In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17‐1659
RICHARD D. DOERMER,
Plaintiff‐Appellant,
v.
OXFORD FINANCIAL GROUP, LTD.,
Defendant‐Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 16 CV 8248 — Manish S. Shah, Judge.
____________________
ARGUED NOVEMBER 29, 2017 — DECIDED MARCH 7, 2018
____________________
Before WOOD, Chief Judge, and KANNE, Circuit Judge.1
WOOD, Chief Judge. Family disputes over who owns what
are depressingly common—indeed, they are the stuff of the
legal practice of many an estate lawyer. Richard Doermer and
his sister, Kathryn Doermer Callen, are living examples of this
1 Circuit Judge Ripple recused himself after oral argument and did not
participate in the decision of this case, which is being resolved by a
quorum of the panel under 28 U.S.C. § 46(d).
2 No. 17‐1659
phenomenon. The two siblings have spent the better part of
the past decade embroiled in legal disputes about how to
manage their family’s fortune. A little over a year ago,
Richard and Kathryn appeared before this court after Richard
sued his sister and his nephew on behalf of a family nonprofit
foundation over which Richard sought greater control.
Doermer v. Callen, 847 F.3d 522 (7th Cir. 2017). We affirmed the
district court’s dismissal of that action because Richard lacked
capacity to bring a derivative action under Indiana law.
Now Richard has returned. This time his suit is about the
family trust, not the family foundation. And rather than suing
his sister directly, Richard has targeted his sister’s financial
advisor, Oxford Financial Group. He alleges that Oxford gave
Kathryn negligent advice, which caused her to mismanage
the trust. Richard further seeks to compel Kathryn to join the
suit challenging her own financial decisions, by purporting to
name her an “involuntary plaintiff” in the matter.
We need not wade into the dispute over the soundness of
Oxford’s financial advice or Kathryn’s ultimate trust‐manage‐
ment decisions, because Richard, once again, lacks capacity to
pursue this suit under state law and thus fails to state a claim
on which relief can be granted.
I
Richard, who is a citizen of Illinois, and Kathryn, who is a
citizen of Indiana, are the only children of Richard T. and
Mary Louise Doermer. They are also the beneficiaries of a
multi‐million dollar trust that their now‐deceased parents es‐
tablished for their children and grandchildren. The trust has
three trustees: Richard, Kathryn, and a corporate trustee (cur‐
rently Bankers Trust). When their father passed away in 2010,
No. 17‐1659 3
Richard and Kathryn fell into “irreconcilable” disputes about
how to manage the trust and invest its assets. About a year
later, Kathryn hired Oxford, an Indiana corporation, to advise
her about how to handle the trust and resolve the feud with
her brother. The trust paid Oxford’s fees.
In March 2012, Oxford advised Kathryn that the best solu‐
tion to her dispute with her brother was to divide the trust in
two, creating one trust for Kathryn and her children, and an‐
other for Richard and his. Richard eagerly accepted this pro‐
posal. As part of the proposal, Kathryn and Richard agreed to
move the situs of the trust from Indiana to South Dakota, pre‐
sumably to take advantage of South Dakota’s more favorable
laws.
The siblings spent the next several months haggling over
the finer details of asset division. Ultimately, they could not
agree on the terms of a petition to divide the trust. When
Kathryn refused to sign Richard’s proposed agreement in the
fall of 2012, he petitioned a South Dakota state court to order
that the trust be split in half. The court did not grant his re‐
quest, and the trust remains intact to this day.
Richard complains that he has “suffered great losses from
disbursements and benefits that he and his family lineage
would have been entitled to receive” had he been allowed to
pursue his high‐risk, high‐reward investment strategy in
2012. Richard alleges that the reason his sister refused to sign
the trust‐division agreement is because she received negligent
advice from Oxford. If Oxford had not given Kathryn poor
financial advice, he asserts, she would have accepted his
proposed agreement and, as a result, the trust (or, rather,
Richard’s half of the trust) would have earned an additional
4 No. 17‐1659
$2 million in “reasonable investment opportunities during a
Bull Market.”
