Estate of Kerrigan v. Kerrigan

          MEMORANDUM OPINION AND ORDER

          EMILY C. MARKS CHIEF UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Pending before the Court is Defendant James M. Kerrigan's Motion to Dismiss and Alternatively, Motion to Change Venue. (Doc. 19). This dispute centers upon the administration of the Kerrigan Real Estate Investment Trust (“KREIT”) that Decedent George J. Kerrigan established for his benefit several years ago. George J. Kerrigan passed away on August 19, 2017. George Kerrigan's widow, on behalf of his estate, claims that the trustee, Defendant James Kerrigan, failed to distribute proceeds from the trust to Decedent during his lifetime, failed to meet his legal obligation to provide an accounting of the trust assets, and wrongfully converted trust property. Shortly before his death, Decedent established another trust, the George Kerrigan Revocable Trust, as the beneficiary of the KREIT upon his death. The Revocable Trust also brings claims against the Defendant for continuing to improperly administer the trust after Decedent's death.

         The Defendant moves to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction, Rule 12(b)(2) for lack of personal jurisdiction, and Rule 12(b)(6) for failure to state a claim. In the alternative, the Defendant seeks to transfer venue under 28 USC § 1404. For the reasons stated below, the Defendant's motions are due to be denied.

         II. BACKGROUND^[1]

         On or about November 20, 1984, Decedent and his brother, the Defendant James Kerrigan, acquired Gateside, a property in Daleville, Alabama. Gateside provides temporary rentals, long-term mobile home rentals, and RV spaces with hookups. Until April 7, 2006, Decedent and the Defendant jointly owned and managed Gateside. On April 7, 2006, Decedent purchased the Defendant's 50% interest and became the sole owner of Gateside.

         On or about December of 2010, Decedent conveyed his interest in Gateside to the Kerrigan Real Estate Investment Trust (KREIT) to be held as an asset of the KREIT. In late November 2013, Decedent and the Defendant entered into an agreement to memorialize the KREIT. The Trust Agreement names the Defendant as the trustee of the KREIT and Decedent as the sole beneficiary. Decedent and the Defendant signed the Trust Agreement and it was executed in Daleville, Alabama. The agreement mandates that it “be administered under the laws of the State of Alabama and construction of this agreement shall be controlled by the laws of [Alabama].” (Doc. 19-2 at 3). The Trust Agreement was recorded in Dale County, Alabama.

         The terms of the Trust Agreement are sparse-the substantive portion of the document is barely two pages long. The Trust Agreement provides that the trust should be distributed “to meet the ongoing needs of the trust beneficiary to include the normal costs associated with day to day living activities, ” but does not provide the trustee with specific direction about how to decide the needs of the beneficiary. (Doc. 19-2 at 2). It only directs that the decision should be made “at the sole discretion of the trustee.” (Id.). It does not specify what should occur when the beneficiary, Decedent George Kerrigan, dies.

         On or about March 16, 2017, Decedent executed a separate trust agreement establishing the George Kerrigan Revocable Trust, which identifies Decedent as the sole beneficiary of the Revocable Trust during his lifetime. His wife was named as the sole trustee and sole beneficiary following Decedent's death. Decedent assigned his interest as the beneficiary of the KREIT to the Revocable Trust.

         On April 22, 2017, the Defendant signed and had a document notarized titled “Exercise of Appointment by Execution of Certificate of Beneficiary.” That document purports to appoint the great-grandchildren of Decedent as the contingent beneficiaries of the KREIT upon the death of the beneficiary, Decedent. The only signatures on that document are that of the Notary Public and the Defendant as the Trustee of the Kerrigan Real Estate Investment Trust. Decedent, the beneficiary and settlor of the KREIT, did not sign this document and there is nothing to indicate that this assignment was prepared with his approval.

         On June 5, 2017, Defendant entered into an agreement to sell the Gateside Property for $386, 326.79. (Doc. 19-7). The mortgage was seller financed at a rate of four percent interest to be paid to the KREIT in 115 installments of $4, 049.81. The Plaintiffs allege that this purported sale was for less than full and adequate consideration and that the seller financed debt is potentially not properly collateralized. (Doc. 16 at 7, para. 33-34).

         Decedent died in New Hampshire in August of 2017. The Plaintiffs allege that neither Decedent, the Revocable Trust, Decedent's estate, nor Mrs. Kerrigan ever received any income or any benefit from Gateside's operation or its purported sale. The Plaintiffs further allege that the Defendant never reported to Decedent or his estate the financial condition of the trust, in violation of Alabama law.

