White v. Richert
Filing
467
MEMORANDUM Opinion and Order. Signed by the Honorable Heather K. McShain on 5/27/2021. Mailed notice. (pk, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KATHLEEN WHITE MURPHY,
CO-ADMINISTRATOR OF THE ESTATE OF
ANNA M. WHITE, ET AL.,
No. 15 CV 8185
Plaintiffs,
v.
Magistrate Judge McShain
ELIZABETH K. RICHERT,
Defendant.
MEMORANDUM OPINION AND ORDER
This breach-of-fiduciary-duty and indemnification case arises out of a longrunning and bitterly contested family dispute over the assets of the Robert L. Richert
Trust (the Robert Trust) and which version of the trust instrument is authentic.
Plaintiffs Kathleen White Murphy and Thomas White are the coadministrators of the estate of their deceased mother Anna M. White, who was a
named beneficiary of the Robert Trust. Defendant Elizabeth Richert, the plaintiffs’
cousin and the niece of Anna White and Robert Richert, is the trustee of the Robert
Trust. She is also an attorney who has been licensed to practice law in Florida since
1992. [449] 27.1 After a nearly successful settlement conference, multiple rounds of
motion practice, and lengthy delays due to defendant’s medical condition and the
COVID-19 pandemic, this case proceeded to a bench trial over nine days in
Bracketed numbers refer to entries on the district court docket. Referenced page numbers
are taken from the CM/ECF header placed at the top of filings. The parties’ trial exhibits will
be cited as [PX __] for plaintiffs’ exhibits and [DX __] for defendant’s exhibits.
1
September, October, and November 2020 on two narrow claims: (1) plaintiffs’ claim
that defendant breached her fiduciary duty to Anna White by creating a counterfeit
version of the Robert Trust that purported to distribute to defendant an additional
forty-seven percent of the Robert Trust’s assets to which she was not entitled under
the genuine trust instrument; and (2) defendant’s counterclaim that a contract
between defendant and Anna White known as the Receipt and Release requires
plaintiffs to indemnify her for the fees and costs she incurred in this case.
The Court has considered the evidence presented at trial, the parties’ proposed
findings of fact and conclusions of law [328, 329], and the parties’ post-trial briefs and
motions [447, 459, 460, 462]. The Court finds that plaintiffs proved by a
preponderance of the evidence that defendant breached her fiduciary duty to Anna
White by (1) creating a counterfeit version of the Robert Trust that purported to
distribute to defendant an additional forty-seven percent of the trust assets to which
she was not entitled, and (2) failing to distribute to Anna White, in accordance with
the genuine version of the Robert Trust, her share of the forty-seven percent of the
trust assets that defendant attempted to control via the counterfeit trust document.
The Court then finds that the Receipt and Release, which also purports to extinguish
any claim Anna had against defendant respecting the distribution of her share of the
trust assets, does not bar plaintiffs’ claim because (1) there was no consideration for
Anna White’s promise to release her claims against defendant, and (2) the release is
ineffective because it is undisputed that Anna White was unaware that there were
multiple versions of the Robert Trust and that the competing versions of the trust
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documents might form the basis for a claim against defendant. Finally, the Court
finds that plaintiffs proved by clear and convincing evidence that defendant’s breach
of fiduciary duty was reprehensible and conducted with an evil mind, such that an
award of punitive damages on a 1:1 ratio with plaintiffs’ compensatory damages is
warranted under Arizona law, which governs plaintiffs’ entitlement to punitive
damages.
With respect to defendant’s counterclaim, the Court finds that (1) defendant
failed to prove by a preponderance of the evidence that Anna White intended the
indemnification provision to apply to a claim brought by Anna, as opposed to a third
party, against defendant; and (2) in any event, the Receipt and Release is
unenforceable because there was no consideration for Anna’s promise to indemnify
defendant.
Civil Rule 52 provides that, “[i]n an action tried on the facts without a jury . . .
the court must find the facts specially and state its conclusions of law separately.”
Fed. R. Civ. P. 52(a)(1). Thus, “[w]hen a federal judge is the trier of fact, [she] unlike
a jury, is required to explain the grounds of h[er] decision.” Arpin v. United States,
521 F.3d 769, 776 (7th Cir. 2008). Rule 52(a) also requires that, “[w]hen the issue is
the amount of damages,” the Court “must indicate the reasoning process that
connects the evidence to the conclusion[.]” Jutzi-Johnson v. United States, 263 F.3d
753, 758 (7th Cir. 2001).
Below the Court describes the case’s lengthy background, summarizes the
Court’s important pretrial rulings and the relevant evidence presented at trial, and
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sets forth the findings of fact and conclusions of law that support the Court’s
judgment and award of damages to plaintiffs.
Background
This case began in July 2015, when Anna White, then 91 years old, filed a
petition for production of deed and accounting against defendant in the Circuit Court
of Lake County, Illinois. [1-1]. Defendant subsequently removed the case to this Court
based on diversity jurisdiction. [1].2
In brief, Anna’s petition sought an order requiring defendant to transfer title
to Anna’s residence in Buffalo Grove, Illinois from defendant, who held title to the
Buffalo Grove home in her capacity as trustee of the Robert Trust, to Anna. [1-1] 3-4.
