Western District Considers Citizenship of a Donative Trust; Restricts Citizenship to that of the Trustees

Western District Considers Citizenship of a Donative Trust;

Restricts 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).

 

            Watkins, a beneficiary of the Bullitt Trust, brought suit on a number of grounds including breach of fiduciary duty and  against 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.

 

            The 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.

 

            This 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.