The opinion of the court was delivered by: Kram, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff brings this action, styled as a shareholder
derivative suit, to recover a $120,000 payment by defendants
Pleasant Valley Finishing Co., Inc. ("Finishing"), Robert
Judell ("Judell") and Leonard Turetzky ("Turetzky") to
Turetzky through an entity called LST Realty, during the
"winding down" of Finishing. The complaint alleges that such
$120,000 payment to Turetzky is inconsistent with his
fiduciary obligations as a director of Finishing and as a
trustee of Pleasant Valley Finishing Co., Inc., Liquidating
Trust (the "Liquidating Trust"). Defendants interposed an
answer to the complaint denying its material allegations and
raising various affirmative defenses.
Through February 25, 1981, Pleasant Valley Textiles Inc.
("Textiles") was a New York corporation, having as its sole
shareholders Judell and plaintiff's decedent, Joseph R. Snyder
("Snyder"). Judell and Snyder each held a 50% interest in
Textiles. On February 25, 1981, Snyder died leaving a will
(the "Will") appointing plaintiff Executor, and appointing
plaintiff and Sheldon Snyder, decedent's son, trustees (the
"Trustees") with respect to the residuary estate, consisting
of, among other things, decedent's intangible personal
property. Will art. THIRD. The Will grants the residuary
estate to the Trustees and directs them to hold it in a
separate trust for the remainder of plaintiff's life, with
payments of income and/or principal to be made to plaintiff in
accordance with the provisions of article THIRD of the Will.
Through December 22, 1988, defendant Finishing was a New
York corporation engaged in the business of textile
processing, having as its shareholders Turetzky and Textiles.
On that date the directors and shareholders of Finishing
unanimously agreed to adopt a liquidation plan for Finishing
which, among other things, created the Liquidating Trust. In
accordance with Finishing's liquidation plan, Turetzky
received one unit of beneficial interest in the Trust, and
Textiles two units. By agreement dated December 28, 1988 by
and between Finishing, Judell and Turetzky, Finishing's
liquidation plan was effectuated.
By separate agreement dated December 28, 1988, by and
between Textiles, Judell and plaintiff as Executor of
decedent's estate (the "Transfer Agreement"), Textiles also
adopted a plan of liquidation. In accordance with the Transfer
Agreement, Textiles' shareholders surrendered their shares
which were redeemed and cancelled by Textiles in exchange for
two units of beneficial interest in the Liquidating Trust.
On December 28, 1988, Finishing paid to Turetzky, through an
entity called LST Realty, the sum of $120,000 in connection
with the sale of certain of Finishing's assets. In January
1989, plaintiff executed an instrument purporting to assign to
herself "all the right, title and interest of the Estate of
Joseph R. Snyder in and to the [Liquidating Trust] and all
other assets remaining in the name of the said estate . . . as
sole beneficiary under the [Will]" (the "Assignment").
Affidavit of Judith Snyder sworn to on May 10, 1990 ("Snyder
Aff."), Exhibit "4". Plaintiff sues individually, and
derivatively on behalf of Finishing, the Trust and all
shareholders of Finishing and owners of beneficial interest in
the Trust, to recover such $120,000 payment.
Defendants contend that plaintiff has no standing to
maintain this action in her individual capacity and argue that
title to the unit of beneficial interest of the Trust
belonging to the Estate of Joseph R. Snyder (the "Unit of
Beneficial Interest") remains property of the Estate.
According to defendants, in order for plaintiff properly to
maintain this action at all, she must sue in her capacity as
Executor. Defendants contend that as Executor, plaintiff
should be deemed a citizen of New York rather than Florida,
thereby destroying this Court's diversity jurisdiction.
Plaintiff relies on the Assignment to establish her
entitlement to bring this derivative action in her individual
capacity as a resident of the State of Florida, contending
that as a result of the Assignment, she acquired all right,
title and interest in and to the Unit of Beneficial Interest.
the legal representative of the estate of a
decedent shall be deemed to be a citizen only of
the same state as the decedent, and the legal
representative of an infant or an incompetent
shall be deemed to be a ...