Evan W. Gray v. Chester L. Gray, III

2019 DNH 088

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Evan W. Gray

v. Civil No. 18-cv-522-JD Opinion No. 2019 DNH 088 Chester L. Gray, III

O R D E R

As discussed in the court’s order dated May 14, 2019, doc.

no. 54, this case involves disputes among Chester and Barbara

Gray’s three children, Skip, Scott, and Evan Gray.1 Evan brought

suit against Skip as executor of the CLG Estate; as sole trustee

of the CLG Trust; and as co-trustee of the BJG Trust. In his

Amended Complaint, Evan alleges that Chester, prior to his

death, breached his fiduciary duties while he was trustee of the

BJG Trust (Counts 1 and 2). Evan also alleges that Skip

breached his fiduciary duties as trustee of the CLG Trust (Count

3), and he seeks removal of Skip as co-trustee of the BJG Trust

based on alleged conflicts of interest (Count 4).

1 As in its previous orders, the court will refer to the principals in this case by their first names for clarity and succinctness. In his capacity as trustee of the BJG Trust, Skip filed

counterclaims (the “BJG Trust Counterclaims”).2 In Count I, Skip

seeks reimbursement of expenses, attorneys’ fees, and costs

under N.H. Revised Statutes Annotated (“RSA”) 564-B:7-709 and

RSA 564-B:10-1004. In Count II, Skip also seeks attorneys’

fees, costs, and expenses under Harkeem v. Adams, 117 N.H. 687

(1977), alleging that Evan brought his claims with knowledge

that they were “deficient, untimely, frivolous, or otherwise

brought in bad faith.” Doc. 37 ¶¶ 52-53. In Counts I and II,

Skip seeks reimbursement for himself and the BJG Trust from Evan

personally. Skip also seeks reimbursement for himself from the

BJG Trust assets.

Evan moves to dismiss the BJG Trust Counterclaims. Skip

objects.

Background and Standard of Review

The court provided the relevant background and standard of

review in its order dated May 14, 2019, addressing Evan’s motion

to dismiss the CLG Estate Counterclaims. Doc. 54.

2 Skip also filed counterclaims for indemnification and a declaratory judgment in his capacity as executor of the CLG Estate and trustee of the CLG Trust (the “CLG Estate Counterclaims”). This order addresses only doc. no. 42, which is Evan’s motion to dismiss the BJG Trust Counterclaims.

2 Discussion

Evan moves to dismiss the BJG Trust Counterclaims. In

support, he contends that the court lacks subject matter

jurisdiction over the counterclaims; that the counterclaims are

not “mature”; and that Skip must make a claim for attorneys’

fees through a motion under Federal Rule of Civil Procedure

54(d)(2). The court already discussed and rejected these

arguments in its order addressing the CLG Trust Counterclaims

(doc. no. 54). The court’s reasoning in doc. no. 54 rejecting

those arguments applies to Evan’s motion to dismiss the BJG

Trust Counterclaims.

In addition, Evan contends that Skip misuses the term

“indemnification” in the BJG Trust Counterclaims; that Skip

failed to plead facts sufficient to state claims for relief;

that Skip, in his capacity as trustee of the BJG Trust, cannot

assert counterclaims related to Counts 1 and 2 of Evan’s Amended

Complaint because he is not the real party in interest; and that

because Skip shares responsibility for the claims in the Amended

Complaint, the counterclaims are barred by the pari delicto

doctrine. Skip objects, arguing generally that the

counterclaims were properly brought and state cognizable claims

for relief.

3 A. “Indemnification”

Evan takes issue with Skip’s use of the word “indemnify” in

the counterclaims. He argues that the counterclaims seek only

attorneys’ fees, costs, and reimbursement for expenses, not

indemnification. Skip’s use of the word “indemnify” does not

warrant dismissal of the counterclaims.

As explained in the order on the CLG Estate Counterclaims,

RSA 564-B:7-709 and RSA 564-B:10-1004 support claims for

reimbursement of properly incurred expenses, attorneys’ fees,

and costs. Evan argues that Skip cannot show that he is

entitled to attorneys’ fees and costs under RSA 564-B:10-1004.

