14-2955-cv

Mercer v. Bank of N.Y. Mellon

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007,

is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing

a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic

database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not

represented by counsel.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the

Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the

14th day of April, two thousand fifteen.

PRESENT:

AMALYA L. KEARSE,

DEBRA ANN LIVINGSTON,

SUSAN L. CARNEY,

Circuit Judges.

_______________________________________________

HOWARD MERCER AND DAVID MERCER, 

Plaintiffs-Appellants,

- v. - No. 14-2955-cv

BANK OF NEW YORK MELLON, N.A. AND MARTIN D.

NEWMAN, TRUSTEES OF THE TRUSTS U/W NORMAN J.

MERCER, DECEASED,

Defendants-Appellees.

_______________________________________________

DONALD NOVICK (Albert V. Messina Jr., on the brief),

Novick & Associates, Huntington, NY, for PlaintiffsAppellants.

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PAUL T. WEINSTEIN, Emmet, Marvin & Martin LLP, New

York, NY, for Defendant-Appellee Bank of New York Mellon,

N.A.

Neil J. Moritt, Morritt Hock & Hamroff LLP, Garden City,

NY, for Defendant-Appellee Martin D. Newman.

UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, and DECREED

that the judgment of the district court is AFFIRMED.

Plaintiffs-Appellants Howard Mercer and David Mercer (“Plaintiffs”) appeal from a July 21,

2014 order of the United States District Court for the Eastern District of New York (Feuerstein, J.)

granting the motion of Defendants-Appellees Bank of New York Mellon, N.A. and Martin D.

Newman (“Defendants”) to dismiss Plaintiffs’ complaint for lack of subject matter jurisdiction

pursuant to Federal Rule of Civil Procedure 12(b)(1). Plaintiffs are residual beneficiaries of a

testamentary trust (the “Trust”) established under the will of their father, Norman J. Mercer, who

died in 2007. They claim that Defendants, two of the Trust’s three trustees, breached various duties

by making improper distributions from the Trust to Plaintiffs’ step-mother, Carol Mercer, a lifetime

beneficiary of the Trust and its third trustee. The District Court adopted a magistrate judge’s

recommendation that Plaintiffs’ complaint be dismissed pursuant to the “probate exception” to

federal diversity jurisdiction in light of ongoing proceedings in the New York Surrogate’s Court in

Suffolk County. See Mercer v. Bank of N.Y. Mellon, N.A., No. 13-cv-5686, 2014 WL 3655657, at

*3 (E.D.N.Y. July 21, 2014). We assume the parties’ familiarity with the underlying facts and

procedural history of the case, and with the issues on appeal.

We review questions of subject matter jurisdiction de novo. Lefkowitz v. Bank of N.Y., 528

F.3d 102, 107 (2d Cir. 2007). “The ‘probate exception’ is an historical aspect of federal jurisdiction

that holds ‘probate matters’ are excepted from the scope of federal diversity jurisdiction.” Id. at

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105. The Supreme Court has clarified that “the probate exception reserves to state probate courts

the probate or annulment of a will and the administration of a decedent’s estate; it also precludes

federal courts from endeavoring to dispose of property that is in the custody of a state probate court. 

But it does not bar federal courts from adjudicating matters outside those confines and otherwise

within federal jurisdiction.” Marshall v. Marshall, 547 U.S. 293, 311-12 (2006). We agree with

the District Court that Plaintiffs’ claims are barred by the probate exception because they seek to

have the District Court control property that is already under the supervisory control of the

Surrogate’s Court.

The prohibition against “endeavoring to dispose of property that is in the custody of a state

probate court” is, the Supreme Court has explained, “essentially a reiteration of the general principle

that, when one court is exercising in rem jurisdiction over a res, a second court will not assume in

rem jurisdiction over the same res.” Id. at 311-12 (citing Penn General Cas. Co. v. Pennsylvania

ex rel. Schnader, 294 U.S. 189, 195-96 (1935), and Waterman v. Canal-La. Bank & Trust Co., 215

U.S. 33, 45-46 (1909)). This general principle applies equally when, as in this case, the res in

question is not property of an estate but property of a trust. See Princess Lida of Thurn & Taxis v.

Thompson, 305 U.S. 456, 466 (1939); Beach v. Rome Trust Co., 269 F.2d 367, 371 (2d Cir. 1959). 

Moreover, it applies also to jurisdiction that is quasi in rem: it “is not restricted to cases where

property has been actually seized under judicial process before a second suit is instituted, but applies

as well where suits are brought to marshal assets, administer trusts, or liquidate estates, and in suits

of a similar nature where, to give effect to its jurisdiction, the court must control the property.” 

