Court Opinion

ID: 2680251
Source: CourtListenerOpinion
Date Created: 2014-06-24 17:00:35.00709+00
Date Added: 2024-06-11T11:15:49.008216
License: Public Domain

FILED
                                                 United States Court of Appeals
                    UNITED STATES COURT OF APPEALS       Tenth Circuit

                           FOR THE TENTH CIRCUIT                         June 24, 2014

                                                                     Elisabeth A. Shumaker
                                                                         Clerk of Court
KRISTOFER THOMAS KASTNER,

             Plaintiff - Appellant,

v.                                                         No. 13-3254
                                              (D.C. No. 6:10-CV-01012-EFM-KMH)
INTRUST BANK, chartered,                                    (D. Kan.)
a professional corporation; C.Q.
CHANDLER, individually and as
President, Chairman and CEO of Intrust
Bank; ROGER W. LEMON, individually
and as Former Vice President and Trust
Officer of Intrust Bank; MICHAEL P.
CANNADY, individually and as Former
Vice President and Trust Office of Intrust
Bank; DAVID SUTTON, individually
and as Officer at Intrust Bank; INTRUST
FINANCIAL CORPORATION, by and
through C.Q. Chandler, President,

             Defendants - Appellees.

                            ORDER AND JUDGMENT*

Before LUCERO and McKAY, Circuit Judges, and BRORBY, Senior Circuit Judge.

*
      After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
      Kristofer Thomas Kastner, pro se, appeals from the district court’s orders

dismissing his claims in part and granting defendants’ motion for summary judgment.

We have jurisdiction under 28 U.S.C. § 1291 and affirm.

                                    I.    Background

      In June 1996, Kastner’s grandmother, Jessie I. Brooks, executed a revocable

trust naming Intrust Bank as the trustee. The trust provided that distributions would

be made to Ms. Brooks during her lifetime and upon her death, continued for the

benefit of her daughter, Nola Mae Wills. The trust further provided that the

remainder of the trust’s assets, if any, would be distributed to Kastner upon the death

of his mother, Ms. Wills.

      Ms. Brooks died in 2000; however, Ms. Wills is living and receiving income

distributions from the trust. Kastner asserts that in January 2009 he received a letter

from Intrust Bank showing that the trust had lost money since Ms. Brooks’s death.

Proceeding pro se, Kastner, who is legally trained but is not admitted to the practice

of law, filed this diversity action in January 2010 against Intrust Bank and four of its

officers, C.Q. Chandler, Roger Lemon, Michael Cannady, and David Sutton

(collectively “Intrust”). He alleged nine causes of action based on the alleged

devaluation of the trust which he claims is due to trust provisions waiving the

                                          -2-
prudent investor standard and Intrust’s negligence.1 Kastner asserted the following

claims: 1) breach of fiduciary duties to Ms. Brooks in the creation and execution of

the trust; 2) breach of fiduciary duty to refrain from self-dealing to Ms. Brooks in

entering the trust agreement; 3) failure to exercise the degree of care and skill that

would be used by a reasonably competent trustee under the same or similar

circumstances, in failing to produce advice, counsel, or explanation of the waivers of

negligence and prudent investor standards; 4) breach of trust against Ms. Brooks, her

estate, and Kastner; 5) negligent misrepresentation to Ms. Brooks, her estate, and

Kastner as to the nature of the trust agreement and the consequences of its waiver

provisions; 6) fraud by silence by failing to disclose material facts concerning the

nature of the trust agreement and consequences of its waiver provisions; 7) fraud by

silence in failing to disclose material facts concerning the nature of the trust

investments or explain poor investments; 8) fraud in the creation and investment of

the trust; and 9) reformation of the trust agreement to remove the provisions

concerning waivers of negligence and prudent investor standards.

      Intrust moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(1), (6), (7),

and 21. In November 2010, the district court applied Kansas law and dismissed

claims 1, 2, 3, 5, 6, and part of 8 (fraud in the creation) as time-barred under

1
       Kastner brought suit on behalf of himself, as representative of his
grandmother’s estate, and as a beneficiary of the trust. He also named as plaintiffs
the Estate of Jessie I. Brooks and Jessie I. Brooks. However, only Kastner has taken
this appeal.

                                           -3-
Kan. Stat. Ann. § 60-513(b), which requires actions to be brought within ten years of

the act giving rise to the cause of action.2 Four claims remained.3

       In February 2011, Kastner then amended his complaint to assert three new

claims for breach of contract, deceptive trade practices in violation of the Kansas

Consumer Protection Act (“KCPA”), and civil conspiracy. And within his surviving

reformation-of-trust claim, Kastner now sought to remove the trustee.

