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3862938.1
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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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 FIRST
AMENDED COMPLAINT 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: August 17, 2018
Time: 9:30 a.m.
Crtrm.: 8C, 8th Floor
Action Filed: August 8, 2017
PLEASE TAKE NOTICE that, on August 17, 2018 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 64 Filed 07/17/18 Page 1 of 29 Page ID #:1704
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3862938.1 2
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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1. The First Amended 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”); and
2. The WEC lacks standing to bring the instant claim for relief against
Ms. Rodgers;
The Motion is based upon this Notice of Motion, the attached Memorandum
of Points and Authorities, 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 July 5, 2017.
DATED: July 17, 2018 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 64 Filed 07/17/18 Page 2 of 29 Page ID #:1705
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3862938.1 3862938.1 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)]
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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 ......... 5
C. The Settlement Agreement And The Dispute Over The
Designation To The WEC ....................................................................... 9
III. THE STANDARDS FOR RULE 12(B)(6) MOTIONS ................................. 17
IV. THE WEC IS NOT A BENEFICIARY OF THE TRUST, AS THIS
COURT HAS ALREADY FOUND, AND THE FAC DOES NOT
AND CANNOT CHANGE THAT ................................................................. 17
A. The Trust Composite Does Not Name The WEC As A
Beneficiary. ........................................................................................... 17
B. The Settlement Agreement Does Not Make, And Cannot Make,
The WEC A Beneficiary Of The Trust ................................................. 21
C. In Any Event, Grant Failed To Comply With The Terms Of The
Settlement Agreement, And Thus The WEC Could Not Have
Become An “Approved Distributee” Under Its Terms ......................... 24
V. CONCLUSION ............................................................................................... 25
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 3 of 29 Page ID #:1706
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3862938.1 ii
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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TABLE OF AUTHORITIES
Page
Cases
Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937 (2009) .......................................... 17
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, (2007) ......................... 17
Boy Scouts of America v City of Escondido, 14 Cal.App.4th 189 (1971) ............ 10, 19
Boys & Girls Club of Petaluma v. Walsh, 169 Cal.App.4th 1049 (2008) ...... 10, 18, 19
City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. 68 Cal.App.4th
445 (1999) ....................................................................................................... 17
Holt v. College of Osteopathic Physicians & Surgeons, 61 Cal.2d 750 (1964).. 10, 19
Shaw v. Regents of the University of California, 58 Cal.App.4th 44 (1997) ............. 22
Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) ............................ 17
Ticor Title Ins. Co. v. Employers Ins. of Wausau 40 Cal.App.4th 1699 (1995) ....... 22
Statutes
Civ. Code § 1636 ................................................................................................. 22, 24
Civ. Code § 1638 ........................................................................................... 21, 22, 24
Civ. Code § 1639 ....................................................................................................... 21
Civ. Code § 1641 ....................................................................................................... 22
Civ. Code § 1644 ....................................................................................................... 22
I.R.C. § 170(c) ........................................................................................................... 14
I.R.C. § 501(c)(3) ....................................................................................................... 14
I.R.C. § 4945(d)(4) .................................................................................................... 14
Probate Code § 24 ...................................................................................... 9, 18, 19, 24
Probate Code § 24(b) ................................................................................................. 19
Probate Code § 24(c) ................................................................................................. 19
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 4 of 29 Page ID #:1707
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3862938.1 3862938.1 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)]
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MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
On June 6, 2018, this Court granted the Motion of defendant Jane Rodgers to
Dismiss the Complaint of plaintiff Wine Education Counsel (“WEC”), finding that
the WEC had not alleged facts demonstrating that it was a beneficiary of the
MacDonald Living Trust Dated August 17, 1987 (the “Trust”) and/or the MacDonald
Family Foundation (the “Foundation”), and thus had not stated a claim for breach of
fiduciary duty against Ms. Rodgers, a Grantmaking Trustee of the Foundation. The
Court, in granting the Motion, specifically found that the WEC – which Grant
Winthrop (“Grant”), Ms. Rodgers’ nephew, designated to receive distributions of
Foundation assets in accordance with a 2013 Settlement Agreement of prior trust
litigation between, among others, Ms. Rodgers and Grant – had not met the statutory
definition of beneficiary under § 24 of the California Probate Code. That section
defines beneficiary as one “to whom a donative transfer of property is made . . . as it
relates to a trust” and who has the right to enforce the trust instrument. That is, in
other words, a gift and the WEC, as a mere third party beneficiary of the Settlement
Agreement supported by consideration, did not fall within the purview of this
definition, and the fact that it maintained an “interest” in the Trust as a result of
Grant’s designation did not confer beneficiary status upon it.
The Court, despite its findings, afforded the WEC the right to amend its
Complaint against Ms. Rodgers, but within strict parameters. The June 6 Order
specifically directed that the WEC could amend if it could allege and demonstrate
that it was “selected as a beneficiary pursuant to the provisions of the Trust
Composite.”1 The First Amended Complaint (“FAC”), facially a response to the
1 As Ms. Rodgers explained in her initial Motion to Dismiss, 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
(Continued…)
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 5 of 29 Page ID #:1708
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3862938.1 2
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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Court’s Order, fails entirely to rectify the fatal flaw in the WEC’s prior Complaint,
and indeed appears not to have attempted to substantively address the Court’s June 6
Order and the limited avenue it articulated for amendment. The FAC consequently
fails to state a claim for relief for breach of fiduciary duty against Ms. Rodgers, for
multiple and independent reasons:
● The FAC does not cite to any provision of the Trust Composite
purporting to “select” the WEC as a beneficiary of the Trust. The reason is simple –
there are no such provisions, and the WEC is demonstrably not a beneficiary under
the terms of Probate Code § 24.
