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Burch-Lucich v. Lucich

United States District Court, Ninth Circuit

October 31, 2013

BEAU BURCH-LUCICH, Plaintiff,
v.
GARY L. LUCICH; MARCAE LUCICH; MICHELLE LUCICH NIECE; LUCICH FAMILY LIMITED PARTNERSHIP, an Idaho limited partnership; and NORTHWEST FUNDING, LLC, formerly known as LUCICH LLC, an Idaho limited liability company, Defendants.

MEMORANDUM DECISION AND ORDER

B. LYNN WINMILL, Chief District Judge.

INTRODUCTION

Before the Court is defendants' Motion to Dismiss for Lack of Jurisdiction and/or to Compel Arbitration (Dkt. 6). The motion is fully briefed and the Court has determined oral argument would not significantly assist the decisional process. The Court will therefore resolve the motion without a hearing. As explained below, the Court will deny the motion.

BACKGROUND

Plaintiff Beau Burch-Lucich is Troy Lucich's only child. Troy died in 1998 when Beau was eight years old. Beau did not know it at the time though, because his mother was raising him in Texas and Troy was not involved.

Beau alleges that his grandparents, defendants Gary and Marcae Lucich, knew he existed but probated Troy's estate as though Troy had no children. As a result, Troy's assets were allegedly distributed to (1) Gary and Marcae; (2) Troy's sister, Michelle; (3) Michelle's children; and "perhaps" (4) the Lucich Family Limited Partnership. Compl. ¶ 18. Beau alleges that all of Troy's assets should have gone to him because, at the time of his death, Troy had no will, no spouse, and no other children.

During the summer of 2004, when Beau was fourteen years old, he wanted to meet his father. He learned Troy had died six years earlier, but he went to visit his grandparents (Troy's parents) in Idaho. Part of that visit included a paternity test, which conclusively established that Troy was Beau's father. During the visit, Beau's grandparents told him he was entitled to one-third of Troy's one-third interest, or eleven percent, in the Lucich Family Limited Partnership, which was created in 1999, after Troy's death. That eleven percent interest was allegedly conveyed to Beau during a family meeting. See Compl. ¶ 3.

Beau alleges he did not learn about the probate of his father's estate until March 2013. He sued in May 2013, alleging seven claims: (1) probate fraud under Idaho Code § 15-1-106; (2) conspiracy to commit probate fraud; (3) breach of fiduciary duty; (4) conspiracy to breach "partnership fiduciary duties"; (5) constructive trust; (6) declaratory judgment; and (7) a "partner's direct action" under Idaho Code 53-2-1001.

MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION

Defendants first contend that this Court lacks subject-matter jurisdiction. Beau alleges jurisdiction under 28 U.S.C. § 1332, based on diversity of citizenship. According to the complaint, Beau is a citizen of Texas, the defendants are citizens of Idaho, and the amount in controversy exceeds $75, 000. Defendants do not dispute any of this, but say that even if the requirements for diversity jurisdiction are met, the probate exception strips the Court of jurisdiction.

1. The Probate Exception to Diversity Jurisdiction

The probate exception is "distinctly limited in scope, " as the Supreme Court clarified in Marshall v. Marshall, 547 U.S. 293, 299 (2006). Marshall described the basic contours of the exception as follows:

[T]he probate exception reserves to state probate courts the probate or annulment of a will and the administration of a decedent's estate; it also precludes federal courts from endeavoring to dispose of property that is in the custody of a state probate court. But it does not bar federal courts from adjudicating matters outside those confines and otherwise within federal jurisdiction.

Id. at 311-12. So under Marshall, this Court must answer three questions: (1) Does the action require the Court to probate or annul a will? (2) Does it require the Court to administer Troy's estate? and (3) Does it require the Court to dispose of property in the custody of a state probate court?

The answer to all three questions is no. Beau is claiming his grandparents and other relatives committed various torts, including fraud and breach of fiduciary duty, when they purposely left him out of Troy's probate proceedings. He also claims that he is entitled to a larger share of the Lucich family partnership. These issues can be resolved without probating Troy's will (if one existed) or administering Troy's estate. Also, Beau is not seeking to "reach a res in the custody of a state court." Id. at 312. He is seeking a personal judgment against the defendants themselves, who allegedly already received estate assets. See Compl. ¶ 18. Pursuing these claims in federal court will not interfere with Troy's probate proceedings within the meaning of the probate exception. See, e.g., Jones v. Brennan, 465 F.3d 304, 307-08 (7th Cir. 2006) (Posner, J.) (a breach of fiduciary duty claim accusing the guardians of mismanaging an estate "does not ask the court... to administer the estate"); Breaux v. Dilsaver, 254 F.3d 533, 536-37 (5th Cir. 2001) (probate exception did not apply when heirs sought damages against estate administrator personally for his alleged fraud and breach of fiduciary duty, where any judgment would be satisfied from administrator's own property and not from estate property).

Despite Marshall, defendants insist this Court lacks jurisdiction because Beau is alleging fraud under Idaho Probate Code § 15-1-106. This section, however, just says that if someone has perpetrated a fraud in connection with probate proceedings, then "any person injured thereby" may obtain (a) "appropriate relief against the perpetrator" or (b) "restitution" from persons who benefitted from the fraud. Idaho Code § 15-1-106.[1] So when a court entertains an action under § 15-1-106 it is not interfering with the probate proceedings. That is, the court would not be probating or annulling will, administering an estate, or disposing of property in the state court's custody.

This point is underscored by the Uniform Law Comments to this section, which clarify that "[t]he remedy of a party wronged by fraud is intended to be supplementary to other protections provided in the Code and [an action under this section] can be maintained outside the process of settlement of the estate." See Idaho Code § 15-1-106, Uniform Law Cmts.[2] This Court, therefore, may properly hear a fraud action under Idaho Code § 15-1-106.

Finally, the Court is not persuaded that it could decline jurisdiction as a discretionary matter simply because this case has, as defendants put it, "probate overtones." Mot. Mem., Dkt. 6-1, at 6. Under Marshall, jurisdiction plainly exists, notwithstanding the probate overtones. And, as "Chief Justice Marshall famously cautioned: It is most true that this Court will not take jurisdiction if it should not: but it is equally true, that it must take jurisdiction if it should.... We have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given.'" Marshall, 547 U.S. at 298-99 (quoting Cohens v. Virginia, 6 Wheat. 265 (1821)).

For all these reasons, the Court will deny defendants' motion to dismiss this case based ...


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