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Rudd v. Branch Banking & Trust Co.

United States District Court, N.D. Alabama, Southern Division

July 15, 2019

KATHERINE M. RUDD, individually, and as Co-Trustee of the J.W. Goodwin and Virginia M. Goodwin Grandchildren's Trust, and as Co-Trustee of the Joy Goodwin Adams Irrevocable Trust dated July 19, 1989, et al., Plaintiffs,
v.
BRANCH BANKING & TRUST COMPANY, Co-Trustee of the Joy Goodwin Adams Irrevocable Trust dated January 2, 1987 and the Joy Goodwin Adams Irrevocable Trust dated July 19, 1989, Defendant/Third-Party Plaintiff,
v.
JOY G. ADAMS, Third-Party Defendant.

          MEMORANDUM OPINION & ORDER

          JOHN E. OTT CHIEF UNITED STATES MAGISTRATE JUDGE.

         In this action, Plaintiffs Katherine M. Rudd (“Kate”) and Tiffany Rudd Atkinson (“Tiffany”) (collectively “Plaintiffs”), bring claims under Alabama state law for breach of fiduciary duty based upon allegations of malfeasance in the administration of family trusts and related business organizations. (See Doc.[1] 1-1 at 5-31 (“Complaint” or “Compl.”); Doc. 31, Amended Complaint (“Amended Complaint” or “Amd. Compl.”)). The cause comes to be heard on a motion filed by previously-dismissed defendant Wells Fargo Bank, N.A. (“Wells Fargo”) seeking $83, 484.50 in attorney's fees and $455.77 in expenses from out of the res of certain trusts that the parties and the court have referred to as the “Marital Trust” and the “Shares Trusts, ” “to the extent those trusts might be determined to still exist and/or to have any traceable assets.” (Doc. 91). Plaintiffs opposes the motion (Doc. 94), and Wells Fargo has filed a reply in support. (Doc. 95). Upon consideration, the court[2] will grant Wells Fargo's fee application in total.

         I. BACKGROUND

         Plaintiffs originally filed this action on September 27, 2013, in the Circuit Court of Jefferson County, Alabama (the “state court”) against two defendants, Branch Banking and Trust Company (“BB&T”) and Wells Fargo. Broadly stated, Plaintiffs alleged those defendants and their respective, predecessor-in-interest financial institutions had engaged in wrongdoing while serving as co-trustees of certain trusts created by Plaintiffs' grandparents. The parties and the court have referred to the trusts involved in this action by the shorthand designations the “Share I Trust, ” the “Share II Trust” (collectively the “Shares Trusts”), the “1989 Trust, ” the “Marital Trust, ” and the “Grandchildren's Trust.” Plaintiffs asserted that BB&T and Wells Fargo as co-trustees, and another company appointed in some instances to serve in their stead as a trust “custodian, ” Arlington Trust Company (“Arlington”), enabled Plaintiffs' mother, Joy G. Adams (“Joy”), the life beneficiary and the then-“other” co-trustee of the relevant trusts, to obtain distributions and trust property in contravention of the governing trust instruments. Plaintiffs charged that in so doing BB&T and Wells Fargo breached obligations as a co-trustee to protect the interests of remainder beneficiaries, which Plaintiffs alleged to include themselves individually or certain of the other family trusts of which Plaintiffs claimed to be trustees, beneficiaries, or both. Plaintiffs further contended that Joy, BB&T, Wells Fargo, and Arlington kept Plaintiffs in the dark about their interests in the respective trusts by failing to send them notices and disclosures about the existence and operation of the trusts.

         BB&T and Wells Fargo removed the action to this court based on diversity jurisdiction. (Doc. 1). Some of Plaintiffs' claims against BB&T remain pending but are not material to the instant motion. As to Wells Fargo, following removal, it filed an alternative motion for a dismissal or a stay, arguing that Plaintiffs had entered into a forum-selection agreement by which they had stipulated to litigate their claims against Wells Fargo within the confines of another, related civil action that Plaintiffs had previously filed in the state court against Wells Fargo and others. (Doc. 9). The court granted Wells Fargo's motion to dismiss, concluding that Plaintiffs were bound by the forum-selection agreement providing that they would bring their claims against Wells Fargo, if it all, in a related proceeding then pending in the Circuit Court of Jefferson County, Alabama, Birmingham Division, before the Hon. Judge Robert S. Vance, Jr., case number CV-2012-900915.00 (hereinafter the “State-Court Action”). (Doc. 27 at 21-29). Accordingly, the court dismissed those claims without prejudice to Plaintiff's right to re-file them in the State-Court Action. Plaintiffs subsequently took the opportunity to do so. Wells Fargo then moved this court to certify as final, pursuant to Fed.R.Civ.P. 54(b), that portion of its Memorandum Opinion and Order that dismissed Plaintiffs' claims against Wells Fargo without prejudice. (Doc. 32). Plaintiffs later joined in that motion (Doc. 42), which the court granted. (Doc. 44). No. appeal followed, however.

