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Ellen Aguiar v. William Natbony

May 16, 2011

ELLEN AGUIAR,
PLAINTIFF,
v.
WILLIAM NATBONY, INDIVIDUALLY AND AS TRUSTEE OF THE THOMAS S. KAPLAN 2004 QUALIFIED TEN YEAR ANNUITY TRUST AGREEMENT AND THE DAFNA KAPLAN 2003 EIGHT YEAR ANNUITY TRUST AGREEMENT, THOMAS KAPLAN, AND DAFNA KAPLAN,
DEFENDANTS.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.:

MEMORANDUM OPINION & ORDER

This is a suit for breach of fiduciary duty. Plaintiff Ellen Aguiar alleges that the trustee of two irrevocable Grantor Retained Annuity Trusts breached his fiduciary duty by failing to exercise independent judgment and not acting as a neutral and disinterested trustee. As a result, the trusts' assets were allegedly diminished and Aguiar was removed as beneficiary.

Defendants have moved to transfer, to dismiss, or to stay the case. For the reasons stated below, Defendants' motion to transfer this action to the Southern District of Florida will be granted, and Defendants' remaining motions will be denied as moot.

BACKGROUND

Plaintiff is the mother of Guma Aguiar ("Guma") and is a resident of Florida. (Cmplt. ¶¶ 1, 4) Guma is a party to several lawsuits in Florida involving Thomas Kaplan ("Kaplan"), who is Guma's uncle and Plaintiff's brother. (Id.; see Leor Exploration & Production LLC, et al. v. Guma Aguiar, Case No. 09-60136-CIV-Seitz/O'Sullivan (S.D. Fla.); Guma Aguiar v. William Natbony, Thomas Kaplan, Katten Muchin Rosenman LLP, and Pardus Petroleum, LP, Case No. 09-60683-CIV-Seitz/O'Sullivan (S.D. Fla.); Thomas Kaplan v. Guma Aguiar and The Lillian Jean Kaplan Foundation, Case No. 09-001509 CA (07) (Fla. Cir. Ct. 17th Jud. Cir.)) According to the Complaint, the present suit arises from actions taken by defendant Thomas Kaplan ("Kaplan") as a result of a bitter business dispute with his nephew, Guma Aguiar ("Guma"), a non-party to this action. As a result of this business dispute with Guma, Kaplan launched what he termed an "offensive" across "the broadest front imaginable" which included the wrongful acts against plaintiff Aguiar -- Kaplan's sister and Guma's mother -- that give rise to this action. (Cmplt. ¶ 1)

In 2003, Kaplan and Guma founded Leor Exploration and Production LLC, an oil and gas company, and Guma became CEO of Leor. (Cmplt. ¶ 16) In 2007, Leor sold its assets for $2.55 billion. (Id. ¶ 11) Almost all of these proceeds were placed in two irrevocable Grantor Retained Annuity Trusts ("GRATs") that had been formed several years earlier: the Thomas S. Kaplan 2004 Qualified Ten Year Grantor Retained Annuity Trust Agreement (the "Thomas Trust") and the Dafna Kaplan 2003 Eight Year Grantor Retained Annuity Trust Agreement (the "Dafna Trust"). (Id.) Plaintiff and her issue were named beneficiaries of the Thomas Trust and remainder beneficiaries of the Dafna Trust. (Id. ¶¶ 13, 14) Plaintiff was entitled to receive income and principal after the expiration of the original trust terms, which would occur in 2014 for the Thomas Trust and 2011 for the Dafna Trust, and during the lifetimes of Kaplan or his wife, Dafna. (Id.) William Natbony is the trustee of the Trusts, and allegedly "derives all or substantially all of his income from entities controlled or owned by Kaplan." (Id. ¶ 15) The Trusts obligate Natbony to be a disinterested trustee and prohibit Kaplan and his wife from controlling the actions of the trustee. (Id. ¶¶ 20, 21)