The petition also sought an accounting of the Robert Trust and an order dissolving
the Receipt and Release, which purported to extinguish Anna’s claim to further
distributions from the Robert Trust.
I.
The Robert Trust
Robert L. Richert was Anna White’s brother and the uncle of both plaintiffs
and defendant. [280] 4, ¶ 1.3 Robert, who resided in Carefree, Arizona, created the
Robert L. Richert Revocable Trust on June 12, 2008. [Id.] 4, ¶¶ 2-3. The trust named
Subject-matter jurisdiction was proper at the time of removal because Anna White was an
Illinois citizen, defendant was a Florida citizen, and the amount in controversy exceeded
$75,000. See 28 U.S.C. 1332(a)(1); [1] 2. Complete diversity existed after Anna White’s death
because the legal representatives of her estate, Kathleen White Murphy and Thomas
Murphy, are “deemed to be [ ] citizens only of the same State as” Anna White. 28 U.S.C.
§ 1332(c)(2). Defendant has argued that this case falls within the probate exception to federal
jurisdiction, but the Court rejected that argument earlier in the litigation and sets forth in
greater detail below its reasons for doing so.
2
In their proposed final pretrial order, the parties stipulated to thirty facts [280] 3-6, and the
Court admitted the stipulations into evidence at trial. [450] 118-19.
3
4
Robert as the settlor, trustee, and beneficiary of the trust and defendant as successor
trustee. [PX 26] 30; see also [id.] 37; [PX 29] 59.
In September 2009, Robert underwent surgery at the Mayo Clinic in Phoenix
for non-small cell carcinoma and became incapacitated. [449] 94; [PX 34] FIDELITY
0090. To become trustee during Robert’s incapacitation, defendant submitted a
Trustee Certification Form to Fidelity Investments, where Robert had established a
trust account. [449] 94, 96-102; [PX 34] FIDELITY 0083-0088, 0090. The Certification
Form, which was accompanied by a letter from Robert’s doctors stating that he was
unlikely to recover, instructed Fidelity to recognize defendant as trustee of the Robert
Trust. [PX 34] FIDELITY 0083, 0088. This paperwork was signed by defendant and
notarized on September 21, 2009, and it was faxed to a Fidelity branch in Arizona.
[Id.] FIDELITY 0083, 0091. Although defendant testified she had no recollection of
signing or submitting this paperwork to Fidelity, [449] 96-102, the Court finds that
she did so in order to be recognized as the Robert Trust’s successor trustee after
Robert became incapacitated.
Robert died on November 9, 2009. [280] 4, ¶ 4.
A.
The Robert Trust’s Assets
At the time of Robert’s death, the Robert Trust held title to Robert’s home in
Carefree and $611,814.45 in the Fidelity account. [280] 4, ¶ 9. The parties stipulated
5
that, between November 17, 2009 and January 15, 2010, defendant wrote eight
checks on the Robert Trust’s Fidelity account for a total of $622,364.91:4
Date
Check No.
Payee
Amount
Nov. 17, 2009
1076
Cash
$13,407.50
Nov. 25, 2009
1077
Cash
$3,178.57
Dec. 28, 2009
1051
Cash
$30,000.00
Dec. 31, 2009
1078
Cash
$8,646.47
Jan. 7, 2010
1079
Anna White
$30,000.00
Jan. 15, 2010
1080
Cash
$10,000.00
Jan. 15, 2010
1081
Anna White
$124,823.09
Jan. 15, 2010
1082
Cash
$402,309.28
[280] 5, ¶¶ 18-23.
It is undisputed that defendant made out six of the checks–totaling
$467,541.82–to cash. Despite disposing of nearly a half-million dollars (and slightly
more than seventy-five percent of the trust’s cash assets) in this fashion, defendant
testified that she could not remember how the $467,541.82 had been spent. [450] 6872. Nor did defendant testify why she had made these checks out to cash, as opposed
to a specific payee. Defendant did testify that she initially deposited this money into
The discrepancy between the parties’ stipulation and the documented amount of money
withdrawn appears to stem from the fact that the investment value of the Robert Trust
account increased in November 2009, December 2009, and January 2010, even while money
was being withdrawn. See [PX 16, PX 17, PX 18]. For example, although the account had
$611,814.45 as of November 1, 2009, its value increased by $10,102.58 by November 30, 2009.
[PX 16] 1.
4
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a Chase bank account that “belonged to [her] uncle” and to which she added her name,
[458] 17, but she produced no banking records to corroborate this claim. Two other
checks, totaling $154,823.09, were made out to Anna White, and the parties
stipulated that those checks were deposited into Anna’s bank account. [280] 5, ¶¶ 16,
28. The Court accordingly finds that Anna White received $154,823.09 from the
Robert Trust account.
On February 18, 2010, defendant closed out the Robert Trust account by
writing a final check in the amount of $94.26 to cash. [280] 5, ¶ 24; [PX 30] 7; see also
[PX 19] (showing zero balance for Robert Trust’s Fidelity account as of February 28,
2010). Defendant testified that she acted with Anna White’s knowledge when she
closed the Fidelity account, and that she closed the account because she “was paying
expenses for the estate, and Fidelity had a monthly check limit.” [458] 17.
