Elder v. Whitney Bank

MOTION to Dismiss For Failure to State a Claim

W.D. La.January 20, 2017

1 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA CHAD Y. ELDER CIVIL ACTION NO. 17-cv-00036 Plaintiff JUDGE TRIMBLE vs. MAGISTRATE PEREZ-MONTES WHITNEY NATIONAL BANK Defendant MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM UNDER FED. R. CIV. P. 12(b)(6) FILED BY WHITNEY BANK Defendant, Whitney Bank (incorrectly identified as Whitney National Bank), defendant herein and trustee of the Chad York Elder Class Trust, files this Motion to Dismiss for Failure to State a Claim pursuant to Fed. R. Civ. P. (“Rule”) 12(b)(6). Plaintiff, Chad Y. Elder (“Plaintiff” or “Elder”), filed three separate claims against Whitney Bank. The following is a summary of the claims and the grounds for dismissal under Rule 12(b)(6): 1. Termination: Plaintiff requests the CYE Class Trust be terminated pursuant to La. R.S. 9:2026(1) and/or La. R.S. 9:2027, but has failed to plead any grounds for termination thereunder. 2. Principal Distribution: In paragraph XII, Plaintiff requests that the principal of the CYE Class Trust be distributed to Plaintiff-even though Plaintiff is the income beneficiary and has no right to the trust principal. 3. Damages: Plaintiff claims that, “[a]s a result of the inability to avail himself fairly of any benefits from either trust he has suffered damages… .” Plaintiff does not plead that Whitney Bank’s conduct caused these damages. At most, Plaintiff’s complaint claims that Whitney Bank (as trustee) complied with settlor’s wishes and its duties under the CYE Class Trust Instrument. As such, Plaintiff does not plead Whitney Bank breached a duty; therefore, Plaintiff has failed to state a claim for damages. Case 1:17-cv-00036-JTT-JPM Document 6 Filed 01/20/17 Page 1 of 2 PageID #: 24 2 For these reasons and for the reasons set forth in t e attached memorandum in support and exhibits, which are incorporated herein by reference, Whitney Bank prays that the Court dismiss Plaintiff’s complaint with prejudice pursuant to Rule 12(b)(6). Respectfully submitted /s/ Brandon K. Black Brandon K. Black (La. Bar No. 24298) Michael R. Rhea (La. Bar No. 34722) Jones Walker LLP 8555 United Plaza Blvd. Four United Plaza, Fifth Floor Baton Rouge, LA 70809 Tel: (225) 248-2128 Fax: (225) 248-3128 bblack@joneswalker.com Counsel for Defendant Whitney Bank CERTIFICATE OF SERVICE I hereby certify that on the 20th day of January, 2017, I e-mailed the below persons and electronically filed the foregoing pleading with the Clerk of the Court using the Court's CM/ECF system, which sent electronic notifications to: Mark Jeansonne 2472 Main / P.O. Box 301 Hessmer, LA 71341 jeansonnelaw@yahoo.com Counsel for Plaintiff, Chad Elder s/ Brandon K. Black Brandon K. Black Case 1:17-cv-00036-JTT-JPM Document 6 Filed 01/20/17 Page 2 of 2 PageID #: 25 1 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA CHAD Y. ELDER CIVIL ACTION NO. 17-cv-00036 Plaintiff JUDGE TRIMBLE vs. MAGISTRATE PEREZ-MONTES WHITNEY NATIONAL BANK Defendant MEMORANDUM IN SUPPORT OF MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM UNDER FED. R. CIV. P. 12(b)(6) FILED BY WHITNEY BANK Respectfully submitted /s/ Brandon K. Black Brandon K. Black (La. Bar No. 24298) Michael R. Rhea (La. Bar No. 34722) Jones Walker LLP 8555 United Plaza Blvd. Four United Plaza, Fifth Floor Baton Rouge, LA 70809 Tel: (225) 248-2128 Fax: (225) 248-3128 bblack@joneswalker.com Counsel for Defendant Whitney Bank Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 1 of 26 PageID #: 26 i TABLE OF CONTENTS I. PLAINTIFFS’ ALLEGATIONS AND TRUST PROVISIONS ................................... 1 A. Summary of Allegations and Important Trust Provisions .......................... 2 B. Summary of the Claims in the Complaint ........................................... 4 II. LAW AND ARGUMENT ............................. .................................................... 4 A. Rule 12(b)(6) Standard. ................................................................... 4 B. Trusts: Louisiana Law ..................................................................... 5 1. General Trust Law ........................................................................ 5 2. Trust Indestructibility ............................................................... 6 C. Plaintiff Has Failed to State a Claim for Termination of the CYE Class Trust Upon Which Relief Can be Granted. ............................ 6 1. La. R.S. 9:2026-Change in Circumstances ........ ..................... 7 2. La. R.S. 9:2027-Accomplishment of Purposes Becoming Impossible or Illegal ................................................................ 8 3. Louisiana Case Law--Trust Termination ................................. 8 4. Plaintiff Has Failed to State a Claim for Termination of the CYE Class Trust. ................................................................ 9 5. Conclusion-Termination of the CYE Class Trust ...................... 19 D. Any Claim of Plaintiff to the Trust Principal Should Be Dismissed. ....... 19 E. Plaintiff Has Failed to State a Claim For Damages. ................................ 20 III. CONCLUSION ............................................................................................. 20 Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 2 of 26 PageID #: 27 ii TABLE OF AUTHORITIES CASES Albritton v. Albritton, 600 So.2d 1328, 1332 (La. 1992) ........................................................................ 6 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ..................................................... 4, 5 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1953, 1974 (2007) ....................................................... 