● The FAC’s only apparent effort to salvage its claim against Ms. Rodgers
– by alleging that the Settlement Agreement amended the Trust Composite to render
the WEC a trust beneficiary – cannot survive either a cursory legal analysis or an
encounter with the language of the Agreement itself. Under California law, an
agreement cannot modify a trust once the settlors are deceased. Further, the
Settlement Agreement specifically designates “Approved Distributees” such as the
WEC as third party contract beneficiaries, empowered to enforce the distribution
provisions in paragraph 6 of the Agreement. That is, the Settlement Agreement
confers contract beneficiary status on the WEC, not trust beneficiary status.
● The face of the Settlement Agreement is otherwise irreconcilable with
the assertions in the FAC, and those assertions must therefore be disregarded under
the law. The Agreement provides, for example, that Grant – who claimed to have
assumed the position of Grantmaking Trustee of the Foundation after the 2011 death
(…Continued)
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 64 Filed 07/17/18 Page 6 of 29 Page ID #:1709
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3862938.1 3
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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of his mother and Ms. Rodgers’ sister, Marilyn – specifically resigned that position
under the terms of the Agreement and waived and released any “standing with regard
to either the Foundation or the Survivor’s Trust, under any circumstances.” Thus,
when Grant ultimately designated the WEC to receive a distribution, he was
necessarily exercising his bargained-for contractual rights and not acting under the
authority of the Trust – he’d released any rights to or powers under the Trust. And
the WEC – whose rights derive exclusively from those of Grant – cannot, in turn,
acquire rights in the Trust when its designor had no Trust related rights to confer
upon it, nor Trust-originated powers to do so.
● The FAC’s purported interpretation would create an obvious absurdity
and require the disregard of express contractual language, in direct contravention of
the California rules of contractual construction. Specifically, if the drafters of the
Settlement Agreement wanted Approved Distributees to enjoy Trust beneficiary
status, they could and would have articulated that intent on the face of the Agreement.
They did not, instead opting to describe those distributees as third party contract
beneficiaries, while not uttering a single word suggesting that the distributees would
be availed of any rights under the Trust. But the FAC’s allegations, if accepted,
would require the Court to discard the description of status actually found in the
Agreement and treat it as a nullity – it would make no sense to identify the distributees
as the contract’s third party beneficiaries if the intent were to confer more robust and
durable Trust rights – and to instead indulge WEC’s capricious interpretation, which
finds no textual support anywhere in the document. Even the designee from whom
WEC first derived its rights, the American Endowment Foundation (whom Grant had
earlier designated), clearly recognized the bundle of rights it received and then
assigned to WEC to be limited to contractual rights.
● Even if one accepted the FAC’s apocryphal construction of the terms
and import of the Settlement Agreement – and Ms. Rodgers submits that’s a legal
impossibility – the WEC’s assertions still fail because Grant failed to comply with
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 7 of 29 Page ID #:1710
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3862938.1 4
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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the terms of the Agreement in designating his distributees, and thus, the FAC
confirms that even pursuant to the terms of the Settlement Agreement, the WEC
never became an “Approved Distributee” in accordance with those settlement terms.
For these reasons, the FAC fares no better than the WEC’s previous and
equally feckless effort to ensnarl Ms. Rodgers in its dispute with San Pasqual
Fiduciary Trust Company (“San Pasqual”), and this effort should meet the same
fate. The claim for breach of fiduciary duty against Ms. Rodgers fail as a matter of
law, and the Complaint should be dismissed as against her, without leave to amend.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. Family History And The Composition Of The Trust2
As explained in Rodgers’ prior Motion, 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.
After both Virginia’s and Gordon’s death, the Trust was divided between
Investment Trustees and Grantmaking Trustees. And that division resulted in a
dichotomy in authority and responsibility concerning these two classes of trustees.
The Investment Trustees maintained the: (1) “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
2 Rodgers’ initial Motion to Dismiss included a lengthy recitation of the history of
the Trust in its various iterations. In the interests of brevity, that full history has not
been recited here.
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3862938.1 5
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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regarding the Foundation…”; and (2) “sole authority regarding the selection and
management of trust assets and all routine administrative matters regarding the
Foundation, but without authority to determine the amounts and identities of the
charitable beneficiaries of the Foundation….” (Trust, Section B, Article II,
Paragraphs C.2 and C.3.) The Grantmaking Trustees, in turn, were prescribed finite
and limited responsibilities under Section B, Article II, Paragraph B of the Trust
Composite: “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.”
More important, the Grantmaking Trustees are vested with the sole and
exclusive authority to determine charitable beneficiaries under the Foundation, :
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.) [Emphasis added.]
The FAC ignores these provisions, and entirely fails to address their import
concerning the WEC’s status. Most notably, these terms demand that the
Grantmaking Trustees, in their capacity as the sole authority concerning the
determination of the Foundation’s charitable beneficiaries, confer beneficiary status
on the WEC. They did not do so. Nor, for that matter, does the Settlement
Agreement on which the WEC relies render the WEC a beneficiary.
B. Grant Winthrop’s Campaign Against The Family And The Trust
Rodgers’ prior Motion explained Grant’s singular animus toward his family,
and his seemingly insatiable appetite for conflict concerning the Trust. The
consequence of that unfortunate devotion to discord led to the initiation of lengthy and
destructive litigation after his mother Marilyn’s death in 2011 and the division of the
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 9 of 29 Page ID #:1712
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3862938.1 6
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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Foundation’s trusteeship. That litigation was eventually settled in 2013.
The superficial origin of that litigation was the appointment, after Gordon’s
death in 1992, of Roxanne B. Chapman (“Chapman”) and David S. Wang (“Wang”)
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, however, 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.
The FAC purports to make much of Chapman’s and Wang’s conduct, and
alleges that Rodgers should have but failed to remove the two as Investment Trustees.