That argument is premature in a motion to dismiss, and Skip’s

pleading is adequate to give Evan notice of the claims alleged.

See Shelton v. Tamposi, 164 N.H. 490, 502-03 (2013) (indicating

that trial court should determine whether an award of attorneys’

fees is warranted under RSA 564-B:10-1004 after considering the

merits of the lawsuit).

B. Pleading of Facts Showing Entitlement to Relief

1. Count I (Reimbursement of Expenses)

Evan argues that Skip cannot obtain relief under RSA 564-

B:7-709, which allows a trustee to be reimbursed from trust

assets for properly incurred expenses, because Evan does not

have access to the BJG Trust assets. Evan, however, is a

4 trustee of the BJG Trust, and he is a proper defendant in that

capacity to the extent Skip seeks reimbursement from assets of

the BJG Trust under RSA 564-B:7-709. See Fed. R. Civ. P.

17(a)(1)(E). Evan also ignores RSA 564-B:10-1004, which

provides that costs, expenses, and reasonable attorneys’ fees

may be paid to any party from another party in a proceeding

involving the administration of a trust. In Count I, Skip

claims attorneys’ fees against Evan personally under RSA 564-

B:10-1004 in addition to claiming them from the BJG Trust.

Next, Evan argues that Skip cannot “properly” incur any

expenses as trustee of the BJG Trust. Evan contends that Skip

breached his fiduciary duties as trustee of the BJG Trust by

answering Skip’s third-party complaint and crossclaim against

himself; that Skip’s counsel has engaged in “excessive

overbilling and overzealous filings” that are “patently

unreasonable”; and that this legal dispute creates a conflict of

interest that prevents Skip from fulfilling his fiduciary

responsibilities.

Evan offers no authority in support of his contention that

Skip per se violated a fiduciary duty by filing and answering a

crossclaim against himself in different capacities, or that the

mere existence of an unresolved legal dispute between a trustee

and one of a trust’s beneficiaries means that the trustee

violated his fiduciary duties. Trustees are required to act in

5 the best interests of the trust’s beneficiaries and in

accordance with the terms and purposes of the trust, and that

includes trustees’ actions in bringing and defending lawsuits.

See RSA 564-B:8-801 (requiring trustees to administer trusts “in

accordance with” the trust terms and purposes, the

beneficiaries’ interests, and the New Hampshire Trust Code).

To the extent Evan relies on assertions and rhetoric

directed at opposing counsel to support his motion to dismiss,

they do nothing to advance his cause.3 See, e.g., doc. 42-1 at

4-9. The court expects all parties and counsel to refrain from

ad hominem rhetoric in advancing arguments. The court concludes

that none of Evan’s arguments warrant dismissal of Count I of

the BJG Trust Counterclaims.

2. Count II (Harkeem v. Adams)

In Count II, Skip alleges that he is entitled to costs and

expenses under Harkeem v. Adams because Counts 1, 2, and 4 of

Evan’s Amended Complaint are frivolous.4 Skip contends that

Evan also refers to the BJG Trust Counterclaims with 3

reference to counsel’s first name without any explanation for that unusual practice.

In Counts 1 and 2 of the Amended Complaint, Evan alleges 4

that Chester breached his fiduciary duties as trustee of the BJG Trust by failing to properly invest trust assets and by improperly distributing trust principal to himself. In Count 4, Evan alleges that the court should remove Skip as co-trustee of the BJG Trust because Skip failed to keep Evan reasonably

6 Count 1 of the Amended Complaint is frivolous because Chester

properly invested in municipal bonds in the BJG Trust as

permitted by Article 4.11 of the BJG Trust. Skip contends that

Count 2 of the Amended Complaint is frivolous because Article

2.3.A(4) of the BJG Trust permitted Chester an “unconditional

right to withdraw up to five percent” of the BJG Trust’s

principal balance each year, and Skip alleges that Chester

withdrew amounts below that sum. Skip alleges that Evan knew or

should have known about these facts.

