United States District Court, Southern District of New York
June 22, 2001
MADELYN LISA GREEN, PLAINTIFF,
RUTH DOUKAS, NICK DOUKAS, CLAIRE FALLON, TIMOTHY FALLON, REGINA BENEVENUTI, "GEORGE" BENEVENUTI, MERRILL KELMAR, PAUL KELMAR, JONATHAN FALLON, HILLARY FALLON, LAUREN HEIMAN ANGLE, AND MELINDA HEIMAN HART, DEFENDANTS
The opinion of the court was delivered by: Mcmahon, J.
MEMORANDUM DECISION AND ORDER DISMISSING CERTAIN CLAIMS, GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, AND DISPOSING OF PENDING IN LIMINE MOTIONS
Both parties have made motions at the close of discovery. Defendants move for dismissal and/or summary judgment on a variety of grounds, as well as for an order in limine precluding the testimony of two experts. Plaintiff moves for partial summary judgment on the issue of confidential relationship as against one defendant, her sister Ruth Doukas, and for the most part opposes defendants' various motions.
1. Plaintiff's Claims For Defamation, Intentional Infliction of Emotional Distress, And Tortious Interference With Inheritance Are Dismissed.
Plaintiff concedes that her claims for defamation and intentional infliction of emotional distress are time-barred,*fn1 and that her claim for tortious interference with inheritance does not lie, as Connecticut (where her mother lived and died) does not recognize such a claim. DiMaria v. Silvester, 89 F.Supp.2d 195, 196 (D.Conn.1999). Therefore, these causes of action are dismissed.
2. Plaintiff's Claim For Tortious Interference With Financial Expectancy Is Dismissed In Part.
Plaintiff's concession regarding the claim of tortious interference with inheritance means that her claim for tortious interference with financial expectancy must also be dismissed, at least in part. While Connecticut recognizes a tort of this nature, no claim will lie where one's "expectancy" is the expectancy of an inheritance. Put otherwise, one cannot take the barred claim of interference with inheritance, recharacterize it as a claim for interference with expectancy, and evade the legal bar to suit.
The elements of this claim are as follows: (1) The existence of a business relationship or expectancy; (2) knowledge by the defendant of the relationship; (3) tortious interference by the defendant, i.e ., proof that the defendant acted maliciously, or was guilty of fraud, misrepresentation, intimidation or molestation; (4) proof that the interference cause harm; and (5) damages to the plaintiff. DiMaria, 89 F.Supp.2d at 201 (applying the elements of interference with expectancy to the proper distribution under a will).
Plaintiff's claim is, in substance, that as one of three daughters of Dorothy Green, she had an expectancy of coming into a one-third share of her mother's estate as it existed at a particular point in time. Her expectancy of a one-third share arose from the fact that her mother had so provided in her will. Indeed, she avers that she has satisfied the "knowledge" requirement of the tort of interference with financial expectancy (which lies only where the defendant knew of the plaintiff's expectancy) by pleading and proving that her sisters were aware of the contents of their mother's original will. Thus, there is nothing to the expectancy claim but a claim that she expected to inherit more money than she did-or that there was some interference with her "right" to inherit.*fn2
Connecticut clearly recognizes Dorothy Green's right to do anything she wanted with her property during her life-using it or disposing of it as she wished without regard to the interests of the named beneficiaries in her will. Hall v. Hall, 91 Conn. 514 (1917); Cherniak v. Home National Bank and Trust Co. of Meriden, 151 Conn. 367, 370 n. 2 (1964) (noting, with respect to a spouse's interest in the property of the other spouse before death, that "[o]ne cannot be defrauded of that to which he has no right.") (citing Hall ). Madelyn Green had no legally-cognizable expectancy that her mother's estate (and her one-third share thereof) would be of any particular size. Thus, she has no claim for interference with expectancy for any monies not in Dorothy's estate at the time of her death.
However, plaintiff also claims that Ruth and Claire diverted assets after Dorothy's death, before the will was probated. Madelyn did have a financial expectancy in one-third of her mother's remaining estate as it existed at the time of her death, the equal division of which Ruth was obligated to oversee. See DiMaria, 89 F.Supp.2d at 201. Thus I will not dismiss Madelyn's claim for interference with expectancy to the extent she seeks her full share of any monies that were wrongfully diverted from the estate after her mother's death.