It alleges, for example, that Rodgers’s attorney Neale Creamer recommended that she
take “corrective action” as against Chapman and Wang – relating to the
compensation the two were receiving – but that she “failed to act on any of” his
recommendations. FAC, ¶ 20-26. But those contentions have no currency here, not
merely because tenure of Wang and Chapman was the subject of the 2013 Settlement
Agreement and thus all claims related to their conduct have been released, but
additionally because Rodgers’ right to remove the Investment Trustees derived from
her status as a beneficiary, not as a Grantmaking Trustee, and could only be
exercised in concert with her sisters. After Linda’s death in 1995, Marilyn’s
agreement was therefore needed to remove Wang and Chapman – the Trust
Composite afforded the surviving MacDonald daughters to remove the Investment
Trustees, but only if they acted unanimously.3 Rodgers, in other words, lacked the
unilateral right to remove Wang and Chapman while Marilyn was alive.
3 This right, significantly, arose from the MacDonald daughters’ status as
beneficiaries, not as Grantmking Trustees. Indeed, the specific section conferring
the right, Article II of Section B of the Trust Composite, is headed “Other
Beneficiaries’ Rights to Remove and Replace Trustee.” That is, Rodgers
maintained this discretion strictly as a beneficial right, and thus no duties – fiduciary
or otherwise – attended to that right.
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 10 of 29 Page ID #:1713
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3862938.1 7
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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The FAC acknowledges that reality, though in a backhand manner. FAC, ¶ 31
(“Following Marilyn’s death, Rodgers alone had the power under the Trust
Composite” to remove Chapman and Wang.). And that admission matters, because
Marilyn passed away in August 2011 – more than two years after the FAC alleges
problems with Chapman and Wang were allegedly brought to Rodgers’ attention –
and Rodgers removed Wang and Chapman in early February 2012, a few months
later, once a successor trustee was in place. In short, Rodgers moved to address
concerns regarding the Investment Trustees promptly upon assuming the sole and
beneficial right to do so.4
Those irrefutable facts aside, Grant placed the implications of Marilyn’s death
directly in issue as part of the prior litigation. Marilyn had been married to John
Winthrop (“John”) (General Counsel for WEC) – Grant’s father – but the two had
divorced prior to her death and Grant was their only surviving child.5 And Grant
contended, and apparently continues to contend based on the content of the FAC, that
he assumed his mother’s position as Grantmaking Trustee in the wake of her death.
Based on that unproven contention, he proceeded to launch the bitter and divisive
fusillade of allegations and litigation discussed above, one that unfortunately
consumed the Trust for two-years until what Ms. Rodgers and Mr. Hilf believed was
a court-approved, global settlement reached in late 2013 and approved by the Los
Angeles Superior Court in early 2014.
The byzantine scope of Grant’s and John’s litigation campaign was detailed in
Ms. Rodgers’ previous Motion, but bears mention here. Ms. Rodgers was, in
4 Beyond that, and though not within the strict confines of the Motion, Rodgers
testified unequivocally in deposition on June 11, 2018 that she raised the issue of
Wang’s and Chapman’s compensation with Marilyn on multiple occasions, and
Marilyn would not consider their removal. She could not, in other words, have
effectuated their removal during Marilyn’s lifetime.
5 Marilyn’s and John Winthrop’s other son, Clayton Winthrop, died under unusual
circumstances prior to Marilyn’s own death.
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 11 of 29 Page ID #:1714
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3862938.1 8
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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particular, forced to defend herself and the Foundation against numerous petitions
Grant brought during the dispute, several of which are referenced in the FAC. The
Petitions are attached for the Court’s reference, as well as Objections that
Ms. Rodgers filed to Grant’s Petitions. See Request for Judicial Notice, Exhs. 1, 2, 3,
5, 6, 7 and 8.6 Grant’s precipitous conduct 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. FAC, ¶ 41. That prospective damage
was, Ms. Rodgers believed, cured by the Settlement Agreement, under which Grant
was given the contractual right to designate certain distributees. Specifically, in
exchange for his resignation as a purported Grantmaking Trustee and termination of
all of his beneficial rights in the sub-trusts created by the Trust Composite, Grant
obtained, solely through the Settlement Agreement, the right to designate qualified
charitable recipients to receive disbursements representing approximately 1/3 of the
Foundation’s assets. FAC, Exhibit B, Paragraph 6.
That contractual right was the centerpiece of the WEC’s initial Complaint, and
it remains the linchpin of its claims against Ms. Rodgers in the FAC though with a
new twist. The FAC asserts that the Settlement Agreement somehow modified the
Trust Composite and, in the process somehow elevated the WEC to the status of
Trust Beneficiary – contrary to the law and the plain and inescapable language of the
Agreement, which creates a carefully defined deviation for the disposition of a
specified portion of the Foundation’s assets as Grant’s primary consideration for his
entering the Agreement in exchange for his relinquishment of all of the rights and
powers actually or arguably conferred upon him by the Trust Composite. – .7 FAC,
6 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.
7 This is essentially the same contention found in the original Complaint, which
likewise asserted that the WEC was a beneficiary of the Trust as a consequence of
(Continued…)
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 12 of 29 Page ID #:1715
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3862938.1 9
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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¶ 47. The FAC is little more than a marginally dressed up rehash of the same
contention found in the original Complaint, which likewise claimed that the
Settlement Agreement rendered the WEC a beneficiary. And the WEC’s problem
thus remains the same, namely that regardless of whether one were to consider the
agreement a Trust modification (it is not) rather than directions for the disbursement
of a portion of the Foundation’s funds in settlement of the litigation (which it is),
neither the Settlement Agreement nor Grant’s designation of any qualifying
charitable entity to receive funds somehow magically conferred beneficiary status on
the WEC. The Settlement Agreement, to the contrary, takes pains to circumscribe the
breadth of rights Grant’s designees enjoyed, specifically limiting them to third-party
contractual beneficiaries.
C. The Settlement Agreement And The Dispute Over The Designation
To The WEC
Ms. Rodgers’ previous Motion explained that 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 means someone receiving a gift. But that necessarily excludes
the WEC, which is neither named in the Trust nor even arguably the recipient of a gift
under its terms. The Settlement Agreement – the only instrument under which the
WEC purports to derive any rights – doesn’t change that inevitable result, because it
was instead the product of a bargained for exchange involving consideration. Nor
does the Settlement Agreement suggest, in any manner, that the Trust Composite was
being modified to change the class or identity of Trust beneficiaries. Indeed, a simple
review of terms confirms that precisely the contrary was intended, and effected.
