Wellin v. Wellin

135 F.Supp.3d 502

Peter J. Wellin, et. al., Plaintiffs,

v.Wendy Wellin, individually and as Trustee of the Keith S. Wellin Florida Revocable Living Trust u/a/d December 11, 2011, Defendant.

No. 2:14–cv–4067–DCN

United States District Court, D. South Carolina, Charleston Division.

Signed September 30, 2015

Bryson M. Geer, Merritt G. Abney, Patrick Coleman Wooten, Robert H. Brunson, Nelson Mullins Riley and Scarborough, Charleston, SC, for Plaintiffs.

James B. Hood, Molly Agnes Hood Craig, Robert H. Hood, Hood Law Firm, Gedney M. Howe, III, Charleston, SC, Gray Thomas Culbreath John D. Hudson, Jr., John T. Lay, Lindsay Anne Joyner, Gallivan White and Boyd, John Fisher Beach, Ellis Lawhorne and Sims, Lyndey Ritz Zwingelberg, Adams and Reese, Columbia, SC, for Defendants.

ORDER

DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

This matter is before the court on defendant Wendy Wellin's ("Wendy") motion to dismiss ten of the eleven claims asserted against her by plaintiffs Peter J. Wellin ("Peter"), Cynthia Wellin Plum ("Cynthia"), and Marjorie Wellin King ("Marjorie"). For the reasons set forth below, the court grants in part and denies in part Wendy's motion to dismiss.

I. BACKGROUND¹

On October 20, 2014, Keith Wellin's ("Keith") three adult children—Peter, Cynthia, and Marjorie (collectively, "the Wellin children"), individually and as co-trustees and beneficiaries of the Wellin 2009 Irrevocable Trust—filed a complaint against Wendy, individually and as trustee of the Keith S. Wellin Florida Revocable Living Trust u/a/d December 11, 2001. The complaint alleges that

[t]hrough her prolonged and consistent pattern of mistreatment toward the children and Keith, Wendy defamed the children to Keith and others, unduly influenced and coerced Keith with respect to his finances and estate planning, isolated Keith from his children, grandchildren, and other relatives, instilled in Keith anger, distrust, and hatred toward his three children, and, ultimately, enriched herself and her family at the expense of the children and Keith's other lineal descendants.

Compl. ¶ 3.

Wendy, to whom Keith was married for almost twelve years before his death on September 14, 2014, was Keith's fourth wife. Id. ¶¶ 14–15. The Wellin children, who collectively have eight children, assert that both they and their children maintained a "close, loving relationship" with Keith until 2013. Id. ¶¶ 17–18. At the time of his marriage to Wendy, Keith's net worth exceeded $150 million. Id. ¶ 20.

On November 12, 2002, shortly before their marriage, Keith and Wendy entered into a prenuptial agreement. Id. ¶ 21. The prenuptial agreement "[sought] to protect [the Wellin children's] interests in [Keith's] estate by having this Agreement in full force and effect." Id. ¶ 22. The prenuptial agreement identified Keith's assets at the time of his marriage as "Keith's Separate Property" and provided that Wendy "waive[d] any claim to whatsoever to [Keith's] Separate Property ... that she may now have or hereinafter acquire as Keith's Wife." Id. ¶ 23. The prenuptial agreement provided that Wendy would receive $7.6 million in the event Keith predeceased Wendy and they were still married, and further provided that should Keith become infirm or mentally incapacitated, Wendy would not take actions to limit the Wellin children's access to Keith. Id. ¶¶ 24–25.

In 2001, Keith, with the assistance of attorney Tom Farace ("Farace"), created the Keith S. Wellin Florida Revocable Living Trust ("the Revocable Trust"), which was the primary instrument that provided for distribution of Keith's assets upon his death. Id. ¶ 33. Under the terms of the Revocable Trust, Keith was the trustee, Peter was the successor trustee, and Cynthia was the backup successor trustee. Id. ¶ 34. Over the course of his marriage to Wendy and prior to 2013, Keith revised the Revocable Trust on multiple occasions, increasing the fixed amount Wendy would receive upon his death from $7.6 million to $25 million. Id. At all times prior to 2013, Keith's estate planning documents were structured so that Wendy would receive a fixed amount, and the Wellin children would receive the bulk of Keith's residuary estate, an amount significantly greater than the amount left to Wendy. Id. ¶ 35.

