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Falls v. Goldman Sachs Trust Company, N.A.

United States District Court, E.D. North Carolina, Western Division

December 18, 2017

RALPH L. FALLS, III, Plaintiff,
v.
GOLDMAN SACHS TRUST COMPANY, N.A. as Executor of the Estate of Ralph L. Falls, Jr.; GOLDMAN SACHS TRUST COMPANY, N.A. as Trustee of the Ralph Lane Falls Revocable Declaration of Trust; DIANE C. SELLERS; LOUISE FALLS CONE individually and on behalf of her minor children and unborn issue; TOBY CONE; MARY COOPER FALLS WING individually and on behalf of her minor children and unborn issue; GILLIAN FALLS CONE individually and on behalf of her minor children and unborn issue; K.L.C. by her next friends and parents, Louise Falls Cone and Toby Cone, Defendants.

          ORDER

          LOUISE W. FLANAGAN United States District Judge

         This matter is before the court upon the following motions: 1) joint motion to compel discovery by plaintiff Ralph L. Falls, III (plaintiff or “Falls III”) and defendant Mary Cooper Falls Wing (“Wing”) (DE 104); 2) motion for partial judgment on the pleadings by defendant Dianne C. Sellers (“Sellers”) (DE 106); 3) plaintiff's motion for leave to file amended complaint (DE 125); and 4) defendant Sellers's motion to dismiss defendant Wing's crossclaims for annulment (DE 166). Following multiple extensions of time to allow the parties to complete settlement activities, briefing now has concluded and the issues raised are ripe for ruling. For the following reasons, the court grants plaintiff's motion to amend, denies as moot the motion for judgment on pleadings and the motion to compel, and grants the motion to dismiss.

         STATEMENT OF THE CASE

         Plaintiff commenced this action on August 12, 2016, asserting the following claims: 1) claim seeking declaration that a certain Fifth Amendment to Revocable Declaration of Trust of Ralph L. Falls, Jr., purportedly executed by plaintiff's father, Ralph L. Falls, Jr., (“Decedent”), before his death, is invalid; 2) tort claim of malicious interference with the right to inherit, asserted against defendant Sellers; 3) breach of lease claim against the Estate of Ralph L. Falls, Jr. (the “Estate”); 4) alternative claim seeking declaration regarding the enforcement of a lease provision in the Fifth Amendment to Revocable Declaration of Trust of Ralph L. Falls, Jr. Plaintiff seeks declaratory relief and damages, as well as costs and attorney's fees.

         In November 2016, defendant Goldman Sachs Trust Company, N.A. (“Goldman Sachs”) answered and filed a motion to dismiss plaintiff's third claim for breach of lease. Defendant Sellers answered and asserted a counterclaim for declaratory judgment that plaintiff is not entitled to attorney's fees. Defendants Louise Falls Cone (“Cone”); Toby Cone; Gillian Falls Cone; and K.L.C. by her next friends and parents, Louise Falls Cone and Toby Cone (collectively, the “Cone defendants”), filed an answer and amended answer, including counterclaim for declaratory judgment that plaintiff is not entitled to attorney's fees.

         Defendant Wing filed an answer containing admissions and allegations generally aligned with the allegations in the complaint, along with the following crossclaims asserted against the other defendants:

1) Declaratory judgment that a certain “Revocable Trust or its amendments” are invalid, due to lack of capacity and improper influence;
2) Annulment of marriage between Decedent and defendant Sellers due to lack of capacity and improper influence;
3) Alternative declaratory judgment that the purported marriage and the “Revocable Trust or its amendments” are invalid due to lack of capacity and improper influence.

         (Answer and crossclaims (DE 49) at 14-18).

