Zeigenfuse v. Kemp & Assocs., Inc., CIVIL ACTION NO. 14-05954

DAVID ZEIGENFUSE Plaintiff v. KEMP & ASSOCIATES, INC. Defendant

CIVIL ACTION NO. 14-05954

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MARCH 17, 2015

PAPPERT, J.

MEMORADUM

Defendant Kemp & Associates, Inc. ("Kemp") is an "heir hunter." (Am. Compl. ¶ 6, Doc. No. 6.) Their business involves tracking down and contacting heirs who would otherwise not know that they are entitled to an inheritance. (Id.) Kemp understandably expects compensation for this service. In this case, that compensation took the form of an agreement that Plaintiff David Zeigenfuse ("Zeigenfuse") would pay Kemp one-third of the amount of Zeigenfuse's inheritance. (Id. ¶ 16.) Zeigenfuse eventually inherited roughly $245,000 and Kemp was paid $77,563 from that inheritance. (Id. ¶¶ 24, 25.)

Zeigenfuse now retrospectively attacks Kemp's business model. He alleges Kemp's arrangement with him was champertous, void, unenforceable, and of no force and effect. (Id. ¶ 30.) He demands a full refund of the $77,563 paid to Kemp out of his inheritance. Kemp moves to dismiss Zeigenfuse's claims, arguing, among other things, that the Alabama probate court that determined Zeigenfuse's inheritance also determined that the agreement between Zeigenfuse and Kemp was valid. It argues that this Court cannot second-guess that determination. Zeigenfuse disputes that the probate court ever considered the validity of theagreement. Construing the Amended Complaint in the light most favorable to Zeigenfuse, the Court denies Kemp's motion.

Factual and Procedural Background

In early 2007, Cary Douglas Piper ("Piper") died intestate in Alabama with an estate valued at approximately $3,000,000. (Am. Compl. ¶¶ 7, 9.) A petition for letters of administration was filed in the Probate Court of Covington County, Alabama. (Id. ¶ 8.) Less than a year after Piper's death, the Probate Court issued a Decree of Final Settlement declaring that Piper had no known living heirs, and the case was closed. (Id. ¶ 10.)

Piper, however, did have living heirs, one of whom was Zeigenfuse. (See id. ¶ 12.) Shortly after the probate case was closed, a Kemp representative called Zeigenfuse at his Pennsylvania home and told him that he was an heir to an estate. (Id. ¶ 15.) At the time, Zeigenfuse was unaware of Piper's death or of his right to inherit from Piper's estate. (Id. ¶ 17.) Kemp, through its representative, did not give Zeigenfuse details about his right to inherit on this initial call. (Id. ¶ 16.) Rather, Zeigenfuse was informed that before Kemp would divulge further information, Zeigenfuse would need to execute an Assignment and Power of Attorney (the "Assignment") directing that Kemp receive one-third of the value of any assets Zeigenfuse would eventually inherit. (Id. ¶ 16.) The Assignment authorized Kemp to retain an attorney to establish Zeigenfuse's heirship, collect all assets due Zeigenfuse from the Piper estate, and fulfill the Assignment. (Id. Ex. A ¶ 2.) Zeigenfuse executed the Assignment at his home several days later. (See id. ¶ 18.) Zeigenfuse believes that Kemp also entered into similar assignment agreements with other heirs to the Piper estate. (See id. ¶ 19.)

Kemp then hired Alabama attorney Gilbert M. Sullivan, Jr. ("Sullivan") to reopen the Piper estate case. (Id. ¶ 19.) Sullivan was to be paid a percentage of the funds payable to Kempunder the assignment agreements. (Id. ¶ 21.) Therefore, while Sullivan was ostensibly representing the interests of the potential heirs in the probate case, he had a financial incentive to maximize the amount to be paid to Kemp under the assignments. (See id. ¶ 19.) Sullivan accordingly had an interest in ensuring that the assignments were not invalidated, in potential conflict with the interests of the heirs. (Id. ¶ 27.)

Sullivan filed a petition to reopen the Piper estate case, asserting the right of Zeigenfuse and other heirs to inherit from the estate. (Id. ¶ 22.) The Alabama probate court eventually entered an Order Determining Heirs, finding that Zeigenfuse was entitled to a 10% share of the Piper estate.¹ (See Mot. to Dismiss Ex. C, Doc. No. 8.) The probate court then entered a Decree of Partial Settlement directing that the estate administrator pay Sullivan $2,000,000. (Mot. to Dismiss Ex. D.) Sullivan was to distribute this money to the heirs according to their respective shares of the estate, including a payment of $200,000 to Zeigenfuse. (Id.) The Decree of Partial Settlement did not reference Kemp. Zeigenfuse alleges that Sullivan withheld one-third of Zeigenfuse's $200,000 payment and gave it to Kemp pursuant to the Assignment. (See Am. Compl. ¶ 25.)