After Leor was sold in 2007, Kaplan and Guma could not reach agreement as to how the proceeds of the sale should be divided, and this dispute resulted in Guma's termination as CEO. (Id. ¶ 16) Guma then filed a lawsuit in Texas state court against Pardus LLP, an entity owned by Kaplan that had an equity interest in Leor, and against Natbony as trustee of the Trusts.*fn1 (Id. ¶ 17) In response, Kaplan allegedly threatened to damage Guma's reputation if Guma further pursued the litigation, "including by taking action against Guma's family, including his mother, plaintiff Aguiar." (Id. ¶ 18) Leor then filed a suit alleging that Guma's sister (a beneficiary of the Trusts) and brother-in-law defrauded Leor while employed by the company. (Id. ¶ 19; see Leor Exploration & Production LLC v. Angelika Aguiar, et al.,Case No. 09-014890 CACE (12)) Plaintiff and her issue were removed as beneficiaries of the Trusts by January 7, 2009 amendments to the Trusts. (Id. ¶ 3)

Plaintiff claims that Natbony is financially dependent on the Kaplans (id. ¶ 15), and that -- acting at the Kaplans' volition -- Natbony abused his discretion, breached his fiduciary duties, and acted in bad faith by: (1) removing Plaintiff and her issue as beneficiaries of the Trusts (Count I); (2) dissipating the assets of the Trusts (Count II); and (3) wrongfully obtaining the consent of Plaintiff and her children to a "Unitrust Election" which provides for larger distributions to the Kaplans than to the other beneficiaries (Count III). The Unitrust Elections were made in 2006 and 2007 pursuant to New York Estate Powers and Trusts Law, Section 11-2.4, and "allowed Natbony to make larger distributions to the Kaplans, as Settlors of the Trusts, than were provided for when the Trusts were created." (Id. ¶ 26) Plaintiff and her issue consented to the Unitrust Elections based on Natbony's allegedly misleading and incomplete representations. (Id. ¶ 27) Plaintiff further alleges that the Kaplans aided and abetted Natbony's breach of fiduciary duty by directing Natbony to manage the trusts for their benefit (Count IV). The Defendants are all residents of New York, and Plaintiff contends that Defendants' allegedly tortious acts were committed in New York. (Id. ¶¶ 5-7; Pltf. Br. 21)

DISCUSSION

I.LEGAL STANDARD

Defendants have moved to transfer this action to the Southern District of Florida pursuant to 28 U.S.C. § 1404(a). Section 1404(a) provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). "The purpose of § 1404(a) is 'to prevent waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense.'" In re Stillwater Min. Co. Sec. Litig., No. 02 Civ. 2806(DC), 2003 WL 21087953, at *2 (S.D.N.Y. May 12, 2003) (quoting Trehern v. OMI Corp., No. 98 Civ. 0242(RWS), 1999 WL 47303, at *1 (S.D.N.Y. Feb. 1, 1999) (internal quotations omitted)).

"A court performs a two-part inquiry to determine whether transfer is appropriate. First, the court must determine whether the action sought to be transferred is one that 'might have been brought' in the transferee court." In re Collins & Aikman Corp. Sec. Litig., 438 F. Supp. 2d 392, 394 (S.D.N.Y. 2006). Second, "the court must evaluate whether transfer is warranted using several factors relating to the convenience of transfer and the interests of justice." Id.

Accordingly, the initial question under § 1404(a) is whether the court in the proposed transferee jurisdiction had personal jurisdiction over the defendant when the action was filed:

"The threshold question for a court considering a [transfer] under § 1404(a) is whether the action could have been brought in the district to which the moving party seeks to transfer the action." Alexander Ins. Ltd. v. Executive Life Ins. Co., No. 90 Civ. 8268, 1991 WL 150224, at *2 (S.D.N.Y. July 29, 1991). "[A]n action might have been brought in another forum if, at the time the action was originally filed, the transferee court would have had subject matter jurisdiction and personal jurisdiction over the defendants, and if venue would have been proper in the transferee court." Posven, C.A. v. Liberty Mut. Ins. Co., No. 02 Civ. 0623, 2004 WL 63497, at *7 (S.D.N.Y. Jan. 12, 2004).

