15‐802‐cv
Raymond Loubier Irrevocable Trust v. Noella Loubier
In the
United States Court of Appeals
For the Second Circuit
________________
August Term, 2016
(Argued: October 25, 2016 Decided: June 1, 2017)
Docket No. 15‐802‐cv
________________
RAYMOND LOUBIER IRREVOCABLE TRUST, NOELLA LOUBIER
IRREVOCABLE TRUST, ESTATE OF GERVAIS A. LOUBIER,
Plaintiffs‐Appellants,
—v.—
NOELLA LOUBIER, RAYMOND LOUBIER REVOCABLE TRUST,
NOELLA LOUBIER REVOCABLE TRUST,
Defendants‐Appellees.*
* The Clerk of Court is directed to amend the caption as set forth above.
1
________________
Before:
LEVAL, SACK, RAGGI, Circuit Judges.
________________
On appeal from a judgment of dismissal entered in the United States
District Court for the District of Connecticut (Eginton, J.) based on the lack of
subject matter jurisdiction, the parties dispute whether, for purposes of
determining diversity, the citizenship of the party trusts is properly identified by
reference only to that of their trustees or also to that of all beneficiaries. Because
the plaintiff trusts are traditional common law fiduciary agreements, and,
further, because they are not separate juridical entities under the relevant state
law of Florida, we conclude that the citizenship of their trustees controls a
diversity determination.
VACATED AND REMANDED.
________________
EDDI Z. ZYKO, Esq., Middlebury, Connecticut, for Plaintiffs‐Appellants.
HOWARD M. CAMERIK, Gray Robinson, P.A., Fort Lauderdale,
Florida (Jeffrey P. Mueller, Day Pitney LLP, Hartford,
Connecticut, on the brief), for Defendants‐Appellees.
________________
2
REENA RAGGI, Circuit Judge:
The parties in this action are involved in an inheritance dispute pertaining
to the assets of the now deceased Raymond Loubier, as conveyed to various
revocable and irrevocable trusts in his name and that of his wife Noella Loubier.
Two of the Loubiers’ irrevocable trusts, as well as a contingent trust beneficiary,
Gervais A. Loubier, invoke diversity jurisdiction to sue Noella Loubier and two
of the Loubiers’ revocable trusts for alleged breach of fiduciary duty. Plaintiffs
here appeal from a judgment entered in the United States District Court for the
District of Connecticut (Warren W. Eginton, Judge) on March 3, 2015, dismissing
the case for lack of subject matter jurisdiction in light of plaintiffs’ failure to
demonstrate complete diversity. See 28 U.S.C. § 1332. The district court’s
diversity determination was based on its understanding that Noella Loubier, a
Florida citizen, is on both sides of the case caption because not only is she an
individually named defendant and the trustee of the defendant revocable trusts,
but also she was purportedly the trustee of the plaintiff Raymond Loubier
Irrevocable Trust.
We need not here decide whether the presence of the same person, in two
different capacities, on both sides of a case caption, defeats diversity because the
challenged judgment here rests on a misapprehension as to the particular
3
irrevocable trusts named as plaintiffs. Plaintiffs bear some responsibility for
confusion on this and other issues. Nevertheless, it is useful at the outset to
clarify the identity of the party trusts.
The irrevocable trust agreements attached to the complaint are dated
February 25, 2000, and name Roland Loubier as their sole trustee (“2000
Irrevocable Trust Agreements”). In an affidavit filed in support of dismissal,
Noella Loubier stated that these 2000 Irrevocable Trust Agreements were
supplanted by the Raymond Loubier Irrevocable Trust Agreement dated January
29, 2003, and the Noella Loubier Irrevocable Trust Agreement dated August 18,
2005, for both of which she is named trustee. In opposing dismissal, plaintiffs
asserted that the Loubiers’ 2000, 2003, and 2005 irrevocable trust agreements are
distinct and that the intended party plaintiffs here are, indeed, the couple’s 2000
irrevocable trusts. For purposes of this appeal, defendants accept plaintiffs’
characterization of the 2000 Irrevocable Trust Agreements as “the intended and
proper party plaintiffs,” Appellees’ Br. 4 n.2, and agree that the trustee of both
these trusts is Roland Loubier, who appears to be a citizen of Canada.1
1 Plaintiffs confuse this issue in their opening brief by identifying Gervais
Loubier, a citizen of Connecticut, as the trustee of the 2000 Irrevocable Trust
Agreements. But this appears to be a scrivener’s error as plaintiffs’ citations for
4
With the identity of the plaintiff trusts thus clarified, plaintiffs argue that
they have established complete diversity because plaintiff Gervais Loubier is a
citizen of Connecticut; the plaintiff trusts take the Canadian citizenship of their
trustee, Roland Loubier; defendant Noella Loubier is a citizen of Florida; and the
defendant revocable trusts of which she is the trustee take her Florida
citizenship. Defendants disagree. They argue that the party trusts’ citizenship is
properly identified not only by their trustees but also by their beneficiaries,
which here results in Florida and Connecticut citizens being on both sides of the
case caption, as Noella Loubier and Gervais Loubier are direct or contingent
beneficiaries of all four party trusts.