3. The Parties' Motions For Summary Judgment On Plaintiff's Claims Of Constructive Fraud, Constructive Trust, and Breach of Fiduciary Duty Are Granted In Part And Denied In Part.
The Second Circuit reversed this Court's award of summary judgment dismissing plaintiff's claims of alleged undue influence and conversion-claims sounding in constructive trust, breach of fiduciary duty and constructive fraud. This Court does not intend to grant summary judgment on those claims again unless there is a technical reason to do so, such as lack of jurisdiction or time bar. Similarly, I do not believe it appropriate to grant Madelyn summary judgment as against her sister Ruth on the question of confidential relationship. The jury will dispose of that question as part of the trial.
a. Plaintiff's Claims Against Her Nieces And Nephews Are Dismissed For Lack of Subject Matter Jurisdiction
Plaintiff concedes that, as against her nieces and nephews, she has not pled damages in the jurisdictional amount. Since jurisdiction in this action is predicated solely on diversity, and the claims against the various defendants are not joint and several, the law is clear that plaintiff must satisfy the jurisdictional amount as against each individual defendant. See Chase Manhattan Bank N.A. v. Aldridge, 906 F.Supp. 870 (S.D.N.Y.1995); Gardiner Stone Hunter Int'l v. Iberia Lineas Aereas De Espana, 896 F.Supp. 125, 128 (S.D.N.Y.1995); Congram v. Giella, No. 91 Civ. 1134, 1992 WL 349845, at *3 (S.D.N.Y. Nov. 10, 1992) ("In a diversity case involving a single plaintiff and multiple defendants, aggregation of claims is not proper unless the liability to the plaintiff is common, undivided or joint."); 1 James W. Moore et al., Moore's Federal Practice ¶ 0.97 (2d ed. 1995) ("Basically, aggregation is allowed when the defendants' liability to the plaintiff is common, undivided, or joint. It is not allowed when the defendants' liability is several, or if the claims against them are separate and distinct from one another."). She has not done so.
Nonetheless, plaintiff insists that this Court need not dismiss as against those defendants, arguing that supplemental or ancillary jurisdiction may be invoked to keep her claims against them before this Court. Plaintiff is incorrect.
Section 310 of the Judicial Improvements Act of 1990, codified at 28 U.S.C. § 1367, governs this court's exercise of supplemental jurisdiction. Section 1367(a) provides, in pertinent part:
Except as provided in subsections (b) and (c) ... in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to the claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution ....
28 U.S.C. § 1367(a). This Court has original jurisdiction, based on diversity, over the plaintiff's state law claims against Ruth Doukas and Claire Fallon. See Viacom International, Inc. v. Kearney, 212 F.3d 721, 726 (2d Cir.2000) (applying Section1367 to defendant's counterclaim where court's original jurisdiction was based on complete diversity of the parties); David Seigel, Practice Commentary 832 (1993) (noting that "[b]y no means does [§ 1367(b) ] exclude [supplemental jurisdiction] from diversity cases in general"). If there were no other restrictions in the statute, § 1367(a) would permit me to exercise supplemental jurisdiction over Madelyn's claims against the nieces and nephews, as they are sufficiently related to the original claims.
However, § 1367(b) carves out a number of exceptions to the general use of supplemental jurisdiction in diversity actions:
In any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or over claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.
28 U.S.C. § 1367(b)(emphasis added). The claims at issue here do not meet the amount-in-controversy requirement of § 1332. See 28 U.S.C. 1332(a). See also American Building Maintenance Co. v. 1000 Water Street Condominium Assoc., 9 F.Supp.2d 1028 (E.D.Wisc.1998) ("[O]nly when the matter exceeds a certain sum does a federal court have jurisdiction over that claim."); 3A Moore's Federal Practice ¶ 20.07[5.-2]; ("Because both complete diversity and the amount in controversy are 'jurisdictional requirements' under § 1332, neither can be evaded by an appeal to supplemental or pendent party jurisdiction."); Henkel v. ITT Bowest Corp., 872 F.Supp. 872 (D. Kansas 1994) (citing Moore's). The question, then, is whether the nieces and nephews fall under one of the categories described in § 1367(b).
