### In the



# United States Court of Appeals

For the Seventh Circuit

____________________

No. 17

‐ 1659

R ICHARD D. D OERMER

, Plaintiff

‐ Appellant

,

v.

O XFORD F INANCIAL G ROUP

, 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

.

____________________

A RGUED N OVEMBER 29, 2017

— D ECIDED M ARCH 7, 2018

____________________

Before W OOD

, Chief Judge

, and K ANNE

, Circuit Judge

. 1

W OOD

, 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 additional4 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 a6 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 WirelessNo. 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 IllinoisNo. 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 re10 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 A FFIRMED

.

2 See generally Charles Dickens, Bleak House (Bradbury & Evans, 1853)

(“[T]he whole estate is found to have been absorbed in costs[!]”).