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Federal Appellate Court Reverses District Court Ruling in Light of New Supreme Court Case

Yueh-Lan Wang v. New Mighty U.S. Trust, et al.
No. 1:10-cv-01743 (United States Court of Appeals for the Columbia, December 9, 2016)

by Marie Claire Langlois, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Available at: https://www.cadc.uscourts.gov/internet/opinions.nsf/
FF60C0475C3C0ACE852580840057C8BE/$file/12-7038.pdf

Ms. Yueh-Lan Wang married Mr. Yung-Ching Wang in 1935. Mr. Wang acquired substantial wealth during his lifetime, and before his death, transferred a significant amount of that wealth into the New Mighty U.S. Trust (“New Mighty”), allegedly to reduce Ms. Wang’s share of the marital estate. In addition, to being a wealthy man, Mr. Wang had at least two extra-marital relationships. In 2008, a child of one of these affairs, Winston, who Ms. Wang had raised, sued New Mighty, in order to recover Ms. Wang’s rightful share of the estate.

In 2011, defendants moved to dismiss the complaint on various claims, including a lack of diversity. Ms. Wang was a resident of Taiwan, and the district court found that through its beneficiaries, New Mighty was a citizen of Delaware, the District of Columbia, and the British Virgin Islands.

Congress has granted federal district courts jurisdiction over controversies where the amount in controversy is over $75,000 and where all adverse parties are completely diverse. When both a plaintiff and a defendant share foreign citizenship, as in this case, complete diversity does not exist. The district court dismissed the complaint.

After filing a motion for reconsideration, which was denied, Winston, on behalf of Ms. Wang, appealed the district court decision. While the appeal was pending, the Supreme Court decided Americold Realty Trust v. ConAgra Foods, Inc. In Americold, several corporations brought suit against a real estate investment trust (REIT) created under the laws of Maryland. The issue of jurisdiction was raised sua sponte upon appeal, and that issue made it all the way to the Supreme Court.

Ultimately, the Supreme Court determined that under Maryland law, an REIT’s citizenship was determined by the citizenship of its shareholders, but the Court took the opportunity to clarify some of its previous holdings regarding the citizenship of trusts. The Court said:

“Many States [] have applied the ‘trust’ label to a variety of unincorporated entities that have little in common with [a traditional trust.] Maryland, for example, treats [an REIT] as a ‘separate legal entity’ that itself can sue or be sued. So long as such an entity is unincorporated. . .it possesses the citizenship of all its members.” Americold, 16 S. Ct. 1012, 1016 (2016).

In comparison, the Court clarified that a traditional trust is not considered a distinct legal entity, but instead a “fiduciary relationship” between multiple people. This relationship is not such a being that it can hauled into court, and for purposes of diversity, the citizenship of its trustee[s] must be applied. Id.

While the appellate court in Wang acknowledged the possibility of varying interpretations of Americold, the court found instructive the Supreme Court’s reliance on the trust’s entity-status. The court concluded that a “traditional trust” is a trust that “lacks juridical person status,” and determination of whether a trust retains juridical person status can be found in the laws under which it was formed. New Mighty, formed under Title 19, chapter 13 of the D.C. Code cannot sue or be sued, and therefore, constituted a traditional trust and not a juridical person. Because New Mighty’s trustee was a citizen of only Virginia and the District of Columbia, and not a foreign citizen, diversity jurisdiction existed.


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