4, 5 Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004) ................. 2 Collins v. Morgan Stanley, 224 F.3d 496, 498 (5th Cir. 2000) ......................................... 2 Elliott v. Foufas, 867 F.2d 877, 881 (5th Cir. 1989) .................................................... 5 In re Guidry Trust, 713 So.2d 631, 633 (La. App. 3 Cir. 1998) .................................... 5, 6 Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir. 1992) ........................................ 5 Harriss v. Concordia Bank & Trust, 265 So.2d 330, 332- 33 (La. App. 3 Cir. 1972) ....... 9 In re James C. Atkinson Clifford Trust, 762 So.2d 775, 776 (La. App. 1 Cir.), writ denied, 772 So.2d 655 (La. 2010) .............. 5, 7 In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) ........................... 2 In re Mashburn Marital Trusts, 951 So.2d 1136 (La. App 1 Cir. 2006), writ denied, 954 So.2d 164 (La. 2007) ................ 7 McLendon v. First National Bank, 299 So.2d 407, 410(La. App. 2d Cir. 1974) .............. 6 In re Succession of McLean, 580 So.2d 935 (La. App. 2 Cir.), writ denied, 584 So.2d 682 (La. 1991)........................ 14 In re Succession of Noe, 398 So.2d 1173, 1177 (La. App. 2 Cir.), writ denied, 405 So.2d 530 (La. 1981) .............. 9 Roberts v. Benoit, 605 So.2d 1032, 1041 (La. 1991) ................................................... 20 Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 3 of 26 PageID #: 28 iii In re Succession of Wilkerson, 9 So.3d 1058, 1061 (La. App. 2 Cir.), writ denied, 10 So.3d 741 (La. 2009) ................ 5, 8 U.S. ex rel. Williams v. C. Martin Company, Inc., 2012 WL 1565279 *3 (E.D. La., May 1, 2012) ........................................................... 4 STATUTES Fed. R. Civ. P. 8(a)(2) ................................................................................................ 4 Fed. R. Civ. P. 12(b)(6) .....................................................................................1, 4, 20 49 CFR Part 40 .................................................................................................... 3 La. R.S. C.C. art. 1572 ......................................................................................... 8 La. R.S. 9:1731 ................................... ................................................................. 5 La. R.S. 9:1802 ................................... ................................................................. 8 La. R.S. 9:2026(1) .............................................................................. 4, 6-8, 10-14, 17, 19 La. R.S. 9:2026(2) ...................................................................................................... 7 La. R.S. 9:2027 ................................... ........................................ 4, 6, 8, 10-14, 17, 19 La. R.S. 9:2028 ................................... ................................................................. 6 La. R.S. 9:2029 ................................... ......................................................... 16, 19 La. R.S. 9:2082 ................................... ............................................................... 15 La. R.S. 9:2086 ................................... ............................................................... 13 La. R.S. 9:2181 ................................... ............................................................... 12 La. R.S. 9:2191 ................................... ............................................................... 12 La. R.S. 9:2251 ................................... ............................................... 13, 15-16-19 Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 4 of 26 PageID #: 29 iv TREATISES 1 La. Law Rev. 774 (778) ........................................................................................... 6 La. Civil Law Treatise, Trusts, §5.10 (2016) ............................................................ 12 La. Civil Law Treatise, Trusts, §7.6 (2016) .............................................................. 19 Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 5 of 26 PageID #: 30 1 MAY IT PLEASE THE COURT: Defendant, Whitney Bank (incorrectly identified as Whitney National Bank), defendant herein and trustee of the Chad York Elder Class Trust, files this Memorandum in Support of Motion to Dismiss for Failure to State a Claim pursuant to Fed. R. Civ. P. (“Rule”) 12(b)(6). Plaintiff, Chad Y. Elder (“Plaintiff” or “Elder”), seeks to “terminate” the Chad York Elder Class Trust (“CYE Class Trust”) under Louisiana law. Plaintiff has pleaded no grounds for termination of the trust. In addition, Plaintiff seeks damages allegedly caused by Whitney Bank’s strict adherence to its duties as set forth in the CYE Class Trust Instrument. Since Plaintiff does not allege that Whitney Bank caused the damages and merely alleges that Whitney Bank complied with the settlor’s intention and its duties under the trust instrument, Plaintiff is not entitled to damages because Plaintiff does not allege a breach of a duty. In addition, Plaintiff seeks to terminate the CYE Class Trust, and then have the princi al in the trust transferred to Plaintiff, even though Plaintiff is not the principal beneficiary of the trust. Under the Louisiana law, if the trust is terminated, the principal beneficiaries are entitled to the trust principal, not Plaintiff- who is the income beneficiary. For the following reasons, Plaintiff has failed to state a claim upon which relief can be granted. Whitney Bank is entitled to the dismissal of Plaintiff’s complaint pursuant to Rule 12(b)(6). I. PLAINTIFFS’ ALLEGATIONS AND TRUST PROVISIONS Documents attached to a complaint and documents