Riggs v. Peschong 06-CV-366-JD 10/02/08 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Beniamin C. Riggs, Jr. d/b/a Resource Management Company
v. Civil No. 06-CV-366-JD Opinion No. 2008 DNH 184
Janet Peschong. Personal Representative for the Estate of Frank Gregory
O R D E R
Benjamin C. Riggs, proceeding pro se, moves to compel Janet
Peschong to direct her attorney in a probate proceeding in
Oklahoma, Douglas C. Gould, to transfer all funds he received
from Frank Gregory, which he is holding in his client trust
account, to the account opened by the court for this case. In
support of his motion, Riggs accuses Gould of operating under a
conflict of interest and accuses others, associated with
Gregory's estate, of misconduct. Peschong objects, contending
that when Gregory died, the escrow funds held by Gould became
property of Gregory's estate which is under the jurisdiction of
the probate court in Oklahoma.
Background
Riggs brought suit on September 1, 2006, in Carroll County (New Hampshire) Superior Court, alleging claims against Frank
Gregory that arose from their dealings in which Riggs, operating
as Resource Management Company, advanced money to Gregory in
exchange for agreed payments from Gregory's expected attorneys'
fees earned in "Fen-Phen" litigation. Gregory then removed the
case to this court, based on diversity jurisdiction. Riggs moved
for a preliminary injunction to prevent Gregory from using the
attorneys' fees he received, which was denied because Riggs could
not show a likelihood of irreparable harm.
Several months later, Riggs moved for a preliminary
injunction and an attachment. Riggs sought an order prohibiting
Gregory from using or disposing of any funds he received as legal
fees from the Fen-Phen cases until he deposited the amount
Riggs's claimed in this suit with the court or into a trust
account held by his New Hampshire counsel. Riggs also sought an
attachment against Gregory's property in Oklahoma.
The magistrate judge held a hearing during which he
explained to Riggs that this court cannot attach property that is
outside of its jurisdiction. The magistrate also noted that
Gregory had agreed to transfer money from his personal trust
account to his counsel's trust account. Based on those
circumstances, the motion was denied. Gregory's counsel later
withdrew, and Gregory filed an appearance to proceed pro se. A
2 few months later, Douglas Gould filed an appearance on Gregory's
behalf.
In response to Riggs's motion for payment of fees held by a
law firm associated with Gregory in the Fen-Phen cases, Petroff &
Associates, the court ordered the parties "to provide Petroff a
directive and agreement to place the funds in escrow with the
Clerk of this Court to be paid out in accordance with the
judgment of this Court." R & R (dkt. no. 62), approved on June
11, 2007 (dkt no. 77). The docket shows that the court received
$15,689.88 on June 29, 2007.
On September 5, 2007, Gregory's counsel filed a letter
explaining that Gregory had died. The court construed the letter
as a suggestion of the defendant's death, and the case was then
stayed to permit substitution of a representative of the estate
for the decedent. On January 8, 2008, Janet Peschong, as
Administratrix of the Estate of Frank Gregory, was substituted as
the defendant. Counsel filed a notice of appearance on her
An estate proceeding was initiated in probate court in
Oklahoma, In the Matter of the Estate of Frank Gregory. Case. No.
PB-2007-1049 (District Court, Okla. County, Okla. Jan 3, 2008).
Gould represents Peschong in the probate proceeding. On March
10, 2008, Gould filed a claim in the probate proceeding for
3 payment of $6, 695.74 for attorneys'’ fees owed from his
representation of Gregory in the case pending here. Prior to
filing his claim, Gould had been paid $5,000 toward the amount
Gregory owed him. Riggs also filed a claim and is represented by
counsel in the probate proceeding in Oklahoma. Riggs and Gould
have raised the issue of Riggs's claim to Gregory's funds held in
Gould's client trust account in the probate proceeding, although
the disposition of that issue, if any, has not been reported
here.
Discussion
Riggs seeks an order to compel Peschong to direct Gould to
deposit Gregory's funds that are held in Gould's client trust
account into the court's escrow account. Peschong objects to the
motion on the ground that Gregory's funds that are held in
Gould's client trust account are part of Gregory's estate. She
contends that the "probate exception" to this court's
jurisdiction precludes the relief Riggs seeks.
The jurisdiction of federal courts is limited by the
"'probate exception.'" Marshall v. Marshall. 547 U.S. 293, 308
(2006). Under that exception, federal courts will not interfere
with the administration of an estate and are precluded "from
endeavoring to dispose of property that is in the custody of a
4 state probate court." Id. at 311. Despite the exception,
federal courts retain the power to adjudicate the rights of
creditors and others to the decedent's estate. Id.
