In Federal Court on A Trust or Estate Related Matter and Want to Get Out? Princess Lida May Be the Answer.
Keith J. Hesse Nov. 19, 2015
In the groundbreaking case of Marshall v. Marshall, 547 U.S. 293, 126 S. Ct. 1735, 164 L. Ed. 2d 480 (2006), the United State Supreme Court scaled back the (widely perceived) extensive parameters of the so-called “probate exception” to federal jurisdiction in cases involving estate fiduciaries or touching upon state court probate proceedings. As a result, more cases that involve probate issues, estate proceedings or the parties thereto are ending up in federal court. However, even though a plaintiff may successfully fend off a challenge to federal court jurisdiction based on the probate exception – as several have done (at least in part) - merely clearing this jurisdictional hurdle does not assure that such “victorious” litigant will stay in federal court.
A potential counterbalance to more expansive federal court jurisdiction, given the “loosening” of the probate exception, where state probate (or trust) proceedings are in play, is the doctrine of prior exclusive jurisdiction. Under such doctrine, it is inappropriate for a federal court to exercise jurisdiction where there are two suits, one in state court and one in federal court, and the suits are in rem or quasi in rem. This is also known as the Princess Lida doctrine. This does not refer to a Star Wars character, but, rather, to the Supreme Court decision in Princess Lida of Thurn and Taxis v. Thompson, 305 U.S. 456, 59 S. Ct. 275, 83 L. Ed. 285 (1939). It has been held that this doctrine of prior exclusive jurisdiction has melded with the probate exception in cases involving state probate proceedings and estate administration, which may conflict with federal jurisdiction. See Selseth v. Darwit, 536 F. Supp. 2d 883 (N.D. Ill. 2008).
In Princess Lida, state court proceedings in Pennsylvania were commenced concerning a trust set up to benefit Princess Lida of Thurn and Taxis, formerly Lida Eleanor Purcell Fitzgerald, emanating from her divorce from George P. Fitzgerald and payments from the divorce settlement. The Pennsylvania state court maintained jurisdiction of this matter for years, which included the filing and review of accountings. After several years of having the trust in the Pennsylvania state court, and while the same was still pending, Lida instituted suit in federal court in the Western District of Pennsylvania alleging mismanagement of the trust funds and requesting various relief. Subsequently, both the state court and the federal court enjoined the parties in the other action from pursuing the same. The state court’s ruling was affirmed by the Pennsylvania Supreme Court. Obviously, at a stalemate, with each court (the state and federal) ordering the parties not to pursue the other case, the United States Supreme Court accepted jurisdiction and acted.
The United States Supreme Court held that one court's exercise of jurisdiction over the administration of a trust precluded a second court from exercising quasi in rem jurisdiction over a later lawsuit brought by the beneficiaries of the trust asserting claims against the trustees for mismanaging the trust. The Court noted that two courts may have concurrent jurisdiction over cases involving in personam claims, and both may “proceed with the litigation at least until judgment is obtained in one of them which may be set up as res judicata in the other.” However, the Court held that there cannot be concurrent jurisdiction over in rem or quasi in rem claims. The Court stated:
[I]f the two suits are in rem, or quasi in rem, so that the court, or its officer, has possession or must have control of the property which is the subject of the litigation in order to proceed with the cause and grant the relief sought the jurisdiction of the one court must yield to that of the other.
We have said that the principle applicable to both federal and state courts that the court first assuming jurisdiction over property may maintain and exercise that jurisdiction to the exclusion of the other, is not restricted to cases where property has been actually seized under judicial process before a second suit is instituted, but applies as well where suits are brought to marshal assets, administer trusts, or liquidate estates, and in suits of a similar nature where, to give effect to its jurisdiction, the court must control the property.
The Supreme Court thus ruled that the Common Pleas Court of Pennsylvania had acquired jurisdiction, and that the federal court for the Western District of Pennsylvania was without jurisdiction of the suit subsequently brought for the same or similar relief, and that the parties in that suit were properly enjoined from pursuing it.
This principle, which has become known as the “Princess Lida Doctrine”, has been applied routinely throughout the country. See Dailey v. National Hockey League, 987 F. 2d 172, 175 (3d Cir. 1993) (acknowledging the continuing validity of the Princess Lida doctrine). In short, “[t]he Princess Lida doctrine requires abstention based upon principles of comity and in rem jurisdiction.” Selton v. U.S. Bank Trust Nat. Assn., SD, No. 6:14-cv-1278-ORL-37KRS, 2015 WL 4987706, *4, 2015 U.S. Dist. LEXIS 109487 (M.D. Fla. August 19, 2015).
As indicated, the Princess Lida doctrine applies equally to state and federal courts. See Cartwright v. Garner, 751 F. 3d 752, 761 (6th Cir. 2014) (“The principle that the court first assuming jurisdiction over the property may maintain and exercise that jurisdiction is applicable to both state and federal courts.”). As a consequence, Princess Lida also applies where no federal court is involved and both the first and second actions are pending in the courts of different states. In such cases, where a court in one state first assumes in rem or quasi in rem jurisdiction over property, a court in a later-filed action in another state must abstain from hearing claims relating to the same property. In re Rust's Estate, 17 Pa. D. & C.3d 627 (Pa. Com. Pl. 1979) (expressly holding that Princess Lida applies where two actions are pending in the courts of different states, and that the exercise of in rem or quasi in rem jurisdiction by a court in one state deprives a court in a different state of jurisdiction over a later-filed in rem or quasi in rem action concerning the same subject matter as the first action); Interfirst Bank-Houston v. Quintana Petroleum, 699 SW 2d 864, 878 (Tex. Ct. App. 1985) (applying Princess Lida and holding that “Where the jurisdiction of a court [of another state] has attached, and the proceeding is quasi in rem, as is the administration of a trust, other courts should not interfere with that jurisdiction.”)
Florida courts have likewise adopted the principles enumerated in Princess Lida and noted their applicability to cases involving trusts. Blake v. Blake, 172 So. 2d 9, 10 (Fla. 3d DCA 1965) (“As between courts of concurrent jurisdiction, it has generally been held that the court which first exercises jurisdiction over a matter retains such jurisdiction to the termination of the cause.”). Indeed, prior to Princess Lida, the Florida Supreme Court held that “a court which has in its rightful possession or under its control property involved in litigation may exercise jurisdiction over such property to the exclusion of all other courts, and another court of concurrent jurisdiction cannot interfere and wrest from it the jurisdiction first obtained.” Maddox Grocery Co. v. Hay, 100 So. 747, 747 (Fla. 1924).
1 See, e.g., Jones v. Brennan, 465 F.3d 304 (7th Cir. 2006); May v. J.P. Morgan Chase & Co., 2009 WL 482719 (E.D. Mich 2009).