referenced in the pleadings and central to the claims may be considered part of the pleadings in conjunction with a ruling on a Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 6 of 26 PageID #: 31 2 Rule 12(b)(6) motion to dismiss.1 As such, the following is a summary of the allegations in the complaint and the important provisions of the CYE Class Trust Instrument, which is repeatedly referenced in the complaint. A. Summary of Allegations and Important Trust Provisions In the complaint, Plaintiff alleges that his father, Joe D. Elder, Jr. (“settlor”) established an “Irrevocable Inter Vivos Trust” called the CYE Class Trust on December 20, 2007. Complaint, ¶IV. Plaintiff alleges settlor died on October 10, 2011. Complaint, ¶VII. The Trustee of the CYE Class Trust is alleged to be Whitney Bank. Complaint, ¶1. The CYE Class Trust is an “irrevocable” trust. Complaint, ¶IV; Exhibit 1 (Trust Instrument, Art. VII). The income beneficiary of the CYE Class Trust is Plaintiff. Complaint, ¶IX; Exhibit 1 (Trust Instrument, Art. 3.1). According to Article 3.2 of the Trust Instrument, “[p]rovided that the prerequisite required under Section 3.4 hereinbelow is met, the TRUSTEE must distribute to the Income Beneficiary or expend for his benefit, all of the net income of the TRUST at least annually….Any amount of net income that is not distributed due to a failure of the Income Beneficiary to meet the prerequisite required under S ction 3.4 hereinbelow will be accumulated, unless otherwise provided by law.” Exhibit 1 (Trust Instrument, Art. 3.2). “Any accumulated income may be distributed to the Income Beneficiary t later date if the prerequisite under Section 3.4 has been met at such later date, in the sole discretion of the TRUSTEE.” Id. at Art. 3.2. According to Article 3.4, “[a]s a prerequisite to any distributions under this Article III, the Beneficiary shall undergo drug testing in order to confirm that the beneficiary is not at that time engaging in the illegal use of drugs.” Id. at Art. 3.4. “TRUSTEE shall have the sole 1 Collins v. Morgan Stanley, 224 F.3d 496, 498 (5th Cir. 2000); Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004); In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 7 of 26 PageID #: 32 3 discretion to determine the nature and extent of these tests, including a determination to discontinue the requirement of drug testing as a prerequisite to making distributions.” Id. “Provided, however, as a minimum, that the tests conducted shall be in accordance with the procedures promulgated by the Federal Motor Carrier Administration (49 CFR Part 40) or any similar regulations promulgated by any similar federal government entity (exclusive of any reporting or disclosure requirements thereunder).” Id. “Furthermore, TRUSTEE may require satisfactory results of more comprehensive testing, such as hair and nail testing, as prerequisite to distributions” Id. “If the TRUSTEE is not satisfied with the test results, the TRUSTEE is directed to withhold distributions under this Article III until such time as the Beneficiary can pass tests acceptable to TRUSTEE.” Id. Thus, Plaintiff must pass a drug test to be entitled to distributions f income under the CYE Class Trust. Also according to the CYE Class Trust, the principal beneficiaries are “all children of Chad York Elder who are born or conceived before the death of Chad York Elder, and exclusive of any children adopted by Chad York Elder.” Id. at Art. 4.2. The termination provisions of the trust call for the following: (1) for principal beneficiaries who are 28 years old or older, then the trust shall terminate with respect to said beneficiaries and all amounts shall be distributed to said beneficiaries within 9 months after the death of the income beneficiary (Plaintiff); (2) for principal beneficiaries who are younger than 28 years old at the death of the income beneficiary (Plaintiff), then the trust will terminate and all amounts shall be distributed to those beneficiaries upon reaching the age of 28. Id. at Art. 5.3. Finally, Article 5.6 mandates “[e]ach TRUST shall terminate upon the distribution of all of the accumulated income and principal of the TRUST.” Id Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 8 of 26 PageID #: 33 4 In sum, Plaintiff is the income beneficiary for his l fe (assuming he passes a drug test before each distribution), and upon Plaintiff’s death, the trust will terminate for each of his children, as principal beneficiaries, when the children turn 28 years old. Under the CYE Class Trust, Plaintiff is NOT entitled to the principal of the trust. B. Summary of the Claims in the Complaint The following summarizes the claims asserted in the complaint: 1. Termination: Plaintiff requests the CYE Class Trust be terminated pursuant to La. R.S. 9:2026(1) and/or La. R.S. 9:2027, but has failed to plead any grounds for termination thereunder. 2. Principal Distribution: In paragraph XII, Plaintiff requests that the principal of the CYE Class Trust be distributed to Plaintiff-even though Plaintiff is the income beneficiary and has no right to the trust principal. 