Macken, Carolyn v. Jensen, Erik , 333 F.3d 797 ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-4345
CAROLYN MACKEN, as next friend of her children
Shannon M. Macken and Sean M. Macken,
Plaintiff-Appellant,
v.
ERIK JENSEN, individually and as trustee of the
Richard J. Macken, Jr., Trust,
Defendant-Appellee.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 02 C 6152—Suzanne B. Conlon, Judge.
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ARGUED MAY 30, 2003—DECIDED JUNE 24, 2003
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Before FLAUM, Chief Judge, and EASTERBROOK and
RIPPLE, Circuit Judges.
EASTERBROOK, Circuit Judge. To provide for his heirs,
Richard Macken established and funded a trust. Richard
had complete discretion over the disposition of the trust’s
assets and unbridled power to change the trust’s terms.
After his death in 2001 the trust’s plan took effect. Benefi-
ciaries of the trust include Shannon and Sean Macken,
Richard’s minor children by Carolyn Macken, his former
wife. Each of Richard’s children becomes entitled to some
2 No. 02-4345
of the principal at age 25; the trustee has discretion to
distribute interest and principal earlier “for the health,
maintenance in reasonable comfort, education (includ-
ing postgraduate) and best interests of the child”.
Article IV §7 requires the trustee to “render an ac-
count of its receipts and disbursements at least annually
to each adult income beneficiary.” Shortly after Richard’s
death, Carolyn asked the trustee for an accounting, even
though Shannon and Sean are minors. When the trustee
declined, Carolyn filed this suit on their behalf under the
diversity jurisdiction, 28 U.S.C. §1332, demanding an
accounting and unredacted copies of the trust documents.
The complaint alleged that all plaintiffs are citizens of
Illinois and that Erik Jensen, who succeeded Richard as
trustee, is a “resident” of Indiana. That allegation is
defective—citizenship may differ from residence, see
Denlinger v. Brennan, 87 F.3d 214 (7th Cir. 1996)—but, as
Jensen concedes that he is a citizen of Indiana, the
error does not require dismissal.
There are two other potential problems with subject-
matter jurisdiction. One is the nonstatutory, but estab-
lished, exception for the administration of decedents’
estates. See Markham v. Allen, 326 U.S. 490, 494 (1946);
Dragan v. Miller, 679 F.2d 712 (7th Cir. 1982). Richard’s
trust appears to be a will substitute. The assets he con-
trolled through the trust at the time of his death by-
passed probate, and it is unclear whether he even had a
will. Federal taxing authorities treated the trust assets
as part of Richard’s holdings, and thus as subject to
the estate tax. We held in Storm v. Storm, No. 02-3078
(7th Cir. May 13, 2003), that the probate exception ap-
plies to disputes about trusts used in lieu of wills, if
the parties present an issue that would be resolved in
probate had a will been used, or the issue is ancillary to
such a dispute. Compare Hamilton v. Nielsen, 678 F.2d
No. 02-4345 3
709 (7th Cir. 1982), with Georges v. Glick, 856 F.2d 971 (7th
Cir. 1988).
The second problem is the amount in controversy, which
must exceed $75,000 for a case to proceed in federal court.
Carolyn does not contend that the trust has failed to
honor any financial obligation to Shannon or Sean. In-
stead she wants documents that will help her determine
whether the principal is being prudently managed and
the income applied according to the trust’s terms. The
complaint did not make any effort to estimate the value
of this information, contending instead that jurisdiction is
automatic because the trust corpus exceeds $75,000.
The district judge rejected that proposition and dismissed
the suit for want of subject-matter jurisdiction. Because
we agree with the district judge’s conclusion, we need
not decide whether the probate exception to the diver-
sity jurisdiction independently precludes the use of §1332.
Carolyn estimates (though without unredacted copies
of the documents she cannot be sure) that the value of
Shannon’s and Sean’s interests (taken jointly) is about
$300,000. That comfortably exceeds $75,000, even when
each child’s interest is considered separately—as it must be.
See Snyder v. Harris, 394 U.S. 332 (1969); Clark v. Paul
Gray, Inc., 306 U.S. 583 (1939). But there is no dispute
about the value of the assets held in trust or either child’s
entitlement, so that sum is no more “in controversy” than
the value of a Rolls Royce would be relevant to a dispute
about the price of new shock absorbers. See Gardynski-
Leschuck v. Ford Motor Co., 142 F.3d 955 (7th Cir. 1998); cf.