B.
The Robert Trust Documents
During discovery, the parties produced three versions of the Robert Trust:
Version A [PX 26] 5-33, Version B [PX 26] 37-63, and Version C [PX 29]. As the Court
explained in its prior order granting in part and denying in part defendant’s motion
for summary judgment, Versions A and B are identical except that (1) Version A has
two post-it notes, written by defendant, attached to page 4 of the trust instrument,
[PX 26] 10; and (2) the word “FAXED” appears on the first page of Version B, and the
date September 21, 2019, the time “17:06”, a fax number with the Arizona area code
480, and the word “KINKOS” appears on each page of Version B, [id.] 37-63. See White
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v. Richert, No. 15 CV 8185, 2018 WL 4101512, at *2 (N.D. Ill. Aug. 28, 2018) (White
III).
In Versions A and B of the Robert Trust, paragraph 5.4.1 provides that:
If the Settlor’s residence is part of the trust estate or is owned by the
Settlor at the time of his death, then the Settlor’s residence, personal
effects, household goods, automobiles(s), and any interest he may have
in any insurance policies thereon, shall be distributed to ELIZABETH
K. RICHERT, the Settlor’s niece. If at the time of the Settlor’s death, the
Settlor’s residence is not part of the trust estate or is not owned by the
Settlor, then forty-seven percent (47%) of the trust estate shall be
distributed to ELIZABETH K. RICHERT, the Settlor’s niece.
[PX 26] 9 (Version A); [id.] 40 (Version B).
In contrast, paragraph 5.4.1 of Version C directed that defendant receive not
only the Carefree home, but also an additional forty-seven percent of the Robert
Trust’s assets:
If the Settlor’s residence is part of the trust estate or is owned by the
Settlor at the time of his death, then the Settlor’s residence, personal
effects, household goods, automobiles(s), and any interest he may have
in any insurance policies thereon, shall be distributed to ELIZABETH
K. RICHERT, the Settlor’s niece. In addition to the Settlor’s residence,
forty-seven percent (47%) of the trust estate shall be distributed to
ELIZABETH K. RICHERT, the Settlor’s niece.
[PX 29] 3.
All versions of the Robert Trust provided that, if Anna White survived her
brother, she would receive forty-seven percent of the trust estate. [PX 26] 9 (Version
A); [id.] 40 (Version B); [PX 29] 3 (Version C). Likewise, all versions of the trust
documents provided that six percent of the trust estate was to be distributed among
three charitable organizations in Carefree, Arizona. [PX 26] 9-10 (Version A); [id.] 4041 (Version B); [PX 29] 3-4 (Version C). However, Versions A and B failed to identify
8
a specific beneficiary to receive the remaining forty-seven percent of the trust’s
assets–the same forty-seven percent that Version C purports to distribute to
defendant. Each version of the trust documents directed that, in the event that the
trust failed to provide for “distribution of the trust estate or any part thereof, such
interest shall be distributed to the intestate heirs of the Settlor, as then determined
by the laws of the State of Arizona as then in effect.” [PX 26] 10 (Version A); [id.] 41
(Version B); [PX 29] 4.
It is undisputed that the Robert Trust held title to the Carefree home at the
time of Robert’s death. [PX 11] 2-6. Consequently, title to the home passed to
defendant in accordance with paragraph 5.4.1 of each version of the trust instrument.
The critical dispute in this case is which version of the Robert Trust instrument
is genuine. If Versions A and B are authentic, then defendant was entitled to the
Carefree home but not the additional forty-seven percent of the trust estate that
Version C purports to distribute to her. Because Versions A and B did not provide for
the distribution of forty-seven percent of the trust estate, moreover, paragraph 5.5 of
Versions A and B obligated defendant to distribute that sum–$287,552.79–in
accordance with then-applicable Arizona intestacy law. This would have required
defendant to distribute a third of that sum–$95,850.83–to Anna White.5 But if
Under Ariz. Rev. Stat. § 14-2103(3), if a decedent is not survived by a descendant or a parent,
the estate is distributed to “the descendants of the decedent’s parents or either of them by
representation.” In Robert’s case, that meant that each of his sisters, Anna White and Mary
Jane Richert, was entitled to a one-third share of the forty-seven percent at issue, while the
children of Robert’s brother Thomas, defendant and David Richert, were each entitled to a
one-sixth share. See [PX 23] (Richert-White family tree).
5
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Version C were the genuine trust document, then defendant would have been entitled
to the Carefree home and a further $287,552.79.
1.
Production of Version C
At trial, defendant testified that she found Version C of the Robert Trust
“months after [Robert] passed away in a locked floor safe in the master bedroom
closet” of the Carefree home. [458] 14-15. When defendant read Version C, she
understood it to accurately represent her uncle’s wishes, which Robert had disclosed
to her in prior conversations: defendant would receive title to the Carefree home, a
small portion of the trust estate would be distributed to local charities, and the
remainder would be divided equally between defendant and Anna White. [458] 10.
Defendant testified that she retained the original of Version C and mailed a copy to
Anna White. [Id.] 17.
Despite the importance of Version C to the claims in this case, defendant did
not produce that document–or even mention that it existed–until February 2017,
nearly two years into the litigation, and only because of a set of highly unusual–and,
the Court finds, entirely falsified–circumstances.
