Court Opinion

ID: 2732878
Source: CourtListenerOpinion
Date Created: 2014-09-15 20:00:09.557458+00
Date Added: 2024-06-11T12:16:12.998986
License: Public Domain

NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                               ______________

                                     No. 13-3973
                                   ______________

                             ANTHONY V. BARBIERO,
                                               Appellant
                                     v.

              GERALD S. KAUFMAN; GERALD S. KAUFMAN CORP
                             ______________

             APPEAL FROM THE UNITED STATES DISTRICT COURT
               FOR THE EASTERN DISTRICT OF PENNSYLVANIA

                                (D.C. No. 2-12-cv-06869)
                       District Judge: Hon. Mary A. McLaughlin
                                    ______________

                      Submitted Under Third Circuit LAR 34.1(a)
                                 September 12, 2014
                                  ______________

        Before: MCKEE, Chief Judge, SMITH, and SHWARTZ, Circuit Judges.

                              (Filed: September 15, 2014)
                                    ______________

                                      OPINION
                                   ______________

SHWARTZ, Circuit Judge.

      Anthony Barbiero is a beneficiary of a trust. He filed suit in Pennsylvania’s

Orphans’ Court to replace the trustee, Gerald S. Kaufman (the “Pennsylvania Action”).
                                           1
Kaufman removed the case to the District Court. Because the District Court correctly

declined to remand this case and correctly dismissed this case in favor of ongoing

litigation in Illinois state court, we will affirm.

                                                I

       As we write principally for the benefit of the parties, we recite only the essential

facts and procedural history. Barbiero is one of approximately 600 tenants in common of

an office building in Philadelphia valued at more than $50 million. The building is held

in a trust of which Barbiero is a beneficiary. Barbiero and his wife have a 0.0549%

interest in the building. Kaufman manages the trust. Under the trust agreement, trustees1

are prohibited from encumbering the property unless all tenants in common agree.

       Kaufman filed suit in Illinois (the “Illinois Action”), seeking permission to deviate

from the unanimity provision, contending that he is unable to secure the consent of all

tenants in common as required by the trust agreement and that, absent a loan secured by a

mortgage on the property, the beneficiaries will lose the trust property. Barbiero, among

others, was named as a defendant, both individually and as a representative of a class of

beneficiaries. The Illinois Action is pending.

       Three months after the Illinois Action began, Barbiero filed the Pennsylvania

Action, in which Barbiero alleged that Kaufman breached his fiduciary duty2 by entering

       1
        The parties use “nominee” and “trustee” interchangeably.
       2
        This Court affirmed the dismissal of similar claims against Kaufman brought by
other beneficiaries, albeit on different grounds than those discussed herein. See Appel v.
Kaufman, 481 F. App’x 774 (3d Cir. 2012) (not precedential).
                                                2
into a mortgage agreement without the consent of all tenants in common, that the

mortgage is in default and accruing interest of 14.05%, and that replacement of Kaufman

is necessary “to prevent a pending foreclosure.” App. 48.3 Kaufman removed the

Pennsylvania Action to the District Court pursuant to 28 U.S.C. § 1446, Barbiero filed a

motion to remand under 28 U.S.C. § 1447(c), and Kaufman filed a motion to dismiss.

       The District Court denied the motion to remand. It held that it had diversity

jurisdiction, as the suit met the $75,000 amount in controversy requirement and the

parties were diverse: Barbiero was a citizen of New York, Kaufman was a citizen of

Illinois, and Gerald S. Kaufman Corp., which holds title to the building, was a citizen of

Delaware, its state of incorporation, and Illinois, the site of its principal place of business.

The District Court also rejected Barbiero’s argument that the citizenship of the trust and

of each of its beneficiaries had to be considered because Barbiero had petitioned for

Kaufman’s removal only on behalf of himself as a single beneficiary and neither the trust

nor any of the other beneficiaries were parties. Next, the District Court rejected

Barbiero’s argument that remand was required under Princess Lida of Thurn & Taxis v.

Thompson, 305 U.S. 456 (1939), concluding that Princess Lida applies to two separately

filed cases and not to a single case initially brought in state court and then removed to

federal court. The District Court also rejected Barbiero’s argument that it should abstain

and remand the Pennsylvania Action to the Orphans’ Court, noting that “federal courts

       3
        Elsewhere, Barbiero alleged that foreclosure proceedings are not currently
pending.
                                               3
have exceedingly limited warrant to simply yield jurisdiction on matters of state law.”

App. 21-22.

       The District Court, however, dismissed the case for lack of subject matter

jurisdiction under Princess Lida. It held that the Pennsylvania and Illinois Actions are

quasi in rem for the purposes of Princess Lida and that it was required to “cede

jurisdiction to the previously filed and ongoing Illinois Action . . . .” App. 29.

       The District Court denied Barbiero’s motion for reconsideration. The District

Court acknowledged that it had incorrectly determined that Barbiero’s 0.0549% interest

in the property satisfied the amount in controversy requirement, but held that the amount

in controversy requirement was still satisfied because Barbiero’s suit alleged that

Kaufman’s actions threatened the entire property. Barbiero appeals.4

                                              II

                                              A

       We first address the existence of subject matter jurisdiction under 28 U.S.C.

