Gerschel v. Bank of America , N.A.

Background

Marianne Gerschel sued Bank of America, N.A. concerning three trusts for which the Bank had served or currently served as trustee. The motions addressed only the 1950 Marianne Trust, created by Marianne’s grandfather in 1950. Marianne sought to remove the Bank as trustee and become the trust’s sole remaining trustee.

Under the trust instrument, Marianne was entitled to the trust’s income during her lifetime but not its principal. If she died without surviving children, the principal would be divided between the trustees of the 1950 Patrick Trust and the 1950 Laurent Trust. Those trusts were therefore contingent remainder beneficiaries. The Bank and Marianne were serving as co-trustees according to the complaint.

Marianne alleged that the Bank breached fiduciary duties by failing to turn over assets from two other trusts and was therefore unfit to continue as trustee. The Bank said it did not oppose resigning as trustee and transferring the 1950 Marianne Trust’s assets to Marianne with court approval.

Motions to Intervene

Trustees of the 1950 Patrick Trust—Mark Giannone and Patrick Gerschel—and trustees of the 1950 Laurent Trust—Philippe Gerschel, Alexander Gerschel, and Andre Gerschel—asked to intervene under Federal Rule of Civil Procedure 24. Intervention allows a nonparty with a legally protected interest to join an existing case when the case could impair that interest and the existing parties do not adequately protect it.

The court held that the motions were timely. It also held that the proposed intervenors had a sufficient interest because they were contingent beneficiaries of the trust principal and had a legitimate concern about whether that principal would be preserved if Marianne became the sole trustee. Their ability to participate would be impaired if the court resolved the trustee-removal request without allowing them to be heard.

The court further found that neither Marianne nor the Bank adequately represented the proposed intervenors’ interests. In particular, neither existing party sought to oppose Marianne’s becoming sole trustee or to require an uninterested corporate trustee to replace the Bank. The court therefore held that the proposed intervenors were entitled to intervene as of right under Rule 24(a).

Jurisdiction

The court considered whether Patrick Gerschel’s New York citizenship affected federal diversity jurisdiction because Marianne also was a New York citizen. The court concluded that Patrick could intervene without eliminating the court’s subject-matter jurisdiction. It relied on supplemental jurisdiction, which can allow a federal court to hear related matters involving additional parties. The court reasoned that the intervenors sought only to oppose the relief Marianne requested and were not asserting additional claims against the existing parties.

The court also explained that even if Patrick could not intervene, dismissal for failure to join a required party would not necessarily follow. Another trustee of the 1950 Patrick Trust, Giannone, could participate, and the other intervenors’ position would also affect Patrick’s interests. The court ultimately retained jurisdiction over Patrick and the other proposed intervenors.

Disposition

The court granted the proposed intervenors’ motions to intervene. The Clerk of Court was directed to terminate the motions at ECF Nos. 19 and 20. The court expressly did not decide whether the proposed intervenors would succeed in opposing Marianne’s requested relief; it decided only that they were entitled to participate and be heard.