Grace v. Bank Leumi Trust Co. of N.Y., No. 02 Civ. 6612 (RMB), 2004 WL 639468, at *3 (S.D.N.Y. Mar. 31, 2004) (alterations in original).

In determining whether a proposed transferee court has personal jurisdiction over a defendant, courts must look to the "state of affairs" when the action was filed:

In Hoffman v. Blaski, 363 U.S. 335, 342 (1960), the Supreme Court ruled that in considering where an action "might have been brought," the district court must look to the state of affairs "at the time of the bringing of the action." That is, subject matter jurisdiction, personal jurisdiction, and venue would have had to have been proper in the transferee court at the time the action was filed.

Ivy Soc'y Sports Group, LLC v. Baloncesto Superior Nacional, No. 08 Civ. 8106 (PGG), 2009 WL 2252116, at *3 (S.D.N.Y. July 28, 2009). Because § 1404(a) requires personal jurisdiction at the time the action was filed, a defendant's waiver or consent to personal jurisdiction is not sufficient. See Bayer Schera Pharma AG v. Sandoz, Inc., 08 Civ. 03710 (PGG), 2009 WL 440381, at *4 (S.D.N.Y. Feb. 18, 2009) ("[A] defendant's consent to submit to jurisdiction of a proposed transferee court after an action is filed will not satisfy Section 1404(a)."); Kenwin Shops, Inc. v. Bank of Louisiana, No. 97 Civ. 907, 1999 WL 294800 (LMM), at *2 (S.D.N.Y. May 11, 1999) (explaining that the "might have been brought" analysis in §1404(a) "focuses on the time at which the action was commenced, not on subsequent events"); Alexander & Alexander, Inc. v. Donald F. Muldoon & Co., 685 F. Supp. 346, 349 (S.D.N.Y. 1988) ("28 U.S.C. §§ 1404(a) and 1406(a) provide that a district court may transfer an action only to a district or division where the action might have been brought initially. Venue must be proper and the defendants must be amenable to process in the transferee forum. These requirements cannot be waived by the party seeking the transfer." (citing Hoffman , 363 U.S. at 335)); see also Schertenleib v. Traum, 589 F.2d 1156, 1161 (2d Cir. 1978) (noting that § 1404(a) "authorize[s] transfer only to an alternative forum in which jurisdiction over the defendant could have been obtained at the time suit was brought regardless of his consent"); PI, Inc. v. Ogle, 932 F. Supp. 80, 85 (S.D.N.Y. 1996) (denying a motion to transfer where the defendant had failed to demonstrate that he was subject to personal jurisdiction in the transferee district at the time the suit was filed).

Under § 1404, the party seeking transfer has the burden of demonstrating that transfer is appropriate. See New York Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 114 (2d Cir. 2010) ("[T]he party requesting transfer [under § 1404(a)] carries the 'burden of making out a strong case for transfer.'") (quoting Filmline (Cross-Country) Prods., Inc. v. United Artists Corp., 865 F.2d 513, 521 (2d Cir. 1989)); Volkswagen De Mexico, S.A. v. Germanischer Lloyd, 768 F. Supp. 1023, 1028-29 ("An action may be transferred only to a district where it might have been brought initially. 28 U.S.C. §§ 1404(a), 1406(a). Venue must be proper and the defendants must be subject to personal jurisdiction in the transferee forum. The party seeking transfer bears the burden of establishing personal jurisdiction over the defendants in the transferee forum." (citing Alexander & Alexander, Inc., 685 F. Supp. at 349, 350)).

Accordingly, the threshold question here is whether a court sitting in the Southern District of Florida would have had personal jurisdiction over the defendants at the time this action was filed.

II.ANALYSIS

A.This Action Might Have Been Brought in the Southern District of Florida

Whether a district court in the Southern District of Florida has personal jurisdiction over Defendants depends on (1) whether jurisdiction exists under Florida's long-arm statute; and (2) whether a Florida court's exercise of personal jurisdiction over Defendants comports with federal due ...


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