§ 1332(a) and the District Court’s denial of Barbiero’s motion to remand. The District

Court had diversity jurisdiction. The $75,000 amount in controversy requirement is met.

       4
         We have jurisdiction pursuant to 28 U.S.C. § 1291. The District Court’s
jurisdictional decisions are reviewed de novo insofar as they raise questions of law, and
the underlying factual determinations are reviewed for clear error. See Mala v. Crown
Bay Marina, Inc., 704 F.3d 239, 247 (3d Cir. 2013). “We review the District Court’s
decision not to abstain for abuse of discretion, although the underlying legal questions
that determine whether the case falls within the range in which the District Court may
exercise discretion are subject to plenary review.” IFC Interconsult, AG v. Safeguard
Int’l Partners, LLC, 438 F.3d 298, 305 (3d Cir. 2006).
                                              4
Where, as here, a plaintiff seeks injunctive relief, “the amount in controversy is measured

by the value of the right sought to be protected by the equitable relief.” In re Corestates

Trust Fee Litig., 39 F.3d 61, 65 (3d Cir. 1994). Here, Barbiero seeks to remove the

trustee to protect the trust property. The request to remove “a trustee does not

[necessarily] place the entire trust corpus into controversy; instead plaintiffs must seek by

way of an injunction protection from an activity which threatens in excess of $[75,000] of

the trust corpus.” Id. at 66. Thus, to determine the amount in controversy, we must look

to the value that Kaufman’s alleged conduct threatens. Barbiero alleged that Kaufman’s

conduct created the threat of foreclosure on the property. By alleging that Kaufman’s

conduct jeopardized the entire value of the $50 million property, Barbiero sought

“protection from an activity which threatens in excess of $[75,000] of the trust corpus.”

Corestates, 39 F.3d at 66. Thus, the amount in controversy requirement is satisfied.

       The parties are completely diverse. See Zambelli Fireworks Mfg. Co. v. Wood,

592 F.3d 412, 419 (3d Cir. 2010) (“Complete diversity requires that . . . no plaintiff be a

citizen of the same state as any defendant.”). Barbiero is not a citizen of the same state as

either defendant, but he contends that the trust is also a party and that the citizenship of

each of its approximately 600 beneficiaries must therefore be considered. This argument

lacks support. This Court has held that “[i]n a suit by or against the individual trustees of

a trust, where the trustees possess certain customary powers to hold, manage and dispose

of assets, their citizenship, and not that of the trust beneficiaries, is controlling for

diversity of citizenship purposes.” Emerald Investors Trust v. Gaunt Parsippany Partners,
                                                5
492 F.3d 192, 200-01 (3d Cir. 2007) (internal quotation marks and alteration omitted).

This suit is against a trustee who appears to possess such powers, and thus it is the

trustee’s citizenship that matters. Further, the statute on which Barbiero relies does not

require that the trust be a party. 20 Pa. Cons. Stat. § 7766 (“[A] beneficiary may request

the court to remove a trustee . . . .”). Accordingly, the District Court correctly concluded

that the parties are completely diverse.

       The District Court also correctly declined to remand the action to the Orphans’

Court despite “its expertise in the area of trusts and estates.” App. 18. “Federal district

courts have a virtually unflagging obligation to exercise the jurisdiction given them,” and

“[a] district court has little or no discretion to abstain in a case that does not meet

traditional abstention requirements.” IFC Interconsult, AG v. Safeguard Int’l Partners,

LLC, 438 F.3d 298, 305-06 (3d Cir. 2006) (internal quotation marks and alteration

omitted). “The threshold requirement for a district court to even entertain abstention is a

contemporaneous parallel judicial proceeding,” meaning “there must be identities of

parties, claims, and time.” Id. at 306.

       Here, no such parallel judicial proceeding exists. Although the Illinois Action

does involve administration of the same trust, the claims and relief sought are distinct

from those in this case. Cf. Reichman v. Pittsburgh Nat’l Bank, 465 F.2d 16, 17-18 (3d

Cir. 1972) (affirming dismissal of federal complaint “under the abstention doctrine”

where there were ongoing Orphans’ Court proceedings involving the same parties and

claims). For this reason, we conclude that the District Court lacked discretion “to even
                                               6
entertain abstention,” IFC Interconsult, 438 F.3d at 306, and that it correctly denied

Barbiero’s motion to remand on that ground.

       Furthermore, Princess Lida does not support remand to the Orphans’ Court. The

Princess Lida doctrine “prevents a court in which an action is filed from exercising

jurisdiction when a court in a previously filed action is exercising control over the

property at issue and the second court must exercise control over the same property in

order to grant the relief sought.” Dailey v. Nat’l Hockey League, 987 F.2d 172, 175 (3d

Cir. 1993). This rule seeks to avoid “legal disharmony” between courts that may be

asked to make decisions about the same property. Id. at 177.