We consider the question of trust citizenship in light of the Supreme
Court’s recent decision in Americold Realty Trust v. Conagra Foods, Inc., 136 S. Ct.
1012 (2016) (holding that, for diversity purposes, real estate investment trust
(“REIT”) organized under Maryland law for benefit of its shareholders takes its
citizenship from all those shareholders). While Americold does not speak directly
to the circumstances of this case, it does distinguish (1) traditional trusts
establishing only fiduciary relationships and having no legal identity distinct
this statement, and the trust agreements themselves, make plain that Roland
Loubier is the sole trustee. See J.A. 25, 90, 291–92.
5
from their trustees, from (2) the variety of unincorporated artificial entities to
which states have applied the “trust” label, but which have little in common with
traditional trusts. See id. at 1016. The REIT at issue in Americold was one of the
latter entities. By contrast, the party trusts here derive from trust agreements
establishing only traditional fiduciary relationships. Further, the trusts here at
issue are not distinct legal entities under the relevant Florida state law. We
conclude that legal proceedings involving such traditional trusts are effectively
brought by or against their trustees and, thus, it is the trustees’ citizenship, not
that of beneficiaries, that matters for purposes of diversity.
Applying this legal conclusion to the record on appeal, we cannot
confidently resolve the question of diversity because the citizenship of Roland
Loubier, trustee of both plaintiff trusts, is not clearly established. In an affidavit
filed in the district court, Roland Loubier provides his Canadian address, but
nowhere states that he is, in fact, a citizen of Canada, much less that, in his
capacity as trustee, he wishes to pursue this action. The omission is significant
because if Roland Loubier were a United States citizen domiciled abroad,
diversity would be defeated. See Herrick Co. v. SCS Commc’ns, Inc., 251 F.3d 315,
322 (2d Cir. 2001) (“United States citizens domiciled abroad are neither citizens
of any state of the United States nor citizens or subjects of a foreign state, so that
6
§ 1332(a) does not provide that the courts have [diversity] jurisdiction over a suit
to which such persons are parties.” (internal quotation marks omitted)). Thus,
the case must be remanded for plaintiffs to furnish proper allegations, either in
an amended complaint or by affidavit, as to the citizenship of Roland Loubier,
the sole trustee of the 2000 Irrevocable Trusts.
Accordingly, we vacate the judgment of dismissal because it rests on a
misapprehension as to the identity of the plaintiff irrevocable trusts, and we
remand this case to the district court for it to reconsider subject matter
jurisdiction in light of this opinion.
I. Background
A. The Plaintiff Irrevocable Trust Agreements
On February 25, 2000, Florida citizens Raymond and Noella Loubier
respectively signed the plaintiff Irrevocable Trust Agreements bearing their
names. Both agreements identify Raymond Loubier’s brother Roland Loubier as
sole trustee.
In their initial complaint, plaintiffs alleged that the purpose of the 2000
Irrevocable Trust Agreements was to compensate Raymond “Loubier[’s]
brothers, Roland, Paul, Reginald, Laurient, Martin, [and] Gervais” for “their
material and essential contribution to the successful family lumber and
7
construction business . . . built in Florida.” J.A. 9 (Compl. ¶ 5). The 2000
Irrevocable Trust Agreements do provide for Raymond and Noella Loubier,
during their lifetimes, to make tax‐free gifts, but set forth no obligation to do so
and identify no intended donees.
Attorney memoranda dated March 1, 2000, and sent respectively to
Raymond and Noella Loubier, and to trustee Roland Loubier, memorialize a
further purpose of the 2000 Irrevocable Trust Agreements: the transfer of
Raymond and Noella Loubier’s insurance policies to the trustee so that, upon
their deaths, proceeds can be paid to beneficiaries with minimal tax
consequences.
Each of the Loubiers’ 2000 Irrevocable Trust Agreements names the other
spouse as primary beneficiary, with the trustee directed to make payments to
that spouse according to the terms of separate trusts: a Family Trust and a
Marital Trust. Only upon the death of both spouses, does each 2000 Irrevocable
Trust Agreement instruct the trustee to make distributions of any remaining
property entrusted to him under that agreement to some 24 persons—if then
living—in stated percentages. Plaintiff Gervais Loubier is named as one of these
8
contingent beneficiaries, but his death after the filing of this appeal and while
Noella Loubier remains alive may have ended that status.2
B. The Defendant Revocable Trust Agreements
On December 20, 1999, some two months before entering into the
aforementioned 2000 Irrevocable Trust Agreements, Raymond and Noella
Loubier each signed Revocable Trust Agreements naming him‐ or herself as both
grantor and trustee of the agreement bearing his or her name, and naming his or
her surviving spouse as successor trustee in the event of the grantor’s death or
inability to serve (“1999 Revocable Trust Agreements”).3 In the event the spouse
cannot serve as successor trustee, each grantor appoints Roland Loubier and First
2 Plaintiffs’ counsel was granted leave to substitute the Estate of Gervais Loubier
as a plaintiff‐appellant. That substitution has no effect on our diversity analysis
because “[i]t has long been the case that the jurisdiction of the court depends
upon the state of things at the time of the action brought.” Grupo Dataflux v.