         On December 20, 2016, the court entered an order addressing both the instant case and a second case involving two of the same parties, Goldman Sachs Trust Company, N.A., as Executor of the Estate of Ralph L. Falls, Jr. v. Ralph L. Falls, III, No. 5:14-CV-777-FL (E.D. N.C. ), concerning an alleged loan by Decedent to Falls III (hereinafter the “Loan Case”). In such order the court severed a counterclaim by Falls III for breach of fiduciary duty related to the lease provision in the Fifth Amendment to Revocable Declaration of Trust of Ralph L. Falls, Jr., and consolidated that counterclaim into the instant case. The court noticed a Rule 16(b) scheduling conference in the instant case to be held concurrently with pre-trial conference in the Loan Case, anticipating consideration of “settlement mechanism(s) which may lead to a global resolution of the issues raised in these cases.” (Order (DE 62) at 3).

         At hearing on January 3, 2017, the court stayed all trial activities in the Loan Case pending a limited initial period of discovery in aid of global settlement in both cases. “[T]o allow for potential settlement resolution, in lieu of entering a case management order at [that] time, the court [directed] the parties in the [instant] case to file a joint proposed consent order regarding scheduling.” (Order (DE 70) at 4). In consent order entered January 17, 2017, the court noted that the parties exchanged initial disclosures on January 11, 2017, and that they would engage in an initial period of limited discovery in the instant case to conclude May 26, 2017, with mediation contemplated for June 2017. The court noted availability of court to hold a teleconference following close of initial period of discovery, prior to mediation, upon request of the parties. The court concluded by noting: “Should settlement efforts prove unsuccessful following a mediation or other court-hosted settlement conference, this Court shall enter a complete case management scheduling order that shall govern with respect to all remaining activity in this case through dispositive motions.” (Order (DE 75) at 4).

         During the initial period of limited discovery in aid of settlement, on May 1, 2017, the court granted in part and denied in part a motion to quash subpoena filed by attorney John C. Hine (“Hine”). In the same order the court granted Goldman Sachs's motion to dismiss plaintiff's breach of lease claim as time-barred.

         On May 26, 2017, plaintiff and defendant Wing filed the instant motion to compel discovery seeking 1) an accounting of all estate and trust activity and 2) documents evidencing communications between Goldman Sachs and the other defendants, withheld on the basis of a purported common interest privilege.

         On June 2, 2017, defendant Sellers filed the instant motion for partial judgment on the pleadings, seeking judgment in her favor on plaintiff's first claim for declaratory judgment, on the basis that the claim does not present an actual controversy because plaintiff does not seek to declare either a certain “Fourth Amendment” or “Third Amendment” also invalid. (Motion (DE 106) at 3).

         On June 23, 2017, plaintiff filed the instant motion for leave to amend complaint, accompanied by a proposed amended complaint, a redline comparison, and the same exhibits that accompanied the original complaint. In the proposed amended complaint, plaintiff seeks to expand his first claim to assert that “all amendments” to the “Ralph Lane Falls Revocable Declaration of Trust” “executed after August 2011 that disinherit Falls III and Falls III's minor children are invalid.” (Prop. Am. Compl. ¶ 86). Plaintiff seeks to expand his second claim to include allegations against the Cone defendants, and he seeks to expand his fourth claim to include allegations regarding the “Fourth Amendment.” (Id. ¶ 114). Plaintiff restates his third claim for breach of lease “to preserve his appeal rights.” (Id. ¶ 111 n.1). Plaintiff also seeks to add his minor children, M.E.F., L.C.F., and J.B.F., as plaintiffs, as well as add factual allegations against the Cone defendants and in other respects as set forth in more detail herein.

         In the meantime, while the above-described motions were ripening, the parties filed multiple status reports and motions for extensions of time regarding the parties' ongoing settlement efforts, and the court entered extension orders, including the following:

