United States District Court, S.D. New York
DONALD M. THEA and DEBORAH L. THEA, Plaintiffs,
NEIL C. KLEINHANDLER, individually and as trustee of the FREDERICA FISHER THEA REVOCABLE TRUST, NEW SCHOOL UNIVERSITY, and ERIC T. SCHNEIDERMAN as Attorney General of the State of New York, Defendants.
MEMORANDUM AND ORDER
P. KEVIN CASTEL, District Judge.
Plaintiffs Donald Thea and Deborah Thea (the "Theas") initially brought this action in their individual capacity against defendants Neil Kleinhandler, the Frederica Fisher Thea Revocable Trust, the New School University (the "New School"), and Eric Schneiderman, as Attorney General of the State of New York. The Theas had requested a declaration as to their rights to property allegedly belonging to the estate of Frederica Fisher Thea, their stepmother, as well as other relief.
In a Memorandum and Order dated May 12, 2014, the Court dismissed the Theas' claims without prejudice for lack of subject matter jurisdiction. The Theas now move for leave to amend, asserting that they have been duly appointed administrators of Frederica's estate. The proposed amended complaint asserts claims on behalf of the Theas in their individual capacity, in their capacity as creditors of the estate, and in their capacity as special administrators of the estate. For reasons explained, the Theas' motion is denied.
The following facts are taken from the Proposed Second Amended Complaint (the "PSAC"), documents incorporated by reference in the PSAC, and matters of which judicial notice may appropriately be taken. See Chambers v. Time Warner, Inc. , 282 F.3d 147, 152-53 (2d Cir. 2002). All facts are assumed to be true for the purpose of deciding plaintiffs' motion to amend. All reasonable inferences are drawn in favor of the plaintiffs. See In re Elevator Antitrust Litig. , 502 F.3d 47, 50-51 (2d Cir. 2007) (per curiam); Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals , 282 F.3d 83, 88 (2d Cir. 2002).
In or about 1985, Stanley Thea ("Stanley") married his third wife, Frederica Fisher Thea ("Frederica"). (Viola Decl. Ex. A ("PSAC") ¶ 13.) On April 13, 1995, Stanley and Frederica executed an agreement under which they agreed to execute mutually beneficial wills (the "Agreement"). (See id. ¶¶ 14, 22, 24.) The Agreement was subsequently modified on January 12, 1996, to reflect changes made to Stanley's Last Will and Testament. (Id. ¶ 15.) Under the terms of the Agreement, Stanley was to execute a will that bequeathed the majority of his estate to Frederica. (PSAC Ex. B, at 2-4.) In the event that Frederica were to predecease Stanley, the Theas, his children by his first marriage, would inherit. (Id.; PSAC ¶ 13.) In exchange, Frederica was to execute a Last Will and Testament naming Stanley as the beneficiary of her entire estate. (PSAC Ex. B, at 1, 32-33.) Should Stanley predecease her, the entire estate would go to the Theas. (Id.) Under the terms of the Agreement, neither party was to alter or revoke their Last Will and Testament without the written consent of the other. (Id. at 1.) On January 12, 1996, Stanley executed a Last Will and Testament in accordance with the Agreement. (Id.) On April 13, 1995, Frederica executed a Last Will and Testament in accordance with the Agreement. (See id.; PSAC ¶ 15.) The Agreement and wills were all executed in New York. (See PSAC Ex. B, at 1.) At the time they entered into the Agreement, both Stanley and Frederica were residents of New York. (See id. at 2, 32.)
On September 1, 1998, Stanley passed away, predeceasing Frederica. (PSAC ¶ 29.) Pursuant to Stanley's Last Will and Testament, which conformed to the Agreement, Frederica inherited the majority of Stanley's estate. (See id. ¶ 31.) The estate included property located in Manhattan and Queens. (PSAC Ex. B, at 3.) After Stanley's death, but no later than December 2002, Frederica created the Frederica Fisher Thea Revocable Trust (the "Trust"). (PSAC ¶ 44.) The Trust named Frederica and defendant Neil Kleinhandler as co-trustees and the New School as the sole remainder beneficiary of the Trust. (Id. ¶¶ 7, 47.) Subsequently, Frederica transferred all, or substantially all, of her assets into the Trust. (Id. ¶¶ 49, 51-52, 57.)
For the remainder of Frederica's life, the Trust managed the assets for her benefit. (See id. ¶¶ 51-58.) Among the actions taken by the Trust in managing the assets were the sale of the New York properties to facilitate the purchase of property in California. (See id. ¶¶ 51-54, 56.) Frederica passed away on or about February 4, 2012. (Id. ¶ 59.) At the time of her death, Frederica was a resident of California. (See id. ¶ 58.) After Frederica's death, Kleinhandler was contacted by law enforcement officials and arranged for the disposition of Frederica's body. (Id. ¶¶ 65, 67.) Kleinhandler did not inform the Theas of Frederica's death and, since her death, has not administered the Trust for their benefit. (Id. ¶ 75.)
