Osborn v. Griffin

ELIZABETH A. OSBORN PLAINTIFF v. JOHN M. GRIFFIN, ET AL. DEFENDANTSand LINDA G. HOLT, ET AL. PLAINTIFFS v. DENNIS B. GRIFFIN, ET AL. DEFENDANTS

CIVIL ACTION NO. 2011-89 (WOB-CJS)

CIVIL ACTION NO. 2013-32 (WOB-CJS)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF KENTUCKY NORTHERN DIVISION AT COVINGTON

Dated: September 5, 2013

MEMORANDUM OPINION AND ORDER

This matter is before the Court on defendants' motions to dismiss (Docs. 16, 17), plaintiffs' motion for hearing (Doc. 51), defendants' motion for judicial notice (Doc. 76), and defendants' appeal from the Magistrate Judge's ruling on their motion for protective order as to the deposition of Dennis B. Griffin (Doc. 72).

The Court held a hearing on these motions on Wednesday, September 4, 2013. Kent Wicker and Jennifer Schultz represented the Holt plaintiffs, and Janet Jakubowicz and Benjamin Lewis represented plaintiffElizabeth Osborn. Joseph Callow and John Floyd represented the Griffin defendants and Martom Properties. George Jonson represented defendant Keating, Meuthing & Klekamp, PLL. Also present were Christopher Griffin and Gasser Callow, in-house counsel for Griffin Industries; plaintiffs Judith Prewitt, Cynthia Roeder, and Elizabeth Osborn; and defendants John M. Griffin and Robert Griffin. Official court reporter Joan Averdick recorded the proceedings.

Background

These cases arise out a family dispute among the children of Griffin Industries, Inc.'s founder, John L. Griffin ("Father"), involving the probate of Father's estate and the conveyance of several properties. Four sisters -- Elizabeth ("Betsy"), Linda, Judith, and Cynthia ("Cyndi") -- have sued three of their brothers: John M. Griffin ("Griffy"), Dennis B. Griffin ("Dennis"), and Robert Griffin ("Robert") (collectively "the brothers").

The Court also handled a prior lawsuit Betsy brought against her brothers related to the handling of their mother's estate, which was settled in 1993. Osborn v. Griffin, Cov. Civil Action No. 90-209.

The complete factual allegations of these matters need not be set forth in full here, but they will be discussed below in relation to the pending motions.

Betsy filed her current lawsuit on April 27, 2011. In her Amended Complaint (Doc. 26), Betsy asserts the following claims: (1) Breach of Fiduciary Duties as Trustees (Griffy and Dennis); (2) Breach of Fiduciary Duties as Executors; (3) Civil Conspiracy/Aiding and Abetting (all defendants); (4) Tortious Interference with Inheritance (all defendants); (5) Fraudulent Conveyance in Violation of KRS 378.010 (Griffy and Dennis); and (6) Negligence and/or Gross Negligence Arising out of Estate and Trust Administration (Griffy and Dennis).

Defendants filed a motion to dismiss the Amended Complaint on several grounds, which this Court denied on January 5, 2012, stating:

Having reviewed the written filings and heard from the parties, and being otherwise sufficiently advised, the Court finds that the facts alleged preclude a finding at this juncture that Plaintiff's claims are barred by either the statute of limitations or res judicata. The Amended Complaint makes allegations of fraud and breach of fiduciary duty permeating all of the probate and trust transactions described and perhaps tolling the statute of limitations. In the opinion of the Court, full development of the record is required for a just resolution of this matter.

(Doc. 45) (emphasis added).

On May 4, 2012, Robert filed a motion to disqualify Betsy's counsel. After a hearing, the Court also denied that motion. (Doc. 92).

Discovery in Osborn then moved forward, under the supervision of United States Magistrate Judge Candace J. Smith.

On March 8, 2013, Linda, Judith and Cynthia filed their own lawsuit, naming as defendants Dennis, Griffy, Robert, Martom Properties, and the law firm of Keating, Meuthing & Klekamp.

These sisters allege that the Griffin defendants "engaged in a pattern of racketeering activity to defraud plaintiffs, their sisters, of hundreds of millions of dollars in assets left to the plaintiffs by their parents in their wills and in trusts, and of the honest services of the defendants Dennis B. Griffin and John M Griffin as Co-Executors of their father's estate and as Co-Trustees of his 1967 Trust." (Compl. ¶ 1).

Specifically, these sisters allege that, the brothers realized in the 1980s after both parents became ill that, under their wills and trusts, if Father died first, the "Non-Working Children"¹ would own a majority of the Griffin Industries stock. The sisters further allege that, after Mrs. Griffin died in August 1985, "the Griffin Defendants began executing a scheme to prevent the Non-WorkingChildren from assuming control of the Company, and to garner the great bulk of the Griffin Industries stock for themselves." (Compl. ¶ 37).

