This blog, written by Thomas E. Rutledge, focuses primarily on business entity law in Kentucky. Postings on contract law, contractual and statutory construction, and the entity law of other jurisdictions appear as well. There may as well be some random discussions of classical, medieval and renaissance history.
Monday, July 28, 2014
Western District Considers Citizenship of a Donative Trust; Restricts Citizenship to that of the Trustees
District Considers Citizenship of a Donative Trust;
Citizenship to that of the Trustees
In a recent decision, the Judge Russell of the Western
District considered how to assess, for purposes of diversity jurisdiction, the
citizenship of a donative trust.He determined
that only the citizenship of the trustee, and not as well the citizenship of
the trusts’ beneficiaries, would be pertinent.Watkins v. Trust Under Will of
William Marshall Bullitt, Civil Act. No. 3:13-CV-01113-TBR, 2014 WL 2981016
(W.D. Ky. July 1, 2014).
a beneficiary of the Bullitt Trust, brought suit on a number of grounds including
breach of fiduciary duty andagainst PNC
Bank, the Trust’s trustee. PNC removed to federal court, and Watkins sought a
remand, arguing that there should be attributed to the trust the citizenship of
its Kentucky domiciled beneficiaries.Were that done diversity would be lacking.PNC argued that only the citizenship of the
trustee should be considered in determining the trust’s citizenship.
Court began by reviewing the competing rulings of Carden v. Arkoma Associates, 494 US 185 (1990) (citizenship of an
unincorporated association determined by reference to the citizenship of all of
the members therein) and Navarro Savings
Association v. Lee, 446 US 458 (1980) (in suit brought by trustees in their
individual capacities, only the citizenship of the trustees would be relevant in
determining citizenship) and noted that the subject trust was a traditional
donative (and not a business trust).From there Judge Russell determined that as the Bullitt Trusts lacks independence
but is “dependent upon PNC to own and manage its property for the benefit of
the beneficiaries,” only the citizenship of the trustees would be relevant.
holding is consistent with certain rulings of other courts while it is at the
same time in opposition of other rulings – it does not appear that a majority
rule has yet emerged.Reviews of those
other rules can be found HERE and HERE.