         Wells Fargo moved, pursuant to Ala. Code § 19-3B-709, to be reimbursed from out of the property held by the Shares Trusts, the Marital Trust, or both, in the amount of $39, 331 for attorney's fees and expenses incurred in this court. (Doc. 29). The court initially denied that motion. (Doc. 45). In so doing, the court determined that it could not order payment of fees from out of the res of either trust because it did not appear from the record that the court possessed jurisdiction over the current co-trustees of either the Shares Trusts or the Marital Trust, who would, the court concluded, be necessary parties to any such adjudication. Wells Fargo moved for reconsideration of that denial. (Doc. 48). The court agreed to do so and ultimately held that Wells Fargo could recover fees and expenses from the trust property under § 19-3B-709. (Doc. 90 at 56-85). As such, the court ordered Wells Fargo to file an application and evidence itemizing, documenting, or otherwise supporting the specific amount of fees and expenses claimed and the reasonableness thereof. (Id. at 84).

         Wells Fargo has now filed such materials. (Doc. 91). Specifically, Wells Fargo claims entitlement to $83, 484.50 in attorneys' fees and $455.77 in expenses, “to be paid out of the estates of the Shares Trusts and/or the Marital Trust to the extent those trusts might be determined to still exist and/or to have any traceable assets.” (Id. at 1). Wells Fargo also claims that it will be entitled to recover additional fees incurred in litigating its fee motion. (Id., ¶¶ 2, 11). Wells Fargo contends that its fees and expenses have been “properly incurred” for purposes of Ala. Code § 19-3B-709(a)(1), and are reasonable. In support of its fee application, Wells Fargo has declarations from two of its attorneys of record in the case (Docs. 91-1, 91-3) and itemized billing records (Doc. 91-2).

         Plaintiffs oppose the motion. (Doc. 94). They first argue that Wells Fargo is judicially estopped from seeking fees and expenses from out of the res of the Shares Trusts or the Marital Trust. (Id. ¶¶ (I)(4) -(8)). Specifically, Plaintiffs point to summary judgments Judge Vance entered in the State-Court Action on March 7, 2017, in which he accepted contentions that Plaintiffs cannot prevail on claims involving administration of the Shares Trusts or the Marital Trust because those trusts no longer exist. (Id. ¶ (I)(5)). Plaintiffs note that they filed a motion to alter, amend, or vacate Judge Vance's summary judgment order in favor of Wells Fargo. (Id. at p. 4 n. 2). A review of documents in the state-court case file available on www.Alacourt.com indicate, however, that Judge Vance summarily denied that motion on December 18, 2018 (Doc. 1205 in the State-Court Action). Those documents also indicate that Plaintiffs filed a notice of appeal on February 8, 2019, with Wells Fargo cross-appealing from an order by Judge Vance denying its request for attorneys' fees in the State-Court Action. As far as this court can tell, that appeal remains pending in the Alabama Supreme Court. In addition to its judicial-estoppel claim, Plaintiffs press a host of arguments urging that the amount of fees that Wells Fargo seeks is excessive and unreasonable. (Doc. 94 at pp. 5-13). In a related vein, Plaintiffs also contend that Wells Fargo's “limited success” in this court “warrants a low or no fee award.” (Id. at p. 13).

         II. DISCUSSION

         A. Judicial Estoppel

         The court first considers Plaintiffs' argument that Wells Fargo is judicially estopped from seeking attorneys' fees and expenses. Generally speaking, under the doctrine of judicial estoppel, “where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.” New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (quoting Davis v. Wakelee, 156 U.S. 680, 689 (1895)). Because this is a diversity case, the court is bound to apply judicial estoppel as interpreted under Alabama state law. See Original Appalachian Artworks, Inc. v. S. Diamond Assocs., Inc., 44 F.3d 925, 930 (11th Cir. 1995); Nationwide Prop. & Cas. Co. v. Phillip Hunt & Cmty., & S. Bank, Inc., 2014 WL 2698637, at *2 (N.D. Ala. June 13, 2014) (Ott, M.J.). For determining the applicability of judicial estoppel, the Alabama Supreme Court has embraced the factors set forth in the United States Supreme Court's decision in New Hampshire v. Maine, 532 U.S. 742 (2001). See Ex parte Jackson Hosp. & Clinic, Inc., 167 So.3d 324, 332 (Ala. 2014); Ex parte First Ala. Bank, 883 So.2d 1236, 1246 (Ala. 2003). Under that formulation, a court generally looks for the following elements:

(1) a party's later position must be clearly inconsistent with its earlier position; (2) the party must have been successful in the prior proceeding so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or second court was misled; and (3) the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.

Hamm v. Norfolk So. Ry. Co., 52 So.3d 484, 494 (Ala. 2010) (internal quotation marks and citations omitted).

         In support of their claim that these requirements are met, Plaintiffs highlight that Wells Fargo maintained throughout the course of the State-Court action that both the Shares Trusts and the Marital Trusts had already terminated even prior to the commencement of that litigation. Plaintiffs further emphasize that, on March 7, 2017, Judge Vance granted summary judgment in favor of Wells Fargo, holding that the Marital Trust had terminated and “ended for all purposes” in August 2013, thereby precluding Plaintiffs from having standing to pursue claims as its trustees. (See Doc. 65-1 at 4-5, Doc. 981 in the State-Court Action). And “on the same date, ” Plaintiffs say, “Judge Vance [likewise] concluded that the Shares Trust[s] had terminated in April 2011 and that Plaintiffs lacked standing to bring claims with respect to the Shares Trust[s].” (Doc. 94 ¶ 5, citing Doc. 983 in the State-Court Action, Doc. 66-1 in this action). As such, Plaintiffs contend that, by seeking to recover fees from out of these trusts that Judge Vance ...


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