Atlas Glob. Grp., L.P., 541 U.S. 567, 570 (2004) (internal quotation marks omitted).
We express no views as to what claims the Estate of Gervais Loubier can pursue
against defendants. As for claims made on behalf of the plaintiff trusts, for the
reasons stated in this opinion, they can be pursued only by Roland Loubier, the
trustee named in the 2000 Irrevocable Trust Agreements. These matters can be
addressed by the parties on remand to the district court.
3 Only Raymond Loubier’s 1999 Revocable Trust Agreement is included in the
record on appeal, but like the parties, we assume that Noella Loubier’s 1999
Revocable Trust Agreement parallels that of her late husband.
9
Union National Bank to serve jointly as successor co‐trustees. At present, Noella
Loubier serves as trustee of both 1999 Revocable Trust Agreements.
While the record contains no contemporaneous legal memoranda as to the
purpose of these revocable trust agreements, their terms suggest the Loubiers’
intent to convey a significant amount of their assets to themselves “in trust.”
Thus, each 1999 Revocable Trust Agreement instructs the trustee to distribute to
the respective grantor the net income from property transferred to the trustee
under the agreement; to preserve the grantor’s right to use real property placed
in the trust as his or her permanent residence; to use transferred assets for the
grantor’s benefit in the event of his or her hospitalization, disability, need for
assisted living, or incapacity; and to collect assets of the grantor upon, and to pay
expenses associated with, the grantor’s death. Each 1999 Revocable Trust
Agreement also instructs the trustee to use separate trust entities, specifically, a
Credit Shelter Trust and a Marital Trust, to make distributions to a surviving
spouse so as to minimize tax obligations. Only upon the death of both spouses
does each 1999 Revocable Trust Agreement instruct the successor trustee to make
distributions to the same 24 persons and in the same percentages as identified in
the subsequent 2000 Irrevocable Trust Agreements. Thus, until his own death,
10
Gervais Loubier was a contingent beneficiary of the defendant as well as the
plaintiff trusts.
C. The Instant Action
On August 22, 2013, this action was filed in the name of Gervais Loubier
and the plaintiff trusts against Noella Loubier and the defendant trusts for which
she serves as trustee. The original complaint alleges that Noella Loubier
provided Gervais Loubier a “purported accounting” of the defendant Raymond
Loubier 1999 Revocable Trust that reported total assets of $5 million, “which on
information and belief is some 7–9 million dollars less than it should be.” J.A. 10
(Compl. ¶ 10). The complaint further alleged that Noella Loubier “has amassed
and retained for herself all the assets of said plaintiff Trusts . . . to the detriment
of the plaintiffs.” Id. (Compl. ¶ 11).
Plaintiffs do not repeat these allegations in their amended complaint.
There, they allege simply that, as trustee of the defendant trusts, Noella Loubier
owes “the plaintiff”—presumably Gervais Loubier—a fiduciary duty to account;
that Gervais Loubier has demanded an accounting, which Noella Loubier has
refused; and that moneys may be due Gervais Loubier, the plaintiff trusts, and
11
the beneficiaries of those trusts, the amount of which cannot be determined
without an accounting. See id. at 279–80.4
Thus, plaintiffs sought to compel (1) an accounting of the defendant 1999
Revocable Trusts, (2) payment to plaintiffs and trust beneficiaries of amounts
that the accounting showed were due to them, and (3) appointment of the trustee
of the plaintiff trusts as receiver for assets of the defendant trusts held by Noella
Loubier. See id. at 281.5
Defendants moved to dismiss the amended complaint under Fed. R. Civ.
P. 12(b)(1), (b)(2), for lack of personal and subject matter jurisdiction. The district
4 The “Accounting” provision of the 1999 Revocable Trust Agreements states that
“[u]pon the request of any vested beneficiary, when the fair market value of the
assets held hereunder exceeds One Thousand Dollars ($1,000), Trustee shall
render an account of receipts and disbursements at least annually to Grantor, if
living; otherwise, Trustee shall render such an account to each adult income
beneficiary.” J.A. 247 (emphasis added). We express no view as to Gervais
Loubier’s entitlement to an accounting under this provision. Plaintiffs do not
assert that the plaintiff trusts, which are not beneficiaries of the 1999 Revocable
Trust Agreements, have any such right.
5 In their amended complaint, plaintiffs stated that the defendant revocable trusts
“should be deemed to be realigned as plaintiffs given their interest in an
accounting proceeding.” J.A. 279. Mindful perhaps that, under their trustee
theory of trust citizenship, it might be difficult to demonstrate diversity
jurisdiction if the defendant revocable trusts, for which Noella Loubier serves as
trustee, were made plaintiffs at the same time that Noella Loubier remained as
the sole defendant, plaintiffs withdrew their realignment request at oral
argument and, instead, sought leave to amend the complaint again on remand.
12
court granted dismissal on the latter ground, assuming, as already noted, that the
2003 and 2005 Irrevocable Trust Agreements supplied or referenced by
defendants, which name Noella Loubier as trustee, were the operative plaintiff
trusts, and concluding therefrom that “[a]t least one of the plaintiff trusts shares
Florida citizenship with defendants,” thereby defeating complete diversity. J.A.