Under those terms, Grant’s various petitions were dismissed, he resigned as
(…Continued)
the Settlement Agreement. The FAC offers the same rationale, but merely takes the
time to allege specifically, again without basis, that the settlement terms resulted in
a Trust modification rendering the WEC a beneficary.
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 13 of 29 Page ID #:1716
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3862938.1 10
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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purported Grantmaking Trustee, and he waived and released any and all rights he had
as a Trust beneficiary. FAC, Exhibit B, ¶ 9. That is, and accepting without conceding
that he ever became a Grantmaking Trustee, Grant relinquished that position
voluntarily as part of the Settlement Agreement and otherwise released any other
claim he otherwise maintained concerning the Trust Composite.8 And, as explained
above, the Trust Composite assigned to the Grantmaking Trustees the sole and
exclusive authority to determine the charitable entities that would receive grants from
the Foundation. In fact, a close reading of applicable case authority does not
necessarily confer beneficial standing on the charitable recipients of the grants (none
of whom are identified in the Trust Composite) – their rights arguably are of a
contractual nature, as well. See e.g., Holt v. College of Osteopathic Physicians &
Surgeons, 61 Cal.2d 750, 753 (1964), see, also, Boys & Girls Club of Petaluma v.
Walsh, 169 Cal.App.4th 1049, 1058 (2008), and Boy Scouts of America v City of
Escondido, 14 Cal.App.4th 189, 195-197 (1971). All of which is to confirm that
Grant’s designations under the Settlement Agreement could not, ipso facto, infuse his
designees with beneficiary status, particularly since Grant had resigned from and
waived any right to assert the role of Grantmaking Trustee long prior to making his
designation of WEC in 2016.
Nor, significantly, does the Settlement Agreement hint or suggest that its terms
wrested from the Grantmaking Trustees the power to name charitable recipients of
grants from the Foundation. In fact, a special process was created for Grant’s
selection of a distributee by which Ms. Rodgers and Mr. Hilf were excluded from
exercising their discretion. Only San Pasqual was provided with the right/power to
disapprove Grant’s designee, and then it was on circumscribed grounds. Settlement
8 The Settlement Agreement in fact permitted Grant to resign as a Grantmaking
Trustee as of the effective date of the Agreement. FAC, para 47. Grant likewise
released any interest he may have had as to in any aspect of the Trust Composite,
and the trusts created under the Trust Composite, including without limitation the
Foundation. FAC, ¶ 20, Exhibit B (page 27).
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 14 of 29 Page ID #:1717
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3862938.1 11
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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Agreement, ¶¶, 3, 6(d). The Settlement Agreement further provided that “San
Pasqual may disapprove in its sole, absolute and unreviewable discretion…” but
Grant, Jane [Ms. Rodgers] and Peter [Mr. Hilf] or San Pasqual may petition the Court
for approval of the charitable organizations such party proposes as ‘Approved
Distributees’.” Settlement Agreement, ¶ 6(f) and (g). Ms. Rodgers thus had no
power or right under the terms of the Settlement Agreement to “approve” of Grant’s
choice(s) of designees.9
The FAC does not allege in that regard that either Ms. Rodgers or Mr. Hilf
exercised any approval rights with regard to WEC’s designation, contends only that
they sought the protection of the Caplin Drysdale opinion letter that San Pasqual
obtained in its due diligence process as to its concern over the effects of the millions
of dollars WEC would receive pursuant to the Settlement Agreement, and thus the
WEC’s satisfaction post-distribution of the criteria set forth in the Settlement
Agreement “as described in I.R.C. §170(c), tax exempt organization under
I.R.C.§501(c)(3), and not a private foundation under I.R.C. §509”10 FAC ¶ 67, p.
22; Settlement Agreement ¶¶ 6(f), (j).
The Settlement Agreement in fact articulates precisely the contrary to that
alleged in the FAC. The Agreement sets forth, for example, that while Grant
9 The Settlement Agreement prescribed three arteries through which the designated
funds would be channeled to recipients. Grant 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, Grant 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. Grant 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 Grant could nominate – subject to San Pasqual’s approval –
recipients for approximately one-third of the Trust assets intended for the Foundation,
in the assets’ various form and as the Trust took possession of them.
10 There were serious ramifications to the Foundation in the event of a violation of
the above-referenced criteria.
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 15 of 29 Page ID #:1718
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3862938.1 12
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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received as consideration for his releases and waivers 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, Grant’s approved designees would
merely be third party contractual beneficiaries, not Trust beneficiaries:
“Notwithstanding any provision of this Agreement, all Approved Distributees
shall be third party beneficiaries of this Agreement for the limited purpose of
enforcing the rights to receive the aforesaid distributions described in this
Agreement, including in Paragraph 6.” FAC, Exhibit B, ¶ 9, pp.18-19.
(Emphasis added.)
The Agreement thus made its intentions clear on this subject, affording Grant’s
Approved Designees – and that’s what the WEC claims itself to be – the right to
enforce the contract provisions as intended beneficiaries of that contract. The FAC
cites to and acknowledges that fact at paragraph 47, but nonetheless and inexplicably
contends elsewhere that this same Agreement somehow conferred on the WEC an
entirely different and wholly irreconcilable set of rights – that of Trust beneficiary.
That allegation makes no sense whatsoever, and finds no support on the face of the
Settlement Agreement itself or the law.11
That said, and setting aside their legal status, the Agreement prescribed a
specific process by which Grant could designate distributees that could then, if the
Settlement Agreement was complied with, become Approved Distributees. The FAC
pays lip service to these steps, alleging generally at Paragraph 48 contends that “the
Settlement Agreement permitted Grant Winthrop to identify to San Pasqual within
ten days up to five Proposed Approved Distributees to receive one-third of the net
assets of the Mac Donald Foundation (the “GGW Charitable Amount”).” FAC ¶ 48.