       Intrust moved to dismiss the amended complaint under Fed. R. Civ. P.

12(b)(6), and all remaining claims other than breach of trust. On June 1, 2011, the

district court granted the motion, leaving only the breach-of-trust claim.

       After discovery, Intrust moved for summary judgment on the remaining claim.

The district court granted summary judgment in favor of Intrust, and Kastner now

appeals. He challenges the district court’s dismissal orders, summary judgment

order, and certain discovery rulings. He also claims bias on the part of the district

court judge and requests certification of questions of state law.

2
       In diversity cases, the law of the forum state governs analysis of the
underlying claims. Reid v. Geico Gen. Ins. Co., 499 F.3d 1163, 1167 (10th Cir.
2007). Federal courts sitting in diversity also apply state law for statute-of-
limitations purposes. Burnham v. Humphrey Hospitality Reit Trust, Inc., 403 F.3d
709, 712 (10th Cir. 2005).
3
       The district court also struck as plaintiffs Jessie I. Brooks, the Estate of Jessie
I. Brooks, and Kristofer Thomas Kastner as personal representative of the Estate.

                                           -4-
                                     II.    Discussion

      A. Motions to Dismiss

      We review de novo a district court’s dismissal of a complaint for failure to

state a claim, applying the same standards as the district court. Russell v. United

States, 551 F.3d 1174, 1178 (10th Cir. 2008). We accept the well-pleaded allegations

of the complaint as true and construe the allegations in the light most favorable to the

plaintiff. Id. To survive a Rule 12(b)(6) motion, a plaintiff must plead “enough facts

to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570 (2007). And because Kastner is proceeding pro se, we construe

his filings liberally; however, we will not act as his advocate. See Hall v. Bellmon,

935 F.2d 1106, 1110 (10th Cir. 1991).

             1. November 2010, Dismissal Order

      Kastner states that he appeals from the district court’s November 2010

dismissal order. Aplt. Opening Br. at 4. That order dismissed five claims but on

appeal Kastner argues error with regard to two of the five claims: negligence (claim

# 3) and negligent misrepresentation (claim # 5). He claims, in conclusory fashion,

that these claims were “each viable claims plead appropriately.” Id. at 24.

      The district court held that a number of Kastner’s claims, including his claims

for negligence and negligent misrepresentation, were related to the creation of the

trust agreement and inclusion of the waiver provisions. Under Kansas law, claims

             shall not be deemed to have accrued until the act giving
             rise to the cause of action first causes substantial injury, or,

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             if the fact of injury is not reasonably ascertainable until
             some time after the initial act, then the period of limitation
             shall not commence until the fact of injury becomes
             reasonably ascertainable to the injured party, but in no
             event shall an action be commenced more than 10 years
             beyond the time of the act giving rise to the cause of
             action.

Kan. Stat. Ann. § 60-513(b) (emphasis added). These claims were premised on

alleged wrongful conduct concerning the 1996 creation and execution of the trust

agreement, yet Kastner’s suit was filed fourteen years after execution of the trust

agreement. Consequently, the court held these claims were barred by the ten-year

statute of repose under § 60-513(b). We agree.

      To the extent Kastner also seeks to challenge the dismissal of his other claims

for relief related to the creation and inclusion of the waiver provisions (claims 1, 2, 6,

and part of 8), these claims are likewise time-barred.

             2. June 2011, Dismissal Order

      After Kastner amended the complaint following the district court’s November

2010 dismissal order, Intrust moved to dismiss under Fed. R. Civ. P. 12(b)(6), six of

the seven remaining claims (all but the breach-of-trust claim).4 The district court

granted the motion.

4
      The seven claims were: breach of trust; fraud by silence in failing to disclose
material facts concerning the nature of the trust investments or explain poor
investments; fraud in the investment of the trust; reformation of trust; breach of
contract; deceptive trade practices under the KCPA; and civil conspiracy.

                                          -6-
      Regarding the reformation-of-trust and removal-of-trustee claim, the district

court agreed with Intrust that Kastner was not a “qualified beneficiary” and,

therefore, lacked standing to seek reformation or modification of the trust. On

appeal, Kastner argues the district court erred in finding he was not a “qualified

beneficiary,” pointing to the fact that Intrust has been treating him as a qualified

beneficiary since 2001.

      Under Kansas law, a “beneficiary” is a person who “[h]as a present or future

beneficial interest in a trust, vested or contingent.” Kan. Stat. Ann. § 58a-103(2)(A).