3. Damages: Plaintiff claims that, “[a]s a result of the inability to avail himself fairly of any benefits from either trust he has suffered damages… .” Plaintiff does not plead that Whitney Bank’s conduct caused these damages. At most, Plaintiff’s complaint claims that Whitney Bank (as trustee) complied with settlor’s wishes and its duties under the CYE Class Trust Instrument. As such, Plaintiff does not plead Whitney Bank breached a duty; therefore, Plaintiff has failed to state a claim for damages. For the reasons outlined below, Plaintiffs’ claims for termination of the CYE Class Trust should be dismissed pursuant to Rule 12(b)(6). II. LAW AND ARGUMENT A. Rule 12(b)(6) Standard. Rule 12(b)(6) permits dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” “To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts ‘to state a claim to relief that is plausible on its face’” under Rule 8 of the Federal Rules.2 Under Rule 8(a)(2), a complaint must contain “a short andplain statement of the claim showing that the 2 U.S. ex rel. Williams v. C. Martin Company, Inc., 2012 WL 1565279 *3 (E.D. La., May 1, 2012), citing Ashcroft v. Iqbal, 566 U.S. 662, 129 S.Ct. 1937, 1949 (2009), quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1953, 1974 (2007). Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 9 of 26 PageID #: 34 5 pleader is entitled to relief.” In order to survive a motion to dismiss, a complaint must set forth factual allegations that are “enough to raise a right to relief above the speculative level.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007). While “detailed factual allegations” are not necessary for a complaint to survive a motion to dismiss, a complaint must present “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do.” Id. (internal citations omitted). Moreover, “‘in order to avoid dismissal for failure to state a claim, a plaintiff must plead specific facts, not mere conclusory allegations....’” Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir. 1992) (emphasis added), quoting Elliott v. Foufas, 867 F.2d 877, 881 (5th Cir. 1989). In short, a plaintiff must “nudge[] their claims across the line from conceivable to plausible.” Twombly, 127 S.Ct. at 1974. B. Trusts: Louisiana Law 1. General Trust Law “A trust is a relationship created when a settlor transfers title to property to a trustee, who is charged with administering the property as a fiduc ary for the benefit of a beneficiary.” In re Guidry Trust, 713 So.2d 631, 633 (La. App. 3 Cir. 1998), citing La. R.S. 9:1731. “In construing a trust, the settlor’s intention controls and is to be ascertained and given effect, unless opposed to law or public policy.” In re Succession of Wilkerson, 9 So.3d 1058, 1061 (La. App. 2 Cir.), writ denied, 10 So.3d 741 (La. 2009). Parol or extrinsic evidence may be admitted to aid in construing the trust instrument only if the instrument is ambiguous and uncertain and only to explain, not contradict, the instrument.” In re James C. Atkinson Clifford Trust, 762 So.2d 775, 776 (La. App. 1 Cir.), writ denied, 772 So.2d 655 (La. 2000). Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 10 of 26 PageID #: 35 6 2. Trust Indestructibility “The concept of trust indestructibility is inherent i our Louisiana Trust Law.” McLendon v. First National Bank, 299 So.2d 407, 410 (La. App. 2d Cir. 1974). “’The Act upholds the doctrine that a valid trust, once it is created, should run the precise course and the full course which its settlor has charted in its terms.” Id., quoting 1 La. L. Rev. 774, 778. “Deviations can be ordered only by the court and then only the better to carry out the purposes of the trust.” In re Guidry Trust, 713 So.2d 631, 634 (La. App. 3 Cir. 1998), quoting McLendon, 299 So.2d at 410. “’The order to turn back or to abandon the trust can be given only by the court and then only for the most compelling reasons.’” Id. “’Specifically, the parties at interest are forbidden to break up the trust in violation of its terms by consent betwen or among themselves.’”3 Id. “This concept of indestructibility has been carried over into thenew trust code.” Id. The supreme court in Albritton v. Albritton, 600 So.2d 1328, 1332 (La. 1992), stated, “[w]e have held this concept of trust indestructibility is ‘inherent in our Louisiana trust law.” “Taken as a whole, we believe these rules set forth a public policy of protecting the trust instrument from any modification or termination contrary to settlor’s clearly expressed intent.” Id. “These are imperative rules of public order, and ay violation of these rules is an absolute nullity.” Id. C. Plaintiff Has Failed to State a Claim for Termination of the CYE Class Trust Upon Which Relief Can be Granted. The Louisiana Trust Code outlines very onerous standards for trust termination. The two standards that apply here are set forth in La. R.S. 9:2026(1) and La. R.S. 9:2027. The legal standards and pleading requirements for each will be addressed below. 3 See also, La. R.S. 9:2028 (“The consent of all settlors, trustee , and beneficiaries shall not be effective to terminate the trust or any disposition in trust, unless the trust instrument provides otherwise.”). Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 11 of 26 PageID #: 36 7 1. La. R.S. 9:2026-Change in Circumstances La. R.S. 9:2026 provides as follows: La. R.S. 9:2026(2) does not apply here (and is not alleged to apply). The only provision potentially applicable is La. R.S. 9:2026(1), which was amended in 1997. According to the case law considering La. R.S. 9:2026(1) prior to the 1997 amendment, “[t]he modification or deviation from the terms of the trust provisions based on La. R.S. 9:2026(1) depends upon an analysis of four essential elements: (1) what is the purpose of the trust; (2) what are the change of circumstances, (3) whether the result in the change i circumstances was anticipated by the settlor, and (4) whether the change of circumstances not anticipated by the settlor defeats or substantially impairs the purpose of the trust.”4 Based on a 1997 amendment to La. R.S. 9:2026(1), the third factor and part of the fourth factor listed above (“whether the result in the change in circumstances was anticipated by the settlor”) are no longer applicable.5 After the 4 In re Mashburn Marital Trusts, 951 So.2d 1136 (La. App 1 Cir. 2006), writ denied, 954 So.2d 164 (La. 2007), citing In re James C. Atkinson Clifford Trust, 762 So.2d 775, 776 (La. App. 1 Cir. 2000). 