In July 2016, Richard sued Oxford in Illinois state court on
behalf of the trust; he alleged that he was suing in his capacity
as both a beneficiary of the trust and a co‐trustee. His com‐
plaint sets forth two counts: (1) “breach of fiduciary duty and
negligence,” and (2) “gross negligence and wilful [sic] and
wanton misconduct.” The complaint identifies Kathryn as an
“involuntary plaintiff.” Aside from sending Kathryn a letter,
in which a copy of the complaint and a request that she join
as a plaintiff was enclosed, however, Richard took no steps to
bring her into the litigation. Oxford was properly served.
Oxford removed the case to federal court on the basis of
diversity jurisdiction and then promptly moved to dismiss
Richard’s complaint under Federal Rule of Civil Procedure
12(b)(1). It argued that Richard lacks capacity to bring suit on
behalf of the trust under state law. The district court handled
Oxford’s motion to dismiss under Rule 12(b)(6) rather than
12(b)(1), correctly explaining that capacity problems implicate
a plaintiff’s ability to state a claim, not the district court’s sub‐
ject‐matter jurisdiction. Korte v. Sebelius, 735 F.3d 654, 668
(7th Cir. 2013); see also Meyers v. Oneida Tribe of Indians of Wis‐
consin, 836 F.3d 818, 820 (7th Cir. 2016) (“[W]hen appropriate,
a court may treat a motion filed under Rule 12(b)(1) as if it
were a Rule 12(b)(6) motion.”).
Before turning to the merits of the capacity issue, the dis‐
trict court noted that there was a dispute about which state’s
law should control. Oxford argued that the trust agreement’s
choice‐of‐law clause required the court to apply South Dakota
law, while Richard pushed for Illinois law, the law of the fo‐
No. 17‐1659 5
rum state. Applying Illinois choice‐of‐law principles, the dis‐
trict court decided that South Dakota substantive law gov‐
erned, since South Dakota is the situs of the trust. It noted,
however, that the outcome would be the same no matter
which of those two state laws applied, because there were no
significant differences between them.
The district court then granted Oxford’s motion to dis‐
miss. It held that Richard could not sue Oxford in his capacity
as trust beneficiary, because state law prohibits a trust benefi‐
ciary from suing a third party on behalf of a trust (absent spe‐
cial circumstances that Richard did not allege). The district
court also found that Richard could not sue Oxford in his ca‐
pacity as co‐trustee, because both state law and the trust
agreement require a majority of trustees to consent to such a
suit and that consent was missing. Richard now appeals, and
we affirm.
II
Richard’s first assault on the judgment is one we must
entertain: he says that the district court lacked subject‐matter
jurisdiction. Because this case arises under state law, the
district court had jurisdiction only if every plaintiff is diverse
from every defendant. 28 U.S.C. § 1332(a). Richard asserts
that Kathryn is an “involuntary plaintiff” whose presence
destroys diversity jurisdiction because she, like defendant
Oxford, is a citizen of Indiana. He is wrong.
We note at the outset that joinder of parties is a procedural
matter that is governed by federal law in federal courts, and
there is nothing in the Federal Rules of Civil Procedure that
permits a plaintiff unilaterally to force another party to join
his lawsuit as an involuntary plaintiff. It is possible to name a
6 No. 17‐1659
person as a defendant, serve that person with process, and
then ask the court to realign the parties, but that is not what
Richard did. It is also possible for a district court to compel
the joinder of a party under Federal Rule of Civil Procedure
19(a), but Richard did not ask the district court to do that, ei‐
ther. Even if he had, the district court would have turned
down the request. Nothing in the record suggests that
Kathryn is a party who should be joined if feasible within the
meaning of Rule 19. See Thomas v. United States, 189 F.3d 662,
667 (7th Cir. 1999) (explaining the standards used to deter‐
mine whether a person fits the Rule 19 profile). Moreover, not
even Rule 19 requires the addition of a person who would de‐
stroy subject‐matter jurisdiction. To the contrary, Rule 19(b)
calls on the district court to decide whether the case can go
forward without that person and offers a number of adjust‐
ments that may be (and often are) possible.