368. This timely appeal followed.
II. Discussion
A. Standard of Review
On appeal from a dismissal for lack of subject matter jurisdiction under
Fed. R. Civ. P. 12(b)(1), we review a district court’s factual findings for clear
error, see Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.À.R.L, 790 F.3d 411,
417 (2d Cir. 2015), and its legal conclusions de novo, see Haber v. United States, 823
F.3d 746, 751 (2d Cir. 2016). In so doing, we accept the complaint’s material
allegations as true, and we draw all reasonable inferences in the plaintiffs’ favor.
See Mantena v. Johnson, 809 F.3d 721, 727 (2d Cir. 2015). We may also consider all
extrinsic evidence proffered by the parties to the district court in support of their
jurisdictional positions. See Carter v. HealthPort Techs., LLC, 822 F.3d 47, 57 (2d
Cir. 2016).
13
To establish subject matter jurisdiction under 28 U.S.C. § 1332, as
implicated here, plaintiffs bear the burden of making a preponderance showing,
inter alia, of “‘complete diversity,’ i.e. all plaintiffs must be citizens of states
diverse from those of all defendants.” Pennsylvania Pub. Sch. Emps.’ Ret. Sys. v.
Morgan Stanley & Co., 772 F.3d 111, 118 (2d Cir. 2014) (quoting Exxon Mobil Corp.
v. Allapattah Servs., Inc., 545 U.S. 546, 553 (2005)). There is no question that the
named individual parties are of diverse citizenship. When the complaint was
filed, plaintiff Gervais Loubier was a citizen of Connecticut and defendant Noella
Loubier was a citizen of Florida. Thus, whether plaintiffs have demonstrated
complete diversity depends on the citizenship of the party trusts.
B. The Identity of the Plaintiff Trusts
As earlier observed, the parties agree that the district court’s diversity
ruling rests on a clear error of fact because the operative plaintiff trusts are those
reflected in Raymond and Noella Loubier’s 2000 Irrevocable Trust Agreements,
not their 2003 or 2005 Agreements. In reviewing the challenged dismissal on this
appeal, therefore, we look to the 2000 Irrevocable Trust Agreements and to their
trustee, Roland Loubier, in deciding whether plaintiffs have established diversity
jurisdiction.
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C. Trust Citizenship
1. Supreme Court Precedent
“Despite over two centuries of federal litigation involving trusts, the
method for determining a trust’s citizenship [is] long unsettled and the subject of
much debate.” Zoroastrian Ctr. & Darb‐E‐Mehr of Metro. Washington, D.C. v.
Rustam Guiv Found. of N.Y., 822 F.3d 739, 748 (4th Cir. 2016). While this court has
not conclusively decided how trust citizenship should be determined for
purposes of diversity jurisdiction, three Supreme Court decisions are relevant to
our task here: Navarro Savings Association v. Lee, 446 U.S. 458 (1980); Carden v.
Arkoma Associates, 494 U.S. 185 (1990); and Americold Realty Trust v. Conagra Foods,
Inc., 136 S. Ct. 1012 (2016).
In Navarro, plaintiffs were trustees of a business trust organized under
Massachusetts law. See Navarro Sav. Ass’n v. Lee, 446 U.S. at 459. The trust
declaration authorized the trustees to hold title to real estate investments for the
benefit of trust shareholders. See id. It further gave the trustees exclusive
authority over this property, as well as over decisions to invest or to lend trust
funds. See id. It specifically authorized the trustees to sue and to be sued either
in the name of the trust or in their own names as trustees. See id. In their own
names, the trustees sued Navarro Savings Association for breach of a loan
15
agreement that the trustees had entered into for the benefit of the trust. See id.
The question before the Supreme Court was “whether the trustees of a business
trust may invoke the diversity jurisdiction of the federal courts on the basis of
their own citizenship”—which differed from that of the Texas defendant—
“rather than that of the trust’s beneficial shareholders”—a number of whom
were Texas citizens. Id. at 459–60.
The Supreme Court concluded that the citizenship of the named plaintiff
trustees, and not that of the trust’s shareholders, controlled the diversity
assessment in Navarro. See id. at 465. In so ruling, the Supreme Court reasoned
that the plaintiff trustees were the real parties in interest to the controversy based
on their possession of “certain customary powers to hold, manage, and dispose
of assets, for the benefit of others.” Id. at 464–65.6
6 The sole Navarro dissenter, Justice Blackmun, urged that the business trust at
issue, a creature of Massachusetts law, be viewed differently from traditional
common law trusts. See Navarro Sav. Ass’n v. Lee, 446 U.S. at 467–69 & n.2
(quoting Restatement (Second) of Trusts § 1, cmt. b, p.4 (1959) (“The business
trust is a special kind of business association and can best be dealt with in
connection with other business associations.”)). Trust shareholders in Navarro
exercised significant control over trustees’ actions by virtue of their right to elect
trustees annually or to remove them from office, even without cause, by majority
vote. Shareholder majority approval was also required for trustees to engage in
any transaction involving more than 50% of trust assets. “Most significantly,” in
Justice Blackmun’s view, shareholders had the power not only to amend the trust
16
Plaintiffs here argue that the trustees of the party trusts exercise
comparable powers and, thus, even though plaintiffs sued in the names of the
trusts rather than the trustees, it is the trustees’ citizenship that should determine
whether there is diversity jurisdiction.