5 As the comments to La. R.S. 9:2026(1) provide, “[a]s originally written Section 2026(1) allowed termination or modification of a trust only if the court found that the impairment of the trust purpose was Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 12 of 26 PageID #: 37 8 amendment to La. R.S. 9:2026 in 1997, to state a claim for termination of the trust, Plaintiff must plead facts supporting the following three factors: (1) what is the purpose of the trust, (2) what is the change in circumstances, and (3) whether the change in circumstances defeats or substantially impairs the purpose of the trust. 2. La. R.S. 9:2027-Accomplishment of Purposes Becoming Impossible or Illegal La. R.S. 9:2027 provides as follows: Thus, to state a claim for termination of the CYE Class Trust under La. R.S. 9:2027, Plaintiff must plead facts supporting the assertion that the purpose of the trust has become impossible of accomplishment or illegal.” 3. Louisiana Case Law--Trust Termination The following Louisiana cases have considered the legal standards for terminating a trust. In Wilkerson, the settlor “did not decree who would certainly receive the principal of the trust in his will,” and [i]nstead, the [settlor] charged the named trustees to bestow the principal and income, according to their discretion and in whatever percentage they deemed proper, to one or all of certain listed people.” Wilkerson, 9 So.3d at 1061. The court affirmed the trial court’s findings that “the trust provision which committed the testamentary dispositions to the choice of third persons was in violation of La. R.S. 9:1802 and La. C.C. art. 1572,” and as such, “striking due to ‘circumstances not known to a settlor and not a ticipated by him.’” The language “circumstances not known to the settlor and not anticipated by him” was removed from La. R.S. 9:2026(1); thus, the third and part of the fourth factor above are no longer applicable. Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 13 of 26 PageID #: 38 9 the provision so defeated the purpose of the trust as to render the entire trust invalid.” Id. at 1059, 1061. In Succession of Noe, 398 So.2d 1173, 1177 (La. App. 2 Cir.), writ denied, 405 So.2d 530 (La. 1981), the court found that the change in circumstance alleged (i.e., petitioner’s divorce from her husband whom the settlor did not trust andthe naming of petitioner as trustee in her father’s will) does not constitute legal reason to m dify the trust because the central purpose of the trust, to provide administration of the grandchildren’s inheritance until they reached a certain age, was not impaired. In Harriss v. Concordia Bank & Trust, 265 So.2d 330, 332-333 (La. App. 3 Cir. 1972), the court found “the purpose of the trust is to maint in and support Mrs. Harriss for the duration of her natural life,” and principal distributions could be made to Harriss “in case of serious illness, surgical operation, or other grave emergency.” Harriss requested the trust be terminated and all of the principal distributed to her because sh was burdened with the care of her father and mother who were both ill. Id. at 332. The trustee had distributed principal to Harriss previously, and the court found that “further invasions would reduce the principal to the extent that she would no longer have sufficient income from the trust for the bare necessities of life.” Id. at 333. The court found “the termination of the trus would not accomplish its purpose,” but”[o]n the contrary, … would defeat its primary pur ose” of providing maintenance and support for the duration of Harriss’ life. Id. As such, the court denied Harriss’ request to terminate. 4. Plaintiff Has Failed to State a Claim for Termination of the CYE Class Trust. In this case, it is clear from the CYE Class Trust In trument that the purpose of the trust was that the settlor wanted to encourage Plaintiff (h s son) to refrain from engaging in the illegal Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 14 of 26 PageID #: 39 10 use of drugs, and if Plaintiff was able to do so, to provide income to Plaintiff as the income beneficiary of the trust for the duration of his life. Exhibit 1 (CYE Class Trust, Arts. 3.2, 3.4). It is also clear from the terms of the CYE Class Trust, that the Settlor intended that the children of Plaintiff be the principal beneficiaries of the trust. Id. at Arts. 4.2, 5.1. The date of the CYE Class Trust termination “shall be determined by the age of the Principal Beneficiaries at the time of the death of the Income Beneficiary” as outlined above. Id. at Art. 5.1. Plaintiff has made numerous irrelevant allegations, as outlined below. These allegations do not constitute grounds for termination of the trus under La. R.S. 9:2026(1) because the allegations do not constitute a “change in circumstances” that “would defeat or substantially impair the purposes of the trust.” Likewise, the allegations are irrelevant to termination of the trust under La. R.S. 9:2027, because the purpose of the CYE Class Trust has not “become[] impossible of accomplishment or illegal.” The following addresses the factual allegations that Plaintiff claims support termination of the Trust a set forth in paragraph X of the Complaint: Allegation No. 1: Complaint, ¶X(a). Response to Allegation No. 1: Plaintiff complains that Whitney Bank, as trustee, has breached the CYE Class Trust Instrument by failing to make distributions and failing to render an accounting. However, Plaintiff makes no factual allegation with respect to exactly what distributions were required to be made and why the failure to make said distributions was violative