On the eve of her deposition, defendant produced a PDF copy of Version C to
plaintiffs’ counsel. [451] 284-85. At trial, defendant explained that the original
Version C had been stolen from her home in Florida, along with a set of silverware
and several boxes of records, at a time she could not recall. [458] 25; see also [280] 5,
¶ 16 (stipulation that “[d]efendant does not remember the exact date that the original
of [Version C] was stolen from her home”). Defendant suspected that one of her law
10
clients, who had repaired her kitchen cabinets in exchange for legal services, was the
culprit. [458] 46. Defendant testified that she had a “good reason” for not reporting
the burglary to the police, and that she does not disclose her address to anyone
because of her past involvement in an abusive relationship. [451] 50; [458] 25.
Defendant acknowledged that she did not disclose during discovery that Version C
had been stolen from her home. [451] 50.
In a fortunate turn of events, however, a copy of Version C had “appeared in
[defendant’s] mailbox in an opaque plastic bag” sometime in early 2017. [458] 25. In
defendant’s telling, plaintiffs had likely taken the copy of Version C that defendant
sent to Anna White and “had someone plant” it “into [her] mailbox to set me up[.]”
[Id.]. According to defendant, “the only individuals who had a motive to put a copy of
the trust into my mailbox were plaintiffs or their attorneys.” [Id.] 27. Defendant
testified that Thomas White had likely hired a private investigator to locate
defendant and place the copy of Version C in her mailbox. [Id.] 25-27.
Defendant denied altering or forging anything related to the Robert Trust.
[458] 36. Based on her conversations with her uncle, defendant believed that Version
C was the authentic version of the trust, and that Robert had substituted a revised
version of paragraph 5.4.1 distributing the additional forty-seven percent of the trust
estate to defendant “rather than go to the trouble of re-executing a document and
finding witnesses and a notary.” [Id.] 37.
2.
Production of Versions A and B
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The discovery of Version C prompted plaintiffs to file in April 2017 a motion to
compel a supplemental deposition of defendant and for leave to issue a subpoena to
Fidelity to produce more legible copies of the checks that defendant had written on
the Robert Trust’s account. [146]. Regarding the latter request, the Court accepted
plaintiffs’ contention that more legible copies of the checks were relevant to
discovering the bank accounts into which defendant had deposited funds from the
Robert Trust. [Id.] 7; [158] 17-18. But the Court’s minute entry authorizing this
discovery contained two scrivener’s errors, one concerning the party that had filed
the motion and one regarding the content sought from Fidelity. The Court’s order
stated that “[t]he motion is granted in that the Court further gives leave for defendant
to either subpoena or request from Fidelity more legible copies of the Robert Trust.”
[151] 1 (emphasis supplied). Relying on the expanded language of the Court’s order,
plaintiffs subpoenaed Fidelity for copies of the checks issued on the Robert Trust as
well as the trust instrument itself. In May 2017, Fidelity produced Version A and
Version B of the Robert Trust. See [PX 33] FIDELITY 0051-0079; [PX 34] FIDELITY
0091-0117.
At trial, defendant testified that she visited her uncle in Arizona after his
cancer surgery and found Version A “on a desk in the office of [her] uncle’s house, in
a stack of papers and the papers were loose.” [458] 12. Having already discussed with
Robert how he wanted his property distributed after his death, defendant did not read
Version A at that time. [Id.] 11-12.
C.
Anna White’s Expected Distributions from the Robert Trust
12
Kathleen White Murphy testified that, after Robert’s death, she had several
conversations with defendant about Anna White’s share of the Robert Trust assets.
[451] 62. Defendant told Kathleen that Anna would receive a one-half interest in both
the Carefree home and the remainder of Robert’s estate, while defendant would
receive the other half. [Id.]. Defendant also told Kathleen that she and her son were
making repairs to the Carefree home and planned to sell it. [Id.] 62-63. Defendant
emailed Kathleen an appraisal of the home to show to Anna, who did not have a
computer. [Id.] 63-64; [280] 4, ¶ 8. Kathleen testified that defendant was disappointed
in the appraisal, which valued the home around $500,000, because she believed it
was worth closer to $1 million. [451] 63-64. Defendant wanted to wait for the real
estate market to pick up before trying to sell the Carefree home. [Id.] 64.
Thomas White also discussed the Robert Trust’s assets with defendant after
Robert died. According to Thomas, defendant said that Anna would receive a one-half
interest in the Carefree home. [452] 36. Thomas asked defendant about her plans for
selling the home, and defendant said that she “wanted to hold off on selling it because
there was a lot of work that still had to be done on it,” and “the market was not at a
good point to be able to sell it at this time.” [Id.] 39. Thomas testified that this
conversation reassured him because the house would be sold and “soon enough my
mom would realize from the sale of that house.” [Id.].