Over three years later, the probate court entered a Decree of Final Settlement. (Mot. to Dismiss Ex. E.) The Decree of Final Settlement directed that $326,917.10 be paid to Albrittons, Clifton & Moody, PC Trust Account for distribution to the heirs, which included a $32,691.73 distribution to Zeigenfuse. (See id. ¶ 7.) The Decree of Final Settlement also provided for a payment of "$108,972.43 to Gilbert M. Sullivan, Jr. PC, Trust Account, FBO Kemp and Associates, as full payment for fees pursuant to the contract with the heirs." (Id. ¶ 6.)

Six days later, the Alabama probate court entered an Amended Decree of Final Settlement. (See Mot. for Leave to File Sur-reply Ex. A, Doc. No. 17.)² The Amended Decree of Final Settlement differs from the Decree of Final Settlement in several ways. First, it increases the commission due to the estate administrator by $4,302.20. (See id. ¶ 4.) Second, it deletes the paragraph directing a payment to Sullivan for the benefit of Kemp. (See id.) Third, it directs the $326,917.10 be paid to Sullivan - rather than Albrittons, Clifton & Moody - for distribution to the heirs. (See id. ¶ 6.) Zeigenfuse alleges that Sullivan withheld an additional payment for Kemp under this distribution. (See Comp. ¶ 25.) In all, Zeigenfuse alleges that he inherited approximately $245,000 from the Piper estate and Sullivan withheld "$77,563 from [this] inheritance and remitted those funds to Kemp, minus [Sullivan's] fee of approximately $7,563.00." (Id.)

Zeigenfuse filed suit in the Philadelphia Country Court of Common Pleas on September 15, 2014. (See Notice of Removal ¶ 3, Doc. No. 1.) Kemp removed the case to this Court based on diversity of citizenship jurisdiction. Zeigenfuse filed an Amended Complaint after removal. Zeigenfuse attacks the Assignment as champertous under Pennsylvania law. He asserts causes of action for rescission (Count I), restitution (Count II), fraud by misrepresentation (Count III), declaratory judgment (Count IV), unjust enrichment (Count V), conspiracy (Count VI), constructive trust (Count VII), conversion (Count VIII), and violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL") (Count IX). He requests a declaration that the Assignment is void and unenforceable, return of the $77,563.90 paid to Kemp from his inheritance, punitive damages, and treble damages under UTPCPL. Kemp moves to dismiss all of Zeigenfuse's claims pursuant to Rule 12(b)(6) of the Federal Rules ofCivil Procedure for failure to state a claim upon which relief can be granted. Zeigenfuse has filed a motion for remand, asking the Court to remand the case rather than dismiss it should the Court find that it lacks subject matter jurisdiction over the case.

Legal Standard

A Rule 12(b)(6) motion tests the sufficiency of the factual allegations in the complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). When confronted with a 12(b)(6) motion, a district court must conduct a two-step analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the district court "must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions." Id. at 210-11. Then, it "must determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief.'" Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). When making this determination, the court can consider "the allegations contained in the complaint, exhibits attached to the complaint and matters of public record." Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). The district court must "construe the complaint in the light most favorable to the plaintiff . . . ." Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008).

Discussion

This action as a collateral attack on the Alabama Court's decision

Kemp does not specifically attack the sufficiency of the factual allegations of any particular Count in the Amended Complaint. Rather, Kemp argues that Zeigenfuse's suit is "a masquerading attack on the final judgment of [the Alabama probate court]." (Mot. to Dismiss at 6.) Kemp frames this basic argument under a number of related doctrines: full faith and credit,collateral attack, res judicata, judicial estoppel, Rooker-Feldman, and comity.³ However articulated, Kemp's arguments on this point share the same basic premise that Zeigenfuse and/or this Court are bound by the judgment of the Alabama probate court, which issued the Decree of Final Settlement ordering a distribution to Kemp from the Piper estate "as full payment for fees pursuant to the contract with the heirs." (Mot. to Dismiss Ex. E.) Therefore, the Alabama probate court necessarily decided that the Assignment was valid. (See id. at 9.) It is improper for Zeigenfuse to attack the validity of the Assignment here. (Id.)

Zeigenfuse counters by pointing to the Amended Decree of Final Settlement, which deletes the reference to the payment to Kemp. (See Mot. for Leave to File Sur-reply Ex. A.) Zeigenfuse argues that the Amended Decree "changed, replaced, and superseded the Decree of Final Settlement" so as to "completely eviscerate[]" Kemp's arguments based on the Alabama probate court's ruling on the validity of the Assignment.

Kemp's collateral attack arguments...