Rondina v. Feigenbaum

RYAN RONDINA Plaintiff, v. RICHARD FEIGENBAUM Defendant.

3:19-CV-01699 (KAD)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

JANUARY 25, 2021

MEMORANDUM OF DECISION

RE: DEFENDANT'S MOTION TO DISMISS, ECF NO. 22

Kari A. Dooley, United States District Judge:

This case arises out of the administration of various testamentary trusts established by Grantor Herman Abbott for the benefit of, at least initially, his two daughters. Plaintiff, Ryan Rondina ("Rondina"), the Grantor's grandson, claims an interest in two of the trusts set up for the benefit of his aunt, Ellen Taub ("Ellen"), and brings this action against the Trustee of those trusts, Defendant Richard Feigenbaum. Rondina's claims sound in both breach of contract and breach of fiduciary duty. Pending before the Court is the Defendant's motion to dismiss all claims against him pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). The Court heard oral argument on July 14, 2020. For the reasons set forth below, the motion to dismiss is DENIED.

Allegations, the Trust indentures and the Settlement Agreement

Herman Abbott had two daughters, Nancy Abbott and Ellen Taub. (Compl. ¶ 12.) Ellen is married to Bruce Taub, and Plaintiff-Rondina, Nancy's son, is Herman's only grandchild. (Compl. ¶ 12, 13.) Herman died on April 1, 2007. (Compl. ¶ 9.)

Prior to his death, in June 1998, Herman created both the Herman Abbott Revocable Trust and the Herman Abbott Irrevocable Insurance Trust (the "ILIT Trust"). (Compl. ¶ 7.) Herman's death led to the creation of several sub-trusts. (Compl. ¶ 11.) Shares were allocated to Herman's children, Nancy and Ellen. (Revocable Trust Indenture Art. III, ECF No. 24-1; Irrevocable Insurance Trust Indenture Art. II, ECF No. 24-2.) The sub-trusts flowing from the Herman Abbott Revocable Trust were further split into GST-Exempt and Non-Exempt Trusts. (Revocable Trust Indenture Art. III.) The result of which is that, following Herman's death, there were six sub-trusts: Nancy's GST-Exempt, Non-Exempt, and ILIT Trusts; and Ellen's GST-Exempt, Non-Exempt, and ILIT Trusts. Each of the relevant trust indentures make it clear that the assets held in all six of these sub-trusts could, upon certain contingencies occurring, pass to Rondina. The claims brought herein concern only Ellen's Non-Exempt and ILIT Trusts, the assets of which Rondina alleges will, at least in part, pass to him upon Ellen's death. (Compl. ¶ 22, 40.)

David Bailey served as independent trustee of these trusts from their creation until April 15, 2015, at which point Defendant-Feigenbaum became the independent trustee of Ellen's Non-Exempt Trust. (Compl. ¶ 12, 23; Feigenbaum Aff. ¶ 6.) Feigenbaum subsequently became the independent trustee of Ellen's ILIT Trust on December 22, 2017. (Feigenbaum Aff. ¶ 7.)

Prior to Feigenbaum's appointment, a dispute arose among Rondina, Nancy, and Ellen regarding purported misappropriation of trust funds by Ellen's husband Bruce. To resolve the dispute, Ellen, Nancy, Rondina and prior trustee Bailey entered into a confidential Settlement Agreement. (Compl. ¶ 14.) Among other provisions, the Settlement Agreement called for mutual releases by and between all parties to the Agreement, releasing the signatories from any liability resulting from claims then held by any other party. (Settlement Agreement § 16, ECF No. 28-1.) Bailey, in his capacity as Trustee, Ellen, Nancy and Rondina signed the agreement in September 2013.

Section 11 of the Settlement Agreement describes a "Distribution Policy" by which certain monies (defined by a formula contained in the Settlement Agreement) would be paid to Ellen ona quarterly basis. This Distribution Policy arguably conflicts with the original trust indentures, which left the question of distributions of either principal or income to the absolute discretion of the independent trustee.¹

Bailey and later Feigenbaum made payments under the Settlement Agreement and in accordance with the Distribution Policy until at least 2017. (Compl. ¶ 24.) Then, on May 31, 2018, Feigenbaum claimed to have terminated Ellen's Non-Exempt Trust and distributed all of the trust assets, an amount in excess of one million dollars, to Ellen. (Compl. ¶ 25-26.) Around this time, Feigenbaum also pledged the assets of Ellen's ILIT Trust as security for a line of credit. (Compl. ¶ 41-43.) As of December 31, 2018, the outstanding balance on the line of credit was $1,616,999.43, and the assets in Ellen's ILIT Trust had a value of $1,771,741.60. (Compl. ¶ 57-58.)