Subsection (b) applies here if the nieces and nephews are "persons made parties under Rule 14, 19, 20, or 24." Although plaintiff does not explicitly say so, I assume her argument is that, because these defendants were named in the original complaint, they were not "made parties" under any of the listed rules under a literal reading of 1367(b).
Such an interpretation of 1367(b) is untenable. A plaintiff should not be able to evade the exception to 1367(b) by naming parties over whom there is no jurisdiction in her original pleading, as she did here. The law has not descended to a level of absurdity where parties over whom there is no jurisdiction can be treated as parties pendent if they are named originally, but not if they are sought to be added later. Indeed, Congress' intent in drafting 1367(b) was to prevent plaintiffs from circumventing § 1332 "by the simple expedient of naming initially only those defendants whose joinder satisfies section 1332's requirements and later adding claims not within original federal jurisdiction against other defendants who have intervened or been joined on a supplemental basis." Viacom Int'l, 212 F.3d at 727 (quoting H.R.Rep. No. 101-734, at 29 (1990)). The same reasoning must also apply to the "simple expedient" of naming a party at the outset of a lawsuit in order to avoid § 1332.
And in fact, the "loophole" sought by plaintiffs is not a loophole at all. I do not have original jurisdiction over plaintiff's claims against her nieces and nephews. As I would have to grant a motion to dismiss them for lack of subject matter jurisdiction, these parties would have to be added pursuant to one of the Federal Rules of Civil Procedure listed in 1367(b) in order to become parties defendant.
Judge Sweet of this district reached this very same conclusion when asked to find supplemental jurisdiction over defendants named in the original complaint who destroyed complete diversity. Dieter v. MFS Telcom, Inc., 870 F.Supp. 561 (S.D.N.Y.1994) (finding that, under § 1367(b), non-diverse defendants "would not be able to be joined by the Dieters after the initiation of the litigation under Rules 14, 19, 20, or 24, since their addition would destroy diversity.")
Indeed, because these defendants could not be named on the basis of this court's original jurisdiction, defendants in fact were joined in this action implicitly pursuant to one of the rules listed in 1367(b): Rule 20. That rule "allows a plaintiff to bring a separate claim against a separate defendant when the plaintiff's right to relief ... arises out of the same transaction or occurrence, and presents a common question of law or fact." See American Building Maintenance Co. v. 1000 Water Street Condominium Assoc., 9 F.Supp.2d 1028 (E.D.Wisc.1998) (" ABM "). In ABM, as here, plaintiff was diverse from all defendants, but plaintiff's claim against the condominium association did not meet the amount-in-controversy requirement. The court held that 1367(b) barred the claim:
Rule 20 appears to be the only basis for ABM's making a claim against the condominium association.... ABM joined the condominium association as a defendant because that claim arose out of the same circumstances as ABM's claim against the [other defendants], not because this court had original jurisdiction over that claim. Rule 20 ... is the rule that allowed ABM to make the claim against the condominium association in the first place.
Id. at 1031 (emphasis added).*fn3
The Second Circuit recently rejected the argument that a non-diverse defendant could remain in a lawsuit under a theory of supplemental jurisdiction, though without any explicit discussion of the fact that the defendant, rather than being joined later, was named in the initial complaint. In Herrick Co. v. SCS Communications, Inc., No 99-7976, 2001 WL 588242 (2d Cir. May 23, 2001), one plaintiff brought claims against multiple defendants, and federal subject matter jurisdiction was based solely on diversity of the parties pursuant to 28 U.S.C. § 1332. After finding that Herrick had failed to meet its burden of establishing diversity with respect to defendant Skadden, Arps, Slate, Meagher & Flom LLP, the court found that the district court could not properly exercise supplemental jurisdiction over Herrick's lawsuit against Skadden. Id. at 8280. In so holding, the Court pointed out that supplemental jurisdiction was being alleged:
not merely over a pendent claim but rather over a claim involving a party as to whom there would be no independent federal subject matter jurisdiction.... In such cases, "the [supplemental] jurisdiction of the federal courts is limited not only by the provision of Art. III of the Constitution [extending the federal judicial power to "Cases" and "Controversies" only] but also by Acts of Congress," ... including, most critically in the case before us, the diversity statute, 28 U.S.C. § 1332, which mandates complete diversity... Thus it is well-settled that the existence of diversity between a plaintiff and one defendant cannot support a federal court's exercise of supplemental jurisdiction over another non-diverse defendant... Any other result would "allow the requirement of complete diversity to be circumvented" and "would simply flout the congressional command."