Ten years after Navarro, in another diversity case, the Supreme Court
considered how to determine the citizenship of a different artificial entity created
by state law: a limited partnership. See Carden v. Arkoma Assocs., 494 U.S. at 186.
A five‐member majority specifically declined to extend to limited partnerships
the rule treating corporations as citizens of their states of incorporation. See id. at
195. It further declined to determine a limited partnership’s citizenship by
looking only to general, not limited, partners on the ground that only the former
exercised control over the business and its related litigation. See id. at 192.
Rather, the Court adhered to the “rule that diversity jurisdiction in a suit by or
against the [artificial] entity depends on the citizenship of all the members.” Id.
at 195 (internal quotation marks omitted).
declaration, but also to “terminate the trust” entirely. Id. at 469. In these
circumstances, he thought that the citizenship of the beneficial shareholders, not
the trustees, should determine diversity jurisdiction. See id. at 476.
17
Insofar as Arkoma Associates relied on Navarro to urge otherwise, the
Court was dismissive, observing that “Navarro had nothing to do with the
citizenship of the ‘trust’” at issue. Id. at 192–93. Rather, “it was a suit by the
trustees in their own names,” id. at 193, and thus presented “the quite separate
question” of whether these trustees, who “were undoubted ‘citizens’ (viz.,
natural persons) were the real parties to the controversy,” id. at 191.
Defendants rely on Carden to argue that, for purposes of diversity
jurisdiction, the citizenship of any unincorporated entity that sues or is sued in
its own name necessarily takes on the citizenship of all its members, which, in
the case of trusts, is the citizenship of all named beneficiaries, both vested and
contingent.
Courts applying Navarro and Carden to the question of a trust’s citizenship
for diversity purposes have reached different conclusions. The Seventh Circuit,
as well as the Fifth, ruled that “[t]rusts take the citizenship of the trustees rather
than of the beneficiaries.” Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314, 318 (7th
Cir. 1998); see also Mullins v. TestAmerica, Inc., 564 F.3d 386, 397 & n.6 (5th Cir.
2009) (stating that district court had applied correct tests to determine citizenship
of various entities, citing Navarro for principle that “citizenship of a trust is that
of its trustee”). By contrast, the Third Circuit, “after considering Navarro and
18
Carden,” ruled that “the citizenship of both the trustee and the beneficiary should
control in determining the citizenship of a trust.” Emerald Inv’rs Tr. v. Gaunt
Parsippany Partners, 492 F.3d 192, 205 (3d Cir. 2007).
Most recently, the Supreme Court itself discussed Carden and Navarro in
considering, for diversity purposes, “how to determine the citizenship of a ‘real
estate investment trust,’ an inanimate creature of Maryland law.” Americold
Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. at 1014. In a unanimous decision, the
Court concluded that one looked to the citizenship of the REIT’s shareholders, as
they were the “members” of that particular legal entity. See id. at 1016.
The reasoning informing this conclusion warrants attention. In Americold,
the Supreme Court observed that it had originally recognized only human beings
to be citizens for jurisdictional purposes. See id. at 1015. Thus, “if a ’mere legal
entity’” were sued, the relevant citizens for purposes of diversity “were its
‘members,’ or the ‘real persons who come into court’ in the entity’s name.” Id.
(quoting Bank of United States v. Deveaux, 9 U.S. (5 Cranch) 61, 86–91 (1809)). The
Court later “carved a limited exception for corporations,” which Congress
codified to allow corporations to be considered citizens of their states of
incorporation or principal places of business. Id.; see 28 U.S.C. § 1332(c) (1958).
Neither Congress nor the Court, however, had ever expanded this grant of
19
citizenship to include other artificial entities, “such as joint‐stock companies or
limited partnerships.” Americold Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. at
1015. For such entities, the Court had adhered to its “‘oft‐repeated rule that
diversity jurisdiction in a suit by or against the entity depends on the citizenship
of all its members.’” Id. (quoting Carden v. Arkoma Assocs., 494 U.S. at 195–96)
(alterations and internal quotation marks omitted).
The Supreme Court acknowledged that it had never expressly defined the
term “members,” but observed that it had equated a legal entity’s members
“with its owners or the several persons composing such association.” Id.
(internal quotation marks omitted). Thus, the Court had identified, with
reference to state law, (1) “the members of a joint‐stock company as its
shareholders,” (2) “the members of a partnership as its partners,” and (3) “the
members of a union as the workers affiliated with it.” Id.
Applying these principles to the REIT at issue in Americold, the Court
concluded that, as an unincorporated entity organized under Maryland law, the
REIT possessed the citizenship of its members. See id. at 1016. Maryland law
effectively defined those members as the REIT’s shareholders. See id. (citing Md.
Corp. & Assns. Code Ann. §§ 8‐101(c), 8‐102 (2014) (stating that REIT is
“unincorporated business trust or association” in which property is held and
20
managed “for the benefit and profit of any person who may become a
shareholder”)). Indeed, other provisions of Maryland law appeared to place
REIT shareholders “in the same position as the shareholders of a joint‐stock
company or the partners of a limited partnership.” Id.