Riggs asks the court to take custody of Gregory's funds held
in Gould's client trust account by ordering Peschong to direct
Gould to deposit the funds into escrow with the court.1 Peschong
contends that those funds are part of Gregory's estate and are
within the jurisdiction of the probate court.2 Riggs argues that
the funds are not part of Gregory's estate under Oklahoma law,
based on Wilson v. Kane. 852 P.2d 717 (1993).
In Wilson v. Kane, the Oklahoma Supreme Court considered
whether a probate court's proceedings had preclusive effect to
bar claims made by Wilson against the personal representative of
her uncle's estate, Kane. Id. at 719. Wilson's uncle bought
certificates of deposit payable to Wilson upon his death, but
Kane cashed the certificates and deposited the proceeds into the
estate. Id. The probate court ruled that the certificates of
1Riggs does not ask for an order to compel Gould to deposit the disputed funds into escrow with the court. He acknowledges that Gould is no longer appearing in this case and recognizes that Gould and the disputed funds are in Oklahoma, not New Hampshire.
2Peschong merely cites the Oklahoma statute pertaining to probate procedures to show that the disputed funds are part of Gregory's estate.
5 deposit were Wilson's property, not property of the estate, and
ordered the proceeds to be paid to her. Id. at 719-20.
Wilson brought a claim of "conversion of nonprobate assets
by mismanagement" against Kane arising from his treatment of the
certificates of deposit. Id. at 720-21. Kane argued that res
judicata barred Wilson's claims because she could have, but did
not, raise the conversion claim in the probate proceeding. Id.
The supreme court ruled that because Wilson's claim was for
conversion of her personal property, not probate assets, her
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Riggs v. Peschong 06-CV-366-JD 10/02/08 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Beniamin C. Riggs, Jr. d/b/a Resource Management Company
v. Civil No. 06-CV-366-JD Opinion No. 2008 DNH 184
Janet Peschong. Personal Representative for the Estate of Frank Gregory
O R D E R
Benjamin C. Riggs, proceeding pro se, moves to compel Janet
Peschong to direct her attorney in a probate proceeding in
Oklahoma, Douglas C. Gould, to transfer all funds he received
from Frank Gregory, which he is holding in his client trust
account, to the account opened by the court for this case. In
support of his motion, Riggs accuses Gould of operating under a
conflict of interest and accuses others, associated with
Gregory's estate, of misconduct. Peschong objects, contending
that when Gregory died, the escrow funds held by Gould became
property of Gregory's estate which is under the jurisdiction of
the probate court in Oklahoma.
Background
Riggs brought suit on September 1, 2006, in Carroll County (New Hampshire) Superior Court, alleging claims against Frank
Gregory that arose from their dealings in which Riggs, operating
as Resource Management Company, advanced money to Gregory in
exchange for agreed payments from Gregory's expected attorneys'
fees earned in "Fen-Phen" litigation. Gregory then removed the
case to this court, based on diversity jurisdiction. Riggs moved
for a preliminary injunction to prevent Gregory from using the
attorneys' fees he received, which was denied because Riggs could
not show a likelihood of irreparable harm.
Several months later, Riggs moved for a preliminary
injunction and an attachment. Riggs sought an order prohibiting
Gregory from using or disposing of any funds he received as legal
fees from the Fen-Phen cases until he deposited the amount
Riggs's claimed in this suit with the court or into a trust
account held by his New Hampshire counsel. Riggs also sought an
attachment against Gregory's property in Oklahoma.
The magistrate judge held a hearing during which he
explained to Riggs that this court cannot attach property that is
outside of its jurisdiction. The magistrate also noted that
Gregory had agreed to transfer money from his personal trust
account to his counsel's trust account. Based on those
circumstances, the motion was denied. Gregory's counsel later
withdrew, and Gregory filed an appearance to proceed pro se. A
2 few months later, Douglas Gould filed an appearance on Gregory's
behalf.
In response to Riggs's motion for payment of fees held by a
law firm associated with Gregory in the Fen-Phen cases, Petroff &
Associates, the court ordered the parties "to provide Petroff a
directive and agreement to place the funds in escrow with the
Clerk of this Court to be paid out in accordance with the
judgment of this Court." R & R (dkt. no. 62), approved on June
11, 2007 (dkt no. 77). The docket shows that the court received
$15,689.88 on June 29, 2007.