         The Plaintiffs allege that the Defendant violated various statutes and breached his fiduciary obligations to Decedent and now, to the Revocable Trust. Accordingly, the Plaintiffs bring claims for Breach of Fiduciary Duty (Count One); Accounting (Count Two); Conversion (Count Three); Negligence (Count Four); and Equitable Relief in the Form of a Constructive Trust (Count Five); and Breach of Trust under Alabama Code § 19-3b-1001 (Count Six).

         The Defendant brings this Motion to Dismiss for lack of subject matter jurisdiction, lack of standing, lack of personal jurisdiction, and for failure to state a claim. In the alternative, the Defendant moves to transfer venue to the Defendant's home state of Massachusetts or New Hampshire, the state where Decedent resided when he died and where Mrs. Kerrigan currently resides.

         III. ANALYSIS

         A. The Court has subject matter jurisdiction over this matter, and the Plaintiffs have adequately pleaded their claims.

         a. Legal Standard for Motions to Dismiss for Lack of Subject Matter Jurisdiction

         Generally, a court's first duty is to determine whether it has subject matter jurisdiction because that implicates the court's power to hear the case. Fla. Wildlife Fed'n Inc. v. U.S. Army Corps of Eng'rs, 859 F.3d 1306, 1322 (11th Cir. 2017) (observing that while not an unyielding rule, subject matter should generally be resolved first); United States v. Salmona, 810 F.3d 806, 810 (11th Cir. 2016) (citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998)). The burden of establishing a federal court's subject-matter jurisdiction rests on the party asserting jurisdiction. See Thomson v. Gaskill, 315 U.S. 442, 446 (1942); Eaton v. Dorchester Dev., Inc., 692 F.2d 727, 732 n.9 (11th Cir. 1982; Bond Safeguard Ins. Co. v. Wells Fargo Bank, N.A., 502 F. App'x. 867, 869 (11th Cir. 2012).

         Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, parties may assert lack subject-matter either through a factual attack or a facial attack on the pleadings. See Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir.1990) (per curiam). A facial attack questions the sufficiency of the pleading, and the plaintiff enjoys similar safeguards provided when opposing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Sea Vessel Inc. v. Reyes, 23 F.3d 345, 347 (11^th Cir. 1994). The court accepts the plaintiff's allegations as true, construes them most favorably to the plaintiff, and will not look beyond the face of the complaint to determine jurisdiction. Id. A factual attack, however, permits “the trial court [to] proceed as it never could under 12(b)(6).” Lawrence, 919 F.2d at 1529 (quoting Williamson v. Tucker, 645 F.2d 404, 415 (5th Cir. May 20, 1981)). The court is permitted to undertake a wide-ranging investigation and, in order to ascertain whether subject matter jurisdiction exists, may look beyond the pleadings and review or accept any evidence submitted by the parties. Id.

         There is, however, an important distinction between the court's power to determine whether it has subject matter jurisdiction and the ability to reach the substantive claims that form the basis of the case. The wide-ranging power afforded to the court is limited to consideration of subject matter jurisdiction, and when the inquiry encroaches upon the merits of the case, the plaintiff is entitled to protection from the court's power to weigh the facts under a Rule 12(b)(1) motion. Eaton, 692 F.2d at 733 (“The argument against premature dismissal on 12(b)(1) grounds is particularly strong when the basis of jurisdiction is also an element of plaintiff's cause of action on the merits”).

         Thus, where subject-matter jurisdiction is “inextricably intertwined” with the merits of the case, Lawrence, 919 F.2d at 1529 (quoting Eaton, 692 F.2d at 733), “the defendant's challenge to the court's jurisdiction is also a challenge to the existence of a federal cause of action.” Williamson, 645 F.2d at 415. In such cases, the court's power is more limited than under a straightforward Rule 12(b)(1) motion. This is to prevent a defendant from challenging the underlying cause of action by means of an attack on subject-matter jurisdiction which enables the judge, rather the jury, to weigh the merits of the case. Whitson v. Staff Acquisition, Inc., 41 F.Supp.2d 1294 (M.D. Ala. 1999) (quoting Eaton, 692 F.2d at 733). Instead, the court should convert the Rule 12(b)(1) motion to a Rule 12(b)(6) motion to provide the plaintiff with the appropriate protections. Id. (citing Eaton, 692 F.2d at 733).

         b. Legal Standard for Motion to Dismiss for ...