The actions allegedly taken by the Griffin defendants in furtherance of their plan to deprive plaintiffs of their inheritance are numerous, but include the following:

• Causing the Campbell County Probate Court to dismiss Father as the Executor of Mrs. Griffin's Will, and having themselves appointed as Co-Executors;

• Causing themselves to be appointed as Co-Trustees of the Griffin Family Trust and the 1967 Trust;

• Making false representations to plaintiffs regarding the contents of their parents' estate plans and the tax consequences thereof;

• Fraudulently concealing from the plaintiffs knowledge of the contents of their parents' estate plan regarding the passing of the stock of Griffin Industries, specifically that the plans intended for some stock to pass to the sisters rather than cash alone;

• By formulating a "redistribution plan" that ignored their parents' intent and permitted the brothers to purchase Griffin Industries stock at a discounted rate using money taken out of the company, rather than their own funds;

• Misrepresenting to plaintiffs the fair value of Father's stock and making illusory sales to the grandchildren followed by repurchases by defendants at discounted prices;

• Refusing plaintiffs' requests to read their mother's will;

• Amending company bylaws to ensure that the brothers would retain the majority of the company stock;

• After Father's death in 1995, causing the conveyances of certain properties to Martom Properties, which they created as a vehicle for their fraud;

• Defrauding plaintiffs out of their interest in Craig Protein, which property was owned by Father and should have been transferred to the 1967 Trust;• Misappropriating the Cold Spring Property

As to Keating, plaintiffs allege that the firm had a conflict of interest when it assisted Griffy in having Father's estate reopened in order to divest plaintiffs of their interest in the Cold Spring Property. (Compl. ¶ 99). Plaintiffs allege that they were not aware of this wrongdoing until August 2012. (Compl. ¶ 100).

The Holt plaintiffs assert the following claims: (1) RICO (Dennis, Griffy, and Robert); (2) Fraud (Dennis, Griffy, and Robert); (3) Breach of Fiduciary Duty as Executor of Rosellen Griffin's Will (Griffy and Dennis); (4) Breach of Fiduciary Duty as Executors of Father's Will and as Trustees of Father's Trust (Griffy and Dennis); (5) Civil Conspiracy/Aiding and Abetting (Dennis, Griffy, and Robert); (6) Tortious Interference with an Inheritance (Dennis, Griffy, Robert, and Martom); (7) Negligence and/or Gross Negligence Arising out of the Estate Administration for Rosellen Griffin (Griffy and Dennis); (8) Negligence and/or Gross Negligence Arising out of the Estate Administration for Father (Griffy and Dennis); and (9) Professional Negligence (KMK).

On June 26, 2013, the Court consolidated these two actions.

The Keating firm now moves to dismiss the sole claim against it for professional negligence, and the Griffin defendants and Martom move for dismissal of the RICO claim.²

Analysis

A. Motion to Dismiss RICO Claim

Subsequent to the briefing on the motion to dismiss the Holt plaintiffs' RICO claim, the Griffin defendants moved this Court to take judicial notice of the record in Betsy's recently-unsealed 1990 lawsuit. (Doc. 76). The Court agrees that such judicial notice is proper, and the Holt plaintiffs do not object. (Doc. 81). That motion will thus be granted.

The consequence of the Court doing so, however, is that defendants' motion to dismiss the RICO claim must be converted to a motion for summary judgment, allowing time for discovery to create a complete record. See Fed. R. Civ. P. 12(d).

As the Court noted at the hearing, such a course is prudent even absent conversion given the complex issues presented by the statute of limitations questions pertaining to the RICO claims, as well as the other issues identified in the parties' briefs. Discovery willundoubtedly bring these issues into clearer focus for purposes of summary judgment.

Thus, the motion to dismiss the RICO claim will be denied without prejudice to raising defenses to this claim at the summary judgment stage.

B. Motion to Dismiss by the Keating Law Firm

KMK makes three arguments in support of its motion to dismiss the professional negligence claim asserted against it in relation to its involvement in the reopening of Father's probate estate in December 2010.

1. The Exercise of Supplemental Jurisdiction

First, KMK urges that the Court should not exercise its supplemental jurisdiction over the claim because it presents a novel question of Kentucky law and the case is in its early stages. Further, they assert that being a party in the Holt case creates a "distraction" because KMK has represented defendants in the Osborn matter for over two years.

A district court's decision to exercise supplemental jurisdiction is one of discretion. Ritchie v. United Mine Workers, 410 F.2d 827, 829 (6th Cir. 1969). A district court shall have supplemental jurisdiction over claims not within its original jurisdiction if the claims "are so related to claims in the action within such originaljurisdiction that they form part of the same case or controversy under ...