On September 5, 2007, Gregory's counsel filed a letter
explaining that Gregory had died. The court construed the letter
as a suggestion of the defendant's death, and the case was then
stayed to permit substitution of a representative of the estate
for the decedent. On January 8, 2008, Janet Peschong, as
Administratrix of the Estate of Frank Gregory, was substituted as
the defendant. Counsel filed a notice of appearance on her
An estate proceeding was initiated in probate court in
Oklahoma, In the Matter of the Estate of Frank Gregory. Case. No.
PB-2007-1049 (District Court, Okla. County, Okla. Jan 3, 2008).
Gould represents Peschong in the probate proceeding. On March
10, 2008, Gould filed a claim in the probate proceeding for
3 payment of $6, 695.74 for attorneys'’ fees owed from his
representation of Gregory in the case pending here. Prior to
filing his claim, Gould had been paid $5,000 toward the amount
Gregory owed him. Riggs also filed a claim and is represented by
counsel in the probate proceeding in Oklahoma. Riggs and Gould
have raised the issue of Riggs's claim to Gregory's funds held in
Gould's client trust account in the probate proceeding, although
the disposition of that issue, if any, has not been reported
here.
Discussion
Riggs seeks an order to compel Peschong to direct Gould to
deposit Gregory's funds that are held in Gould's client trust
account into the court's escrow account. Peschong objects to the
motion on the ground that Gregory's funds that are held in
Gould's client trust account are part of Gregory's estate. She
contends that the "probate exception" to this court's
jurisdiction precludes the relief Riggs seeks.
The jurisdiction of federal courts is limited by the
"'probate exception.'" Marshall v. Marshall. 547 U.S. 293, 308
(2006). Under that exception, federal courts will not interfere
with the administration of an estate and are precluded "from
endeavoring to dispose of property that is in the custody of a
4 state probate court." Id. at 311. Despite the exception,
federal courts retain the power to adjudicate the rights of
creditors and others to the decedent's estate. Id.
Riggs asks the court to take custody of Gregory's funds held
in Gould's client trust account by ordering Peschong to direct
Gould to deposit the funds into escrow with the court.1 Peschong
contends that those funds are part of Gregory's estate and are
within the jurisdiction of the probate court.2 Riggs argues that
the funds are not part of Gregory's estate under Oklahoma law,
based on Wilson v. Kane. 852 P.2d 717 (1993).
In Wilson v. Kane, the Oklahoma Supreme Court considered
whether a probate court's proceedings had preclusive effect to
bar claims made by Wilson against the personal representative of
her uncle's estate, Kane. Id. at 719. Wilson's uncle bought
certificates of deposit payable to Wilson upon his death, but
Kane cashed the certificates and deposited the proceeds into the
estate. Id. The probate court ruled that the certificates of
1Riggs does not ask for an order to compel Gould to deposit the disputed funds into escrow with the court. He acknowledges that Gould is no longer appearing in this case and recognizes that Gould and the disputed funds are in Oklahoma, not New Hampshire.
2Peschong merely cites the Oklahoma statute pertaining to probate procedures to show that the disputed funds are part of Gregory's estate.
5 deposit were Wilson's property, not property of the estate, and
ordered the proceeds to be paid to her. Id. at 719-20.
Wilson brought a claim of "conversion of nonprobate assets
by mismanagement" against Kane arising from his treatment of the
certificates of deposit. Id. at 720-21. Kane argued that res
judicata barred Wilson's claims because she could have, but did
not, raise the conversion claim in the probate proceeding. Id.
The supreme court ruled that because Wilson's claim was for
conversion of her personal property, not probate assets, her
claim was not within the probate court's limited jurisdiction.
Id. at 722. As a result, res judicata did not bar her claim.
Id.
Wilson v. Kane is not applicable to the circumstances of
this case. Unlike the certificates of deposit at issue there,
which became Wilson's property upon the death of her uncle, the
disputed funds here were not Riggs's property at the time of
Gregory's death.3 Riggs has not shown that Gregory's funds,
which were held in Gould's client trust account, did not become
part of Gregory's estate when Gregory died.
3Although Riggs states that an estate does not include secured interests and tax liens, he cites no authority to support his assertion.
6 Based on the record presented^ this court lacks
jurisdiction^ under the probate exception^ to interfere with the
administration of the estate in Oklahoma. In the absence of
jurisdiction over the funds in Gould's accountA the court cannot
compel Peschong to direct Gould to have the disputed funds
deposited here.
Conclusion
For the foregoing reasons, the plaintiff's motion to compel
(document no. 163) is denied.
SO ORDERED.
Joseph A. DiClerico, Jr. United States District Judge
October 2, 2008
cc: Peter G. Callaghan, Esquire Douglas N. Gould, Esquire Resource Management Company, pro se