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Trust Beneficiaries Not Indispensable Party in Trust Lawsuit Under Federal Rule of Civil Procedure 19

The plaintiff sued the trustee, in her fiduciary capacity as well as individually, as a beneficiary.  If successful, the trustee’s beneficial interest would have been eliminated.  There were remainder beneficiaries whose interest in the trust would have also been eliminated if the lawsuit was successful.  Those additional beneficiaries were not added as defendants in the lawsuit, even though their interest would have been eliminated. 

The Federal District Court for the Southern District of Florida ruled that those additional beneficiaries did not have to be added as defendants in the lawsuit. As explained by the Court:

Defendant moves to dismiss for failure to join the Prospective Defendants, arguing they are indispensable because the Amended Trust names them as beneficiaries. Defendant argues that, to the extent this case could render the Amended Trust invalid, the Prospective Defendants interests will be affected.  Plaintiffs, in response, argue that the Prospective Defendants’ interest as remainder beneficiaries in the trust are adequately represented by [the Defendant].

Under Rule 19, an indispensable party is one who, in the person’s absence, the court cannot afford complete relief among the existing parties.  Here, Defendant is a beneficiary under the Amended Trust.  As such, her interest in protecting the trust property is as strong, if not stronger, that the Prospective Defendants.  Under the Amended Trust, the Prospective Defendants will not receive anything under the Amended Trust until Defendant dies.  There is no indication that Defendant cannot adequately represent the interests of the remainder beneficiaries.  Accordingly, Defendant has not shown that, in the Prospective Defendant’s’ absence, the Court cannot accord complete relief among existing parties.  See generally, Weillin v. Wellin, No. 2:14-cv-4067, 2015 U.S. Dist. LEXIS 19488, at 24-25 (D.S.C. Feb. 12, 2015) (holding absent beneficiaries not necessary under Rule 19(a)(1)(B)(i) in lawsuit seeking to invalidate a trust because their interests were adequately represented by existing parties.).

Under Rule 19, a party is also indispensable if the person claims an interest in the action, and not allowing the parties to join “may impair or impede their ability to protect their interest,” or “leave an existing party subject to substantial risk of incurring double, multiple or inconsistent obligations.”  Fed. R. Civ. P. 19(a)(1)(B).  Here, however, there is no evidence that the Prospective Defendants claim any interest in this action.  Defendant provides an affidavit from [one of the remainder trust beneficiaries], which states “I see that my brother and I are named as beneficiaries of the trust***”  However, [she] does not claim any interest in this action un here affidavit.  Because the Prospective Defendants have not claimed an interest in the action, despite being aware of the action, their joinder is unnecessary.  See U.S. v. Bowen, 172 F.3d 682, 689 (9th Cir. 1999) (holding joinder of absent party unnecessary because party was aware of the action and chose not to claim an interest); School Dist. of City of Pontiac v. Sec. of U.S. Dept. of Educ., 584 F.3d 253, 266 (6th Cir. 2009) (“[I]t would turn Rule 19 analysis on its head to argue that the States’ interests are now impaired because they declined to participate in this much-publicized case.”); HDR Engineering, Inc. v. R.C.T. Engineering, Inc.,No. 08-cv-81040, 2010 WL 2402908, at *4 (S.D. Fla. June 15, 2010) (“[C]ourts are reluctant to join a nonparty for the purpose of protecting that nonparty’s interests when the nonparty itself has not claimed an interest in the outcome of a suit.”). 

Although claiming jurisdiction over a party in an inheritance dispute, which is typically an in rem proceeding, may not present much of an issue, the more common issue in federal litigation is maintaining subject matter jurisdiction.  To maintain federal subject matter jurisdiction over most inheritance disputes, diversity jurisdiction is required, which requires complete diversity between all of the plaintiffs and all of the defendants.  The ability to refrain from adding in non-diverse parties may allow a litigant to maintain federal diversity jurisdiction.  The flexibility of Rule 19 should be considered.

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