Rejecting an argument that Navarro Savings Association v. Lee, 446 U.S. at
458, compelled the conclusion “that anything called a ‘trust’ possesses the
citizenship of its trustees alone,” the Supreme Court reiterated Carden’s
pronouncement that “‘Navarro had nothing to do with the citizenship of [a]
“trust.”’” Americold Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. at 1016 (alteration
in original) (quoting Carden v. Arkoma Assocs., 494 U.S. at 192–93). “Rather,
Navarro reaffirmed a separate rule that when a trustee files a lawsuit in her name,
her jurisdictional citizenship is the State to which she belongs—as is true of any
natural person.” Id. (emphasis in original).
At the same time, however, the Court acknowledged that not all trusts
were akin to the REIT before it. “Traditionally, a trust was not considered a
distinct legal entity, but a fiduciary relationship between multiple people.” Id.7
7 This characterization of “traditional trusts” finds support in both the Second
and Third Restatement of Trusts. See Restatement (Second) of Trusts § 2 (1959)
(defining trust as “fiduciary relationship with respect to property, subjecting the
21
“Such a relationship was not a thing that could be haled into court;” rather,
“legal proceedings involving a trust were brought by or against the trustees in
their own name.” Id. Thus, the Court stated, “[f]or a traditional trust, . . . there is
no need to determine its membership, as would be true if the trust, as an entity,
were sued.” Id.
As our sister circuits have observed, the last quoted statement in Americold
“may generate as many questions as it answers.” Zoroastrian Ctr. & Dab‐E‐Mehr
v. Rustam Guiv Found., 822 F.3d at 749; see Wang by & through Wong v. New Mighty
U.S. Tr., 843 F.3d 487, 493 (D.C. Cir. 2016). Does it mean that there is never a
need to determine the “membership” of a traditional trust because its citizenship
is always that of its trustee? Or, does it mean that every time a trust is sued in its
own name, its citizenship is the citizenship of all its members? Who are the
members of a traditional trust that, as here, identifies both vested and contingent
person by whom the title to the property is held to equitable duties to deal with
the property for the benefit of another person, which arises as a result of a
manifestation to create it”); Restatement (Third) of Trusts § 2 (2003) (defining
trust as “fiduciary relationship with respect to property, arising from a
manifestation of intention to create that relationship and subjecting the person
who holds title to the property to duties to deal with it for the benefit of charity
or for one or more persons, at least one of whom is not the sole trustee”).
22
beneficiaries? See Zoroastrian Ctr. & Dab‐E‐Mehr v. Rustam Guiv Found., 822 F.3d
at 749 (posing similar questions).
While the Supreme Court did not speak directly to these matters in
Americold, it followed its discussion of traditional trusts with the observation that
state laws now apply the “‘trust’ label to a variety of unincorporated entities”—
such as the REIT there at issue—that “have little in common” with traditional
trusts. Americold Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. at 1016. Where state
law applies a “trust” label to “a separate legal entity that itself can sue or be
sued,” that trust is subject to the “rule that it possesses the citizenship of all of its
members.” Id. (internal quotation mark omitted).
From this reasoning, we conclude that the rule reiterated by the Supreme
Court in Americold and Carden—ascribing to an unincorporated entity the
citizenship of all its members—may apply to any number of trusts recognized in
law as distinct juridical entities. But it does not apply to a traditional trust that
establishes only a fiduciary relationship and that cannot sue or be sued in its own
right. The distinction is evident in decisions from other circuits. See Wang by &
through Wong v. New Mighty U.S. Tr., 843 F.3d at 494 [D.C. Cir.] (“[W]e believe
Americold would not apply the Carden test to a traditional trust, as it is not an
entity[with juridical status.]”); cf. RTP LLC v. Orix Real Estate Capital, Inc., 827
23
F.3d 689, 691–92 (7th Cir. 2016) (concluding that retirement funds organized as
trusts under state law but allowed to sue and to be sued in their own names have
citizenships of their members). A number of district courts, including some
within this circuit, have similarly read Americold to support the conclusion that a
traditional trust’s citizenship remains that of its trustee.8
8 See, e.g., U.S. Bank Tr., N.A. v. Monroe, No. 1:15‐CV‐1480 (LEK/DJS), 2017 WL
923326, at *4 (N.D.N.Y. Mar. 8, 2017) (holding that diversity citizenship of trust
depends on type of trust at issue, with “traditional trust . . . tak[ing] the
citizenship of its trustees without regard to the trust’s beneficiaries” (internal
quotation marks omitted)); U.S. Bank, Nat’l Ass’n v. UBS Real Estate Sec. Inc., 205
F. Supp. 3d 386, 411 (S.D.N.Y. 2016) (observing that when “[t]rusts have no
power to sue on their own behalves . . . only the Trustee’s citizenship is relevant
to th[e] diversity analysis”); see also Algiers Dev. Dist. v. Vista Louisiana, LLC, No.