Caudle v. American Arbitration Association, 230 F.3d 920(7th Cir. 2000). Shannon and Sean seek equitable relief—a
complete copy of the trust plus an accounting of its assets
and cash flows—rather than damages. In a suit for injunc-
tive relief, “the amount in controversy is measured by the
value of the object of the litigation.” Hunt v. Washington
State Apple Advertising Commission, 432 U.S. 333, 347
4 No. 02-4345
(1977). And, at least in this circuit, the object may be
valued from either perspective—what the plaintiff stands to
gain, or what it would cost the defendant to meet the
plaintiff’s demand. See In re Brand Name Prescription
Drugs Antitrust Litigation, 123 F.3d 599, 609-10
(7th Cir. 1997); Uhl v. Thoroughbred Technology &
Telecommunications, Inc., 309 F.3d 978, 983-84 (7th
Cir. 2002). The cost to the trustee of turning over an
unexpurgated copy is negligible, and Carolyn does not
contend that an audit would cost the trust more than
$75,000 to conduct. Indeed, after the district court dis-
missed the complaint, the trustee furnished Carolyn with
a copy of the accounting that had been performed under
Article IV §7. Any debate about the accounting is moot.
So what could be the value, from the minor children’s
perspective, of obtaining the full text of the trust instru-
ment and all amendments? It is not as if the trustee
were hiding information that ought to be disclosed be-
fore any litigation occurs and would, if known, reveal
whether a substantive controversy exceeds the jurisdic-
tional amount. Whether Carolyn is entitled to see the
complete trust documents is the very matter in issue, so
the question “what is the value of this secret?” cannot
be elided. Their lawyer concedes that he hasn’t a clue
what the omitted information, which concerns other ben-
eficiaries’ entitlements (and may affect their privacy),
may be worth to Shannon and Sean. The potential value
would lie in monitoring the trustee to prevent improper
distribution of income and principal to beneficiaries
other than the children. Yet only a grave error by the
trustee in determining other beneficiaries’ entitlements
could cost either Shannon or Sean $75,000, and Carolyn
concedes that she has no reason to suspect that the trust-
ee has made, or will in the future make, any error, let
alone a whopper. So how could $75,000 per child now be
in controversy?
No. 02-4345 5
Counsel’s response invokes the principle that a case
may be dismissed only if the court is certain that the
plaintiff cannot recover the jurisdictional amount. St.
Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S.
283, 289 (1938). See also Pratt Central Park Limited
Partnership v. Dames & Moore, Inc., 60 F.3d 350 (7th Cir.
1995). This is the rule for damages actions, not for equi-
table actions; it does not eliminate the need to place a
realistic value on injunctive relief. Moreover, the rule of
St. Paul supposes that the plaintiff has first made a good
faith effort to estimate the stakes. No one is entitled to
file in federal court and throw on the defendant (and
the judicial system) the entire burden of estimation plus
the risk of uncertainty in that process. To the contrary,
Fed. R. Civ. P. 11(b)(3) requires the plaintiff (personally
or through counsel) to establish evidentiary support, or
at least a likelihood of obtaining that support, before fil-
ing suit in federal court. What Carolyn’s lawyer con-
tends—that a plaintiff may file a federal suit with no
basis for an assertion that the stakes exceed $75,000, and
then use the discovery process to have the merits re-
solved ahead of any jurisdictional inquiry (recall that
this dispute is about access to potentially discoverable
information)—does nothing other than confess a viola-
tion of Rule 11.
When the monetary value of a controversy cannot be
estimated, litigation must commence in state court. If
evidence developed in state litigation shows that the
value exceeds the jurisdictional minimum, then the defen-
dant may remove the suit under 28 U.S.C. §§ 1441(a) and
1446(b). A plaintiff may be able to move to federal court
by dismissal and refiling if time remains in the statute
of limitations. Not until it becomes evident that the infor-
mation in these trust instruments is worth more than
$75,000 should anyone knock on the federal court’s door.
AFFIRMED
6 No. 02-4345
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-24-03