11 The WEC cannot, as explained below, be a third party contract beneficiary and a
trust beneficiary for purposes of the distributions Grant ultimately pegged it to
receive, because the basis for enforcement of its rights would be dichotomous and
inconsistent.
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 16 of 29 Page ID #:1719
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3862938.1 13
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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The Agreement is far more specific, in fact, and provides that:
Paragraph 6.e. Within ten (10) business days after the date of this
Agreement, or such later time to which San Pasqual, Jane and
Peter F. may unanimously consent in writing, Grant shall identify
to San Pasqual in writing the “Proposed Approved Distributees,” to
which Grant proposes receive the transfer of the GGW Charitable
Amount.” The “Proposed Approved Distributees” may consist of
more than one charitable organization. Grant may propose up to five
(5) charitable organizations, and specify his order of preference…. If
Grant does not timely provide this written designation, then the
procedure for court approval in subpart (g) shall apply…
Paragraph 6.g. Upon the occurrence of any of the circumstances in
subparts (e) or (f) for seeking court approval, Grant, Jane, Peter F. or
San Pasqual may petition the Court for approval of the charitable
organization(s) such party proposes as “Approved Distributees.” The
issue for the Court will be the same as it was for San Pasqual under
subpart (f), that is, whether the Proposed Approved Distributees are
qualified charities as described in I.R.C. §170(c), are tax exempt
organizations under I.R.C.§501(c)(3), are not “private foundations”
under I.R.C.§509, and will provide such acceptances, assurances and
confirmations which the Court deems prudent to assure compliance
with applicable law. The Court will review the issue de novo, as
opposed to whether San Pasqual abused discretion in disapproving.
However, the Court shall give preference to Grant’s selection of the
Proposed Approved Distributees if they meet the foregoing criteria.
The finality of the Court’s order shall constitute an “Effective
Designation” for the purposes of subpart (d).
Grant was required, in short, within specified time periods, to identify to San
Pasqual up to five charitable organizations under paragraph 6.e to receive the
amounts which he was permitted to allocate. If those designations were made, Grant,
San Pasqual, Ms. Rodgers or Mr. Hilf could petition the Court in accordance with
paragraph 6.g for approval of one or more of Grant’s designees as an “Approved
Designee.” But neither action occurred, something that is clear on the face of the
FAC – which notably omits any allegations that Grant complied with either of
paragraphs 6.e or 6.g of the Settlement Agreement.
Instead, long after the time periods specified in the Settlement Agreement
had elapsed, Grant and San Pasqual – whom the Settlement Agreement charged with
the responsibility of vetting the designees and ensuring they were qualified charities
under §170(c) of the Internal Revenue Code – ultimately engaged in a lengthy
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 17 of 29 Page ID #:1720
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3862938.1 14
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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discourse over the propriety of Grant’s selected charities, something the FAC
describes in detail. The Foundation 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 – and Grant’s designees thus had to be
public charities, and confined as such. I.R.S. § 4945(d)(4). San Pasqual and the
WEC devoted considerable time explaining that question.12
Indeed, the FAC devotes – as did its predecessor – pages to the finite details of
San Pasqual’s discharge of its vetting 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 organization under I.R.C. § 501(c)(3), and not a private charity
under I.R.C. § 509. FAC, ¶ 48. The WEC proceeds to allege that San Pasqual
rejected one of Grant’s initial and primary designee because it concluded that receipt
of the designated funds would “tip” the designee into private charity status. Having
relinquished any claim to the Trust and his alleged position of Grantmaking Trustee,
Grant exercised his contractual right 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 FAC
acknowledges that funds were ultimately distributed in accordance with the
designation. FAC, ¶ 61. San Pasqual additionally approved the AEF to receive the
contractually prescribed amount Grant could designate from his mother Marilyn’s
12 Ms. Rodgers and Mr. Hilf have no role in assessing the eligibility of any designee
of Grant to receive funds – that is the sole province of San Pasqual. The only right
the two were afforded that intersected with Grant’s designation rights is found in the
Settlement Agreement at ¶ 6(k), which controlled the grantmaking functions pending
approval of the Settlement Agreement by the Los Angeles Superior Court in order
to meet the Foundation’s minimum required annual charitable distributions under the
I.R.C. This provision was obsolete after court approval of the Settlement Agreement,
fully two and a half years before Grant designated WEC. In any event, Ms. Rodgers
did not object to the WEC as a recipient, in the wake of the Opinion Letter attached
as Exhibit D to the Complaint.
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 18 of 29 Page ID #:1721
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3862938.1 15
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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trust. FAC, ¶ 55.
In September 2015, however – more than 2.5 years after Grant was obligated to
name the Approved Distributees – in an action bearing no relation whatsoever to the
Settlement Agreement or the Trust Composite, AEF assigned to WEC its “rights and
interests in and to the assets to be distributed to AEF as an ‘Approved Distributee’
and ‘Marilyn’s Estate Approved Distributee’ under the terms of the Settlement
Agreement.” [Emphasis added.] The language of that assignment is telling because
AEF transferred its rights to the “assets” and did not purport to assign any “beneficial
rights” to the WEC – because it did not have any such beneficial rights.13 The WEC
informed San Pasqual of this assignment on October 14, 2015. To protect the
Foundation, San Pasqual was obligated to ensure that the WEC was a charity eligible
for designation and distribution in accordance with the Agreement. FAC, ¶ 62. But
Grant did nothing initially, instead waiting until July 26, 2016 to belatedly designate
WEC as his Proposed Approved Distributee and Marilyn’s Estate Approved Distributee”
FAC ¶ 64.
