Federal Court Denies Trustee’s Motion to Dismiss for Lack of Subject Matter Jurisdiction

Brian and Patricia Hutcherson created a trust for their six children in 1991, and the couple amended the trust’s distribution provisions in 2006. When Brian died in 2008, Patricia and the couple’s son, Tyler, served as trustees. Patricia then exercised her power of appointment over the trust to increase Tyler’s share to 54.5% while reducing the shares of two other children.The other children sued Tyler in Idaho federal district court after Patricia’s death on the basis of diversity of citizenship. The other children alleged that Tyler improperly influenced his mother and breached his fiduciary duties. Tyler moved to dismiss the case for lack of subject matter jurisdiction because of the probate exception from federal court. Alternatively, he moved for dismissal because the amount in controversy did not exceed the jurisdictional limit.

In Chabot v. Chabot, 2011 U.S. Dist. Lexis 13161 (Idaho 2011), the Idaho federal court held that the probate exception to federal court jurisdiction applies to a trust operating as a will substitute but that the exception did not apply to the breach of fiduciary duty claims. The court held that relief was within the exclusive jurisdiction of the Idaho state court to remove and replace trustees. The court denied Tyler’s motion to dismiss for lack of subject matter jurisdiction except to the extent the other children asked the court to administer the trust, remove Tyler as trustee, appoint a new trustee, enjoin Tyler from performing his duties, or distribute the trust assets. 

See Dana G. Fitzsimons, Jr. and Meghan L. Gehr, Recent Cases of Interest to Fiduciaries, McGuire Woods (2011).

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.