The opinion of the court was delivered by: VICTOR Marrero, United States District Judge.
Plaintiff Luiz Eduardo Fontes Williams ("Williams") is a remainderman
of an inter vivos trust (the Trust"). Invoking the Court's jurisdiction
under 28 U.S.C. § 1332, Williams filed suit against the trustee of
the Trust, defendant J.P. Morgan & Co. Incorporated ("Morgan"), seeking
damages for a breach of fiduciary duty and an accounting. By leave of the
Court, the parties filed cross-motions for summary judgment on the issue
of damages calculation. For the reasons set forth below, the Court grants
Morgan's motion in part, denies Morgan's motion in part and denies
The parties do not dispute the facts for the purposes of this motion,
which they assert concerns only issues of law.*fn1 According to
Williams's complaint, the Trust was created in 1958 with a corpus of
approximately $500,000. Morgan, a New York corporation, was appointed the
trustee. Williams's mother ("Mrs. Williams"), a citizen of Brazil, was
identified as the income beneficiary. By its terms, upon Mrs. Williams's
death, the Trust's assets were to be distributed to her surviving
descendants. Williams, also a citizen of Brazil, is a descendant of Mrs.
Williams, as is his brother Anthony Forrest Williams, and they therefore
are the remaindermen of the Trust.
The United States and Brazil never entered the Contemplated Treaty.
Williams thus claims that by the mid-1970's it was clear that the
Contemplated Treaty no longer posed a risk to the income beneficiary's
interests. At that point, Williams claims that the justification for the
trustee's investment in tax-exempt bonds disappeared and that Morgan had
a duty to diversify the investment and consider the remaindermen's
interests in the Trust. Williams does not claim that Morgan engaged in
any fraud or self-dealing or misconduct apart from the negligent and
imprudent failure to invest and/or diversify trust assets since the
mid-1970's. Currently, by Williams's calculation, the trust assets are
valued at "less than $800,000." (Compl. to ¶ 19.)
"It is axiomatic that federal courts are courts of limited jurisdiction
and may not decide over which they lack subject matter jurisdiction."
Lyndonville Sav. Bank & Trust Co. v. Lussier, 211 F.3d 697, 700 (2d Cir.
2000). The federal diversity jurisdiction statute provides federal courts
with subject matter jurisdiction over state law claims if the amount in
controversy exceeds $75,000 and the parties are "citizens of a State and
citizens or subjects of a foreign state." 28 U.S.C. § 1332(a). The
claims at bar meet the requirements for diversity jurisdiction because
Williams is a citizen of Brazil and Morgan is a New York corporation. In
addition, the amount in controversy exceeds $75,000.
A federal court must apply state "substantive" law to a diversity
case. See Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427
(1996) ("[F]ederal courts sitting in diversity apply state substantive
law and federal procedural law."); Erie R. Co. v. Tompkins, 304 U.S. 64
(1938). Here, New York State substantive law applies.
A federal court sitting in diversity must follow the law as enunciated
by the highest court of the state, here, the New York Court of Appeals.
See Calvin Klein Ltd. v. Trylon Trucking Corp., 892 F.2d 191, 195 (2d
Cir. 1989). In the absence of a ruling by the Court of Appeals, a federal
district court is not bound by the opinions issued by New York State's
lower courts. See id. (citing Plummer v. Lederle Laboratories,
819 F.2d 349, 355 (2d Cir. 1987) and Stafford v. International Harvester
Co., 668 F.2d 142, 148 (2d Cir. 1981)). Indeed, a federal court should
reject any lower court's ruling that is inconsistent with a Court of
Appeals decision. See Levin v. Tiber Holding Corporation, 277 F.3d 243,
253 (2d Cir. 2002) (citing First Investors Corp. v. Liberty Mut. Ins.
Co., 152 F.3d 162 165 (2d Cir. 1998). Only "where the substantive law of
the forum state is uncertain or ambiguous, the job of the federal courts
is carefully to predict how the highest court of the forum state would
resolve the uncertainty or ambiguity." Travelers Ins. Co. v. 633 Third
Assocs., 14 F.3d 114, 119 (2d Cir. 1994).
In matters of "procedure," however, federal courts must apply federal
law. See Gasperini, 518 U.S. at 427; Erie, 304 U.S. at 64. As such, a
court reviews a motion for summary judgment under the federal standard of
review. See Gasperini, 518 U.S. at 427; Com/Tech Communications
Technologies v. Wireless Data Systems, Inc., 163 F.3d 149 (2d Cir.
Summary judgment is appropriate only when the "pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits" demonstrate an absence of any genuine issue of material fact
and "the moving party is entitled to judgment as a matter of law." Fed.
R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1936). To grant the motion, a Court must determine from the record
before it that a reasonable trier would not be able to find in favor of
the non-mover. See Brady v. Colchester, 863 F.2d 205, 211 (2d Cir.
1988). In considering the motion, the evidence is viewed in the light
most favorable to the non-moving party; reasonable inferences and factual
conflicts are resolved in his favor. See Cruden v. Bank of New York,
957 F.2d 961, 975 (2d Cir. 1992).
Here, based on Williams's pleading, the parties' cross-motions largely
raise a legal question regarding the availability of damages under New
York law. Accordingly, the factual record before the Court is brief. The
lack of factual detail does not prevent the Court from addressing the
discrete legal issue before it. However, the Court concludes that at this
stage of the litigation, ...