In his motion to dismiss, Evan contends that Skip

misinterprets or mischaracterizes Articles 2.3.A(4) and 4.11 of

the BJG Trust and that his Amended Complaint and the facts show

or will show that his claims are not frivolous.5 Evan’s

arguments are premature. While Skip alleges that Chester’s

investments were proper and that Evan knew or should have known

that this was the case, Evan disputes this. Whether or not

informed of his actions as trustee, because he breached his fiduciary duties, and because he has conflicts of interest.

5 In Count II, Skip also alleged that, under the second paragraph of Article 4.3 of the BJG Trust, he cannot be liable as a successor trustee for the actions of a prior trustee. In his motion to dismiss, Evan asserts that Article 4.3 is irrelevant because he has not brought any claim against Skip himself for Chester’s actions as a predecessor trustee. The relevance of this article is yet to be determined and does not warrant dismissal at this point.

7 Evan’s claims are frivolous will ultimately depend on the

evidence.

a. Real Party in Interest

Evan argues that Skip cannot include allegations about the

frivolity of Counts 1 and 2 of the Amended Complaint in the BJG

Trust Counterclaims because Skip, in his capacity as trustee of

the BJG Trust, is not the real party in interest. Evan contends

that Counts 1 and 2 of the Amended Complaint raised claims

against the CLG Estate, through Skip in his capacity as executor

of the CLG Estate, not against Skip as trustee of the BJG Trust.

Because he is a trustee of the BJG Trust, Skip is a real

party in interest with respect to his counterclaims for

attorneys’ fees, costs, and expenses that he incurs as trustee

of the BJG Trust. See Fed. R. Civ. P. 17(a)(1); RSA 564-B:7-

709. Skip also brings claims against Evan, personally, for

expenses under RSA 564-B:10-1004. Therefore, Evan’s argument

that Skip is not the real party in interest as to these

counterclaims lacks any merit.6

Evan asks the court, alternatively, to strike ¶¶ 11-30 of 6

the BJG Trust Counterclaims as “immaterial and impertinent” under Federal Rule of Civil Procedure 12(f) and to strike ¶¶ 7, 10, and 52 as “scandalous”. Doc. 42-1 at 21. Evan provides no compelling justification for striking those paragraphs which contain assertions that are related to Counts I and II of the counterclaims.

8 Evan also contends that the BJG Trust or Skip in his

capacity as trustee of the BJG Trust cannot be held liable for

damages stemming from Counts 1 and 2 and the Amended Complaint,

which he brought only against the CLG Estate. Evan is incorrect

because the CLG Estate (through Skip), has given notice to Evan

that it will seek attorneys’ fees, costs, and other expenses

related to Counts 1 and 2 of the Amended Complaint from the BJG

Trust. Under Harkeem v. Adams, the BJG Trust can seek to pass

on those expenses to Evan personally based on the alleged

frivolity of the claims in the Amended Complaint.

b. Pari Delicto

Finally, Evan argues that the pari delicto doctrine should

bar the BJG Trust Counterclaims. Pari delicto “is an ‘ill-

defined group of doctrines that prevents courts from finding for

a plaintiff equally at fault as the defendant.” Tamposi v.

Denby, 974 F. Supp. 2d 51, 56 (D. Mass. 2013). Evan contends

that because he and Skip are at equal fault for this litigation,

Skip cannot prevail in his counterclaims for attorneys’ fees and

costs.

Courts will not rule on an affirmative defense in a motion

to dismiss when the facts underlying the defense have not been

established with certitude. Id. at 57-58 & n.8 (applying New

Hampshire law and explaining that “[s]ince facts concerning the

9 in pari [delicto] defense have not been established with

certitude, the motion to dismiss on this basis must be

denied.”). The facts underlying Evan’s “equal fault” defense

have not been established with certitude. Therefore, Evan has

not shown that the BJG Trust Counterclaims should be dismissed

because the parties are in pari delicto.

Conclusion

For the foregoing reasons, Evan’s motion to dismiss (doc.

no. 42) is denied.

SO ORDERED.

__________________________ Joseph A. DiClerico, Jr. United States District Judge

May 16, 2019

cc: Evan W. Gray, Adam M. Hamel, Esq. Ralph F. Holmes, Esq. Bradley M. Lown, Esq. Roy S. McCandless, Esq. Neil B. Nicholson, Esq. Andrea Jo Schweitzer, Esq.