Nor did not Grant obtain Ms. Rodgers’ and Mr. Hilf’s “written consent” to this
untimely designation, as clearly required by the Settlement Agreement (¶ 6.e). What
followed, according to the FAC, was a letter writing campaign aimed at securing
approval for the designation, one that culminated in the WEC’s counsel authoring a
June 30, 2017 Opinion Letter purportedly assuring San Pasqual that receiving the
designated amount would not impair the WEC’s status as a public charity. FAC,
¶¶ 63-71, and Exhibit D. That Opinion Letter satisfied San Pasqual, which approved
the designation. Ms. Rodgers, for her part, did not object in the wake of the Opinion
Letter, and was not prepared to stand in the way of the WEC receiving the distribution
Grant designated to it.
13 In any event, even if the AEF had received beneficial rights (it did not), it never
assigned such rights to the WEC.
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3862938.1 16
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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The WEC filed this litigation in August 2017, almost immediately after the
issuance of the Opinion Letter. But what’s also notable, for our purposes, in the
FAC’s recitation of the AEF-WEC-San Pasqual odyssey are two things. First, Grant
plainly did not designate the WEC in conformity with the terms of the Settlement
Agreement – he did not name his designees within 10 days of the “Effective Date,” as
paragraph 6.e provides, nor did he seek or obtain Court approval in the wake of a
timely designation, which paragraph 6.g demands. Accordingly, whatever status the
WEC enjoys is not one prescribed or sanctioned by the Settlement Agreement, and
certainly not by the Trust Composite. Second, paragraph 76 of the FAC
acknowledges that San Pasqual has distributed funds to the WEC, raising the ever
present question of why this litigation is consuming the Court’s time and the parties’
resources.14 In other words, this entire action boils down to nothing more than an
accounting dispute.
The WEC, with John as its General Counsel, (and Grant) nonetheless insist on
charging ahead. More particularly, and despite this Court’s detailed and
comprehensive Order granting Ms. Rodgers’ Motion to Dismiss, and extending the
WEC a narrow window through which to amend -- that the plain face of the
Settlement Agreement and the Trust Composite close irreversibly -- the FAC persists
in naming Ms. Rodgers in a single count of breach of fiduciary duty, despite the clear
and unambiguous fact that the WEC is not a beneficiary under the Trust. There is, in
short, no basis in law or fact for her continued inclusion in this action, and she must be
dismissed from it immediately, this time with prejudice.
14 The WEC conveniently declines to cite the amount of money it has received, but
for the Court’s edification it has admitted in discovery responses that the amount is
approximately $8.3 million. Placed in context, the WEC is forcing Ms. Rodgers to
incur thousands of dollars in fees, not to mention emotional anxiety and precious
time, when it’s already received in excess of $8 million in distributions. This entire
litigation, simply put, makes no sense.
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 20 of 29 Page ID #:1723
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3862938.1 17
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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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. Moreover, the Court need not
accept as true allegations that contradict matters properly subject to judicial notice,
nor must it assume that allegations contradicted by the exhibits attached to the
complaint are true. See e.g., Sprewell v. Golden State Warriors, 266 F.3d 979, 988
(9th Cir. 2001).
Applying these standards here, the WEC’s Complaint cannot survive.
IV. THE WEC IS NOT A BENEFICIARY OF THE TRUST, AS THIS
COURT HAS ALREADY FOUND, AND THE FAC DOES NOT AND
CANNOT CHANGE THAT
A. The Trust Composite Does Not Name The WEC As A Beneficiary.
The FAC, like the initial iteration of the pleading, names Ms. Rodgers in a
single count for breach of fiduciary duty. Thus, the WEC must plead and prove: (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
breach. See e.g., City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
68 Cal.App.4th 445, 483 (1999). In our case, that showing demands that the WEC
demonstrate that it is a beneficiary of the Trust, because in the absence of that
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 21 of 29 Page ID #:1724
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3862938.1 18
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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showing Ms. Rodgers owes no fiduciary duty to it and the claim must fail. But the
WEC’’s initial Complaint failed precisely because the record it laid established the
opposite proposition – namely, the WEC is not a Trust beneficiary. The FAC fares no better.
Ms. Rodgers’ prior Motion explained, in straightforward terms, why the WEC
is not, and cannot be, a beneficiary of the Foundation (a charitable trust) and why it
therefore lacks standing to assert its claim against Ms. Rodgers. The Probate Code,
at § 24, defines a beneficiary as a “person to whom a donative transfer of property is
made or that person’s successor in interest … (c) as it relates to a trust, means a
person who has any present or future interest, vested or contingent; and (d) as it
relates to a charitable trust, includes any person entitled to enforce the trust.”
That means, in simple terms, a person receiving a gift under the terms of the
trust itself, and one who is entitled to enforce the trust under its terms. . See, also,
Boys & Girls Club of Petaluma, supra, 169 Cal.App.4th at 1058. And this statutory
construct perforce excludes the WEC, whose claim admittedly derives from the
contract rights Grant negotiated and received under the Settlement Agreement, not the
Trust.
The WEC argued, in opposing Ms. Rodgers’ Motion, that § 24 was sufficiently
elastic to embody parties with some kind of ill-defined “special interest” in a Trust ,
and thus it – as a party designated under the Settlement Agreement to receive funds –
could be considered a beneficiary. This Court made quick work of that argument in
its June 6, 2018 Order, however, finding instead that California law narrowly
circumscribes this definitional regime, limiting the class of beneficiaries to those
“having some definite interest in the property – he must be a trustee, or a cestui, or
have some reversionary interest in the trust property.”15 See Order [Doc. 58], p. 7 of
15 As the Court explained in its Order, the term “cestui que trust” is defined as
‘[s]omeone who possesses equitable rights in property . . . receiving the rents, issues
and profits from it[.]” Cestui que trust, Black’s Law Dictionary, (10th Ed. 2014).
As the Court also observed, the WEC does not claim, nor cite any authority for the
(Continued…)
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 22 of 29 Page ID #:1725
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3862938.1 19
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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12, citing Holt, supra, 61 Cal.2d at 753. The Court went on to cite various additional
decisional authority confirming the unambiguous state of the law, including Boy
Scouts of America, supra, 14 Cal.App.4th at 195-197, which emphasized – in language
the Court cited in its Order – that standing under § 24 was conferred to those persons
who were identified as beneficiaries in the charitable trust (there, the Boys Scouts in
the vicinity).