To the extent that Richard’s argument involves a capacity
issue rather than a question of party joinder, we note that
there is no such thing as an “involuntary plaintiff” in the fo‐
rum state, Illinois. If an Illinois plaintiff wants to force another
person to participate in his lawsuit, he must join that person
as a defendant, even if her interests are materially identical to
his own. 735 ILCS 5/2‐404; Whitney v. Mayo, 15 Ill. 251, 255
(1853). South Dakota law is the same. Like the federal system,
South Dakota allows a person to be joined as an involuntary
plaintiff only when that person’s presence is essential for
proper adjudication of the case. Busselman v. Egge, 2015 S.D.
38, ¶ 6 (2015); SDCL § 15‐6‐19(a).
In the face of this adverse authority, Richard contends that
a century‐old Supreme Court decision, Independent Wireless
No. 17‐1659 7
Telephone Co. v. Radio Corp. of America, 269 U.S. 459 (1926), re‐
quires us to recognize an involuntary‐plaintiff proceeding in
his case. Again, he is mistaken. In Independent Wireless, the
Court allowed a patent holder to be joined involuntarily as a
plaintiff in an equitable suit brought by the patent’s exclusive
licensee, on the ground that “both the owner and the exclu‐
sive licensee are generally necessary parties in the [patent in‐
fringement] action in equity.” Id. at 466. But the 1966 amend‐
ments to Federal Rule of Civil Procedure 19 abrogated this
holding by altering the criteria for when a person “must be
joined as a party,” and spelling out the consequences that fol‐
low if joinder is not feasible. Other reasons also undermine
the relevance of Independent Wireless. Richard’s suit is not eq‐
uitable in nature and does not involve either federal law (let
alone the idiosyncrasies of patent law) or failure to join a crit‐
ical party. His case is simply a state‐law suit seeking money
damages. Neither the Supreme Court nor any court of which
we are aware has suggested that a federal court must allow a
non‐party to be forced to join as a plaintiff in a suit arising
under state law.
Richard’s alternative theory for the lack of diversity juris‐
diction is that the trust itself is the “real party in interest,” and
that the trust takes the citizenship of all its trustees (including
Kathryn). The fatal problem with this theory is that traditional
trusts such as the one at issue here—as opposed to so‐called
“business trusts,” which are a newer invention—were not
considered distinct legal entities at common law, and hence
cannot sue or be sued in their own name. Americold Realty
Trust v. Conagra Foods, 136 S. Ct. 1012, 1016 (2016). Instead,
legal proceedings involving these trusts must be “brought by
or against the trustees in their own name[s].” Id. (emphasis
added). As the Supreme Court repeatedly has explained,
8 No. 17‐1659
when a trustee of a traditional trust “files a lawsuit or is sued
in her own name, her citizenship is all that matters for diver‐
sity purposes.” Id. (citing Navarro Savings Ass’n v. Lee, 446 U.S.
458, 462–66 (1980)). Thus, we may look only to Richard’s citi‐
zenship, not the citizenship of his co‐trustees. Because plain‐
tiff Richard and defendant Oxford are citizens of different
states, the district court’s diversity jurisdiction was secure.
The last possible bar to this court’s review on the merits is
appellate jurisdiction. With exceptions not pertinent to this
case, we may exercise appellate review only over “final deci‐
sions of the district courts of the United States.” 28 U.S.C.
§ 1291. Although the parties overlooked this issue in their
briefs, finality was in doubt because the district’s order dis‐
missing Richard’s complaint was “without prejudice.” “We
have gone so far as to say that dismissals without prejudice
are canonically non‐final.” Doss v. Clearwater Title Co., 551 F.3d
634, 639 (7th Cir. 2008) (quotation marks omitted). When we
questioned Richard’s counsel about this problem at oral argu‐
ment, he stipulated that Richard will not refile or attempt to
amend his complaint (or take any other such action in the dis‐
trict court). That stipulation lifts any cloud that existed on our
appellate jurisdiction. Cf. India Breweries, Inc. v. Miller Brewing
Co., 612 F.3d 651, 657 (7th Cir. 2010) (a party can satisfy section
1291’s finality requirement by “unequivocally” stipulating to
dismissal with prejudice). We may thus move on to the capac‐
ity issue.