Gary Steciuk, an independent financial advisor who was also Anna White’s
step-grandson, testified that he contacted defendant to discuss Anna’s expected
distribution from the Robert Trust. [449] 48; [454] 18. Defendant told Gary, who had
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helped Anna with her financial affairs since 2007 or 2008, that “there was a bunch of
money . . . that would be coming to Anna White as a result of the estate, and that
there was a property in Arizona which Anna White would be entitled to half of it,
once it was eventually sold.” [454] 13, 15, 19. Gary likewise testified that defendant
wanted to make repairs to the Carefree home and sell the property only after the
market improved. [Id.] 20. Finally, defendant told Gary that she would make periodic
distributions from the trust to Anna, but she needed to be careful not to dissipate the
trust assets in case any claims were made against Robert’s estate. [Id.] 19.
In 2014, Gary was arrested by federal authorities and charged with one count
of mail fraud. [454] 13. After pleading guilty, he was sentenced to 105 months’
imprisonment. [Id.]. Gary admitted that he had stolen more than $100,000 from Anna
White as part of his crimes. [Id.]. He also acknowledged sending an email to Anna’s
family in August 2016 saying that he was remorseful and wanted to help them with
their case against defendant. [DX 12]; [454] 89-90.
D.
The Loan Agreement
In 2010, Anna and her husband James lived in a second-floor condominium in
Arlington Heights, Illinois. [451] 64. They decided to sell the condo and buy a home
without stairs because James, who was 89 years old, had difficulty navigating stairs.
[Id.]. Anna and James ultimately purchased a house located at 49 Willow Parkway
in Buffalo Grove, Illinois, using funds loaned to them by defendant. [458] 18-19.
The parties introduced conflicting evidence about whose idea it was for
defendant to loan money to Anna and James. Kathleen White Murphy testified that
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defendant proposed loaning $200,000 to Anna, and that Anna would repay the loan
with the proceeds from the sale of the Arlington Heights condo. [451] 67-68.
Defendant also told Kathleen that she needed to loan the funds to Anna, rather than
releasing Anna’s share of the Robert Trust funds, because “there might be other
claimants against the trust[.]” [Id.] 67. Gary Steciuk also testified that it was
defendant’s idea to loan Anna $200,000 to purchase the home, and that defendant
would “forgive the loan . . . once she could release the funds” from the Robert Trust.
[454] 40-41. In contrast, defendant testified that it was Gary’s idea that she loan the
funds to Anna. [458] 17. Although Anna had money invested with Gary, Gary told
defendant that Anna would incur “a lot of penalties and early termination fees” if she
used those funds to purchase the house. [Id.] 17-18.
Defendant ultimately agreed to lend Anna the money, provided that the
Buffalo Grove home would be “titled in my name individually, not as trustee of my
uncle’s trust, until the loan was repaid.” [458] 19. Once the loan was repaid,
defendant testified, she would “quitclaim the property to my aunt and uncle.” [Id.].
On November 8, 2010, defendant and Anna White executed a Loan Agreement
respecting the Buffalo Grove property. [DX 4]. Contrary to defendant’s testimony, the
agreement provided that the Buffalo Grove home would be titled in her name as
trustee of the Robert Trust:
This is to certify that Elizabeth K. Richert will be loaning funds in the
sum of $200,000 from the Robert L. Richert Trust, Elizabeth K. Richert,
Trustee, to Anna M. White for the purpose of purchasing an investment
property at 49 Willow Parkway, Buffalo Grove, IL 60089. The property
will be titled in the name of the Trust and Elizabeth K. Richert, Trustee,
15
until the loan is repaid in full. At the time the loan is repaid, the title to
the property will be transferred to Anna M. White.
*
*
*
As soon as the property at 1322 S. New Wilke Rd., in the names of Anna
M. White and James F. White, is sold, the entire proceeds will be sent
to Elizabeth K. Richert to repay a portion of the loan. The intent is that
the remainder of the loan will be repaid upon distribution of the estate
attached to Robert L. Richert.
However, Elizabeth K. Richert reserves the right to call the balance of
the loan at any time, if necessary, and in such case funds will be
liquidated by Gary C. Steciuk, Investment Representative, from Anna
M. White’s investments in order to repay the balance.
[DX 4].
The parties stipulated that defendant loaned Anna $200,000.00 to purchase
the Buffalo Grove property. [280] 4, ¶ 6. However, no evidence was introduced to show
the accounts from which defendant obtained these funds. Anna and James closed on
the Buffalo Grove home in November 2010. Both the warranty deed, [PX 1], and the
HUD-1 form prepared during the sale, [PX 9] 1, show that the Buffalo Grove home
was transferred to defendant in her capacity as trustee of the Robert Trust.
E.
The Receipt and Release
In July 2011, the White family threw a party for James White’s ninetieth
birthday. Both plaintiffs and their families attended, as did defendant, Gary Steciuk,
and his wife Vicki Steciuk.
While defendant was present at Anna and James’s home, she and Anna
executed the Receipt and Release. [PX 14]. Defendant testified that she had discussed
this agreement with Anna before traveling to Illinois. [458] 20-21. It was defendant’s
16
understanding that obtaining a release from a trust beneficiary was “a standard
procedure.” [Id.] 21. Defendant testified that she asked Anna to sign the release “in
case something should happen to her and her children decided to sue me so I would
not have to be involved in another out-of-state lawsuit.” [Id.].6 According to defendant,
Anna was “happy to execute the receipt and release for me.” [Id.].
