintiff appears to take issue with these changes, as well as certain actions taken by Defendant in her role as co-trustee. For example, Plaintiff alleges that Defendant mismanaged the trust by "publishing a falsely sworn deed, resort[ing] to forgery, titling money in her name instead of a trust, and misappropriating tens of thousands of dollars of Jensen family money." Compl. ¶ 50. Plaintiff also objects to the sale of certain trust property, and various distributions to Defendant's son and others. See, e.g., Compl. ¶¶ 58, 63.
Plaintiff appears to allege various other instances of wrongdoing. For example, Plaintiff suggests that Defendant used his social security number to file a tax return without his permission. Compl. ¶ 16. However, Plaintiff brings no independent claims related to any of these acts. At most, he appears to allege only that these acts demonstrate a breach of Defendant's fiduciary duty as trustee of the 1996 Trust. See Compl. ¶ 18.
In 2012, Leonhart Jensen passed away. Compl. ¶ 44. He was survived by Irene Jensen and his two children. According to Plaintiff, Mrs. Jensen created a new trust—titled "Joint Revocable Living Trust Agreement"—in 2016 ("2016 Trust"). Compl. ¶ 8. Plaintiff was again named as a qualified beneficiary. Id.
While Plaintiff discusses this trust at length, it is unclear to the Court whether or how any of these allegations relate to the named claims. In fact, Plaintiff appears to argue that the 2016 Trust is not a valid trust under "the laws of Oregon, Florida, and federal common law since the 1950s." Compl. ¶ 34.
DISCUSSION
Defendant moves to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), for failure to join a necessary party under Rule 12(b)(7), and for failure to state a claim under Rule 12(b)(6). In the alternative, Defendants asks this Court to "order Plaintiff to make his complaint more definite and certain pursuant to [Rule] 12(e)" and "to strike the language in the pleading that bears no relation to the controversy and could cause prejudice to Defendant" pursuant to Rule 12(f). Def. Mot. 23. For the reasons that follow, the Court finds that Plaintiff (1) does not have standing to bring the claims as alleged and (2) has failed to join a necessary party. Because joining the necessary party would destroy the Court's subject matter jurisdiction, the complaint is dismissed without leave to amend. The Court does not reach Defendant's remaining arguments.
I. Federal Rule of Civil Procedure 12(b)(1)
A motion to dismiss under Rule 12(b)(1) addresses the court's subject matter jurisdiction. Under this rule, a party may challenge the court's original jurisdiction, see e.g., NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 614 (9th Cir. 2016) (arguing plaintiff failed to allege diversity jurisdiction), or a plaintiff's constitutional standing, Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011) ("lack of Article III standing requires dismissal for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1)") (emphasis omitted). The party who seeks to invoke the subject matter jurisdiction of the court has the burden of establishing that such jurisdiction exists. Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010). The party carries that burden by putting forth "the manner and degree of evidence required" by whatever stage of the litigation the case has reached. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
A Rule 12(b)(1) motion may attack the substance of the complaint's jurisdictional allegations even though the allegations are formally sufficient. See Dreier v. United States, 106 F.3d 844, 847 (9th Cir. 1996). Additionally, the court may consider evidence outside the pleadings to resolve factual disputes. Robinson v. United States, 586 F.3d 683, 685 (9th Cir. 2009); see also Dreier, 106 F.3d at 847 (a challenge to the court's subject matter jurisdiction under Rule 12(b)(1) may rely on affidavits or any other evidence properly before the court).
A. Amount in Controversy
"Federal courts are courts of limited jurisdiction and possess only that power authorized by the Constitution and statute." Sandpiper Village Condo. Ass'n, Inc. v. Louisiana-Pacific Corp., 428 F.3d 831, 841 (9th Cir. 2005) (internal quotation omitted). Subject matter jurisdiction is generally conferred upon federal district courts either through diversity jurisdiction, 28 U.S.C. § 1332, or federal question jurisdiction, 28 U.S.C. § 1331. Peralta v. Hispanic Bus., Inc., 419 F.3d 1064, 1068 (9th Cir. 2005). Plaintiff's complaint relies on diversity jurisdiction. Thus, Plaintiff must show that the action is between citizens of different states and that the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332; Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 684 (9th Cir. 2006) (Courts "presume[] that a cause lies outside the limited jurisdiction of the federal courts and the burden of establishing the contrary rests upon the party asserting jurisdiction.") (alterations and quotation marks omitted).
While Plaintiff argues that "[t]his court has exclusive jurisdiction to hear a civil case filed for tax-related identity theft and unauthorized disclosure of a taxpayer's ITTN/SSN," Pl. Resp. 3, the Court sees no citation to support this assertion and no claim related to identity theft or unauthorized disclosures. Similarly, as discussed below, while Plaintiff references a federal common law right to an accounting, the Court sees no support for that position here.
