Woitovich v. Schoenfeld
- Jesse Furman
- 1:22-cv-01742
- U.S. District Court · Southern District of New York
- 12
In Woitovich v. Schoenfeld, Judge Furman granted in part and denied in part dismissal, leaving two damages claims.
Rhonda Woitovich’s claims concerning distribution, accounting, control of, and damages tied to the trust were dismissed, while her personal-damages claims for alleged fiduciary-duty breaches and trust mismanagement—Counts III and V—remained pending against Lydia Schoenfeld.
What happened
In Woitovich v. Schoenfeld, Rhonda Woitovich sued her maternal aunt, Lydia Schoenfeld, over assets in a trust created by Woitovich’s grandmother’s will. Woitovich claimed she was entitled to the trust’s assets and also sought damages for Schoenfeld’s alleged mismanagement and breach of duties.
The court held that the probate exception prevented it from deciding claims seeking distribution of, control over, or an accounting of the trust. It also held that two damages claims were really attempts to obtain the trust’s assets and were therefore barred. But claims seeking personal damages from Schoenfeld for allegedly poor investment decisions could proceed.
Judge Jesse M. Furman granted in part and denied in part Schoenfeld’s motion to dismiss. The court dismissed all claims except Counts III and V, allowed Schoenfeld to answer those remaining claims, and stated that the dismissed claims could be refiled in state court.
The detailed version
- Woitovich v. Schoenfeld · No. 1:22-cv-01742
- Jesse Furman
- Dec. 28, 2022
Background
Rhonda Woitovich sued Lydia Schoenfeld, her maternal aunt, concerning a credit shelter trust established in Ruth Schoenfeld’s will. Ruth was Schoenfeld’s mother and Woitovich’s grandmother. After the death of the trust’s lifetime beneficiary, Woitovich claimed that the will made her the trust’s sole residual beneficiary and that the trust should be distributed to her. Schoenfeld, a co-trustee, disputed that interpretation and refused to distribute the trust to Woitovich.
Woitovich’s operative complaint sought specific performance, a declaration that she was entitled to the trust, an accounting, damages for alleged breach of contract and fiduciary duties, damages for alleged mismanagement, and continuing federal-court monitoring of the trust. Schoenfeld moved to dismiss under Federal Rules of Civil Procedure 12(b)(1), which challenges the court’s subject-matter jurisdiction, and 12(b)(6), which challenges whether the complaint states a legally sufficient claim.
Probate Exception
The court explained that the probate exception is a court-created limit on federal jurisdiction. It generally prevents federal courts from probating or annulling a will, administering a decedent’s estate, or controlling property held by a state probate court. The court rejected Woitovich’s arguments that the exception could not apply to trusts or that it applied only when a state probate court had exclusive authority over the dispute.
The court concluded that the trust remained under the jurisdiction and control of the Nassau County Surrogate’s Court, even though that court had not taken action regarding the trust beyond appointing trustees. The court therefore applied the probate exception claim by claim.
Claims Barred by the Probate Exception
The court held that six claims were barred because they sought distribution from the trust, an accounting, construction or dissolution of the trust, or continuing federal-court supervision of the trust:
- Count I sought specific performance requiring distribution of the trust. - Count II sought a declaration that Woitovich was entitled to the entire trust. - Count VI sought an accounting of the trust’s assets. - Count VII sought construction and dissolution of the trust, with the assets going to Woitovich. - Count IX again sought to compel distribution of the trust. - Count X sought continuing federal-court monitoring of Schoenfeld’s management of the trust.
The court held that Count X directly asked the federal court to administer the trust. It held that the other five claims would require the federal court to control property in the custody of the state probate court.
The court also held that Counts IV and VIII, although framed as damages claims, were actually based on the claim that Schoenfeld was required to distribute the trust to Woitovich. Granting relief on those claims would require the federal court to determine Woitovich’s entitlement to the trust assets and exercise control over them. The probate exception therefore barred those claims as well.
Claims Allowed to Proceed
The court held that Counts III and V were not barred by the probate exception. Those counts sought personal damages from Schoenfeld for allegedly poor investment decisions that devalued the trust. Because Woitovich sought damages directly from Schoenfeld rather than control over or payment from the trust assets, the court treated these as personal claims that could proceed in federal court.
The court also rejected Schoenfeld’s alternative argument that New York’s rule concerning liability between co-trustees required dismissal of Counts III and V. The court held that the rule requires a fact-based inquiry and that the allegations, viewed in Woitovich’s favor at this stage, did not support dismissal. The court denied that argument without prejudice to renewal after the record was more fully developed.
Disposition
The court granted in part and denied in part Schoenfeld’s motion to dismiss. It dismissed all claims except Counts III and V. The court stated that dismissal under Rule 12(b)(1) was without prejudice and that Woitovich could refile the dismissed claims in state court. It denied leave to amend because the defects were jurisdictional and amendment would be futile. Schoenfeld was ordered to answer the operative complaint within fourteen days.
Read the full 12-page opinion on CourtListener, the free public archive maintained by the Free Law Project.