Boy Scouts’ progeny affirms its limitation on conferring beneficiary status
under a Trust. In Boys & Girls Club of Petaluma v. Walsh, 169 Cal.App.4th 1049
(2008), for example, the Court confronted yet again the parameters of § 24, and again
found it limited to those identified in the instrument itself. The trust settlor there – of
an irrevocable charitable trust – named five charitable beneficiaries, and terms of the
trust required that it terminate ten years after the grantor’s death. The successor
trustees, both before and after termination, 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. But a
dispute later arose as to whether a writing naming numerous other charitable entities
expanded the potential beneficiaries of the charitable trust. The Probate Court found
that the writing did not expand the class of beneficiaries, because it was not within
the confines of the Trust instrument, which named the five beneficiaries who were
thus and exclusively 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
(…Continued)
proposition that, it maintains any equitable interest in the property it claims San
Pasqual should distribute it. See Order [Doc. 58], fn. 8.
Case 2:17-cv-05879-DMG-JC Document 64 Filed 07/17/18 Page 23 of 29 Page ID #:1726
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3862938.1 20
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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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.]
The law is therefore clear – to fall within the definition of beneficiary under
§ 24, and to claim breaches of fiduciary duties as against Trustees, one must be
named or identified in the Trust instrument itself. All others are legal strangers to the
Trust, and not its beneficiaries.
The Court, in harmony with this principle, granted Ms. Rodgers’ previous
Motion to Dismiss, because the WEC’s contractual benefits arising under the
Settlement Agreement do not confer on it the right to enforce the Trust Composite and
do not render it a Trust beneficiary. The Court, in granting leave to amend, explained
the finite needle the WEC was compelled to thread, observing that the potential
amendment would prevail only if “Plaintiff can allege that – notwithstanding
Defendant San Pasqual’s alleged refusal to recognize Plaintiff as an Approved
Distributee under the Settlement Agreement – Plaintiff was selected as a beneficiary
pursuant to the provisions of the Trust Composite.” See Order [Doc. 58], page 8 of 12.
The FAC does not allege any facts conforming to the Court’s direction. Indeed,
the WEC has apparently abandoned any claim that it derives any rights from the Trust
Composite, or that its right to distribution finds any support in the terms of the
instrument. That is to say, the FAC does not satisfy the standard the Court set for any
amendment as to the claim against Ms. Rodgers. The WEC instead floats an entirely
new theory in a last-ditch attempt to salvage its claims, alleging that the Settlement
Agreement amended the Trust Composite and that amendment assigned the WEC
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3862938.1 21
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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beneficiary status. For the reasons explained below, this eleventh hour invention must
meet the same fate as the WECs other assertions.
B. The Settlement Agreement Does Not Make, And Cannot Make, The
WEC A Beneficiary Of The Trust
The amendment of the Trust Composite, and more to the point whether the
court order approving the Settlement Agreement effected an amendment, is a question
determined under Section 15409 of the Probate Code.16 Ms. Rodgers does not agree
that the settlement amended the Trust or was intended to do so (only that it permitted
disbursement of Foundation funds in a prescribed manner to end the litigation), but we
need not reach that question because regardless of its disposition, the fact remains that
the terms of the Settlement Agreement itself provide clearly that Grant’s Approved
Designees are contract and not trust beneficiaries. In short, even assuming arguendo
that the Trust had been amended (it was not), that amendment doesn’t help the WEC
in the assertion of its fiduciary duty claim against Ms. Rodgers.
To start, the FAC’s allegations in this regard must be analyzed under the
prevailing rules of contractual construction, given that the WEC is asserting that the
Settlement Agreement – and not the Trust Composite – serves as textual support for
its purported status as a Trust beneficiary, and thus the determination of that question
rests on the language of the Agreement. And California law on contract
interpretation is well-settled. The language of the agreement itself “ is to govern its
interpretation, if the language is clear and explicit, and does not involve an
absurdity.” Civ. Code § 1638. When a contract is written, “the intention of the
parties is to be ascertained from the writing alone, if possible . . .” Civ. Code § 1639.
Those words, in turn, are “to be understood in their ordinary and popular sense, rather
than according to their strict legal meaning; unless used by the parties in a technical
16 The FAC is devoid of any assertion that the Trust was amended pursuant to
Probate Code section 15409, as such an assertion is not tenable.
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3862938.1 22
DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED [FRCP 12(b)(6)]
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sense, or unless a special meaning is given to them by usage, in which case the latter
must be followed.” Civ. Code § 1644. Further, the agreement is to taken and
construed as whole, so “as to give effect to every part, if reasonably practicable, each
clause helping to interpret the other.” Civ. Code § 1641. Moreover, where contract
language “is clear and explicit and does not lead to absurd results, we ascertain intent
from the written terms and go no further.” Ticor Title Ins. Co. v. Employers Ins. of
Wausau 40 Cal.App.4th 1699, 1707 (1995).
Applying those principles here, the FAC cannot withstand even cursory
review. Most compelling, the plain language of paragraph 9 of the Settlement
Agreement entirely settles the issue, providing that “all Approved Distributees shall
be third party beneficiaries of this Agreement for the limited purpose of enforcing
the rights to receive the aforesaid distributions described in this Agreement,
including in Paragraph 6.” FAC, Exhibit B, ¶ 9, pp.18-19. (Emphasis added.). If
that doesn’t constitute an emphatic and unambiguous assertion of the import of the
Agreement, and the intended status distributees would enjoy, it’s difficult to imagine
what would qualify as such.17 That alone puts to rest the WEC’s contention as to its
status, and demands the dismissal of its count against Ms. Rodgers.
