Wine Education Council, Inc. v. San Pasqual Fiduciary Trust Company et al

NOTICE OF MOTION AND MOTION to Dismiss defendant Jane Rodgers and Memorandum of Points and Authorities in Suppor Thereof

C.D. Cal.September 14, 2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 GERALDINE A. WYLE (BAR NO. 89735) geraldine.wyle@ffslaw.com TODD M. LANDER (BAR NO. 173031) todd.lander@ffslaw.com FREEMAN, FREEMAN & SMILEY, LLP 1888 Century Park East, Suite 1900 Los Angeles, California 90067 Telephone: (310) 255-6100 Facsimile: (310) 255-6200 Attorneys for Defendant JANE RODGERS UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION WINE EDUCATION COUNCIL, INC., a Delaware corporation, Plaintiff, vs. SAN PASQUAL FIDUCIARY TRUST COMPANY, a California corporation; PETER HILF, an individual; and JANE RODGERS, an individual, Defendants. Case No. 2:17-cv-05879 DMG (JCx) DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF [Filed concurrently with Request for Judicial Notice; and [Proposed] Order] Judge: Hon. Dolly M. Gee Date: October 20, 2017 Time: 9:30 a.m. Crtrm.: 8C, 8th Floor Action Filed: August 8, 2017 PLEASE TAKE NOTICE that, on October 20, 2017 at 9:30 a.m., or as soon thereafter as the motion and counsel may be heard at the United States Courthouse located at 350 West 1st Street, Courtroom 8C, 8th Floor, Los Angeles, California 90012, Defendant Jane Rodgers will, under Rule 12(b)(6) of the Federal Rules of Civil Procedure, and hereby does move this Court for an Order dismissing Ms. Rodgers from this matter on grounds that: Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 1 of 27 Page ID #:259 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 2 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 1. The Complaint against Ms. Rodgers, alleging a claim for relief for breach of fiduciary duty, fails as a matter of law to demonstrate that any fiduciary relationship existed between Ms. Rodgers and the plaintiff Wine Education Counsel (“WEC”); 2. The WEC lacks standing to bring the instant claim for relief against Ms. Rodgers; 3. The Attorney General of the State of California maintains exclusive standing to bring the claims asserted against Ms. Rodgers in the Complaint; and 4. The claims against Ms. Rodgers are subject to an arbitration provision in a prior settlement agreement, and the claims should therefore be dismissed on that basis. The Motion is based upon this Notice of Motion, the attached Memorandum of Points and Authorities, the Declaration re: Meet and Confer Todd M. Lander, the Request for Judicial Notice, and the [Proposed] Order lodged concurrently herewith, the Court’s file on this matter, and upon such and further evidence and argument as may be presented prior to or at the time of the hearing on this Motion. This Motion is made following the conferring of counsel pursuant to L.R. 7-3, on September 5, 2017. DATED: September 14, 2017 FREEMAN, FREEMAN & SMILEY, LLP By: / s / Todd M. Lander GERALDINE A. WYLE TODD M. LANDER Attorneys for Defendant JANE RODGERS Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 2 of 27 Page ID #:260 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 i DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 TABLE OF CONTENTS Page I. INTRODUCTION ............................................................................................. 1 II. FACTUAL AND PROCEDURAL BACKGROUND ...................................... 4 A. Family History And The Composition Of The Trust ............................. 4 B. Grant Winthrop’s Campaign Against The Family And The Trust ......... 7 C. The Settlement Agreement And The Dispute Over The Designation To The WEC ....................................................................... 9 III. THE STANDARDS FOR RULE 12(B)(6) MOTIONS ................................. 13 IV. THE WEC HAS NO STANDING TO BRING CLAIM FOR BREACH OF FIDUCIARY DUTY AGAINST MS. RODGERS ................................... 14 A. Ms. Rodgers Does Not Stand In A Fiduciary Relationship With WEC. ..................................................................................................... 14 B. The WEC Is Not A Beneficiary Of The Foundation. ........................... 17 C. The WEC Also Lacks Standing Because The Matter Is Within The Exclusive Jurisdiction Of The State Attorney General ................. 20 D. This Matter Is Subject To Arbitration In Any Event ............................ 21 E. The Claims Against Ms. Rodgers Cannot Be Cured By Amendment ........................................................................................... 22 V. CONCLUSION ............................................................................................... 23 Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 3 of 27 Page ID #:261 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 ii DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 TABLE OF AUTHORITIES Page Cases Albrecht v. Lund, 845 F.2d 193 (9th Cir. 1988) ......................................................... 23 Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937 (2009) .......................................... 13 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, (2007) ................... 13, 14 Boys & Girls Club of Petaluma v. Walsh, 169 Cal.App.4th 1049 (2008) ...... 17, 19, 20 City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal.App.4th 445 (1999) ............................................................................... 15 Estate of Parrette, 165 Cal.App.3d 157 (1985) ......................................................... 15 In re Schloss, 56 Cal.2d 248 (1961) .......................................................................... 21 Lopez v. Professional Collection Consultants, 2011 WL 4964886, at * 2 (C.D. Cal. 2011) ........................................................................................ 14 Madden v. Kaiser Foundation Hospitals, 17 Cal.3d 699 (1976) .............................. 22 Patrick v. Alacer Corp., 167 Cal.App.4th 995 (2008)................................................ 19 Schreiber Distributing Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393 (9th Cir. 1986) .......................................................................................... 22 Tri-Growth Centre City, Ltd., v. Sildorf, Burdman, Duignan & Eisenberg, 216 Cal.App.3d 1139 (1989) ........................................................................... 15 Statutes FRCP Rule 12(b)(6) ................................................................................................... 14 I.R.C. § 170(c) ........................................................................................................... 10 I.R.C. § 501(c)(3) ....................................................................................................... 11 I.R.C. § 4945(d)(4) ................................................................................................ 9, 12 Probate Code § 24 .................................................................................................. 9, 20 Probate Code § 24(b) - (c) ......................................................................................... 20 Probate Code § 16040 ................................................................................................ 15 Probate Code § 16040(b) ................................................................................. 