of the trust instrument. Plaintiff merely concludes that distributions were not made. This allegation, even if true, is not grounds for te mination of the CYE Class Trust because it Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 15 of 26 PageID #: 40 11 does not constitute a “change in circumstances” that “would defeat or substantially impair the purposes of the trust.” Moreover, the trust is not subject to termination under La. R.S. 9:2027 because the purpose of the CYE Class Trust has not “become[] impossible of accomplishment or illegal.” This allegation, even if true, is not grounds for termination of the CYE Class Trust and Plaintiff has failed to state a claim. Moreover, while not relevant to this motion, it is important to note the allegations are not true. Article 3.2 of the CYE Class Trust requires that income be distributed to the income beneficiary at least annually, but only if the income beneficiary meets the prerequisites of Article 3.4, which requires the income beneficiary (Plaintiff) o pass a drug test as a prerequisite for every distribution. Exhibit 1 (Trust Instrument, Art. 3.4). Also, although irrelevant to this motion, Whitney Bank, as trustee, provides annual statements and accountings for the CYE Class Trust, and Plaintiff’s allegations to the contrary e false. Allegation No. 2 Complaint, ¶X(b). Response to Allegation No. 2: Assuming for the sake of argument that the CYE Class Trust Instrument contains this provision, the allegation does not warrant termination of the trust under La. R.S. 9:2026(1), because the allegation does n t constitute a “change in circumstances” that “would defeat or substantially impair the purposes of the trust.” Moreover, the trust is not subject to termination under La. R.S. 9:2027 because the purpose of the CYE Class Trust has not Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 16 of 26 PageID #: 41 12 “become[] impossible of accomplishment or illegal.” This allegation, even if true, is not grounds for termination of the CYE Class Trust and Plaintiff has failed to state a claim. Allegation No. 3 Complaint, ¶X(c). Response to Allegation No. 3: La. R.S. 9:2181 specifically provides “[a] trustee is entitled to reasonable compensation form the trust estate for his services as trustee, unless the trust instrument provides otherwise or unless the trustee waives compensation.” Thus, the Louisiana Trust Code specifically entitles Whitney Bank, as trustee, to “reasonable compensation; thus, the identical provision in the trust instrument6 is not illegal. Also, La. R.S. 9:2191 states “[a] trustee is entitled to indemnity from the trust estate for expenses properly incurred by him in the administration of the trust, unless the trust instrument provides otherwise.” Again, the fact the trust instrument permits reimbursement to Whitney Bank, as trustee, for expenses of the trust estate is not illega . Also, if Plaintiff, as income beneficiary, believes that compensation to Whitney Bank, as trustee, is “unreasonable” or if expenses are not properly charged to the estate, then Plaintiff has t e right to traverse by filing a petition in court seeking to adjust the compensation/expenses. See, La. Civil Law Treatise, Trusts, §5.10 (2016). However, such is not grounds to terminate the trust under La. R.S. 9:2026(1) because the allegations do not constitute a “change in circumstances” that “would defeat or substantially impair the purposes of the trust.” Likewise, the allegations are irrelevant to termination of the trust under La. R.S. 9:2027 because the purpose of the CYE Class Trust has not “become[] 6 Exhibit 1 (Trust Instrument, Art. XI). Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 17 of 26 PageID #: 42 13 impossible of accomplishment or illegal.” This allegation, even if true, is not grounds for termination of the CYE Class Trust and Plaintiff has f iled to state a claim. Allegation No. 4 Complaint, ¶X(d). Response to Allegation No. 4: According to La. R.S. 9:2086(A), “[a] corporate trustee shall not purchase for a trust shares of its own stock… or other securities or the stock… or other securities of an affiliate…unless the trust instrument provides otherwise… .” Here, Article 12.2(B) of the CYE Class Trust Instrument specifically permits Whitney Bank to invest trust corpus in the stock of and CDs issued by Whitney Bank. Exhibit 1 (Trust Instrument, Art. 12.2(B)). As such, any such investment is permitted by Louisiana law. Moreover, the fact the trust instrument contains such provision does not constitute, under La. R.S. 9:2026(1), a “change in circumstances” that “would defeat or substantially impair the purposes of the trust,” nor under La. R.S. 9:2027 has the purpose of the CYE Class Trust “become[] impossible of accomplishment or illegal.” Also, although not relevant to this motion, (1) Whitney Bank is not publically traded and does not sell its stock; and (2) no amount of the CYE Class Trust has been invested CDs issued by Whitney Bank in the stock of Whitney Bank’s parent, Hancock Bank (which is publicly traded on the NASDAQ). Moreover, La. R.S. 9:2251 provides “[i]f a provision in the trust instrument is invalid for any reason, the intended trust does not fail, unless the invalid provision cannot be separated from Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 18 of 26 PageID #: 43 14 the other provisions without defeating the purpose f the trust.”7 It is clear from the CYE Class Trust Instrument that the purpose of the trust would not be defeated if Whitney Bank, as trustee, is prohibited from investing in Whitney Bank stock or CDs. Thus, even if such was illegal- which is denied-Louisiana law requires the trust be modified only to delete that provision, and the trust may not