Princess Lida, 305 U.S. at 466-67.

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On appeal, Plaintiffs contend that the District Court erred in concluding that a petition in the

Surrogate’s Court seeking an accounting of the Trust gave that court “custody” of the Trust in the

relevant sense because the petition was filed on June 5, 2014, after Plaintiffs filed their federal

complaint on October 16, 2013. But even if Plaintiffs are correct that Defendants’ probate-exception

challenge must be measured “against the state of facts that existed at the time of filing,” Grupo

Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 571 (2004), we conclude that the Surrogate’s

Court had supervisory control of the administration of the Trust before Plaintiffs brought this action.

New York law gives Surrogate’s Courts extensive powers over testamentary trusts. See N.Y.

Surr. Ct. Proc. Act. §§ 1501-1509. Here, the Surrogate’s Court issued letters testamentary and

letters of trusteeship to Defendants and Carol Mercer on December 1, 2009, giving them the

authority to administer Norman Mercer’s estate and the Trust. On April 13, 2012, Plaintiffs

petitioned the Surrogate’s Court for the removal of Carol Mercer and Defendants as both executors

of their father’s estate and trustees of the Trust. In June 2012, the Surrogate’s Court heard oral

argument on whether to enjoin Carol Mercer and Defendants from making any further distributions

from the Trust, and issued a temporary restraining order barring only Carol Mercer from doing so. 

And on August 29, 2012, the Surrogate’s Court denied summary judgment on Plaintiffs’ petition for

removal, holding that factual disputes involving actions taken by Carol Mercer and Defendants “on

behalf of this estate and the testamentary trusts flowing therefrom” would have to be resolved at

trial. J.A. 384; see In re Mercer, 990 N.Y.S.2d 58 (App. Div. 2014) (affirming the Surrogate

Court’s decision). We need not express any view on the minimum amount of activity that would

have been sufficient to give the Surrogate’s Court supervisory control over the Trust, see Beach, 269

F.2d at 371 (affirming the district court’s dismissal of claims for a trust accounting and related relief

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where both the decedent’s estate and the trust were “still in the process of administration in the

Surrogate’s Court”), because we conclude that the activity described above, taken as a whole,

precluded the District Court from subsequently exercising control over the Trust.

Plaintiffs also argue that their claims against Defendants would not require the District Court

to exercise control over the Trust in such a way as to interfere with the Surrogate’s Court’s control

over it. We disagree. Although Plaintiffs have styled their claims in this case as “in personam”

claims against Defendants for breach of fiduciary duty, breach of contract, and breach of the duty

of loyalty, we must examine the substance of the relief that Plaintiffs are seeking, and not the labels

they have used. See Lefkowitz, 528 F.3d at 107 (concluding that the plaintiff could not skirt the

probate exception by “mask[ing] in claims for federal relief her complaints about the

maladministration of her parent[s’] estates, which have been proceeding in probate courts”). The

only relief requested in the complaint—apart from punitive damages and attorney’s fees, which

cannot be awarded if Plaintiffs do not succeed on their substantive claims—is the restoration to the

Trust of $209,821.17 that Plaintiffs claim was improperly distributed to Carol Mercer (plus interest). 

In other words, Plaintiffs are not simply seeking an adjudication of their own entitlement to a portion

of the Trust funds; they do not seek damages payable to themselves, but are asking the District Court

to undo specific actions already taken by the trustees during the period of probate administration that

Plaintiffs disagree with. Such claims against trustees by a trust’s beneficiaries for “administration

and restoration of corpus” cannot be maintained if another court is already exercising control over

the trust. Princess Lida, 305 U.S. at 467. 

Accordingly, the District Court properly dismissed Plaintiffs’ claims pursuant to the probate

exception. And because the District Court lacked jurisdiction over Plaintiffs’ substantive claims,

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it also properly dismissed Plaintiffs’ separate causes of action seeking punitive damages and

attorney’s fees. We need not address Defendants’ alternative argument that dismissal is required

pursuant to the Colorado River abstention doctrine. See Colo. River Water Conservation Dist. v.

United States, 424 U.S. 800, 817-19 (1976). 

We have reviewed Plaintiffs’ remaining contentions and find them to be without merit. For

the foregoing reasons, the judgment of the District Court is AFFIRMED. 

FOR THE COURT:

Catherine O’Hagan Wolfe, Clerk

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