The parties agree that Plaintiff and Defendant are citizens of different states. Defendant argues, however, that Plaintiff cannot satisfy the amount in controversy. Specifically, Defendant argues that Plaintiff identifies only three possible sources of economic harm: (1) the "tax refund theft of Plaintiffs $3,203 refund," (2) "a disclosure statement that 'imposed a $3,788 tax liability,'" and (3) Plaintiff's interest in the "family homestead." Def. Mot. 6-7. Defendant goes on to argue that "Plaintiff's own complaint discloses that Plaintiff's interest in that homestead was revoked by the second amendment to that same trust document." Id. at 7. Thus, according to Defendant, Plaintiff cannot prove that he is entitled to $75,000 under the claims alleged.
While Plaintiff fails to respond to Defendant's argument, the Court finds that Plaintiff's complaint sufficiently alleges an amount in controversy greater than $75,000. In particular, the Court sees allegations that Plaintiff is entitled to the family homestead, valued at $410,500, and that he is entitled to fifty percent of a trust worth $710,300. See Compl. ¶¶ 1, 9, 40, 81. Defendant does not challenge the value of the homestead or trust. While Defendant may dispute whether Plaintiff is, in fact, entitled to this property under the terms of the operative trust, this argument goes to the merits of the case and is not properly resolved at this time. See Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987) ("A court may not resolve genuinely disputed facts where the question of jurisdiction is dependent on the resolution of factual issues going to the merits.") (internal quotation omitted); Augustine v. United States, 704 F.2d 1074 (9th Cir. 1983) ("[W]here the jurisdictional issue and substantive issues are so intertwined that the question of jurisdiction is dependent on the resolution of factual issues going to the merits, the jurisdictional determination should await a determination of the relevant facts on either a motion going to the merits or at trial."). Defendant's motion to dismiss on this ground is therefore denied.
B. Standing
Defendant also argues that Plaintiff lacks standing to bring the claims as alleged. The "irreducible constitutional minimum" of standing consists of three elements: the plaintiff must have (1) suffered an injury in fact; (2) that is fairly traceable to the challenged conduct of the defendant; and (3) that is likely to redressed by a favorable judicial decision. Spokeo Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016); Lujan, 504 U.S. at 560. To establish an injury in fact, a plaintiff must show that "he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical." Spokeo, 136 S. Ct. at 1547-48 (internal quotation omitted). At this stage in the proceedings, a plaintiff need only "show that the facts alleged, if proved, would confer standing." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1140 (9th Cir. 2003).
Plaintiff has failed to show, on either claim, that he has suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, rather than conjectural or hypothetical. Plaintiff first claims that Defendant, as trustee, breached her fiduciary duties. Under Oregon law, a trustee must "administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with [the Oregon Uniform Trust Code]." O.R.S. 130.650(1). The trustee must also administer the trust "solely in the interests of the beneficiaries." O.R.S. 130.655(1). However, "[w]hile the settlor of a revocable trust is alive, rights of the beneficiaries are subject to the control of the settlor, and the duties of the trustee are owed exclusively to the settlor." O.R.S. 130.510(1). Indeed, "the interests of a beneficiary under a revocable or irrevocable trust vest when the trust becomes irrevocable, and not later, unless the will or trust clearly indicates a contrary intent." O.R.S. 130.730(1).
Here, Plaintiff has alleged that he is a qualified beneficiary of a revocable trust. See, e.g., Compl. ¶ 11. Not only is this trust revocable, but the trust's settlor and sole distributee (Plaintiff's mother, Irene Jensen) is still alive. Because the settlor is alive—and there are no allegations that the trust has become irrevocable or has otherwise provided for the vesting of Plaintiff's interests—Plaintiff's interests have not vested, and the trustee does not owe Plaintiff any fiduciary duties. In other words, Plaintiff has no present, enforceable interest in the trust and has not, therefore, suffered an invasion of a legally cognizable injury at this time.
It is unclear to the Court whether the 1996 Trust is, in fact, a revocable trust. See Compl. Ex. B. at 1 (Certification of Trust stating trust is revocable), Ex. D at 1 (Certification of Trust stating trust is irrevocable); Def. Mot. Ex. 1 at 1 (trust is revocable), 15 (amendment stating trust becomes irrevocable upon death or incapacity of a settlor). Plaintiff also references a "no revoke will substitute" created in 1996 and a 2003 amendment to the trust itself. While the Court would ordinarily grant Plaintiff leave to amend to allege, if he could, that the trust has become irrevocable, Plaintiff's complaint fails on an alternative ground discussed below. Thus, amendment on this issue would be futile.