1) On June 13, 2017, the parties filed a First Status Report and consent request for temporary stay, noting ongoing mediation, such that “filing and response deadlines are suspended and the Court will not rule on any pending matter, including discovery matters, ” until June 19, 2017. (DE 121).
2) On June 19, 2017, the parties filed a Second Status Report and request for amendment of deadlines, noting ongoing mediation, and, noting the parties “are not in agreement on a proposed approach for pending matters.” (DE 124 at 3). Plaintiff noted, however, with respect to the motion to compel, “in the event that the Court were to grant the Motion to Compel, Plaintiff and Ms. Wing agree to suspend compliance by Defendant Goldman Sachs so long as the Early Mediation process is proceeding productively.” (Id.). Plaintiff requested until June 29, 2017, to file a response to the motion for judgment on pleadings, which the court allowed by order entered June 26, 2017.
3) On July 3, 2017, the parties filed a Third Status Report, noting ongoing mediation, and requesting extensions for briefing on the motion for judgment on pleadings and motion to to amend, which the court allowed by order entered July 5, 2017.
4) On July 24, 2017, the parties filed a Fourth Status Report, noting ongoing mediation and proposal made by plaintiff and defendant Wing that the Cone defendants and defendant Sellers had taken under advisement.
5) On August 7, 2017, the parties filed a Fifth Status Report, noting ongoing mediation, and requesting additional briefing extensions to “allow the parties to remain focused on their settlement discussions, ” (DE 142 at 2), which the court allowed on August 22, 2017.
6) On August 21, 2017, the parties filed a Sixth Status Report, noting ongoing mediation and requesting additional briefing extensions to “allow the parties to remain focused on their settlement discussions, ” (DE 143 at 2), which the court allowed on August 22, 2017.
7) On September 1, 2017, the parties filed a Seventh Status Report, noting ongoing mediation and requesting additional briefing extensions to “allow the parties to remain focused on their settlement discussions, ” (DE 150 at 2), which the court allowed on September 6, 2017.
8) On September 18, 2017, the parties filed an Eighth Status Report, noting ongoing mediation and requesting additional briefing extensions to “allow the parties to remain focused on their settlement discussions, ” (DE 152 at 2), which the court allowed on September 19, 2017.
9) On October 16, 2017, the parties filed a Ninth Status Report, noting the parties no longer wished to continue mediation, requesting resumption of briefing on the motion for partial judgment on the pleadings and motion to amend, and noting that the motion to compel discovery is fully briefed.

         On October 23, 2017, defendant Sellers filed the instant motion to dismiss for lack of jurisdiction defendant Wing's crossclaims for annulment, on the basis that such crossclaims are subject to a domestic relations exception to the court's subject matter jurisdiction.

         The court directed the parties to file scheduling plans on or before November 22, 2017, for the court's consideration for entry of case management order. The parties filed two separate Rule 26(f) reports on November 22, 2017, both of which requested a stay of discovery pending the court's resolution of the instant motions. Briefing concluded November 27, 2017, and the instant motions remaining for submittal were submitted on November 30, 2017.

         SUMMARY OF ALLEGED FACTS

         The facts alleged in the proposed amended complaint may be summarized as follows.

         Decedent, a citizen and resident of Wake County, North Carolina, died at the age of 74 on May 11, 2015 . Decedent's adult children are plaintiff, Cone, and Wing. Defendant Cone's spouse is defendant Toby Cone, and her children are defendants Gillian Falls Cone and K.L.C. Plaintiff is a citizen and resident of Summit, New Jersey, and proposed plaintiffs M.E.F., L.C.F., and J.B.F., are his minor children (collectively “plaintiff's minor children”).

         Throughout their lives and continuing until 2013, Decedent maintained a close, loving relationship with Falls III and Falls III's minor children. For decades until about 2013, Decedent continuously employed the services of and relied upon the advice of Hine to handle all aspects of his estate planning. Throughout Hine's representation of Decedent, Decedent's clear intention, as evidenced through contemporaneous documents, was to leave the bulk of his estate to his children, including plaintiff.

         Decedent established in 2002 a qualified personal residence trust, which provided that upon expiration of a ten-year term, the trust property, including a house in Morehead City, North Carolina (the “Morehead City house”) that Decedent used as his personal residence, would pass to plaintiff, outright and free of trust. In 2005, anticipating that title to the Morehead City house would pass to plaintiff August 30, 2012, plaintiff and Decedent executed a lease (the “Lease”), subject of the instant declaratory judgment claim to enforce the Lease, whereby Decedent (as tenant) agreed to rent the Morehead City house from plaintiff (as landlord) starting August 30, 2012, for a one-year term, with option to renew fifteen years thereafter, with monthly rent paid in “a monthly sum mutually agreed between [plaintiff] and [Decedent], ” or if not agreed then to be determined by a qualified appraiser. (DE 129-1 at 2).