In 2003, Keith set aside approximately 900 shares of Berkshire Hathaway stock for the benefit of the Wellin children. Id. ¶ 36. Acting on the advice of Farace, Keith placed these shares in a family limited partnership (the "LP"). Id. Keith retained a 98.9% limited partnership interest in the LP, but the LP was controlled by the Wellin children. Id. The purpose of this transaction was to reduce Keith's tax liability and protect his assets for the Wellin children. Id. Between 2003 and 2009, Keith's estate planning documents provided that when Keith died, the Wellin children would receive his 98.9% interest in the LP. Id. at 37. In 2009, Farace advised Keith to enter into a another transaction, whereby Keith would create an intentionally defective grantor trust, the Wellin Family 2009 Irrevocable Trust (the "Irrevocable Trust"), naming the Wellin children as beneficiaries, and transfer his 98.9% interest in the LP to the Irrevocable Trust in exchange for a promissory note. Id. at 38. Farace clearly communicated with Keith about the advantages and disadvantages of this transaction. Id. Before and after the 2003 and 2009 transactions, Keith's estate planning documents provided that the Wellin children would receive the value of the Berkshire Hathaway shares, while Wendy would receive a fixed amount as provided in the Revocable Trust. Id. at 40.

Beginning in 2011, Keith's health began to deteriorate, which increased his dependence on Wendy and caregivers controlled by Wendy to provide for his health and safety. Id. ¶ 48. Around July 29, 2011, Keith, acting as trustee of the Revocable Trust, divided a UBS account which held the majority of the Revocable Trust's liquid assets into two separate accounts. Id. ¶ 44. Keith then executed a power of attorney appointing Wendy as his attorney-in-fact with respect to one such account, UBS Account number XXX–4378. Id.

In the spring of 2013, Keith's mental capacity began to decline.² Id. ¶ 49. During this time period, Keith terminated Farace and other long-time advisors and retained new attorneys and advisors, including attorneys selected by Wendy. Id. ¶ 50. The new attorneys requested that the Wellin children prepay the promissory note held by the Irrevocable Trust so that Keith could transfer the $25 million bequest to Wendy, as set out in the Revocable Trust, prior to his death. Id. ¶ 51. In the spring or summer of 2013, Keith transferred $4.5 million to Wendy, which she used to purchase a home in Sullivan's Island, South Carolina. Id. ¶ 52. Around the same time, he transferred $25 million to Wendy. Id. ¶ 53. These transfers were the product of Wendy "manipulating, coercing or unduly influencing Keith." Id. ¶ 54. Also in the spring or summer of 2013, Keith failed to consummate the sale of a property in Friendship, Maine to Marjorie, even though he had previously expressed excitement about the sale. Id. ¶ 55.

In July 2013, Keith filed a lawsuit, Wellin v. Wellin ("Wellin I"), No. 2:13–cv–1831, against the Wellin children. Id. ¶ 56. Around the same time, Keith revoked powers of attorney granted to Peter and Cynthia, removed Peter as successor trustee of the Revocable Trust, and removed Cynthia as backup successor trustee of the Revocable Trust, and installed Wendy into these positions. Id. ¶ 57. In the months following the initiation of litigation, Keith's new lawyers drafted one or more revised versions of the Revocable Trust that eliminated or significantly reduced Keith's bequests to the Wellin children and increased his bequests to Wendy and her children. Id. ¶ 60.

In November 2013, Keith and his new attorneys attempted to "turn off" grantor status on the Irrevocable Trust, which would have caused the Irrevocable Trust to incur over $40 million in tax liability, and attempted to execute a "swap" transaction that would have significantly reduced the assets of the Irrevocable Trust. Id. ¶ 61. If effective, these actions would have shifted tens of millions of dollars that would have been received by Keith's children and grandchildren to Wendy and her children. Id. In November 2013, Keith purported to hire a new trust protector of the Irrevocable Trust to bring a separate lawsuit, McDevitt v. Wellin ("McDevitt"), No. 2:13–cv–3595, against the Wellin children, in their capacity as trustees of the Irrevocable Trust. Id. ¶ 62.

The Wellin children allege that "Keith's uncharacteristic and bizarre behavior" was the result of "certain lies, fraudulent misrepresentations, undue influence, coercion, and isolation" by Wendy designed to interfere with the Wellin children's inheritance and enrich herself. Id. ¶¶ 70–71. The Wellin children allege that Wendy's actions to interfere with the relationship between Keith and his children include: (1) preventing the Wellin children from visiting Keith; (2) refusing to answer calls from the Wellin children and failing to inform Keith when they called; (3) insisting that she be present for all visits between Keith and the Wellin children; (4) telling Keith and others lies about the Wellin children; and (5) initiating and controlling the litigation brought by Keith against the Wellin children. Id. ¶ 72. The Wellin children further allege that Wendy has taken steps to influence Keith with respect to his finances and estate planning, including: (1) "coaching" Keith regarding what he should say to lawyers, health care providers, friends, and others regarding the facts of the lawsuits; (2) meeting with Keith's lawyers outside his presence and instructing them on Keith's intentions with respect to the litigation; (3) disseminating communications on behalf of Keith not consistent with his actual or expressed intentions; (4) coercing Keith to terminate Farace and other long-time advisors; (5)...