Although Kansas has substantially adopted the Uniform Trust Code (“UTC”), its

definition of a “qualified beneficiary” is a departure from the UTC. Under the UTC,

a “qualified beneficiary” is a beneficiary who, on the date the beneficiary’s

qualification is determined:

             (A) Is a distributee or permissible distributee of trust
             income or principal;
             (B) Would be a distributee or permissible distributee of
             trust income or principal if the interests of the distributees
             described in subparagraph (A) terminated on that date
             without causing the trust to terminate; or
             (C) Would be a distributee or permissible distributee of
             trust income or principal if the trust terminated on that
             date.

Unif. Trust Code § 103(13). In contrast, under the Kansas Uniform Trust Code

(“KUTC”), a “qualified beneficiary” is a “beneficiary who, as of the date in question,

either is eligible to receive mandatory or discretionary distributions of trust income

or principal, or would be so eligible if the trust terminated on that date.” Kan. Stat.

                                          -7-
Ann. § 58a-103(12)(A). The KUTC therefore does not include within its definition

of “qualified beneficiaries” an individual who would be eligible to receive a

distribution if the current distributee’s interests terminated without terminating the

trust. Under the UTC definition, Kastner, a contingent beneficiary, would qualify as

a “qualified beneficiary” because he would be a distributee if Ms. Wills’ interest

terminated and the trust continued. But the KUTC is critically different in this

respect.

       Additionally, as relevant to Kastner’s reformation-of-trust claim, under Kansas

law only a settlor, co-trustee or “qualified beneficiary” may request removal of a

trustee, id. § 58a-706(a), and only a settlor, trustee or “qualified beneficiary” may

seek modification or termination of a trust, id. § 58a-410(b). As such, contingent

beneficiaries cannot request removal of a trustee or seek modification of a trust.

       In determining whether Kastner was a “qualified beneficiary” under Kansas

law the district court looked to the terms of the trust. Pursuant to the trust terms, the

district court found that Kastner was not currently eligible to receive any

distributions, mandatory or discretionary. It reasoned that the trust provides for

distributions to Ms. Wills (Kastner’s mother), who is currently living, and only upon

her death is Kastner entitled to distributions. Neither would Kastner have been

eligible to receive distributions if the trust terminated at that point in time while

Ms. Wills is still living. The district court concluded, and we agree, that Kastner is

                                           -8-
not a “qualified beneficiary” under the KUTC. Accordingly, dismissal of the

reformation-of-trust claim was appropriate.5

       Turning to Kastner’s deceptive-trade-practices claim under the KCPA, the

district court dismissed the claim finding that Kastner was not a “consumer” within

the meaning of the Act, nor did he allege a “consumer transaction” between himself

and Intrust. Kastner argues on appeal that the “statute clearly applies and [he] has a

7th Amendment right to the claim.” Aplt. Opening Br. at 23. We disagree.

       As the district court observed, the KCPA applies to “‘consumers’ engaged in

‘consumer transactions’ with ‘suppliers.’” Berry v. Nat’l Med. Servs., Inc., 205 P.3d

745, 752 (Kan. Ct. App. 2009); see also Kan. Stat. Ann. § 50-624(b), (c), (l). Its

“protection is limited to individuals . . . who directly contract with suppliers for

goods or services.” CIT Grp./Sales Fin., Inc. v. E-Z Pay Used Cars, Inc., 32 P.3d

1197, 1204 (Kan. Ct. App. 2001). A “consumer” is “an individual . . . who seeks or

acquires property or services for personal, family, household, business or agricultural

purposes.” Kan. Stat. Ann. § 50-624(b). A “consumer transaction” is a “sale, lease,

assignment or other disposition for value of property or services within [Kansas]
5
       Kastner seeks certification on “the qualified beneficiary issue and
interpretation of state trust duties.” Motion, 6-7. We decline to certify because
Kastner does not present a specific legal question for certification. Further, he did
not seek certification until after losing in district court. See Enfield ex rel. Enfield v.
A.B. Chance Co., 228 F.3d 1245, 1255 (10th Cir. 2000). And the issues Kastner
raises for certification are not “sufficiently novel that we feel uncomfortable
attempting to decide [them] without further guidance.” Pino v. United States,
507 F.3d 1233, 1236 (10th Cir. 2007).

                                           -9-
(except insurance contracts regulated under state law) to a consumer; or a solicitation

by a supplier with respect to any of these dispositions.” Id. § 50-624(c). Kastner did

not allege in his complaint that he directly sought or acquired Intrust’s services in

exchange for anything of value. Instead, he alleged that Intrust “deceived” him about

the investment and performance of the trust and failed to provide him with certain

records. R., Vol. I, at 1229. We agree with the district court that Kastner did not

allege that he was a “consumer” or that he was engaged in a “consumer transaction”

within the meaning of the KCPA.