         Decedent consulted with Hine in or around 2007 and executed a last will and testament prepared by Hine that made clear his intentions that (i) each of his grandchildren would receive a pre-death tax bequest of One Million Dollars ($1, 000, 000) to be held in trust for the benefit of the grandchild; and (ii) Falls III was to be the largest beneficiary of Decedent's estate.

         Decedent began a relationship with Sellers in or around 2008. In or around August 2011, without explanation or notice to Hine, Decedent engaged Walter Brodie Burwell, Jr., Esq. (“Burwell”) to change his estate planning documents. According to plaintiff, Sellers convinced Decedent to retain Burwell, with whom she had a pre-existing attorney-client relationship, as part of her plan to influence Decedent to change his estate planning documents to include her as a beneficiary of Decedent's estate. On or about August 4, 2011, Decedent executed the Ralph Lane Falls Revocable Declaration of Trust (the “Revocable Trust”) prepared by Burwell. The Revocable Trust was the primary instrument that provided how Decedent's assets would be distributed upon his death. Decedent transferred most of his real and personal property to the Revocable Trust during his lifetime. The Revocable Trust made clear Decedent's intentions that (i) Falls III, Falls III's minor children, Wing, and Cone's minor children were to be the only beneficiaries of Decedent's estate; and (ii) Sellers and Cone were to be excluded as beneficiaries of the estate.

         Decedent was diagnosed with bipolar disorder in 1981, which was treated with medication under the care of Dr. Richard Weisler (“Dr. Weisler”) until the time of his death. In addition to his mental health issues, Decedent had an extensive history of alcohol abuse from 1960 to 1993. Decedent began experiencing a series of health related issues during 2012 and was first diagnosed with meningioma, benign brain tumors, in or around September 2012.

         Decedent again consulted extensively with Hine, his longtime estate planning attorney, about his estate plan over a period of six months beginning in or around March 2012 and continuing through September 2012. After many months of consultation, Decedent executed a last will and testament on September 27, 2012 that had been prepared by Hine and made clear Decedent's intentions that (i) Decedent's children and grandchildren were to be the only beneficiaries of his estate; and (ii) Sellers was not to be a beneficiary of Decedent's estate. Upon further information and belief, Decedent named Sellers as executrix of his estate in order that she would receive only a commission for administering his estate and would not otherwise or share as a beneficiary in Decedent's estate.

         On September 27, 2012, Decedent executed a “General Durable Power of Attorney Including Health Care Power of Attorney, ” (Prop. Am. Compl. ¶ 54; DE 130-1 at 1), prepared by Hine that designated Falls III as his attorney-in-fact and health care agent. On the same date, Decedent executed a “Health Care Power of Attorney” designating Sellers as his “Health Care Agent.” (Id.; DE 130-1 at 11).

         Decedent underwent surgery for removal of three brain tumors in October 2012, which resulted in complications with his bipolar disorder and the subsequent readmission of Decedent to Duke University Hospital, where he remained through December 2012.

         In the time period after August 4, 2011 to Decedent's death, Decedent executed certain amendments to the Revocable Trust that disinherited Falls III and Falls III's minor children that were prepared by Burwell after consultation with Sellers and Cone (collectively referred to as “Trust Amendments”).[1] According to plaintiff, Decedent lacked capacity to execute the Trust Amendments, which allegedly were the product of Sellers, Cone, and other persons acting in concert with or conspiring with Sellers and Cone to manipulate, coerce, and unduly influence Decedent.

         On January 7, 2013, Decedent also executed a General Power of Attorney designating Sellers as his attorney-in-fact, which was prepared by Burwell, who notarized the signature of Decedent. Decedent experienced further health issues in 2013 which required multiple surgeries, including an ileostomy, repair of multiple hernias, and an emergency splenectomy. In 2013, Decedent relapsed and began drinking alcohol heavily. According to plaintiff, this period of heavy drinking began in June 2013 and ...


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