5, 15, 17 Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 4 of 27 Page ID #:262 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 1 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION The issue before this Court is straightforward. Litigation among the beneficiaries and trustees of the MacDonald Living Trust Dated August 17, 1987 (the “Trust”), and the MacDonald Family Foundation (the “Foundation”), which was established pursuant to the terms of the Trust, resulted in a settlement agreement. In that settlement, Grant Winthrop - a former Trust beneficiary and purported grantmaking trustee of the Foundation - bargained for and received the right to designate the distribution of certain Foundation assets and designated the Wine Education Counsel (“WEC”) as the recipient of those assets. May the WEC, whose rights derive solely from this settlement agreement, sue defendant Jane Rodgers for breach of fiduciary duty when Ms. Rodgers, a grantmaking trustee of the Foundation, has no duty concerning distributions under the settlement agreement nor oversight over those distributions, which instead rest with the Foundation’s corporate investment trustee? The answer is an emphatic no, and the WEC’s claims against Mr. Rodgers cannot stand. Ms. Rodgers is the sole surviving child of settlors Gordon MacDonald (“Gordon”) and Virginia MacDonald (“Virginia”) (collectively, the “Settlors”), and a Grantmaking Trustee of the Foundation. As Grantmaking Trustee, Ms. Rodgers has four central duties in accordance with the terms of the Trust: 1) to choose qualified charitable beneficiaries; 2) to review the charitable beneficiaries chosen by the other Grantmaking Trustee(s) and determine whether to support those choices; 3) to choose the amounts to give to those charitable beneficiaries; and 4) to fill any vacancy so that at all times there are three Grantmaking Trustees. These duties do not extend to the administration and distribution of Trust assets. That responsibility is held by an Investment Trustee - presently defendant San Pasqual Fiduciary Trust Company (“San Pasqual”) - which presides over the management of the Trust assets. Ms. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 5 of 27 Page ID #:263 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 2 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 Rodgers also maintains the right in her beneficial capacity - but not the duty - to remove Trustees of the Trust with or without cause. As a result of a 2014 Settlement Agreement mentioned above, Mr. Winthrop negotiated and received the right to designate one-third of the Trust assets to public charities of his selection. The Foundation may not, under the Internal Revenue Code, award money to private foundations without significant oversight implications, and thus the Settlement Agreement insisted that Mr. Winthrop’s designees be qualified public charities. Significantly, and appropriately, the responsibility for determining the eligibility of Mr. Winthrop’s designees fell exclusively to San Pasqual, the Investment Trustee. Ms. Rodgers and Defendant Peter Hilf - the other Grantmaking Trustee - had no role in assessing that eligibility or in administering the distribution of funds under the Agreement. The WEC’s Complaint alleges that Mr. Winthrop designated it to receive distributions from the Foundation, but that it has yet to receive the designated money. The result is a Complaint against San Pasqual for Declaratory Relief, Breach of Contract, Accounting, Breach of Fiduciary Duty and Unjust Enrichment. But the Complaint also inexplicably names Ms. Rodgers (and Mr. Hilf) in a single count of Breach of Fiduciary Duty, contending that the WEC is a beneficiary of the Trust as a consequence of Mr. Winthrop’s designation and that, as a Grantmaking Trustee, Ms. Rodgers owes it a fiduciary duty. Thus, the illogic continues, Ms. Rodgers has breached that duty by failing to ensure that San Pasqual distributed the designated funds. The Complaint, in the process, misstates and confuses the import of Ms. Rodgers’ status as a Grantmaking Trustee, and her limited and beneficial rights as the MacDonald’s daughter to remove trustees. She does not, as the WEC incorrectly concludes, have the power as a Grantmaking Trustee to remove the Investment Trustees. Nor does she have the duty to “exercise reasonable supervision over [the Investment Trustee] San Pasqual and of the Foundation and San Pasqual-Managed Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 6 of 27 Page ID #:264 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 3 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 Trusts,” as the Complaint further and falsely alleges. In fact, the Trust instrument itself, and well-settled California law, demonstrate that the WEC’s allegations fail on multiple, independent grounds: ● Ms. Rodgers has no duty - fiduciary or otherwise - concerning the distribution of funds under the Settlement Agreement, because those duties fall within the exclusive purview of the Investment Trustee. Inded, the Trust instrument specifically severs the duties of these two classes of trustees, and prohibits the Gantmaking Trustees from involving themselves in the responsibilities of their Investment counterparts. ● The Settlement Agreement, from which the WEC claims its rights, confirms the Investment Trustee’s exclusive domain over determining the eligibility of designees - charging it with the responsibility of determining whether the WEC satisfied the requirements of the Agreement and the law to receive the designated funds. This further affirms that Ms. Rodgers has no duty to the WEC regarding the subject matter of the Complaint. ● The WEC is not, despite its claims to the contrary, a beneficiary of the Foundation and therefore, because it is not receivable, nor is it eligible to receive, a “donative transfer” from the Foundation (the Probate Code’s definition of a beneficiary). It instead seeks to enforce bargained for contractual rights found in the Settlement Agreement and supported by consideration. This is the antithesis of a donative transfer, and thus neither Ms. Rodgers nor any other Grantmaking or Administrative Trustee of the Foundation owes any fiduciary duty to the WEC. ● The WEC has finally failed to join the Attorney General of the State of California (the “AG”) to this action. The AG is a necessary party to this action, and without it, this matter may not proceed. For these reasons, the claims against Ms. Rodgers fail as a matter of law, and the Complaint should be dismissed as against her, without leave to amend. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 7 of 27 Page ID #:265 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 4 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 II. FACTUAL AND PROCEDURAL BACKGROUND A. Family History And The Composition Of The Trust Gordon and Virginia created the Trust in August 1987, and collectively served as the initial trustees until Virginia’s death in October 1991. The Trust was allocated into its sub-trusts following her passing, establishing a: (1) separate trust for Gordon (the “Survivor’s Trust”); (2) separate sub-trust for each of the Daughters (the “LMJ Trusts”); (3) separate generation skipping trust for the Daughters and the Settlors’ grandchildren (the “GST Trust”); and (4) the MacDonald Family Foundation (the “Foundation”). The Foundation and that expanded structure continued with Gordon as sole trustee until Gordon, the surviving Settlor, passed away in March 1992. Gordon’s death gave rise to a division in the trusteeship of the Foundation, and specifically between Investment Trustees and Grantmaking Trustees. That dichotomy is critical here, because the demarcation of authority and responsibility concerning these two classes of trustees disposes of the WEC’s claims against Ms. Rodgers. The Trust prescribes, more specifically, the discrete nature of the grantmaking and investment duties, respectively:1 a. The Grantmaking Trustees have “sole authority to determine the amounts and identities of the charitable beneficiaries of the Foundation and no authority regarding the selection and management of assets or the routine administrative matters regarding the Foundation…” (Trust, Section B, Article II, Paragraph C.3.); and b. The Investment Trustees have “sole authority regarding the selection and management of trust assets and all routine administrative matters regarding the Foundation, but without authority to determine 1 The Trust Composite of the MacDonald Living Trust attached to the Complaint as Exhibit A is, in fact, a composite of the Eighth Amendment and Complete Restatement of the MacDonald Living Trust, dated August 8, 1991; the Ninth Amendment to the MacDonald Living Trust Dated August 17, 1987; signed on January 27, 1992; the Tenth Amendment to the MacDonald Living Trust Dated August 17, 1987, signed on March 13, 1992; and the Amendment to the MacDonald Living Trust Dated August 17, 1992, also signed on March 13, 1992. The Trust Composite incorporates the language from these operative documents. See RFJN, Paragraph 9, Exhibit 9, and Exhibits D through G thereto. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 8 of 27 Page ID #:266 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 5 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 the amounts and identities of the charitable beneficiaries of the Foundation….” (Trust, Section B, Article II, Paragraph C.2.) The Grantmaking Trustees’ duties are additionally described at Section B, Article II, Paragraph B of the Trust Composite: With respect to the Foundation, all decisions made by the Grantmaking Trustees regarding the amounts and identities of the charitable beneficiaries shall be made by unanimous vote of the Grantmaking Trustees if less than three Grantmaking Trustees are then acting; otherwise, such decisions shall be made by majority vote of the Grantmaking Trustees. In short, the Grantmaking Trustees have no authority with regard to the administrative matters of the Foundation, and neither the duty nor the right to oversee the Investment Trustees’ administration of its assets. This unambiguous restriction, alone, lays waste to the WEC’s Complaint against Ms. Rodgers, premised as it is on the contra-textual assertion that she somehow maintained a fiduciary duty to the WEC over the administration and distribution of trust assets.2 Lest there be any doubt, however, the Trust Settlors took pains to restrict Ms. Rodgers’ rights and duties - and those of the other Grantmaking Trustees - unambiguously confirming their intent to temper the scope of the Grantmaking Trustees’ prerogative and sever it from that of the Investment Trustees: With respect to the Foundation, the Grantmaking Trustee, with sole authority to determine the amounts and identities of the charitable beneficiaries of the Foundation and no authority regarding the selection and management of assets and the routine administrative matters regarding the Foundation, shall be our daughters, LINDA MACDONALD HILF, MARILYN MACDONALD WINTHROP AND JANE MACDONALD RODGERS, acting together. (Trust Composite, Section B, Article II, Paragraph C.3.)3 The WEC’s Complaint ignores these collective provisions, and their dispositive import. And whether that is the product of confusion or subterfuge, the 2 That fatal shortcoming in the WEC’s Complaint is without addressing the legally indisputable fact that the WEC is not a beneficiary under the Trust, and thus cannot assert a fiduciary duty claim against Ms. Rodgers in any event. See infra. 3 As explained below, the Probate Code - Section 16040(b) specifically - authorizes a settlor’s ability to expand or restrict in this manner a trustee’s duties in the administration of a trust. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 9 of 27 Page ID #:267 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 6 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 fact remains that under the plain terms of the Trust, Ms. Rodgers has no duty to select, direct or frustrate the distribution of Trust assets, including the funds the WEC is purportedly designated to receive under the 2014 Settlement Agreement. Nor does Ms. Rodgers maintain any duty to oversee generally the Investment Trustees’ administration of the Foundation, despite the WEC’s wrong-headed contention that she does. That allegation is the apparent product of an obvious distortion of a limited, beneficial right Ms. Rodgers holds, as the MacDonalds’ sole surviving daughter, to remove a trustee.4 But that personal and limited right comes with no concomitant duty, and the WEC plainly cannot foist on Ms. Rodgers a responsibility with which the Settlors had no intention to saddle her. Indeed, Paragraph F of Article II of Section B of the Trust, when read in its entirety, reveals the MacDonalds’ plain intent to delegate authority to appoint or remove a trustee of the Trust only to their living children, without reference to and independent of their appointments as Grantmaking Trustee.5 When coupled with the unambiguous terms of the Trust prohibiting the Grantmaking Trustees from exercising authority concerning the administrative matters of the Foundation, this provision merely 4 Section B, Article II, Paragraph F of the Trust provides that at “any time after our deaths that a corporate fiduciary is acting Trustee of any trust hereunder, our then living children, acting unanimously, shall have the power from time to time to remove the corporate fiduciary and to appoint a successor fiduciary in the same manner and under the same circumstances as provided in Paragraph 1 above, provided, however, that these powers or removal and appointment cannot be exercised without cause more than once every two years.” That is the extent of the “right” Ms. Rodgers possesses concerning the Investment Trustee. But Paragraph F(2) makes no mention of any oversight duties - and the Settlors could have and would have articulated a desire to impose that duty, had their intent been to do so - and, indeed, the clause is clear that the MacDonald’s intended to afford Ms. Rodgers this limited right solely in her beneficial status as their daughter, not as a trustee or fiduciary. 5 Ms. Rodgers exercised that limited and personal authority in 2012, removing Chapman and Wang as Investment Trustees, eventually resulting in San Pasqual assuming that position as to the Foundation - San Pasqual remains the Foundation’s Investment Trustee. The Complaint labors to drape itself in that fact, self- consciously suggesting, falsely, that Ms. Rodger’s decision to utilize her limited right somehow validates the WEC’s fact-free contention that she is subject to a duty to monitor the conduct of the Investment Trustees. As explained, the Trust is clear on its face that not only does she hold no such duty, she is precluded from conducting such oversight. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 10 of 27 Page ID #:268 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 7 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 reinforces the obvious fact that the basic predicate of the WEC’s Complaint - that is, Ms. Rodgers’ purported duty over the disbursement of Trust assets and the conduct of the Investment Trustees - is a fallacy, from which flow the myriad misguided and false accusations against Ms. Rodgers and Mr. Hilf. B. Grant Winthrop’s Campaign Against The Family And The Trust Mr. Winthrop has, over the years, demonstrated a seemingly endless and omnivorous appetite for conflict concerning the Trust, one that drove costly and time consuming litigation. Several events, after Gordon’s 1992 death and the division of the Foundation’s trusteeship, fueled this destructive instinct and led to the litigation that was ultimately settled in 2014.6 After Gordon’s death, Roxanne B. Chapman and David S. Wang served as the Investment Trustees, while the three MacDonald daughters - Jane, Linda, and Marilyn - assumed the position of Grantmaking Trustees. That construct survived only a few years, because Linda sadly and prematurely died in April 1995, leaving Mr. Hilf, her husband, surviving her - Mr. Hilf has served as successor Grantmaking Trustee since Linda’s death. More upheaval eventually ensued in August 2011, when 6 Ms. Rodgers is concerned that this litigation is the latest iteration of Mr. Winthrop’s legal campaign against the Trust and members of his extended family. The Complaint, and many of the allegations in it, merely heightens that concern. paragraphs 20 through 27 of the Complaint relate in their entirety, for example, to matters wholly immaterial to the claims for relief the WEC asserts, and focus on a period when Mr. Winthrop was agitating against the Trust. Those paragraphs specifically detail a purported series of communications between Ms. Rodgers and a lawyer named Neale Creamer, starting in 2009 and concerning compensation the Trust was paying Chapman and Wang and whether the two should be terminated as Investment Trustees. These allegations are, of course, utterly irrelevant to the WEC’s assertion of rights under the 2014 Settlement Agreement. Beyond that, they are laden with accusations of misconduct by Chapman and Wang and inertia on Ms. Rodgers’ part. Ms. Rodgers obviously disputes the allegations as to her. But more important, this entire serious of paragraphs are irrelevant and impertinent to the disposition of the Complaint. The same is true of paragraph 31, lines 17-19, which revisits the same issue, claims that Ms. Rodgers alone had the power to remove Chapman and Wang as Investment Trustees and cite to a purported 2012 email from Ms. Rodgers to Mr. Winthrop making unflattering comments about the two. These allegations are likewise irrelevant to the WEC’s contract based claims, are included only to disparage and embarrass Ms. Rodgers. Indeed, they are subject to be stricken under F.R.C.P. Rule Rule 12(f). Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 11 of 27 Page ID #:269 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 8 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 Marilyn passed away, leaving Ms. Rodgers as the sole surviving daughter. Marilyn, in turn, had been married to John Winthrop (“John”), but the two had divorced prior to Marilyn’s death and had one surviving child, Mr. Winthrop.7 Mr. Winthrop contended, and based on the allegations in the Complaint, continues to contend that he assumed his mother’s position as Grantmaking Trustee in the wake of her death. And, based on that contention, he proven to be the pied piper of family discord, launching a fusillade of allegations that unfortunately consumed the Trust for years until what Ms. Rodgers and Mr. Hilf believed was a court-approved, global settlement reached in early 2014. Beginning in 2012, and continuing over the course of almost two years, Ms. Rodgers defended herself and the Foundation against numerous petitions Mr. Winthrop brought, several of which are referenced in the WEC’s Complaint. The Petitions are attached for the Court’s reference, as well as Objections that Ms. Rodgers filed to Mr. Winthrop’s Petitions. See Request for Judicial Notice, Exhs. 1, 2, 3, 5, 6, 7 and 8.8 Mr. Winthrop’s actions threatened to damage or diminish the assets of the Foundation, including his demand for partition of the Foundation in direct contravention of the terms of the Trust. Complaint, ¶¶ 40, 41, 44. Mr. Winthrop, through the Settlement Agreement, was eventually able to obtain substantial, unilateral decision-making control of 1/3 of the Foundation’s assets. Complaint, Exhibit B, Paragraph 6. That right, held by Mr. Winthrop, is the centerpiece of the WEC’s Complaint. The problem for WEC with regard to its claim against Ms. Rodgers is that neither the settlement, nor Mr. Winthrop’s designation of the WEC to receive funds under it, imposed a duty on Ms. Rodgers or conferred 7 Marilyn’s and John Winthrop’s other son, Clayton Winthrop, died under unusual circumstances prior to Marilyn’s own death. 8 Rather than recite the myriad allegations in these petitions, Ms. Rodgers has attached the Petitions and the Objections, to provide the Court with some context as to the scope of the litigation. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 12 of 27 Page ID #:270 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 9 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 beneficiary status on the WEC. C. The Settlement Agreement And The Dispute Over The Designation To The WEC Probate Code § 24 defines a trust beneficiary as a “person to whom a donative transfer of property is made . . . as it relates to a trust.” That constitutes, in simple terms, someone receiving a gift. The statutory definition ipso facto excludes the WEC, however, which is neither named in the Trust nor even arguably the recipient of a gift under its terms. The Settlement Agreement, which serves as the linchpin of the WEC’s Complaint and is the only document from which the WEC may claim to derive any rights, is instead the product of a bargained for exchange involving consideration. Under its terms, Mr. Winthrop’s various petitions were dismissed, he resigned as Grantmaking Trustee, and he waived and released any and all rights he had as a Trust beneficiary. In exchange, he was furnished the contractual right to designate up to five designees to receive one-third of the Foundation’s net assets, in the form of a series of designated distributions. Settlement Agreement, ¶ 6.9 But because the Foundation, as noted, is prohibited by law from awarding funds to a private foundation without retaining significant oversight over the use of those funds - in contrast to an award to a public charity - these designees had to be public charities, and confined as such. I.R.S. § 4945(d)(4). 9 The Settlement Agreement prescribed three arteries through which the designated funds would be channeled to recipients. Mr. Winthrop bargained for and received the right to designate the distribution of one-third of the Foundation’s net assets. The Settlement Agreement also entitled him to reimbursement of certain litigation fees and expenses (not at issue here). Finally, Mr. Winthrop was afforded, pursuant to the terms of the Settlement Agreement, the right to direct a portion of the assets remaining in the Survivor’s Trust allocable to the Foundation (pursuant to the terms of the Settlement Agreement)at such time as it is ready for distribution ) - after the sale of a parcel of real property in Santa Barbara, California. Mr. Winthrop finally was entitled to designate the distribution of the assets that San Pasqual received from Marilyn’s estate. Settlement Agreement, ¶ 6. Though appearing byzantine in complexity, the gist of the Agreement was that Mr. Winthrop could nominate - subject to San Pasqual’s approval recipients for distribution of one-third of the Trust assets intended for the Foundation, in the assets’ various form and as the Trust took possession of them. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 13 of 27 Page ID #:271 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 10 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 There is no reasonable dispute that these distributions fell within the exclusive purview of the Investment Trustee. To start, they clearly related to “the selection and management of trust assets and all routine administrative matters regarding the Foundation” and thus, under the plain language of the Trust Composite, implicated only San Pasqual’s rights and duties - and not, by corollary, those of Ms. Rodgers as a Grantmaking Trustee.10 The Settlement Agreement further lays to rest any conceivable doubt on the subject, because it requires San Pasqual alone to determine whether the designees were eligible to receive Foundation funds as public charities, and to advise Mr. Winthrop of its decision. Id. That makes sense, given that the contemplated distributions obviously concerned the Trust’s administrative, and not grantmaking functions. But it also establishes without ambiguity that Ms. Rodgers had no legal role or responsibility in approving the propriety of the parties Mr. Winthrop designated to receive funds.11 Indeed, the Complaint devotes pages to addressing the finite details of San Pasqual’s discharge of that responsibility. The WEC specifically contends that the Settlement Agreement limits the permissible scope of San Pasqual’s determination to whether the designee is a qualified charitable trust under I.R.C. § 170(c), a tax exempt 10 Ms. Rodgers and Mr. Hilf have no role in assessing the eligibility of any designee to receive funds - that is the sole province of San Pasqual. The only right the two were afforded under is found ¶ 6(k), which provides that Mr. Winthrop may “initially propose” to designate recipients under the Agreement, and that his recipients “must be approved by both Jane and Peter F.” If that approval is not provided, the paragraphs designates a specific recipient to receive this amount of the distribution allocated to Mr. Winthrop. This does not vest or impose any duties on Ms. Rodgers or Mr. Hilf to vet or assess the proprietary of any designee, or to determine if that designee may receive funds consistent with the Foundation’s restrictions on giving to a private charity - those rights and duties lie solely with San Pasqual. It merely permits them to approve the initial designated recipients of Mr. Winthrop’s allocated distribution under the Agreement. In any event, Ms. Rodgers and Mr. Hilf approved the WEC as a recipient, in the Opinion Letter attached as Exhibit D to the Complaint. 11 The terms of the Settlement Agreement confirm that fact, imposing on Ms. Rodgers no responsibility - either explicitly or implicitly - concerning the approval of the designated recipients. [Complaint, Ex. B.] Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 14 of 27 Page ID #:272 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 11 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 organization under I.R.C. § 501(c)(3), and not a private charity under I.R.C. § 509. Complaint, ¶ 47. The Complaint proceeds to allege that San Pasqual rejected Mr. Winthrop’s initial and primary designee - Fidelity Investment Donor Advised Funds - because it concluded that receipt of the designated funds would “tip” the designee into private charity status. Unhappy, but apparently undeterred, Mr. Winthrop proceeded to nominate the American Endowment Foundation (“AEF”) to receive the agreed-upon share of the Foundation’s net assets, and the cash reserve mentioned above. San Pasqual approved, and in fact the Complaint acknowledges that those proceeds were ultimately distributed in accordance with the designation. Complaint, ¶¶ 54, 56. And San Pasqual allegedly approved the AEF to receive the contractually prescribed amount Mr. Winthrop could designate from his mother Marilyn’s trust. Complaint, ¶ 55. Alas, Mr. Winthrop’s perpetual state of dissatisfaction and agitation were not allayed by these approvals and distributions. The Complaint asserts that the WEC - to whom the AEF apparently assigned in 2015 its rights to receive the Trust distributions - has yet to receive any of the cash reserve or distributions from the Survivor’s Trust or Marilyn’s estate. Complaint, ¶ 56.12 The WEC acknowledges that on or about November 23, 2016, San Pasqual’s counsel expressed “concerns about both the AEF assignment and the tax implications of a direct distribution to WEC, including the possibility that such a distribution would ‘tip’ WEC from a public charity over into a private foundation.” Complaint, ¶ 62. In other words, the Complaint contends that San Pasqual exercised the discretion vested in it under paragraph 6 of the Settlement Agreement, namely to ensure that any designee qualified as a public charity. 12 The reasons for this assignment are unclear. But the WEC was in existence prior to the execution of the Settlement Agreement. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 15 of 27 Page ID #:273 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 12 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 That deliberative process did not comport with Mr. Winthrop’s expectations for distribution of the designated funds, however, nor that of the WEC. And the Complaint alleges an inaccurate and misleading rendition of the communications among WEC and San Pasqual counsel in late 2016 and early 2017, the sum and substance of which consist of the WEC demanding the money and San Pasqual explaining its concern that the distribution may “tip” the WEC into private foundation status. What’s notable, for our purposes, is that these allegations confirm that San Pasqual, as the Investment Trustee, maintained dominion over determining the legal eligibility of the designees, and the WEC thus predictably addressed its demands to San Pasqual. Whatever the WEC’s complaints - and they are dubious at best - they are not with Ms. Rodgers. That said, the Complaint is nonetheless revealing regarding the discourse between San Pasqual and the WEC over the past several months, primarily due to the painful incongruity between the Complaint’s ultimate conclusions and the particulars alleged. What the WEC contends, in essence, is that San Pasqual articulated a continuing concern over the WEC as a designated recipient, and whether it was or would remain a public trust. That comported with the responsibility imposed on it in the Settlement Agreement, and the oversight implications of the Trust disbursing to private foundations. I.R.C. § 4945(d)(4). Indeed, the WEC, inversely admitting the legitimacy of these concerns, went so far as to draft an opinion letter from its counsel, one opining that the Trust would retain its status as a public charity after receipt of the funds Mr. Winthrop designated to it - that opinion letter was issued on June 30, 2017, not on May 11, 2011, as the Complaint states. Complaint, ¶ 66, Exhibit D. The Complaint contends, in short, that the WEC has been improperly denied proceeds rightfully assigned to it, and yet details a lengthy process in which it voluntarily participated in an effort to address the Investment Trustees’ express unease about whether the distribution would meet the requirements of the Settlement Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 16 of 27 Page ID #:274 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 13 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 Agreement and the legal limitations on donees. The WEC and Mr. Winthrop, apparently unprepared to allow the process to run its normal course, filed this lawsuit on August 8, 2017, some six short weeks after the June 30 opinion letter. That is bad enough. What’s worse is that the Complaint names Ms. Rodgers in a single count of breach of fiduciary duty, despite the clear and unambiguous fact that she is neither a fiduciary to the WEC, nor is the WEC a beneficiary under the Trust. There is, in other words, no basis in law or fact for her inclusion in this action. And as explained below, she must be dismissed from it immediately. III. THE STANDARDS FOR RULE 12(B)(6) MOTIONS To survive a motion to dismiss, a party asserting a claim in relief must provide sufficient facts that, if “accepted as true, . . . state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, (2007)). A claim “has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. The plausibility standard is not akin to a “probability requirement,” but asks for more than a sheer possibility that a defendant has acted unlawfully. Id. Where a complaint pleads facts that are “merely consistent with” a