be terminated in full. These allegations do not constitute grounds for termination of the trust under La. R.S. 9:2026(1) because the allegations do not constitute a “change in circumstances” that “would defeat or substantially impair the purposes of the trust.” Likewise, the allegations are irrelevant to termination of the trust under La. R.S. 9:2027 because the purpose of the CYE Class Trust has not “become[] impossible of accomplishment or illegal.” This allegation, even if true, is not grounds for termination of the CYE Class Trust and Plaintiff has failed to state a claim. Allegation No. 5 Complaint, X(e). Response to Allegation No. 5: Article 12.2(F) of the CYE Class Trust Instrument authorizes Whitney Bank, as trustee, to “hold any property in the name of a nominee with or without disclosure of any fiduciary relationships,” and “to acquire and to own property in co- ownership with others or with itself as TRUSTEE for any trust or trusts.” Exhibit 1 (Trust Instrument, Art. 12.2(F). Article 12.2(A) of the trust instrument also permits the Trustee “to comingle assets of these TRUSTS with those of any other trusts placed with the TRUSTEE, 7 See, Succession of McLean, 580 So.2d 935 (La. App. 2 Cir.), writ denied, 584 So.2d 682 (La. 1991) (Even if designation in will of same person as trustee and beneficiary invalidated trust instrument on its face, offending provisions could be severed so as to cure deficiency and effect could be given to alternate nomination of trustee, who in fact, accepted positin). Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 19 of 26 PageID #: 44 15 which may be created by the SETTLOR for the Beneficiaries named herein.” Id. at Art. 12.2(A). There is no discussion of nepotism and familial relationships of the Trustee in the CYE Class Trust Instrument. La. R.S. 9:2082(B) provides, “[w]hen there is more than one beneficiary, a trustee shall administer the trust impartially, based on what is fa r and reasonable to all of the beneficiaries, except to the extent the trust instrument manifests an intention that the trustee shall or may favor one or more of the beneficiaries.” Thus, Whitney Bank, as trustee, is required to administer the trust as a fiduciary. Failure to do so does not terminate the trust, but merely gives rise to a claim against the Trustee. There is nothing illegal about these provisions. Moreover, under La. R.S. 9:2251, if this provision f the trust is invalid for any reason, “the intended trust does not fail, unless the invalid provision cannot be separated from the other provisions without defeating the purpose of the trust.” It is clear from the CYE Class Trust Instrument that the purpose of the trust would not be defeated if it is invalid for the trust instrument to permit the Trustee “to hold any property in the name of a nominee, without regard to commingling of assets with a third party, and/or nepotism or familial relations of Trustee.” Thus, even if such was illegal-which is denied-La. R.S. 9:2251 requires the trust be modified only to delete that provision, and the trust may not be terminated in full. This allegation, even if true, is not grounds for te mination of the CYE Class Trust and Plaintiff has failed to state a claim. Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 20 of 26 PageID #: 45 16 Allegation No. 6 Complaint, ¶X(f). Response to Allegation No. 6: Article 12.2(G) of the CYE Class Trust permits Whitney Bank, as trustee, to deposit funds in interest or non-i terest bearing accounts (which would include a checking account). Exhibit 1 (Trust Instrument, Art. 12.2(G)). There is nothing illegal about this provision. This allegation, even if true, is not grounds for termination of the CYE Class Trust and Plaintiff has failed to state a claim. It is clear from the CYE Class Trust Instrument that t e purpose of the trust would not be defeated if it is invalid for the trust instrument to permit the Trustee to invest in a non-interest bearing account. Thus, even if such was illegal-which is denied-under La. R.S. 9:2251, the trust should be modified only to delete that provision, and the trust may not be terminated in full. Again, Plaintiff has failed to state a claim. Allegation No. 7 Complaint, ¶X(g). Response to Allegation No. 7: There is nothing illegal about this provision. In fact, according to La. R.S. 9:2029, if the trust is terminated, “a beneficiary receiving trust property as a result of the whole or partial termination of a trus shall be personally liable for the obligations and liabilities of the trust existing on the date of termination to the extent of the value of the trus property received by such beneficiary unless, in the case of a partial termination, existing trust Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 21 of 26 PageID #: 46 17 property is sufficient to satisfy the obligations and liabilities of the trust.” So, the fact that beneficiaries may be responsible after trust terminatio for contracts entered into by the Trustee is specifically contemplated and validated by the Louisiana Trust Code. These allegations do not constitute a “change in circumstances” that “would defeat or substantially impair the purposes of the trust” under La. R.S. 9:2026. Likewise, the allegations are irrelevant to termination of the trust under La. R.S. 9:2027 because the purpose of the CYE Class Trust has not “become[] impossible of accomplishment or illegal.” Moreover, even if such was illegal-which is denied-under La. R.S. 9:2251, the trust should be modified only to delete the provision, and the trust may not be terminated in full. Again, Plaintiff has failed to state a claim. Allegation No. 8 Complaint, ¶X(h). Response to Allegation No. 8: There is nothing wrong with this