Vicki Steciuk, who was present when Anna and defendant executed the Receipt
and Release, testified that she, too, had previously discussed the release with
defendant. [456] 20. According to Vicki, defendant wanted the release in place to
protect herself in the event of a dispute over the trust. [Id.] 21. Vicki also said that
Anna White “didn’t want any disputes with anything and she wanted to sign [the
release] to protect [defendant] as well.” [Id.] 26. Vicki believed that Anna and
defendant were close and had a good relationship. [Id.] 36.
The Receipt and Release reflects that it was signed by Anna White and
defendant and notarized on July 30, 2011. [PX 14] 2. A caption, “In the matter of the
Accounting of: the Personal Representative and Trustee of the Estate of Robert Louis
Richert, Deceased,” appears in the top-left corner of the first page. [Id.] 1. The
document then provides, in pertinent part:
KNOW ALL MEN BY THESE PRESENTS that the undersigned, Anna
M. White, being of full age, does hereby acknowledge receipt from
Elizabeth K. Richert, as Personal Representative and Trustee of the
Estate of Robert Louis Richert, deceased, of the Property she is entitled
to receive under the Last Will and Testament of Robert Louis Richert
and the Robert Louis Richert Revocable Trust Dated April 24, 2008, in
Defendant testified that she had sued two different cousins in Colorado after discovering
that they had stolen money from the estate of their mother, who was also defendant’s
maternal aunt. [458] 20.
6
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full payment and satisfaction of the bequest(s) to her and in
consideration thereof, the undersigned does hereby:
FIRST: Remise, release, and forever discharge the Personal
Representative and Trustee, Elizabeth K. Richert, individually and as
such Personal Representative and Trustee, of and from any every claim,
demand, action, and cause of action, account, reckoning and liability of
every kind and nature for and on account of any and every matter and
thing whatever arising from or in any manner relating to, or connected
with, the distribution of Property to the undersigned in full payment
and satisfaction of the Bequest.
*
*
*
THIRD: Agree that the undersigned does hereby indemnify and hold
harmless the Personal Representative and Trustee, Elizabeth K.
Richert, individually and as such Personal Representative and Trustee,
of and from any and all liabilities, damages, losses, charges, fees, costs,
and expenses of whatever kind or nature (including reasonable attorney
fees) which the Personal Representative and Trustee shall at any time
sustain by reason of any objection, demand, or claim of whatever kind
or nature, for, upon, or by reason of, the distribution of the Property to
the undersigned in full payment and satisfaction of the Bequest.
FOURTH: Agree that this Receipt and Release shall be binding upon the
heirs, distributees, executors, administrators, legal representatives, and
assigns of the undersigned, and shall inure to the benefit of the heirs,
distributees, executors, administrators, legal representatives, and
assigns of the Personal Representative and Trustee.
[PX 14] 1-2.
Neither Kathleen nor Thomas was present when Anna and defendant executed
the Receipt and Release. [451] 73; [452] 34-35. Vicki testified that Anna “wanted to
handle her affairs privately and she didn’t want any of the children involved.” [456]
29. Vicki also believed that Anna did not trust Kathleen’s husband, and that it was a
“complicated situation in keeping [Anna’s] affairs private from her children and
making them the way she wanted them.” [Id.] 30-31.
18
F.
The Quitclaim Deed
On the same day that defendant and Anna executed the Receipt and Release,
defendant also prepared a quitclaim deed respecting the Buffalo Grove property.
[PX 8]. The deed reflects that defendant, in her capacity as the trustee of the Robert
Trust, transferred title to the home to the “Anna M. White Revoc. Trust.” [Id.] 1.
Gary Steciuk, who observed defendant complete the quitclaim deed, testified
that defendant directed him to retain the deed, rather than “file it with the proper
reporting agency[.]” 454 [44]. According to Gary, defendant did not want to record the
deed because, “if there was something that happened where Anna White needed care,
and in a nursing home or something of that sort, that it was better if the house was
not in her name.” [Id.]. It is undisputed that the quitclaim deed was never recorded
with the appropriate recorder of deeds, and that title to the Buffalo Grove remains in
defendant’s name as trustee of the Robert Trust. [451] 23.
G.
Litigation History
On November 30, 2015, shortly after the case was removed to this Court, the
parties consented to proceed before Magistrate Judge Schenkier, then the designated
magistrate judge, for all further proceedings, including entry of final judgment. [23]
4; [26].7 Judge Schenkier presided over a settlement conference with the parties on
December 8, 2015 [27], after which, following several telephonic status conferences,
it appeared that the parties were close to finalizing a settlement agreement. [32].
7
The undersigned took over this case after Judge Schenkier’s retirement in May 2020. [386]
19
Although the discussions continued through mid-April 2016, the parties ultimately
concluded a settlement could not be reached, and the litigation began in earnest. [38].
1.
First Motion to Dismiss
In June 2016, the Court issued its first memorandum opinion and order in this
case, denying defendant’s motion under Fed. R. Civ. P. 12(b)(6) to dismiss Anna’s
petition for failure to state a claim as well as her motion to dismiss the case for
improper venue or to transfer venue. [48]; White v. Richert, No. 15 C 8185, 2016 WL
3582083 (N.D. Ill. June 28, 2016) (White I).