defendant’s liability, it “stops short of the line between possibility and plausibility of entitlement to relief.” Twombly, 550 U.S. at 557. Under Federal Rule of Civil Procedure 8, a complaint must make a “showing” that the plaintiff is entitled to relief “rather than a blanket assertion” of entitlement to relief. Id. at 555, n.3. Rule 8 “demands more than an unadorned, the defendant- unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Indeed, while properly pleaded facts are considered true for purposes of a Motion to Dismiss, legal conclusions are to be Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 17 of 27 Page ID #:275 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 14 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 disregarded under Rule 12(b)(6). See e.g., Lopez v. Professional Collection Consultants, 2011 WL 4964886, at * 2 (C.D. Cal. 2011), citing Twombly. Applying these standards here, the WEC’s Complaint cannot survive. IV. THE WEC HAS NO STANDING TO BRING CLAIM FOR BREACH OF FIDUCIARY DUTY AGAINST MS. RODGERS The WEC asserts a single count of breach of fiduciary duty as against Ms. Rodgers (and Mr. Hilf), alleging that since “the time WEC was named Grant’s distributee, Hilf and Rodgers, as Grantmaking Trustees of the Foundation, have owed fiduciary duties to WEC, as a beneficiary of the San Pasqual-Managed Trusts. As San Pasqual’s co-trustees, Hilf and Rodgers have fiduciary duties that include the duty to take reasonable steps to prevent San Pasqual from continuing breaches of duty and to work to address San Pasqual’s ongoing breaches of duty.” Complaint, ¶ 90. The Complaint proceeds to assert generically that Ms. Rodgers and Mr. Hilf have failed to exercise the reasonable supervision over San Pasqual that the WEC contends they were compelled to conduct. Complaint, ¶ 91. The Complaint, in other words, premises this claim on two related and necessary assumptions: (1) that Ms. Rodgers and Mr. Hilf, as Grantmaking Trustees, maintained fiduciary responsibilities for the distribution of assets of the type provided for in the Settlement Agreement; and (2) that those duties extended to the WEC, because it became a “beneficiary of the San-Pasqual-Managed Trust” after Mr. Winthrop designated it to receive funds under the Settlement Agreement. As explained below, both assumptions are irretrievably false on the record before this Court, and demand that this claim must be dismissed. A. Ms. Rodgers Does Not Stand In A Fiduciary Relationship With WEC. The elements of a breach of fiduciary duty claim for relief are: (1) the existence of a fiduciary relationship between the plaintiff and defendant; (2) a breach of the defendant’s fiduciary duties; and (3) damages proximately caused by the Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 18 of 27 Page ID #:276 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 15 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 breach. See e.g., City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal.App.4th 445, 483 (1999). A fiduciary and confidential relationship, in turn, may arise whenever “confidence is reposed by persons in the integrity and good faith of another. If the latter voluntarily accepts or assumes that confidence, he or she may not act so as to take advantage of the others’ interest without knowledge or consent.” Id.; see also Tri-Growth Centre City, Ltd., v. Sildorf, Burdman, Duignan & Eisenberg, 216 Cal.App.3d 1139, 1150 (1989). Applying these basic standards, the claims against Ms. Rodgers fails because she is neither a trustee nor a fiduciary concerning the funds Mr. Winthrop designated the WEC to receive. Ms. Rodgers acknowledges, of course, that she is a Grantmaking Trustee, and is a fiduciary in that limited capacity, owing the appropriate corollary duty concerning the “amounts and identities of the charitable beneficiaries of the Foundation.” But her authority extends no further and, as noted, the Settlors specifically prohibited her from exercising any prerogative regarding “the selection and management of assets or the routine administrative matters regarding the Foundation…” (Trust, Section B, Article II, Paragraph C.3.). The Probate Code, § 16040(b), lends statutory support and sanction to this disjuncture of trustee responsibility, providing that, among other things, the Trust settlor may expand or restrict the duties of a trustee by express terms in the Trust and that a trustee is not liable to a beneficiary for duties that are carved out of his or her responsibility under § 16040. Simply put, the Settlors intended to restrict Ms. Rodgers’ duties, and in particular denied her any administrative duties under the Trust. She thus owes no fiduciary duty concerning the management or administration of Trust assets. The MacDonalds’ intent (as the Settlors) is apparent and unambiguous on the face of the Trust Composite, and must be given effect in these proceedings. See Estate of Parrette, 165 Cal.App.3d 157, 161 (1985) (“It is the duty of the court to determine the intent of the settlor or maker of a trust and, when determined, to give such effect. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 19 of 27 Page ID #:277 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 16 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 [Citations.] The intent is to be gathered from the expressions of the trust agreement.”) This instrumental and legal restriction is directly joined here, where the WEC asserts that Ms. Rodgers’ and Mr. Hilf’s fiduciary duties to it derive from their status as Grantmaking Trustees. That contention would necessarily require that the two be invested with authority over the subject matter of the WEC’s Complaint - namely, the distribution of funds under the Settlement Agreement. But we know that’s not the case, because the clear language of the Trust Composite, Article II, Section C(3) proscribes her from any oversight concerning the administrative functions of the Trust. And the contractual rights the WEC purports to enforce, such as they are, plainly concern the management of trust assets, and thus extend only to the administrative arm of the Trust and the duties of the Investment Trustee. In fact, the Settlement Agreement itself, as noted, confirms that the WEC’s claims are outside the scope of Ms. Rodgers’ responsibilities, because it placed in San Pasqual’s hands the duty to approve the eligibility of Mr. Winthrop’s designees to receive unfettered funds consistent with the Foundation’s legal restrictions. Ms. Rodgers and Mr. Hilf in contrast have no authority to intervene or inform San Pasqual’s decisions in that regard, and thus no duty to the WEC - fiduciary or otherwise - as to the timing or efficacy of the designation. These basic facts, all clear on the record, vitiate this claim for relief because they establish a lack of fiduciary duty as a matter of law.13 Beyond that, the Settlors 13 As explained above, Ms. Rodgers’ limited and personal, beneficial right to remove the Investment Trustee does not come with a concomitant duty to conduct oversight. That’s apparent because the Trust, on its face, imposes no duty in connection with this right, and the right itself is clearly unrelated to administrative role or responsibility. Indeed, Ms. Rodgers may remove the Trustee with or without cause, meaning the provision does not entail any responsibility or obligation to monitor the Trustee’s conduct as a preamble to exercising the personal right it affords. Additionally, Ms. Rodgers’ exercise of that right also affects a sub-trust created for her benefit, not just the Foundation. Trust Composite. Section B, Article II, Paragraph F, Beyond that, WEC does not allege this clause as a basis for asserting Ms. Rodgers’ purported fiduciary duty. The Complaint instead rests the claim solely on Ms. Rodgers’ and Mr. Hilf’s status as Grantmaking Trustees. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 20 of 27 Page ID #:278 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 17 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 unambiguously sheltered Ms. Rodgers for any liability stemming from the acts of the Investment Trustee, as Probate Code § 16040(b) permits. The WEC’s claim would consequently require the Court to disregard the language of the Trust Composite, the unambiguous intent of the Settlors, and the clear import of the Settlement Agreement, all on the altar of imposing a duty on Ms. Rodgers and Mr. Hilf that neither the law nor the facts can sustain.14 The Motion must be granted on this basis alone. B. The WEC Is Not A Beneficiary Of The Foundation. The WEC, as mentioned, claims that it is a beneficiary of the Foundation by virtue of its status as a desginee to receive funds under the Settlement Agreement. That is false assumption number two - it is not a beneficiary and thus, even assuming arguendo that Ms. Rodgers maintained some kind of fiduciary duty over the distribution of funds under the 2014 settlement, and she does not, this claim for relief still fails because the WEC lacks standing to assert any claim as a beneficiary. As an initial matter, the WEC is not named by the Settlors (the MacDonalds), in the Trust as a beneficiary - charitable or otherwise - of either the Trust or the Foundation. Section B, Article II. The Trust Composite dictates instead that the identities of the charitable beneficiaries are to be determined by the Grantmaking Trustees. Id., at Article II, Paragraph D.2. The WEC, attempting to circumvent that obvious problem, cites to California Probate Code § 24(C) and Boys & Girls Club of Petaluma v. Walsh, 169 Cal.App.4th 1049, 1058 (2008) in an effort to cobble together a threadbare case as a beneficiary. Neither the statute nor the case support that assertion. 14 During the meet and confer process, the WEC cited to Probate Code § 16013 as a basis for establishing Ms. Rodgers’ purported fiduciary duty. But § 16013 actually affirms the necessity of dismissal, because the duty it imposes is characterized as one “to participate in the administration of the trust.” That is, the very duty the settlor prohibited Ms. Rodgers from exercising in the Trust Composite. Having no administrative duties under the Trust, Ms. Rodgers necessarily maintains no duties under Section 16013 or, for that matter, under any other principles of probate law. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 21 of 27 Page ID #:279 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 18 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 Section 24 defines a “beneficiary” as a “person to whom a donative transfer of property is made or that person’s successor in interest, and … (c) as it relates to a trust, means a person who has any present or future interest, vested or contingent.” See also Boys and Girls Club, supra, 169 Cal.App.4th 1049, 1058 (2008). But that has no currency here, where the WEC purports to assert rights Mr. Winthrop bargained for and received as part of the Settlement Agreement resolving prior litigation. The Complaint is in fact explicit on this issue, alleging that the WEC has been a “beneficiary of the San-Pasqual-Managed Trusts” since “the time WEC was named Grant’s distributee. . .” Complaint, ¶ 90. And it is equally clear that Mr. Winthrop’s right to designate the WEC is strictly contractual, arising out of the Settlement Agreement, and not stemming from the Trust. Paragraph 46 of the Complaint alleges, in confirmation, that under the agreement the various “petitions were dismissed with prejudice and Grant was permitted to designate charitable recipients for certain distributions from the MacDonald Trusts.” These are, in other words and if anything, contract rights supported by consideration - page 8 of the Settlement Agreement provides that the parties entered into it “in consideration of the mutual promises and covenants contained here, the receipt of which are acknowledged . . .” Complaint, Exhibit B, page 8. Mr. Winthrop negotiated the right to make certain designations, parted with consideration to secure that right, and then ultimately exercised his bargained for prerogative by designating the WEC to receive a distribution. Having been designated to be the ultimate recipient of the rights Mr. Winthrop bargained for in the Settlement Agreement, the WEC now seeks to enforce its right to receive those funds. That is, it’s not seeking to ensure receipt of a donative transfer from the Foundation, but rather to enforce a contractual right derived solely from Mr. Winthrop and, concomitantly, to force San Pasqual to discharge the alleged and existing obligation Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 22 of 27 Page ID #:280 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 19 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 to approve and facilitate the distribution.15 That construct, premised as it is on the enforcement of a contract, precludes any finding that WEC is a Trust/Foundation beneficiary. As the Court explained in Patrick v. Alacer Corp., 167 Cal.App.4th 995, 1013 (2008) - in the context of a husband directing stock held in trust to his wife in satisfaction of his community property obligations - the transfer of “trust assets to satisfy an existing obligation is the antithesis of a donative transfer.” (Emphasis in original.) Such is the case here, and it further demands the dismissal of the claims against Ms. Rodgers. The Complaint materially misstates the holding of Boys and Girls in its effort to plead WEC’s status, claiming that it concludes that “charitable beneficiaries proposed yet unapproved by trustees were beneficiaries.” A simple review of the opinion affirms that the WEC is not in fact a beneficiary. The settlor there - of an irrevocable charitable trust - named five charitable beneficiaries. The terms of the trust required that the trust terminate ten years after the grantor’s death, and that both during the term of the trust and upon its termination, the successor trustees were to distribute the remaining balance of the Trust “in such proportions as the Trustees determine in their discretion … including the power to distribute more to some of the charities than others, or to make distribution to one or more of them to the exclusion of others.” Id., at 1054. A dispute arose as to whether a writing naming numerous other charitable entities expanded the potential beneficiaries of the charitable trust. The successor trustees filed a petition to ascertain beneficiaries. The five initially named beneficiaries - by the Settlor - objected and filed a petition to modify the trust and compel distribution to the five of them in equal shares, without giving notice to the additional charitable organizations (identified in the disputed writing). The 15 The fact that the WEC is not itself paying consideration for the designated distribution does not mean that it somehow constitutes a donative transfer under the Trust - as required under § 24. The WEC is seeking to enforce rights derived from Mr. Winthrop, who negotiated and paid consideration for those rights. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 23 of 27 Page ID #:281 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 20 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 Attorney General consented to the modification, but the successor trustee responded and claimed, among other things, that the five named beneficiaries did not have vested rights and therefore lacked standing to bring their petition. The probate court disagreed and granted the petition, finding that, in stark contrast to our case, the Trust established by the Settlor specifically named the five petitioners as beneficiaries and thus they were entitled to distribution. The Court of Appeal affirmed, and observed that: “[Probate Code” Section 24 defines a beneficiary as “’a person to whom a donative transfer of property is made or that person’s successor in interest…’ including a person who has any present or future interest, vested or contingent.” The court then additionally explained: Applying section 24, we conclude the five beneficiaries named in the trust instrument-The Salvation Army, Guide Dogs for the Blind, Hospice of Petaluma, Boys and Girls Club of Petaluma, and Face to Face of Sonoma County-are beneficiaries that have a “present or future interest, vested or contingent” in the Trust. (§ 24, subd. (c).) Even if they hold mere “future interests” or “contingent interests,” the five named beneficiaries are entitled to enforce the trust pursuant to the plain language of section 24, subdivision (d). These five entities do not lack the status of beneficiaries merely because appellants have not exercised their powers as successor trustees to select the five, or other charitable organizations. Id., at 1058. [Emphasis added.] This language strikes at the critical distinction here, and serves to confirm why the WEC is not a beneficiary. The Settlors (the MacDonalds) did not name it as a beneficiary, and it therefore is not entitled to a donative transfer from the Foundation. Neither Probate Code § 24 nor Boys and Girls Club of Petaluma somehow confer standing on it as a beneficiary, and Boys and Girls Club in fact demands the contrary finding. The simple fact is that Ms. Rodgers owes no fiduciary duty to the WEC as a matter of law. On this additional basis, the WEC’s Breach of Fiduciary count against Ms. Rodgers and Mr. Hilf must fail. C. The WEC Also Lacks Standing Because The Matter Is Within The Exclusive Jurisdiction Of The State Attorney General The WEC also lacks standing to bring any breach of fiduciary duty count Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 24 of 27 Page ID #:282 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 21 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 concerning the Trust, because the State Attorney General, except in limited circumstances - such as those in Boys and Girls Club of Petaluma - is vested with broad and nearly exclusive authority to enforce charitable trusts. That principle is deeply embedded in California law. Probate Code Sections 17210 and 16420 provide, for example, that the Attorney General stands in the place of beneficiaries of a charitable trust for purposes of trust enforcement, except in specific instances, none of which are present here. The State Supreme Court consequently held, in In re Schloss, 56 Cal.2d 248 (1961), that the Attorney General is a necessary party to proceedings affecting disposition of assets of a charitable trust. The Complaint against Ms. Rodgers must, as a result, be dismissed.16 The Attorney General, not the WEC, is the real party in interest concerning any enforcement of the Trust, and the WEC is without any standing or authority to prosecute the action now pending against our client. All of which is to make clear, yet again, that the WEC’s continued pursuit of any claims against Ms. Rodgers is both without standing and without substantive grounds. D. This Matter Is Subject To Arbitration In Any Event In addition to the above, WEC lacks standing because the Settlement Agreement - the document this Complaint purports to vindicate - has contractually binding dispute resolution procedures, and a concomitant forum, which he has ignored. Paragraph 18 of that Agreement broadly provides that unless otherwise set forth in the Agreement, the “Neutral shall resolve any disputes with regard to the interpretation or enforcement of this Agreement by binding arbitration.” The WEC’s claims, as reflected on the face of the Complaint, stem from the rights Mr. Winthrop 16 As if to compound the problem, the WEC acknowledged during the meet and confer process that as of the first week of September, the Attorney General has not been served with the Complaint, meaning the single essential party to this action is unaware of its existence. Plaintiff’s counsel later represented that the Attorney General was served on or about September 6, 2017. Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 25 of 27 Page ID #:283 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 22 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 bargained for and received under the Settlement Agreement and, in sum and substance, purport to enforce the terms of the Agreement. Thus, its rights, such as they are, derive solely and exclusively from Mr. Winthrop. Mr. Winthrop, in turn, effectively adopted the position of agent for the designees under paragraph 6(e) of the Agreement, which vests in him the authority the designate up to 5 charitable organizations for receipt of the prescribed distribution, to specify his order of preference and to divide the charitable amount between and among those designees. The WEC, as a designee, holds no independent rights under the Agreement - Recital P makes clear that no third party beneficiaries are intended - and indeed maintains only rights through Mr. Winthrop, its principal and designor. Accordingly, while the WEC did not itself execute the Settlement Agreement, it is nonetheless bound to the Agreement’s arbitration provisions because Mr. Winthrop, its agent, did sign the Agreement and did consent to arbitrate any disputes. See e.g. Madden v. Kaiser Foundation Hospitals, 17 Cal.3d 699, 709 (1976) (an agent or fiduciary has authority to enter into arbitration agreement on its principal’s behalf). E. The Claims Against Ms. Rodgers Cannot Be Cured By Amendment The fatal and myriad flaws in the Complaint establish without hesitation that the WEC has not stated a claim against Ms. Rodgers. Nor can these defects be cured by amendment, because they are rooted in the undisputed record before the Court and the consequent legal implications of that record. The WEC cannot, for example, amend its allegations to survive a further Motion to Dismiss because regardless of what it asserts, the Trust Composite and the Settlement Agreement establish respectively that Ms. Rodgers is not a fiduciary as to the designation the Complaint seeks to enforce and the WEC is not a beneficiary of the Trust/Foundation. No amount of intellectual gymnastics can change those basic facts, and the claims against Ms. Rodgers therefore fail as a matter of law. See e.g., Schreiber Distributing Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393, 1401 (9th Cir. 1986) (leave to Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 26 of 27 Page ID #:284 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3556653.1 26238-391 23 DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)] F R E E M A N , F R E E M A N & S M IL E Y , L L P 1 8 8 8 C E N T U R Y P A R K E A S T , S U IT E 1 9 0 0 L O S A N G E L E S , C A L IF O R N IA 9 0 0 6 7 (3 1 0 ) 2 5 5 -6 1 0 0 amend should be denied of the Court determines that the allegation of other facts could not cure the deficiency”); see also Albrecht v. Lund, 845 F.2d 193, 195-196 (9th Cir. 1988) (leave to amend properly denied where facts on the record not in dispute and lack of liability clear as a matter of law). These principles apply here. The Complaint should be dismissed, without leave to amend. V. CONCLUSION For the foregoing reasons, Ms. Rodgers respectfully requests that the Motion be granted in its entirety. DATED: September 14, 2017 FREEMAN, FREEMAN & SMILEY, LLP By: / s / Todd M. Lander GERALDINE A. WYLE TODD M. LANDER Attorneys for Defendant JANE RODGERS Case 2:17-cv-05879-DMG-JC Document 20 Filed 09/14/17 Page 27 of 27 Page ID #:285