Standard of Review

In this action, Rondina alleges that Feigenbaum breached the Settlement Agreement (Counts I and III) by distributing the Non-Exempt Trust and by encumbering the ILIT Trust. He further alleges that the same conduct was a breach of Feigenbaum's fiduciary duty (Counts II and IV) to Rondina as a contingent beneficiary of these trusts. Feigenbaum now seeks to dismiss all claims. He first asserts that Rondina does not have standing to bring these claims. Alternatively, he asserts that the complaint fails to state a claim for which relief may be granted.

Rule 12(b)(1)

Although the Article III standing inquiry remains focused on whether the party invoking jurisdiction had the requisite stake in the outcome when the suit was filed, courts evaluate Rule 12(b)(1) motions differently depending on when the motion is made and whether the motionattacks the complaint facially or factually. See Carter v. HealthPort Technologies, LLC, 822 F.3d 47, 56 (2d Cir. 2016) (citations and quotations omitted). When the motion is made during the pleadings stage and relies only on the complaint and exhibits thereto, the plaintiff bears no evidentiary burden. HealthPort Technologies, LLC, 822 F.3d at 56 (citations omitted). The task of the district court is to determine whether the Complaint alleges facts that affirmatively and plausibly suggest that the plaintiff has standing to sue. HealthPort Technologies, LLC, 822 F.3d at 56 (citing Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011) (quotations and other citations omitted). If, however, the movant submits evidence beyond the pleadings, then the plaintiff must "come forward with some evidence of their own to controvert that presented by the defendant." HealthPort Technologies, LLC, 822 F.3d at 57 (citations omitted). Nevertheless, "the plaintiffs are entitled to rely on the allegations in the [p]leading if the evidence proffered by the defendant is immaterial because it does not contradict plausible allegations that are themselves sufficient to show standing." Id.

Here, no documents were attached to Rondina's complaint. When the parties briefed this motion to dismiss, Feigenbaum submitted the trust indentures with his motion and Rondina submitted the Settlement Agreement with his opposition. Because these documents are referenced in Rondina's complaint, the Court considers them as incorporated into or integral to the complaint. See Sira v. Morton, 380 F.3d 57, 67 (2d Cir. 2004) (noting that a complaint is deemed to include any written instrument attached to it as an exhibit, materials incorporated in it by reference, and documents that, although not incorporated by reference, are integral to the complaint). The Court therefore treats this motion to dismiss as a facial challenge.

Rule 12(b)(6)

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 557). Legal conclusions and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements," are not entitled to a presumption of truth. Iqbal, 556 U.S. at 678. Nevertheless, when reviewing a motion to dismiss, the court must accept well-pleaded factual allegations as true and draw "all reasonable inferences in the non-movant's favor." Interworks Sys. Inc. v. Merch. Fin. Corp., 604 F.3d 692, 699 (2d Cir. 2010).

Discussion

The Court looks to the pleadings to determine if the Court has jurisdiction to hear the claims and if the claims themselves are plausible. See O & G Industries, Inc. v. Aon Risk Services Northeast, Inc., 922 F. Supp. 2d 257, 262 (D. Conn. 2013) (discussing the standard of review for motions under Fed. R. Civ. P. 12(b)(1) and 12(b)(6)). As required, the Court addresses the 12(b)(1) challenge first. See Bell v. Hood, 327 U.S. 678, 682 (1946) ("Whether the complaint states a cause of action on which relief could be granted is a question of law and just as issues of fact it must be decided after and not before the court has assumed jurisdiction over the controversy.").

A. Rondina's Standing

A motion challenging a plaintiff's standing under Rule 12(b)(1) requires a federal court to ensure that the matter before the court fulfills Article III's case or controversy requirement by verifying that the parties are properly before the court. See Sonterra Capital Master Fund, Ltd v. UBS AG, 954 F.3d 529, 533 (2d Cir. 2020). A plaintiff is properly before a federal court if the plaintiff has "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). Additionally, "[w]here . . . jurisdiction is predicated on diversity of citizenship, a plaintiff must have standing under both Article III of the Constitution and applicable state law in order to maintain a cause of...