Id. at 8266 (citations and footnotes omitted). The Court addressed 1367(b) in a footnote, noting that the effect of the section is to retain the long-standing principle "that in cases in which original federal jurisdiction is founded solely on diversity, there shall generally be no supplemental jurisdiction over claims by plaintiffs against person made parties under Fed.R.Civ.P. 14, 19, 20 or 24" when to do so would violate Section 1332. There was no discussion of the statute's application to original parties-perhaps the Court believed it was a distinction without a difference. Regardless, the holding in Herrick only further supports my conclusion that defendants may not be joined.
Therefore, the claims against Regina Benevenuti, "George" Benevenuti, Merrill Kelmar, Paul Kelmar, Jonathan Fallon, Hillary Fallon, Lauren Heiman Angle, and Melinda Heiman Hart, are for less than $75,000 are dismissed for lack of subject matter jurisdiction.
b. The Remaining Claims Against Ruth Doukas, Nick Doukas, Claire Fallon, And Timothy Fallon Are Not Time Barred.
Plaintiff also alleges constructive fraud and breach of fiduciary duty, and seeks imposition of a constructive trust on the funds wrongly diverted from the estate. None of these causes of action is time-barred.
Dorothy died on September 16, 1995. Any act of undue influence necessarily occurred before that date. In July 1992, Dorothy sold her longtime home in Spring Valley and moved to Waterford Connecticut, near Ruth's home. Some time shortly after this, Ruth allegedly gained power of attorney over Dorothy's bank accounts.
Madelyn alleges that the sisters took money out of Dorothy's accounts for themselves and their children beginning on or about April 27, 1992, until the date of Dorothy's death.*fn4 Plaintiff also claims that the sisters began to exert influence over Dorothy and pressured her to provide them and their families with gifts in the fall of 1992. Plaintiff points to Dorothy's trip to the hospital in September 1992 for surgery. While still in the hospital, plaintiff alleges that Ruth and Claire caused an attorney to draft a new will which made bequests of $5,000 to each of Dorothy's grandchildren (a bequest that did not exist in earlier wills).*fn5 The sisters allegedly continued to divert money up to and shortly after Dorothy's death. Plaintiff commenced this action on November 7, 1997.
Because jurisdiction in this Court is predicated on diversity, New York's (the forum state's) choice of law rules apply. Curley v.. AMR Corp., 153 F.3d 5 (2nd Cir.1998). In this case, New York's "borrowing statute" provides the rule on statutes of limitations for actions which accrue outside the state (and the allegations of undue influence on Dorothy accrued in Connecticut). CPLR § 202 (McKinney 1990). See Cuccolo v. Lipsky, Goodkin & Co., 826 F.Supp. 763, 767 (S.D.N.Y.1993) (citation omitted). The statute requires that the claim of a nonresident plaintiff that accrued outside the state be timely under the statute of limitations of both New York and the state where the claim accrued.*fn6 See id.
For the purposes of the borrowing statute, a cause of action accrues where the injury is sustained rather than where defendant committed wrongful acts. Gordon Co. v. Ross, 63 F.Supp.2d 405 (S.D.N.Y.1999); Global Financial Corp. v. Triarc Corp., 93 N.Y.2d 525, 693 N.Y.S.2d 479 (1999). It is irrelevant that almost all the acts complained of are alleged to have been committed in Connecticut-where an alleged injury is purely economic, the place of injury usually is where the plaintiff resides and sustains the economic impact of the loss. Cuccolo v. Lipsky, Goodkin & Co., 826 F.Supp. 763 (S.D.N.Y.1993). Madelyn Green's place of residence is New Jersey. Thus, the laws to be examined are those of New York and New Jersey, not Connecticut, as both parties believe.
(i) Constructive Fraud and Constructive Trust
Plaintiff brings a claim under Connecticut law for "constructive fraud." Mitchell v. Mitchell, 31 Conn.App. 331, 334, 625 A.2d 828 (1993). The Connecticut courts have used this cause of action interchangeably with that of constructive trust. Regardless of whether I construe this claim as one for fraud or for constructive trust, it is timely under the New York and the New Jersey statutes.