      The district court dismissed the remaining claims concluding that because

Kastner sought damages for only depreciation of the value of the trust property,

the claims were subsumed by the breach-of-trust claim. See Kan. Stat. Ann.

§ 58a-1003(b) (“Absent a breach of trust, a trustee is not liable to a beneficiary for a

loss or depreciation in the value of trust property or for not having made a profit.”).

We see no error.

      B. Summary Judgment Motion

      “We review a district court’s decision to grant summary judgment de novo,

applying the same standard as the district court.” Squires v. Breckenridge Outdoor

Educ. Ctr., 715 F.3d 867, 872 (10th Cir. 2013) (internal quotation marks omitted).

Summary judgment is appropriate if “there is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

                                          - 10 -
      The district court granted summary judgment in favor of Intrust on Kastner’s

claim for breach of trust. Kastner alleged that Intrust invested the trust assets poorly,

Intrust did not invest the trust assets according to the beneficiaries’ wishes, Intrust

failed to provide Kastner with information necessary to protect his interests, and

Intrust breached various statutory duties. Intrust moved for summary judgment on

grounds that 1) Kastner could not establish the appropriate standard of care for a

professional trustee and breach of that standard because he did not provide an expert

to testify to these matters and 2) even if Kastner could produce expert testimony on

the standard of care, Intrust did not commit a breach of trust. In response to Intrust’s

motion, Kastner filed approximately 1,200 pages of separate documents and exhibits.

The district court found that Kastner failed to appropriately controvert Intrust’s facts

because he “did not coherently respond” to the statement of facts. R., Vol. III,

at 1373. Because the district court concluded that Kastner failed to demonstrate

a genuine issue of material fact on the breach-of-trust claim, it did not reach the

standard of care issue.

      Under KUTC, a violation by a trustee of a duty the trustee owes to a

beneficiary is a breach of trust. Kan. Stat. Ann. § 58a-1001. The KUTC further

provides that the Uniform Prudent Investor Act (“UPIA”) governs the investment and

management of trust assets. See id. § 58a-901; see also McGinley v. Bank of Am.,

N.A., 109 P.3d 1146, 1153 (Kan. 2005). The KUTC and UPIA identify certain duties

owed to beneficiaries, several of which Kastner claims Intrust breached.

                                          - 11 -
      On appeal, Kastner argues that he has “proved actual guilt” and “with opinions

totaling 141 pages and over 800 pages of supporting evidence, proves the breach of

the standard of care.” Aplt. Opening Br. at 7-8. As we construe his brief, he claims

that the duties of loyalty, impartiality, and prudent administration have been

breached. His opening brief provides endnotes in which he cites to an affidavit and

“legal opinion,” each over fifty pages and each authored by Kastner, in which he

discusses the standard of care and Intrust’s alleged breach of it.

      Intrust argues on appeal, as it did below, that to prove his breach-of-trust

claim, Kastner is required to provide expert testimony. See In re Estate of Maxedon,

946 P.2d 104, 111 (Kan. Ct. App. 1997) (holding that to establish the standard of care

for a professional trustee, and breach of that standard, it is ordinarily necessary to

present expert testimony). Kastner submitted himself as an expert witness on the

standard of care for a professional trustee. Intrust asserts that Kastner is not a

competent expert under Fed. R. Evid. 702, despite his legal training he cannot

establish the standard of care. The district court found that Kastner had not

appropriately designated experts and, thus, he would not have appropriate expert

testimony to support his breach-of-trust claim past the summary judgment stage.

See R., Vol. III, at 1377 n.16. Review of the record shows that Kastner disclosed one

witness pursuant to Fed. R. Civ. P. 26(a)(2)(C) who would testify consistent with

Kastner’s “legal opinion” documents (sixty-one pages), but would not submit a

                                          - 12 -
written report.6 In short, it does not seem that Kastner submitted any expert witness

pursuant to Fed. R. Civ. P. 26(a)(2)(B).