III
Federal Rule of Civil Procedure 17(b)(3) explains that a
plaintiff’s capacity to sue on behalf of a trust is “determined
… by the law of the state where the [federal district] court is
located.” Here, that state is Illinois, and so we apply Illinois
No. 17‐1659 9
law. (It is true, as Oxford argues, that an Illinois court might
invoke choice‐of‐law principles to apply South Dakota
substantive law if there were outcome‐determinative
differences between the laws of the two jurisdictions. See
Townsend v. Sears, 227 Ill. 2d 147, 155 (2007). But there is no
indication of any such difference in this case. Both Illinois and
South Dakota follow the Restatement of Trusts, and we are
aware of no conflict between the court decisions or statutes in
the two states when it comes to capacity‐to‐sue questions.)
Illinois law bars Richard from suing Oxford in his capacity
as a trustee without the consent of at least one of his co‐
trustees—consent that he has not obtained. 760 ILCS 5/10
(requiring consent of a majority of trustees to act on behalf of
a trust); Madden v. Univ. Club of Evanston, 97 Ill. App. 3d 330,
332 (1981) (“[A] co‐trustee cannot exercise a joint power
individually.”). The requirement for majority agreement
whenever a trustee acts on behalf of a trust is also codified in
Article VIII, § 8‐C(25)(e) of the written trust agreement.
Given that Richard cannot sue Oxford on behalf of the
trust in his capacity as a co‐trustee, the only way he might
have capacity to bring suit is through his status as a trust ben‐
eficiary. In general, a trust beneficiary may not sue a third
party on behalf of the trust. American Law Institute, Restate‐
ment (Third) of Trusts § 107 (2012). Some jurisdictions, in‐
cluding Illinois, recognize an exception to this rule in cases
where the trustee could maintain an action against a third
party but improperly refuses to bring suit. See id., § 107
cmt. c(2). In re Estate of Zivin, 2015 IL App (1st) 150606, ¶ 16
(2015). Nevertheless, a “trustee’s refusal to pursue a claim on
behalf of a trust is ‘improper’ only where it was a breach of
the trustee’s fiduciary duties not to pursue the claim.” In re
10 No. 17‐1659
Estate of Brantman, 2011 IL App (2d) 101137‐U, ¶ 32 (citing Ax‐
elrod v. Giambalvo, 129 Ill. App. 3d 512, 519 (1984)); see also
Zivin, 2015 IL App (1st) at ¶ 26.
Richard has not alleged any facts suggesting that either
Kathryn or the corporate trustee breached a fiduciary obliga‐
tion to the trust by not joining his suit against Oxford. In fact,
as the district court explained in its final opinion, Richard
never addressed his beneficiary status at all in the proceed‐
ings below, even after Oxford raised the issue as an affirma‐
tive defense. Even if we thought that Richard could qualify
for an exception to the general rule that beneficiaries cannot
sue third parties on behalf of a trust (and we do not), his fail‐
ure to address his beneficiary status before the district court
results in waiver. Anderson v. Donahoe, 699 F.3d 989, 997
(7th Cir. 2012).
IV
Because Richard has not alleged facts that would enable
him to sue a third‐party on behalf of the trust, he has failed to
state a plausible claim for relief. Although we lack the power
to prevent the Doermer family from acting out a real‐life ver‐
sion of Jarndyce v. Jarndyce,2 we agree with the district court
that the present action should go no further. The decision of
the district court is AFFIRMED.
2 See generally Charles Dickens, Bleak House (Bradbury & Evans, 1853)
(“[T]he whole estate is found to have been absorbed in costs[!]”).