That dispositive language aside, the FAC does not cite a single clause from the
Settlement Agreement providing that the parties intended any Approved Distributees
to become Trust beneficiaries. There is no such provision, of course, explaining the
WEC’s failure to direct the Court to any contractual language lending support to its
17 We note that in ascertaining the parties’ intent, the Court must base its
construction on the objective intent evidenced by the words of the instrument –
subjective and unexpressed intent is irrelevant to contract interpretation. See Shaw
v. Regents of the University of California, 58 Cal.App.4th 44, 54-55 (1997)
(“Although the intent of the parties determines the meaning of the contract (Civ.
Code, §§ 1636, 1638), the relevant intent is ‘objective’—that is, the objective intent
as evidenced by the words of the instrument, not a party’s subjective intent.”
Accordingly, Grant may not later claim his intent was to confer beneficiary status on
his designees, because that intent is not reflected on the face of the Settlement
Agreement and is, in fact, contravened categorically by paragraph 9.
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DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
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conclusory legal allegation. In fact, the allegation is defied by the content of the
Settlement Agreement – aside from the recitation of distributees as third party
beneficiaries – and must be disregarded as a result. See Sprewell, supra. The Trust
Composite, as explained, vested in the Grantmaking Trustees the right to determine
beneficiaries. But Grant, to the extent he ever became a Grantmaking Trustee,
resigned that status on the effective date of the Settlement Agreement (long before he
designated the WEC as an Approved Distributee) and Grant additionally agreed that
he “shall have no further standing with regard to either the Foundation or the
Survivor’s Trust, under any circumstance.” FAC, Exhibit B, pp. 18-19. (Emphasis
added.) Consequently, when Grant later designated the AEF – and much later still,
the WEC – to receive distributions, he could not have been exercising any authority
under the Trust because he had knowingly relinquished any such authority in the
Settlement Agreement years earlier. He was instead employing his contract rights –
for which he bargained and parted with consideration to receive, in the antithesis of
the gift at the core of the definition of beneficiary under § 24 – under the Agreement,
the only rights he maintained following the effective date of the Settlement
Agreement. And the WEC, by corollary, is limited in the same respect, because its
rights are derived solely from those of Grant. Simply put, if Grant lacked the
authority as a Grantmaking Trustee to name beneficiaries – and he indisputably did –
then his designation of the AEF and the WEC could not have rendered them
beneficiaries as an unavoidable matter of law.18
Beyond all that, the FAC’s allegations would create an impermissible
18 Nor does the Settlement Agreement suggest, anywhere, that the parties’ intent
was to confer beneficiary status on the “Approved Designees”, such that they
became beneficiaries as the time of the Agreement and thus were somehow vested
with that designation before Grant identified them. The Agreement, as noted, makes
clear all Approved Designees were and are third party contract beneficiaries, and
Grant could not have changed that once the Agreement was signed and he released
all his rights in the Trust Composite.
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DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
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absurdity, one that would necessitate the wholesale disregard of the clear implications
of the Settlement Agreement’s terms. The WEC, in acknowledging the third party
beneficiary language at paragraph 9 of the Agreement, must therefore be asserting
that it simultaneously stands as both a contract and a trust beneficiary.19 But as the
rights of a trust beneficiary are greater than those of a third party beneficiary to the
Settlement Agreement, the WEC would, if it had the right to do so, plainly have
chosen to enforce its statutory rights under Probate Code § 24. The parties to the
Settlement Agreement made a deliberate decision to create a class of contract
beneficiaries, and it is those derivative contract rights the WEC is purporting to
vindicate here. To suggest otherwise would negate the import of Paragraph 9 to the
Settlement Agreement and render it a nullity, and for a term found nowhere in the
Settlement Agreement to instead govern the WEC’s rights. And that construction not
only requires a flight from common sense, it would compel the Court to ignore
provisions written into the Settlement Agreement in favor of an interpretation – i.e.,
that the parties somehow intended Approved Distributees to be beneficiaries of the
Trust – that finds no textual support. Doing so contravenes the rules prohibiting an
interpretation that fails to give meaning to contractual language or which creates
absurd results. See Civil Code §§ 1636 and 1638. The WEC’s apparent position
does both. It must be disregarded in light of the terms of the Settlement Agreement
and the law.
C. In Any Event, Grant Failed To Comply With The Terms Of The
Settlement Agreement, And Thus The WEC Could Not Have Become
An “Approved Distributee” Under Its Terms
As a final matter, and again accepting without conceding that the Settlement
Agreement purported to amend the Trust, the WEC’s claim to beneficiary status still
19 Given the clear language of paragraph 9, the FAC’s contention that it is a Trust
beneficiary as a result of the Settlement Agreement cannot be interpreted otherwise.
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DEFENDANT JANE RODGERS’ NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED
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fails because Grant did not comply with the Agreement’s conditional requirements
for designating distributees. The Agreement, as noted, required Grant at Paragraph
6.e to name his proposed “Approved Destributee” within 10 days of the Effective
Date or, if later, with the approval of San Pasqual, Ms. Rodgers and Mr. Hilf. After
that designation, Grant had the right to petition the Probate Court for approval of his
named distributee, under Paragraph 6.g of the Agreement.
As explained above, however, none of this ever happened. Grant did not
designate WEC or AEF as his distributee within 10 days of the Settlement
Agreement, did not seek or obtain Ms. Rodgers’ approval before naming the either
AEF or the WEC, and did not obtain Court approval for his designations once he
belatedly made them. Thus, even if we accept that the Settlement Agreement
modified the terms of the Trust Composite, and even if we suspend disbelief and the
application of the words of the Agreement and conclude that a party denoted
specifically as a “third party beneficiary” somehow became a beneficiary of the
Trust, WEC’s path to receipt of the funds from the Foundation materially departed
from the terms of the Agreement.
V. CONCLUSION
For the foregoing reasons, Ms. Rodgers respectfully requests that the Motion
be granted in its entirety, with prejudice.
DATED: July 17, 2018 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 64 Filed 07/17/18 Page 29 of 29 Page ID #:1732