CV 16‐16402, 2017 WL 121127, at *3 (E.D. La. Jan. 12, 2017) (reading Americold to
hold that if traditional—rather than business—trust is party, “its citizenship is
determined by the trustee’s citizenship”); Guillen v. Countrywide Home Loans, Inc.,
No. CV H‐15‐849, 2016 WL 7103908, at *4 (S.D. Tex. Dec. 6, 2016) (citing Americold
for proposition that if trust is real party, “determine whether it is a ‘traditional
trust’ where a court looks to the citizenship of the trustee, or whether it is a
‘business trust’ (unincorporated association) where a court looks to the
citizenship of the trust’s members to determine jurisdiction”); Daisy Tr. v. JP
Morgan Chase Bank, No. 2:13‐CV‐00966‐RCJ‐VCF, 2016 WL 7107762, at *3–4 (D.
Nev. Dec. 6, 2016) (stating that because “traditional trust . . . cannot sue or be
sued,” Americold signals that its citizenship for diversity purposes is that of its
trustee); Moore v. Ameriquest Mortg. Co., No. 4:16‐CV‐00380, 2016 WL 6159377, at
*2 (E.D. Tex. Oct. 24, 2016) (reading Americold to instruct that “trust label is not
dispositive on the issue of citizenship,” and if “traditional trust is sued in its own
name, only the trustee’s citizenship matters for diversity purposes”); LMP Ninth
St. Real Estate, LLC v. U.S. Bank Nat’l Ass’n, No. 8:16‐CV‐2463‐T‐33AEP, 2016 WL
6068302, at *2 (M.D. Fla. Oct. 17, 2016) (same); Wells Fargo Bank, N.A. v. Transcon.
24
Neither side here disputes that the party trusts—both those named as
plaintiffs and those named as defendants—are traditional common law trusts,
which created fiduciary relationships for purposes of estate planning. See
Appellants’ Supp. Br. 1; Appellees’ Supp. Br. 2, 5. The terms of these trusts
reinforce this conclusion. Unlike the business trusts in Navarro, the party trusts
nowhere authorize suits in the name of either the trust or the trustees. See
Navarro Sav. Ass’n v. Lee, 446 U.S. at 459. Nor do the party trusts here pertain to
shareholders who hold “ownership interests” in trust property and who have
“votes in the trust by virtue of their shares of beneficial interest,” Americold Realty
Tr. v. Conagra Foods, Inc., 136 S. Ct. at 1016 (internal quotation marks omitted).
The party trusts here have vested and contingent beneficiaries with no present
ownership interest in trust property and no power over the trusts’
administration, disbursements, or investments. Cf. Navarro Sav. Ass’n v. Lee, 446
U.S. at 469, 472 (Blackmun, J., dissenting) (noting that shareholders of business
trust had right to elect and to remove trustees and to approve transactions
involving more than 50% of trust assets). While the fiduciary relationship
established by the plaintiff trusts allow vested beneficiaries to demand
Realty Inv’rs, Inc., No. 3:14‐CV‐3565‐BN, 2016 WL 3570648, at *3 (N.D. Tex. July 1,
2016) (same).
25
accountings from and even to sue the trustees, the trusts themselves are not
entities that can be sued except through their trustees. Thus, for these traditional
trusts, it is the citizenship of the trustees holding the legal right to sue on behalf
of the trusts, not that of beneficiaries, that is relevant to jurisdiction. See Wang by
& through Wong v. New Mighty U.S. Tr., 843 F.3d at 494 n.13 (citing Bonnafee v.
Williams, 44 U.S. (3 How.) 574, 577 (1845) (holding that where citizenships of
parties confers jurisdiction, and legal right to sue is in plaintiff, court “will not
inquire into the residence of those who may have an equitable interest in the
claim”)).
To the extent Americold’s contrary conclusion as to the REIT there at issue
was informed by Maryland state law recognizing such trusts as distinct legal
entities capable of suing in their own names, plaintiffs make no such comparable
state law showing with respect to the traditional trusts here. Indeed, Florida law
specifically incorporates the common law of trusts, which states that a traditional
trust “is not a legal entity . . . capable of legal action on its own behalf.”
Restatement (Second) of Trusts § 2 (1957); see Fla. Stat. § 736.0106 (providing for
“common law of trusts” to “supplement this code”). Rather the common law
tasks the trustee with bringing suit on behalf of a trust. See Restatement
(Second) of Trusts § 177 cmt. a (“If a third person commits a tort with respect to
26
the trust property, it is the duty of the trustee to take reasonable steps to compel
him to redress the tort.”); Austin Wakeman Scott et al., Scott and Ascher on Trusts
§ 17.9 (5th ed. 2007) (“Ordinarily, a trustee must take reasonable steps to enforce
all claims held in trust.”).
Florida follows this rule, both when a trustee initiates claims on behalf of
the trust, see Fla. Stat. § 736.0811 (stating that trustee must take reasonable steps
to enforce claims of trust), and when he defends against them, see First Union
Nat’l Bank v. Jones, 768 So. 2d 1213, 1215 (Fla. Dist. Ct. App. 2000) (stating that,
under Florida law, trustee is legal entity who is sued when action is brought
against trust). Thus, although the state court in First Union noted that the action
there was filed against “the trustee, not the trust,” that statement does not
approve actions against the trust in its own name. Id. In the next sentence, the
court made clear that “the trustee is merely the legal entity who is sued when an
action is brought against the trust.” Id. (internal quotation marks omitted).9
9 Florida Statute § 736.1014, entitled “Limitations on actions against certain
trusts,” is not to the contrary. After identifying certain limitations, see id.