Plaintiff similarly fails to assert standing under his second claim for an "accounting." The legal basis for this claim is unclear. Defendant suggests that Plaintiff intended to bring a claim for breach of the trustee's duty to inform and report under O.R.S. 130.710. While Plaintiff does not respond to this suggestion, he does state that he "has a general (federal) common law right to an accounting." Pl. Resp. 2. Plaintiff's citation to North Carolina Dep't of Rev. v. Kimberley Rice Kaestner 1992 Family Trust, 139 S. Ct. 2213 (2019) does not, however, support his position that, under the circumstances here, he is entitled to bring a stand-alone claim for an accounting under the federal common law. Not only does Plaintiff challenge a trust created under state law, but Plaintiff also fails to provide any argument as to how he might satisfy the standing requirements under any such claim. The Court has found no support for his position either.
Even under Defendant's alternative—that Plaintiff's claim arises under O.R.S. 130.710—Plaintiff still lacks standing to proceed. Under O.R.S. 130.710(1), a trustee must keep the "qualified beneficiaries of [a] trust reasonably informed about the administration of the trust and of the material facts necessary for those beneficiaries to protect their interests." This general mandate is not, however, without limit. For example, "while the settlor of a revocable trust is alive, beneficiaries other than the settlor have no right to receive notice, information or reports under this section." O.R.S. 130.710(9). Additionally, "information, notice and reports required by this section shall be given only to the settlor's spouse if: (a) The spouse survives the settlor; (b) The spouse is financially capable; (c) The spouse is the only permissible distributee of the trust; and (d) All of the other qualified beneficiaries of the trust are descendants of the spouse." O.R.S. 130.710(8).
As noted above, Plaintiff's mother, Irene Jensen, is both a settlor and the surviving spouse of a settlor. There are no allegations that she is not financially capable or that there are other permissible distributees. The parties appear to agree that all other qualified beneficiaries are her descendants. Thus, only Irene Jensen is entitled to notice and reports under O.R.S. 130.710, and Plaintiff has no vested interest in the trust. Plaintiff has not, therefore, suffered the invasion of a legally cognizable injury. Without a legally cognizable injury, Plaintiff lacks standing to proceed at this time.
II. Federal Rule of Civil Procedure 12(b)(7)
Defendant next moves the Court to dismiss for failure to join a necessary party. Rule 12(b)(7) provides that a party may move to dismiss a complaint for "failure to join a party under Rule 19." Rule 19 prescribes a two-step analysis to determine whether a party should or must be joined. Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815, 819 (9th Cir. 1985). Under Rule 19(a)(1), the court must first determine whether the party is necessary. Id. A party is necessary if
(A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.Fed. R. Civ. P. 19(a)(1)(A)-(B).
If the party is necessary, but her joinder will destroy jurisdiction, the court must then consider, under Rule 19(b), whether "in equity and good conscience" the action should proceed without her joinder. Takeda, 765 F.2d at 819; see also E.E.O.C. v. Peabody W. Coal Co., 400 F.3d 774, 779 (9th Cir. 2005) (noting that whether a party is indispensable to an action involves "three successive inquiries" with the first determining whether the absent party is "required," the second determining the feasibility of joinder, and the third, if the absent party is required and cannot feasibly be joined, whether "in equity and good conscience, the action should proceed among the existing parties or should be dismissed."). Four factors are relevant to the indispensable inquiry:
(1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by: (A) protective provisions in the judgment; (B) shaping the relief; or (C) other measures; (3) whether a judgment rendered in the person's absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action is dismissed for nonjoinder.Fed. R. Civ. P. 19(b). This analysis is "a practical, fact-specific one, designed to avoid the harsh results of rigid application." Dawavendewa v. Salt River Project Agric. Improvement & Power Dist., 276 F.3d 1150, 1154 (9th Cir. 2002). Generally, determinations under Rule 19 are left to the sound discretion of the trial court. Kescoli v. Babbitt, 101 F.3d 1304, 1309 (9th Cir. 1996).
A. Rule 19(a)
"As a general rule, all beneficiaries are persons needed for just adjudication of an action to remove trustees and require an accounting or restoration of trust assets." Walsh v. Centeio, 692 F.2d 1239, 1243 (9th Cir. 1982). Here, Mrs. Jensen is not only a beneficiary of the trust, but she is the only beneficiary entitled to distributions at this time. Thus, as the sole distributee, she claims a legally protected interest in the subject of this action. Not only would the relief sought affect the assets currently distributed for her benefit, but the Court sees no suggestion that Plaintiff or Defendant could be counted on to vigorously assert Mrs. Jensen's interest in any share of the compensation for the alleged breaches at issue. There is also a possibility that she could seek similar relief in another lawsuit, and that lawsuit could result in multiple obligations for Defendant. In sum, because Mrs. Jensen is a beneficiary, failing to add her as a necessary party would not only impair her ability to protect her interests, but would also leave Defendant subject to the risk of incurring "double . . . or otherwise inconsistent obligations."