The Theas brought suit against Kleinhandler on July 15, 2013. (Docket # 1.) In their Complaint, the Theas requested that the Court declare that Frederica and the Trust's assets rightfully belonged to them, and that any transfers of assets in violation of the Agreement, or subsequent to Frederica's death were null and void. (Am. Compl. ¶¶ 84-88, Docket # 12.) The Theas also alleged that the transfer of assets into the Trust was a violation of the Agreement and void pursuant to section 7-3.1 of the New York EPTL. (Id. ¶¶ 95-97.) The Theas further asserted that Frederica's breach of the Agreement resulted in the Trust assets being placed in a constructive trust for their benefit. (Id. ¶¶ 98-99.) The Theas also requested an equitable accounting in order to determine the assets that rightfully belonged to Frederica's estate. (Id. ¶¶ 104-06.) Finally, the Theas alleged that Kleinhandler, as the personal representative of Frederica's estate, breached a fiduciary duty toward them by not administering her assets in their interest. (Id. ¶¶ 109-11.) At that time, no probate proceedings had been initiated regarding her estate. (PSAC ¶ 76.)
In the May 12 Memorandum and Order, the Court dismissed the Theas' claims for lack of subject matter jurisdiction because full adjudication of the Theas' claims required a representative of Frederica's estate to be a party. Thea v. Kleinhandler, No. 13-cv-4895 (PKC), 2014 WL 2111637, at *6 (May 13, 2014). The Memorandum and Order allowed "an administrator or executor of [Frederica's] estate" to seek leave to amend within twenty-one days of the Order. Id.
Subsequently, the Theas initiated probate proceedings regarding Frederica's estate in the Superior Court of California, County of Monterey. (See id. ¶ 77; PSAC Ex. A, at 1.) A hearing was scheduled for August 13, 2014. (Viola Decl. ¶ 8.) As this date was beyond the twenty-one-day time period provided by the Court, the Theas filed an "Ex-Parte Petition for Letters of Special Administration" in order to continue the action in this Court. (Viola Decl. ¶ 8; Viola Decl. Ex. B, at 1.) A hearing was scheduled for May 28, 2013. (Viola Decl. Ex. B, at 1.) Notice was mailed to all parties, including Kleinhandler and the New School, via Federal Express on May 23, 2013, the Friday before the Memorial Day holiday. (Id. at 2-3.)
Prior to the May 28, 2013, hearing, counsel for the New School submitted a letter to the Superior Court objecting to the Theas' appointment. (Harris Aff. Ex. 2, at 3-4.) In the letter, Counsel asserted that the "special circumstances" warranting emergency relief were "entirely of [the Theas'] own creation" and further noted that the "factual circumstances surrounding Frederica's Will [were] far from clear-cut." (Turkle Aff. Ex. 3, at 2-3.) Accordingly, the New School requested the hearing be postponed so that interested parties could "review [the Theas'] request, confer with counsel, retain counsel in California if needed, and have a full and fair opportunity to be heard on [the Theas'] application." (Id. at 3.)
The Theas and Frederica's step brother, Ned Gershenson, appeared at the hearing. (Harris Aff. ¶ 7; Harris Aff. Ex. 2, at 3.) Counsel for the New School attempted to appear at the hearing telephonically, but was unable to do so. (See Harris Aff. Ex. 2, at 3.) At the hearing, Judge Kingsley, the judge assigned to the California action, reviewed the issues raised in the New School's letter and noted that they did "not relate to [the appointment]." (Id. at 1, 4.) Consequently, the Theas were allowed to proceed. (Id. at 4.) Judge Kingsley noted that allowing the Theas to proceed did "not mean that we're making a finding in anybody's favor at this point." (Id. at 4.) Gershenson did not object to the Theas' appointment. (Id. at 5.)
After the hearing, Judge Kingsley approved the Theas' petition and issued an Order for Probate which appointed them special administrators of Frederica's estate. (Id. at 5.) Under the terms of the appointment, the Theas were granted the authority to (1) "take possession of all real and personal property of the decedent and to preserve it from damage, waste and injury;" (2) "commence and maintain or defend suite and other legal proceedings involving the estate;" and (3) "collect all claims, rents and other income belonging to the estate." (PSAC Ex. A, at 2.) Letters of Appointment were issued the same day. (Id. at 3-4.)
On June 2, 2014, the Theas sought leave to file a Second Amended Complaint. (Docket # 44.) The PSAC alleges six distinct causes of action, brought by the Theas in various capacities. Count I of the PSAC is brought by the Theas in their individual capacity and requests a declaration that the assets of the Trust belong to them. (PSAC ¶¶ 95-100.) Count II of the PSAC, brought by the Theas as special administrators on behalf of Frederica's estate, requests a declaration that the assets of the Trust are estate property. (Id. ¶¶ 106-11.) Count III of the PSAC is brought by the Theas as creditors of Frederica's estate and requests a declaration that any transfers of assets to the Trust are null and void. (Id. ¶¶ 116-19.) Counts IV and V request that the Court impose a constructive trust over the Trust assets and order an equitable accounting. (Id. ¶¶ 121-135.) Finally, Count VI alleges ...