provision. Moreover, even if such was illegal-which is denied-under La. R.S. 9:2251, the trust should be modified only to delete the provision, and the trust may notbe terminated in full. Again, Plaintiff has failed to state a claim. Allegation No. 9 Complaint, ¶X(i). Response to Allegation No. 9: There is nothing wrong with this provision. Moreover, even if such was illegal-which is denied-under La. R.S. 9:2251, the trust should be modified Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 22 of 26 PageID #: 47 18 only to delete that provision, and the trust may not be terminated in full. Again, Plaintiff has failed to state a claim. Allegation No. 10 Complaint, ¶X(j). Response to Allegation No. 10: There is nothing wrong with this provision. See discussion of Allegation No. 3 above. Plaintiff has f iled to state a claim for termination of the CYE Class Trust. Allegation No. 11 Complaint, ¶X(k). Response to Allegation No. 11: Article 12.2(F) of the CYE Class Trust authorizes Whitney Bank, as trustee, to “hold any property in the name of a nominee with or without disclosure of any fiduciary relationships,” and “toacquire and to own property in co-ownership with others or with itself as TRUSTEE for any trust or trusts.” Exhibit 1 (Trust Instrument, Art. 12.2(F). Article 12.2(T) of the CYE Class Trust Instrument provides “[t]he TRUSTEE shall have the power to keep all or any part of the TRUST prope ty at any place in Louisiana or elsewhere within the United States or abroad with such depositories or custodians at such places as TRUSTEE shall deem necessary or advisable and shall have the power to hold securities in the name of nominees.” There is nothing wrong with this provision. Moreover, even if such was illegal-which is denied-under La. R.S. 9:2251, the trust should be modified only to delete the provision, and the trust may not be terminated in full. Again, Plaintiff has failed to state a claim.. Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 23 of 26 PageID #: 48 19 5. Conclusion-Termination of the CYE Class Trust For the reasons outlined above, these allegations do not constitute a “change in circumstances” that “would defeat or substantially impair the purposes of the trust” under La. R.S. 9:2026. Likewise, the allegations are irrelevant to termination of the trust under La. R.S. 9:2027 because the purpose of the CYE Class Trust ha not “become[] impossible of accomplishment or illegal.” Finally, if any of these provisions are found to be invalid-which is denied, then, under La. R.S. 9:2251, the trust should be modified only to delete the invalid provision, and the trust may not be terminated in full. Plaintiff has failed to state a claim upon which relief can be granted for trust termination. Plaintiff’s complaint should be dismissed. D. Any Claim of Plaintiff to the Trust Principal Should Be Dismissed. Plaintiff, as income beneficiary, appears to claim that, after termination of the CYE Class Trust, the trust principal should be distributed directly to Plaintiff. See Complaint, ¶XII on page 2. Such is precluded both by the CYE Class Trust Instrument and by La. R.S. 9:2029. La. R.S. 9:2029 provides as follows: According to La. R.S. 9:2029, the termination of a trust causes the dispositive provisions of the trust to achieve their ultimate effect, which “means that principal is distributed to the principal beneficiary and not returned to the settlor.” La. Civil Law Treatise, Trusts, §7.6 (2016). Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 24 of 26 PageID #: 49 20 The principal beneficiaries in the CYE Class Trust are the children of Plaintiff-not Plaintiff. Exhibit 1 (Trust Instrument, Art. IV). As such, to the extent Plaintiff asserts a claim to the principal of the trust upon termination, Plaintiff has failed to state a claim upon which relief can be granted, and this claim should be dismissed. E. Plaintiff Has Failed to State a Claim For Damages. Plaintiff claims that, “[a]s a result of the inability to avail himself fairly of any benefits from either trust he has suffered damages, including but not limited to loss of enjoyment of life and humiliation.” Complaint, ¶XII on page 4. First, Plaintiff does not plead that Whitney Bank’s conduct caused these damages. Second, Plaintiff’s complaint merely claims that Whitney Bank (as trustee) complied with settlor’s wishes and its duties under the CYE Class Trust Instrument. Under Louisiana law, to be entitled to damages, Plaintiff must plead a breach of a duty. Roberts v. Benoit, 605 So.2d 1032, 1041 (La. 1991). Plaintiff has not pleaded that Whitney Bank breached a duty. For either reason, Plaintiff has failed to state a claim for damages against Whitney Bank. III. CONCLUSION For the foregoing reasons, Defendant, Whitney Bank, prays that the Court grant this motion to dismiss Plaintiff’s complaint for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6). Case 1:17-cv-00036-JTT-JPM Document 6-1 Filed 01/20/17 Page 25 of 26 PageID #: 50 21 Respectfully submitted /s/ Brandon K. Black Brandon K. Black (La. Bar No. 24298) Michael R. Rhea (La. Bar No. 34722) Jones Walker LLP 8555 United Plaza Blvd. Four United Plaza, Fifth Floor Baton Rouge, LA 70809 Tel: (225) 248-2128 Fax: (225) 248-3128 bblack@joneswalker.com Counsel for Defendant Whitney Bank CERTIFICATE OF SERVICE I hereby certify that on the 20th day of January, 2017, I e-mailed the below persons and electronically filed the foregoing pleading with the Clerk of the Court using the Court's CM/ECF system, which sent electronic notifications to: Mark Jeansonne 2472 Main / P.O. Box 301 Hessmer, LA 71341 jeansonnelaw@yahoo.com Counsel for Plaintiff, Chad Elder s/ Brandon K. Black Brandon K. 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