As relevant here, defendant argued that Anna’s petition failed to state a claim
because the Receipt and Release established as a matter of law that defendant could
not be liable for any claims related to an accounting of, and the distribution of assets
from, the Robert Trust. White I, 2016 WL 3582083, at *2. Defendant also contended
that the petition was time-barred under the relevant Arizona statute of limitations.
Id., at *3. The Court held that Anna plausibly alleged that the Receipt and Release
was the product of undue influence and therefore invalid, given Anna’s allegations
that defendant was acting as her attorney at the time. Id.8 The Court also ruled that
it would be premature to dismiss the case based on the statute of limitations, as it
At trial, the parties offered conflicting evidence whether defendant had acted as Anna
White’s attorney in 2011 by preparing the documents in her estate plan. Although this
evidence was arguably relevant to the validity and enforceability of the Receipt and Release,
the Court need not address this evidence or resolve the conflict in light of its conclusion that
the Receipt and Release is invalid on two separate grounds.
8
20
was unclear (1) if Arizona or Illinois law supplied the governing limitations period,
and (2) whether, if Illinois law applied, Anna’s petition was subject to a two-year
limitations period specific to claims of professional misconduct or a catchall, five-year
limitations period. Id., at *3-5.
2.
The Court’s Ruling That the Receipt and Release Is
Ambiguous
Shortly after the Court issued White I, defendant filed her first amended
counterclaim. [51]. The counterclaim asserted eight counts, including the
indemnification claim against Anna based on the Receipt and Release. [Id.] 10-11.
Plaintiffs moved to dismiss the counterclaim, and the Court dismissed all but Count
I, which alleged a breach of the loan agreement, and Count II, the indemnification
count.9 White v. Richert, No. 15 C 8185, 2016 WL 6139929, at *3-9 (N.D. Ill. Oct. 21,
2016) (White II). In holding that Count II survived, the Court determined that the
Receipt and Release was ambiguous as to whether the parties intended to indemnify
defendant only for claims raised by third parties or whether they also intended to
indemnify her for claims raised by Anna herself:
Anna contends that the point of the indemnity language in the Receipt
and Release was to indemnify Richert only for claims brought by third
parties. It was not intended, says Anna, to indemnify Richert for her
costs and fees accrued in a lawsuit brought by Anna herself.
Richert responds that the Receipt and Release squarely defines the
situations under which Anna may be required to indemnify
Richert[, including claims made by Anna herself].
In Illinois, interpretation of a contract’s terms is generally a question of
law. Fifth Third Mortgage Company v. Kaufman, No. 12 C 4693, 2016
WL 2851554, *5 (N.D. Ill. May 14, 2016). If there is any ambiguity in the
9
Defendant later voluntarily dismissed Count I of her counterclaim with prejudice. [330].
21
contract, however, proper resolution of that ambiguity becomes a
question to be resolved by the trier of fact, and cannot be decided on a
motion to dismiss. Bank of America, N.A. v. Oberman, Tivoli & Pickert,
Inc., 12 F. Supp. 3d 1092, 1100 (N.D. Ill. 2014). We apply that rule with
special rigor in a fee-shifting provision, as Illinois law does not provide
for fee shifting absent statute or a contractual agreement to do so.
United Labs., Inc. v. Savaiano, 06 C 1442, 2007 WL 4557095 (N.D. Ill.
Dec. 21, 2007).
In this case, the language of the indemnity agreement is ambiguous; we
cannot determine whether it was intended to indemnify Richert for
claims against her that were allegedly caused by her own behavior. It
will be for Richert to ultimately offer evidence to show that both parties
intended that result.
* * *
It is premature for the Court to decide now whether the indemnity in
the Receipt and Release was intended to cover fees and expenses
incurred by Richert as a result of the suit by Anna[.] *
*
* We
therefore deny the motion to dismiss Count II of the counterclaim.
White II, 2016 WL 6139929, at *5.
3.
Plaintiffs’ Amended Complaint
In the wake of the production of Versions A, B, and C of the Robert Trust in
February and May 2017, plaintiffs moved for leave to file an amended complaint.
[165]. The proposed amendment incorporated by reference Anna’s original petition
and added the claim for breach of fiduciary duty as trustee that was the subject of the
bench trial. Plaintiffs alleged that Version C was “a counterfeit document which
Elizabeth Richert altered and forged by replacing the dispositional language in the
authentic Robert Trust[.]” [173] 3, ¶ 28. Plaintiffs claimed that defendant had
“altered and forged Exhibit C to aggrandize and unlawfully take 47% of the trust
proceeds she was not entitled to.” [Id.] 3, ¶ 29. Their prayer for relief sought a
22
judgment “disgorging the trust proceeds to which Elizabeth Richert was not entitled”
and awarding punitive damages, attorney’s fees, and costs. [Id.] 3.
The parties discussed the proposed amendment at a hearing on July 18, 2017.