       Although Barbiero argues that “the Orphans’ Court has already asserted exclusive

jurisdiction over the trust,” Appellant Br. 25, he ignores the effect of removal, which

places the case “under the sole jurisdiction of the federal court from the time of filing

until the court remands it back to state court.” In re Diet Drugs, 282 F.3d 220, 231 n.6

(3d Cir. 2002). There is no danger of legal disharmony or inconsistent rulings between

the Orphans’ Court and the District Court, as there is no case currently pending in the

Orphans’ Court. Thus, the rule of Princess Lida does not require remand.

                                              B

       Princess Lida, however, does require dismissal of this second-filed case. Because

suits requiring courts to exercise control over the trust property are pending in two

different courts, Princess Lida “requires that the court in which the second suit is brought

yield its jurisdiction if the requisite ‘property’ showing is made.” Dailey, 987 F.2d at
                                              7
176. This showing is made when: “(1) the litigation in both the first and second fora are

in rem or quasi in rem in nature, and (2) the relief sought requires that the second court

exercise control over the property in dispute and such property is already under the

control of the first court.” Id. Because both of these requirements are met as a result of

the earlier-filed Illinois Action, the District Court correctly dismissed this case.5

       First, like most cases involving trusts, the Pennsylvania Action and the Illinois

Action are in rem or quasi in rem under Princess Lida. “[A] suit that concerns or

determines the ownership, control and administration of a trust and the powers, duties

and liabilities of the trustees is either in rem or quasi in rem” under Princess Lida.

Cassity v. Pitts, 995 F.2d 1009, 1012 (10th Cir. 1993); see also Cartwright v. Garner, 751
F.3d 752, 762 (6th Cir. 2014) (“In suits involving trust administration, the court must

control the property in order to give effect to the resolution of the case, and [such suits]

are quasi in rem.”); Thompson v. Fitzgerald, 198 A. 58, 63 (Pa. 1938) (suits to administer

trusts are quasi in rem), aff’d sub nom. Princess Lida, 305 U.S. 456; Austin v. Royal

League, 147 N.E. 106, 109 (Ill. 1925) (a proceeding seeking “to affect the interest of a

named person in specific property . . . is . . . quasi in rem”); Bania v. Royal Lahaina

Hotel, 347 N.E.2d 106, 108 (Ill. App. Ct. 1975) (“Actions [q]uasi in rem determine the

rights of the parties to particular property.”). Similarly, an action is in rem or quasi in

rem where “the conduct of [t]rustees and the damages to [b]eneficiaries must be

       5
       Because we are affirming based on Princess Lida, we need not reach the other
arguments Kaufman makes in support of dismissal.
                                               8
determined in reference to the trust . . . .” Cassity, 995 F.2d at 1012. Such cases differ

from cases “adjudicat[ing] . . . a party’s right or interest . . . .” Dailey, 987 F.2d at 176-77

(internal quotation marks and alterations omitted).

       Applying these principles, the Illinois Action and the Pennsylvania Action are

quasi in rem under Princess Lida and the law of those respective states. In the Illinois

Action, Kaufman requests permission to deviate from the trust agreement, contending

that the agreement itself threatens the viability of the trust. Such contentions necessarily

require a construction of the terms of the trust agreement, which will undoubtedly affect

Barbiero’s interests in and Kaufman’s powers regarding specific property. The

Pennsylvania Action entails assessing Kaufman’s conduct as trustee as compared to his

obligations under the trust agreement, and if Barbiero’s petition is successful, it will

result in the replacement of Kaufman as trustee, intimately affecting the administration of

the trust itself. See Thompson, 198 A. at 63-64. Because both the Illinois Action and the

Pennsylvania Action are suits implicating the administration of the trust and the powers,

duties, and liabilities of the trustee, the first step of the Princess Lida analysis is satisfied.

See Cassity, 995 F.2d at 1012; Dailey, 987 F.2d at 176.

       Second, the relief sought in the Pennsylvania Action and the Illinois Action would

require both courts to exercise control over the trust. See Dailey, 987 F.2d at 176. In the

Illinois Action, Kaufman seeks to reform the language of the trust agreement and expand

his ability to make decisions about the trust property, while in the Pennsylvania Action,

Barbiero seeks to remove Kaufman as trustee. As the District Court noted, if it had
                                                9
granted the relief Barbiero had requested and removed Kaufman, “it would greatly

impede the trust administration proceedings of the Illinois Action and call into question

the justiciability of that suit.” App. 28. Thus, if both courts were to exercise jurisdiction

simultaneously, their decisions could create “the type of legal disharmony the Princess

Lida Court sought to avoid.” Dailey, 987 F.2d at 177. Hence, the District Court

correctly concluded that Princess Lida required it to dismiss this case.

                                             III

       For the foregoing reasons, we will affirm the District Court’s denial of Barbiero’s

motion to remand, its dismissal under Princess Lida, and its denial of Barbiero’s motion

for reconsideration.

                                             10