In New York, a claim of fraud must be brought within six years of the occurrence of the fraud or two years from the time the plaintiff discovered the fraud or could have discovered the fraud through the exercise of reasonable diligence, whichever is longer). N.Y. C.P.L.R. § 213(8). See Ghandour v. Shearson Lehman Brothers., Inc., 624 N.Y.S.2d 390 (1st Dept.1995). Plaintiff need not invoke the discovery rule, however, as there are no allegations of fraud before 1992. Plaintiff's claims for fraud are thus timely under New York law. They are also timely under the New Jersey statute of limitations for fraud, which is also six years. See N.J. Stat. Ann. § 2A:14-1; Southern Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group Ltd., 181 F.3d 410, 425 (3d Cir.1999).
The statute of limitations for actions to impose a constructive trust is also six years. N.Y. C.P.L.R. § 213(1). The limitations periods for constructive trust claim begins to run upon occurrence of wrongful act giving rise to duty of restitution. Bausch & Lomb Inc. v. Alcon Labs., Inc., 64 F.Supp.2d 233 (W.D.N.Y.1999); Elghanayan v. Elghanayan, 265 A.D.2d 262, 697 N.Y.S.2d 268 (1st Dept.1999). Similarly, under New Jersey law, where a complainant seeks imposition of a constructive trust on the basis of fraud, the six-year statute of limitations for common-law claims governs. Pension Fund-Mid-Jersey Trucking Industry v. Omni Funding Group, 687 F.Supp. 962, 96 (D.N.J.1988); Markley v. Camden Safe Deposit & Trust Co., 69 A. 1100 (N.J. Ch.1908). Plaintiff's claim for a constructive trust is therefore timely.
(ii) Breach of Fiduciary Duty
The applicable statute of limitation for breach of fiduciary duty claims under New York law depends upon the substantive remedy sought. See Loengard v. Santa Fe Industries, Inc., 70 N.Y.2d 262, 266 (1987). Where the relief sought is equitable, the six-year limitations period of CPLR § 213(1) controls. See id. at 267 (citations omitted). Where suits alleging breach of fiduciary duty seek only money damages, however, the courts have viewed such actions as alleging "injuries to property," and thus covered by the three year statute of limitations under CPLR § 214(4). See Cooper v. Parsky, 140 F.3d 433 (2d Cir.1998); Whitney Holdings, Ltd. v. Givotovsky, 988 F.Supp. 732, 741 (S.D.N.Y.1997) (citations omitted).
There is nothing in the complaint or plaintiff's papers from which I can conclude that plaintiff seeks anything other than equitable relief.*fn7 Her claim for equitable relief for breach of fiduciary duty is timely under New York law.
Although authority is sparse, it appears that fiduciary duty claims in New Jersey are governed by the six-year statute of limitations. N.J. Stat. Ann. § 2A:14-1 (West 1987). See Fleming Cos., Inc. v. Thriftway Medford Lakes, Inc., 913 F.Supp. 837, 846 (D.N.J.1995); Zola v. Gordon, 685 F.Supp. 354, 374 (S.D.N.Y.1988). New Jersey law does not bar her claim.
(iii) Claims Accruing After Dorothy's Death Are Not Time Barred
In addition to her claims of undue influence during the life of her mother, plaintiff contends that her sister Ruth helped herself to certain bank accounts that, while nominally joint accounts between Ruth and Dorothy, were held that way only to facilitate Ruth's helping her mother take care of her banking affairs. Madelyn contends that these funds should have been distributed as part of Dorothy's estate. These claims obviously accrued after Dorothy's death, and perhaps not until as late as 1997, when Ruth wound up her mother's estate. To the extent plaintiff relies on this theory of breach of fiduciary duty or constructive fraud, she is obviously not time barred.
4. In Limine Motions
As for the in limine motions: the motion to preclude the plaintiff's handwriting expert, Andrew Sulner, is denied. Mr. Sulner's inability to examine original documents may affect the weight of his testimony, but not its admissibility. The motion to preclude the testimony of Mark Lachs is granted; plaintiff's failure to oppose the motion suggests that it has merit. Plaintiff's cross-motion to preclude the expert Berg is granted, since the expert report was not served prior to the expiration of the Court's oft-extended discovery deadline.
This case will be set for trial as soon as the Court's rather full criminal docket permits.
This constitutes the order and decision of the Court.