      On these facts, we cannot conclude that the district court erred in granting

summary judgment in favor of Intrust. Further, we agree with the district court that

Kastner has not demonstrated a genuine issue of material fact. Despite the

voluminous record, and contrary to Kastner’s claims, the record evidence does not

demonstrate that Intrust invested the trust assets poorly.7 Instead, the uncontroverted

evidence is that the trust outperformed the S&P 500 index for the period between

January 1, 2001, to December 31, 2011. On January 1, 2001, the trust balance was

$859,264.52; the balance was $1,006,425.44 on December 31, 2011. In addition, it

disbursed $516,364.51 over this time period. Intrust’s expert witness opined that

Intrust’s investment-management activities were well within industry norms. Nor is

there competent evidence that Intrust violated its statutory duties of loyalty,

impartiality, and prudent administration to the trust beneficiaries. We find no fault

6
       Although Fed. R. Civ. P. 26(a)(2)(C) allows for expert witnesses without a
written report, this must be stipulated to by the parties or otherwise ordered by the
court. See Fed. R. Civ. P. 26(a)(2)(C). The parties have not directed us to any
indication in the record, and we find none, that Kastner’s proposed expert was
properly submitted under Fed. R. Civ. P. 26(a)(2)(C).
7
      Kastner’s complaint alleged that between 2000 and 2008, the trust lost
approximately $40,000.00, the Dow, Nasdaq and S&P 500 investments indices
doubled, and that the trust would be worth over $10,000,000.00 if invested as the
beneficiaries requested. The record belies these contentions.

                                           - 13 -
with the district court’s grant of summary judgment on Kastner’s breach-of-trust

claim.

         C. Discovery Rulings

         Kastner also challenges discovery rulings issued by the magistrate judge. He

did not object, however, to either the magistrate judge’s July 26, 2012, order or

May 31, 2012, order. Kastner has waived appellate review of these non-dispositive

orders. See Fed. R. Civ. P. 72(a) (providing that a party may object to a

non-dispositive order within fourteen days of the order but “may not assign as error a

defect in the order not timely objected to”).8

         D. Bias

         Kastner also complains of bias on the part of the district court. He filed two

separate motions seeking recusal and disqualification, and change of venue. Both

were denied.9 Kastner argues that before becoming a judge, Judge Melgren worked

at a law firm that represented Intrust and had significant financial ties with the

corporation. See Aplt. Opening Br. at 25.

8
      Kastner did not file an objection to the magistrate judge’s May 31, 2012, order
under Fed. R. Civ. P. 72(a) but did file a “Motion for Reconsideration on Discovery.”
The magistrate judge, however, did not treat Kastner’s motion as an objection under
Fed. R. Civ. P. 72(a) and, instead, ruled on the matter under local D. Kan. R. 7.3 for
motions for reconsideration.
9
       Kastner also sought the recusal of the magistrate judge. Because the district
court’s September 2013 order granting summary judgment in favor of Intrust mooted
the recusal motion, we do not reach Kastner’s claims of bias on the part of the
magistrate judge.

                                           - 14 -
      Under 28 U.S.C. § 455(a), a judge “shall disqualify himself in any proceeding

in which his impartiality might reasonably be questioned.” “[D]isqualification is

appropriate only where a reasonable person, were he to know all the circumstances,

would harbor doubts about the judge’s impartiality.” United States v. Mendoza,

468 F.3d 1256, 1262 (10th Cir. 2006) (internal quotation marks omitted). We review

the disqualification ruling for abuse of discretion. See id. The requirements for

disqualification under § 455 are not satisfied by rumor, speculation, beliefs,

conclusions, innuendo, suspicion, opinion, and similar non-factual matters. United

States v. Cooley, 1 F.3d 985, 993 (10th Cir. 1993). Mere familiarity with the

defendants, or the type of charge, or the kind of defense presented do not require

disqualification under § 455. See id. at 994.

      Kastner’s allegations are insufficient to require recusal. The record

demonstrates that, according to Judge Melgren, he did not recall representing Intrust.

He further represented that perhaps the law firm he worked for represented Intrust

but that this was highly doubtful considering that a principal client of the firm was a

rival bank to Intrust. He further represented that after leaving his firm, he was

involved in adversarial litigation against it. Even assuming that Judge Melgren

represented Intrust in unrelated matters, this would not obligate him to recuse himself

under § 455(a). See id. (observing that mere familiarity with defendants is generally

not cause for recusal). Kastner’s claims of Judge Melgren’s bias and significant

                                         - 15 -
financial ties to Intrust are merely speculative. We conclude Judge Melgren did not

abuse his discretion in declining to recuse himself.

                                    III.    Conclusion

      The judgment of the district court is affirmed. Kastner’s motion for

certification of questions of state law is denied. Kastner’s motion requesting oral

argument is denied.

                                                    Entered for the Court

                                                    Wade Brorby
                                                    Senior Circuit Judge

                                           - 16 -