§ 736.1014(1), the statute states: “[t]his section does not preclude a direct action
against a trust described in § 733.707(3), the trustee of the trust, or a beneficiary
of the trust that is not dependent on the individual liability of the settlor,” id.
§ 736.1014(2). We do not understand this provision to recognize, much less
authorize, actions against trusts in their own names. By identifying actions
27
In sum, because the party trusts here are not organized according to state
law as distinct juridical entities but, rather, are traditional trusts, establishing
only fiduciary relationships, they are incapable of being haled into court except
through their trustees. Thus, it is the trustees’ citizenship that must determine
diversity, not the citizenship of trust beneficiaries.
In urging otherwise, defendants argue that “[t]he essence of Americold is
that in a trust case, diversity analysis turns upon whether the trusts or the
trustees are the named part[ies].” Appellees’ Supp. Br. 4. Thus, they maintain
that it matters not that the party trusts are traditional trusts, and to the extent
they sued or were sued in their own names, they “bear the citizenship of each
and all of their members, thus undermining diversity.” Id. at 2.
We are not persuaded. Indeed, the rule defendants urge would only
encourage artful pleading if, in traditional trust cases, a party thought it could
against trusts, as distinct from actions against trustees, the statute simply
acknowledges that a trustee can be sued in his own capacity as distinct from the
trust, e.g., for breach of his fiduciary duties. But nothing in § 736.1014 indicates
that in a direct action against the trust, the trust itself can be named as a party
rather than its trustee. Indeed, Florida’s express incorporation of the law of
trusts resolves any ambiguity in § 736.1014 in favor of Florida trusts being sued
only through their trustees. See id. § 736.0106.
28
create or defeat diversity jurisdiction to its advantage depending on whether it
identified a trust or its trustee as a party to the action.
In cases involving traditional trusts, and absent anything to the contrary in
either the trust instruments or state law, a party does not really have the option
of suing either the trust in its own name or its trustee. The action can be
maintained only against the trustee. We do not understand Americold to hold
that where a traditional trust is mistakenly identified as a party even though, by
its nature, it can only sue or be sued in the name of its trustee, diversity
jurisdiction is properly identified by reference to persons other than the trustee.
It is precisely because traditional trusts cannot sue or be sued except through
their trustees that the named party trusts must be deemed only proxies for their
trustees and, thus, it is the trustees’ citizenship that must inform any diversity
determination.
Here, the plaintiffs are citizens of Connecticut (Gervais Loubier) and
possibly Canada (Roland Loubier, the trustee pursuant to the two 2000
Irrevocable Trust Agreements). Defendants are all citizens of Florida (Noella
Loubier, individually and as trustee under the two 1999 Revocable Trust
Agreements). If an affidavit or an amended complaint is provided by plaintiffs
attesting that Roland Loubier is a citizen of Canada, or of any state other than
29
Florida, then complete diversity would be alleged. But because we cannot reach
that conclusion ourselves on the record before us, we do not reverse the
challenged judgment but, rather, vacate and remand for the district court to
pursue Roland Loubier’s citizenship further consistent with this opinion.
III. Conclusion
To summarize, we conclude as follows:
1. A clear error of fact as to the identity of the plaintiff trusts requires
vacatur of the judgment of dismissal and remand.
2. The four party trusts in this case have no distinct juridical identity
allowing them to sue or to be sued in their own names. Rather, each
is a traditional trust, establishing a mere fiduciary relationship and,
as such, incapable of suing or being sued in its own name.
3. Because the party trusts can only sue or be sued in the names of
their trustees, pleadings in the names of the trusts themselves do not
require that these parties’ citizenship, for purposes of diversity, be
determined by reference to all their members. Cf. Americold Realty
Tr. v. Conagra Foods, Inc., 136 S. Ct. 1012 (2016); Carden v. Arkoma
Assocs., 494 U.S. 185 (1990). Rather, these traditional trusts’
30
citizenship is that of their respective trustees. See generally Americold
Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. at 1016.
4. If, as the record suggests, the plaintiffs are citizens of Connecticut
and Canada, while defendants are all citizens of Florida, diversity is
complete. Nevertheless, because trustee Roland Loubier’s Canadian
citizenship is only suggested, not demonstrated, in the record,
further inquiry is required on remand conclusively to determine
diversity.10
Accordingly, the judgment of dismissal for lack of subject matter
jurisdiction is VACATED and the case is REMANDED for further proceedings
consistent with this opinion.
10 This appeal did not present questions as to personal jurisdiction or standing
and, thus, reaches no conclusion that would preclude district court consideration
of any such issues as might arise on remand.
31
Raymond Loubier Irrevocable Trust v. Noella Loubier
Court: Court of Appeals for the Second Circuit
Date filed: 2017-06-01
Citations: 858 F.3d 719
Copy CitationsCombined Opinion