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What is the Realignment Doctrine in Federal Inheritance Litigation?

By:  Jeffrey H. Skatoff, Esq.

The Realignment Doctrine allows a federal district court to properly align the plaintiffs and defendants so that the characterization as plaintiff or defendant aligns with the parties’ actual interest in the dispute.

Diversity jurisdiction in federal court requires complete diversity as between all of the plaintiffs and all of the defendants. Whether a party is characterized as a plaintiff or defendant can control whether complete diversity exists. In a traditional lawsuit of one plaintiff against one or more defendants, there is no issue as to who is a plaintiff and who is a defendant.

Inheritance litigation can often muddle whether a party should be treated as a plaintiff or a defendant. In many inheritance disputes, the parties will not take traditional stances as plaintiffs and defendants. Take, for example, a trust dispute, in which a plaintiff challenges the validity of deathbed amendment to a revocable trust. The amendment eliminates the bequest of the plaintiff, reduces bequests to some individuals, increases bequests to others, and replaces one trustee with another.

None of the other individuals harmed by the deathbed amendment wish to bring suit. In a typical state court action, where the diversity concept is not relevant, the plaintiff would simply name all of the affected persons, even those who would benefit from the challenge, as defendants. But a beneficiary who has seen his or share decreased as a result of the amendment, and who will gain if the trust contest is successful, who could be named as a nominal defendant because that beneficiary has not chosen to litigate as a plaintiff, nevertheless has an interest in the litigation aligned with the plaintiff.

A federal district court has the ability properly align the parties in a lawsuit so that diversity jurisdiction succeeds or fails based on the actual “interests” of the parties. To be properly aligned, an “actual and substantial” controversy must exist between the plaintiffs and defendants. As explained by the Sixth Circuit:

[t]he courts, not the parties, are responsible for aligning the parties according to their interests in the litigation. If the interests of a party named as a defendant coincide with those of the plaintiff in relation to the purpose of the lawsuit, the named defendant must be realigned as a plaintiff for jurisdictional purposes.

U.S. Fidelity v. Thomas, 955 F.2d 1085, 1089 (6th Cir. 1992) (quoting Continental Airlines, Inc. v. Goodyear Tire & Rubber Co., 819 F.2d 1519, 1523 (9th Cir.1987)).  The appropriate alignment of the parties in a case where jurisdiction is based on diversity “is not to be determined by mechanical rules. It must be ascertained from the ‘principal purpose of the suit,’ . . . and the ‘primary and controlling matter in dispute.'” Indianapolis Gas, 314 U.S. 63, 69 (1941).  This case perfectly answers the question of what is the realignment doctrine in federal inheritance litigation.

Accordingly, in a typical trust contest or other inheritance dispute with numerous parties, the court has the ability to determine who should be treated as a plaintiff and who should be treated as a defendant for purposes of determining whether complete diversity exists for diversity jurisdiction purposes under the realignment doctrine.

Jeffrey Skatoff Esq

Jeffrey H. Skatoff, Esq.

Probate, Trust & Guardianship Litigation

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