Moreover, Irene Jensen is also the trust's sole living settlor and a co-trustee. As a co-trustee, Mrs. Jensen could be subject to liability under the current allegations. Indeed, in his response to Defendant's motion, Plaintiff asserts "that Irene M. Jensen is also in breach of a fiduciary duty." Pl. Resp. 4. Because Mrs. Jensen may well share responsibility with Defendant for the alleged breaches at issue, she should be joined under Rule 19(a). See Hinsdale v. Farmers Nat. Bank and Trust Co., 93 F.R.D. 662 (N.D. Ohio 1982) (Plaintiff's mother, an income beneficiary and co-trustee, was a necessary party that should be joined under Rule 19(a)); Walter v. Drayson, 538 F.3d 1244, 1250 (9th Cir. 2008) (Trustee was necessary party where plaintiff alleged breach of fiduciary duty and an accounting would be necessary to determine the trustees' exposure).
B. Rule 19(b)
Irene Jensen is an Oregon resident. Her joinder would therefore destroy diversity jurisdiction, the only basis for federal subject matter jurisdiction in this matter. Thus, the Court must apply the indispensability analysis of Rule 19(b).
Defendant assumes, without argument, that Irene Jensen would join the action as a defendant. Plaintiff does not object. The Court notes, however, that because Mrs. Jensen is a beneficiary of the trust, her interests may align, to some extent, with Plaintiff's interests. Nevertheless, Mrs. Jensen's roles as the sole distributee and a co-trustee weigh strongly in favor of aligning her as a defendant. This conclusion is supported by Plaintiff's assertion, noted above, that "Irene M. Jensen is also in breach of a fiduciary duty." The Court therefore agrees with Defendant that Irene Jensen would be properly joined as a defendant in this matter.
a. Factor One: The Extent of Prejudice to Any Party or the Absent Party
Analysis under the first factor mirrors the impaired interest analysis under Rule 19(a). Kescoli, 101 F.3d at 1311. As the settlor, co-trustee, and sole distributee of the trust, Irene Jensen claims an interest in the subject matter of this action, and her interest may be harmed if she is not joined. Defendant, too, may suffer prejudice from Irene Jensen's absence in the form of exposure to double or inconsistent obligations should Mrs. Jensen decide to seek relief on her own behalf in state court. The first factor, therefore, weighs in favor of dismissal.
b. Factors Two and Three: Extent to Which Relief Can Be Shaped to Lessen Prejudice and Adequacy of a Judgment Without the Absent Party
Plaintiff provides no argument as to how relief could be shaped to lessen prejudice and whether a judgment without Irene Jensen would be adequate. The Court can conceive of no way to fashion a meaningful judgment on Plaintiff's claims that will not affect Irene Jensen's interests or lessen the possible prejudice to Defendant.
c. Factor Four: Whether an Alternative Forum Exists
Neither party has argued that Plaintiff would not have an adequate remedy in an Oregon state court. All of Plaintiff's claims arise under Oregon state trust law and would ordinarily be adjudicated in the state court system. See Walsh, 692 F.2d at 1244 n.5 (noting that state court was "perhaps a superior forum for resolving questions of local trust law."). Moreover, this case is still young; Defendant has not yet responded to the complaint and discovery has not yet begun. There would therefore be little duplication of effort if this case were to proceed in state court. See id. at 1244. The availability of an alternative forum therefore weighs strongly in favor of dismissal.
Based on the foregoing, the Court concludes "in equity and good conscience" that this action should not proceed without Irene Jensen. By joining Mrs. Jensen, diversity jurisdiction is destroyed. Because this Court does not have subject matter jurisdiction, it will not address Defendant's remaining arguments under Rules 12(b)(6), 12(e), and 12(f).
III. Attorney Fees
Defendant requests reasonable attorney fees under O.R.S. 130.815, O.R.S. 20.105, ORS 20.190(3), and ORCP 17C. Def. Mot. 3, 24. At most, these sources suggest that the Court may, in its discretion, award fees. Given that Defendant provides no argument as to why fees are appropriate in this case, Plaintiff is pro se, and this matter is dismissed on the threshold issues of joinder and subject matter jurisdiction, the Court declines to exercise this discretion. Defendant's request for attorney fees is therefore denied.
CONCLUSION
Defendant's motion to dismiss [16] is GRANTED. Plaintiff's complaint is dismissed without leave to amend and without prejudice to refiling in a court of competent jurisdiction.
IT IS SO ORDERED.
Dated: J une 1 8, 2020.
/s/_________
MARCO A. HERNÁNDEZ
United States District Judge