[192]. Plaintiffs acknowledged that the remedies they sought for the breach-offiduciary-duty claim were different from the remedies sought by Anna’s original
petition. [Id.] 14. With respect to the fiduciary-duty claim, plaintiffs specifically
stated that “[w]e are asking for . . . that portion of the 47 percent that Anna White
would have been entitled to” under Versions A and B of the trust documents. [Id.] 1415, 17-18. Plaintiffs also agreed that the Carefree home was “off the table” because it
“goes to the defendant whether–under any of the three scenarios” established by the
different versions of the trust instrument. [Id.] 16. On August 8, 2017, the Court
granted leave to file the amended complaint. [172].
4.
Defendant’s Challenge to the Court’s Subject-Matter
Jurisdiction
Defendant moved to dismiss the amended complaint on multiple grounds,
including for lack of subject-matter jurisdiction. [176]. In particular, defendant
argued that the fiduciary-duty claim fell within the probate exception to federal
jurisdiction because the claim asked the Court to invalidate one version of the Robert
Trust, disgorge trust property from defendant, and distribute that property to Anna
White. [Id.] 12.
At a hearing on defendant’s motion, the Court rejected this argument
principally because the Court had “not been provided with the factual information
that I find necessary to fully address the argument,” such as whether the Robert
23
Trust “was handled through state probate courts[.]” [193] 7. The Court permitted
defendant to renew the issue on summary judgment so that the Court could “assess
the claim on a factual record, and the parties can fully address issues such as whether
the case law treats a claim for a breach of fiduciary duty by altering a trust document
as a claim that falls within that exception.” [Id.]. However, defendant introduced no
evidence–either at summary judgment or at trial–to show that the Arizona probate
courts conducted any proceedings related to Robert Richert’s will or trust.
5.
Summary Judgment Rulings
In May 2018, defendant moved for summary judgment, arguing that both
counts of the amended complaint were untimely and, alternatively, there was no
genuine factual dispute that Version C was the authentic version of the Robert Trust.
The Court granted the motion in part and denied it in part. White III, 2018 WL
4101512.
First, the Court granted summary judgment to defendant on Count I, finding
that there was no genuine dispute that the claim was untimely under Illinois law.
The Court found that Count I, which “alleges that Ms. Richert breached her
‘duty of honesty and loyalty’ in her role as Ms. White’s attorney” and sought “legal
title to the BG [i.e., Buffalo Grove] property, dissolution of the Receipt and Release,
and an accounting of the Robert Trust,” was “‘[a]n action for damages based on tort,
contract, or otherwise (i) against an attorney arising out of an act or omission in the
performance of professional services’” and was therefore subject to a two-year
limitations period. White III, 2018 WL 4101512, at *5 (quoting 735 ILCS 5/13-214.3).
24
The Court held that Anna’s allegation that she “discovered a problem with title to the
BG property in February 2013” triggered the limitations period because by then Anna
“knew or reasonably should have known that Ms. Richert allegedly violated her
rights.” Id., at *6 (internal quotation marks omitted). Because Anna did not file her
petition until July 17, 2015, more than two years after discovering defendant’s alleged
misconduct, the claim was untimely.
Second, the Court denied summary judgment on the breach-of-fiduciary-duty
claim. The Court determined that this claim was timely under 735 ILCS 5/13-205,
which establishes a five-year “catch-all” limitations period for breaches of fiduciary
duty not addressed by a separate statute. White III, 2018 WL 4101512, at *6.
Rejecting defendant’s argument that Anna’s execution of the Receipt and Release in
July 2011 triggered the limitations period, the Court held that the statute did not
start to run until Anna knew or should have known that multiple versions of the
Robert Trust existed. Id., at *7. Although defendant testified at her deposition that
she showed Version C to Anna within a year of Robert Richert’s death, the Court
explained that it was not until after plaintiffs issued their subpoena to Fidelity in
April 2017 that “it became evident . . . that there was more than one version of the
Robert Trust” in existence. Id. For that reason, the Court ruled that Count II “did not
accrue until sometime in 2017, and it is not time-barred.” Id.
The Court then rejected defendant’s argument that there was no genuine issue
of material fact on the merits of the breach-of-fiduciary-duty claim. Although
defendant contended that the Court could decide as a matter of law that Version C
25
was genuine, the Court held that “the existence of multiple versions of the Robert
Trust, the unusual circumstances under which Ms. Richert says that Version C went
missing and was then returned to her in time for her deposition, and the fact that
Fidelity had copies of Versions A and B but not C, raise fact questions concerning
which version is authentic and governing.” White III, 2018 WL 4101512, at *8.
6.
Death of Anna White
Anna White suffered from dementia, and Kathleen White Murphy testified
that Anna’s health began seriously declining in 2015. [455] 36, 44. On August 29,
2019–eleven days before the originally scheduled trial date of September 9, 2019–
Anna passed away. [341] 1.
The Circuit Court of Lake County appointed Kathleen White Murphy and
Thomas White as the representatives of Anna’s estate, [344-1] 2, and this Court
granted plaintiffs’ ensuing motion to substitute themselves, in their representative
capacity, as the plaintiffs in this case. [348]. The Court found that the substitution
was proper because of Kathleen and Thomas’s appointment as the co-administrators
of Anna’s estate and because the breach-of-fiduciary-duty claim survived Anna’s
death. [Id.] 1. But the Court also ruled that Anna’s claim for punitive damages did
not survive her death as a matter of Illinois law. As the Court explained, “[u]nder
Illinois law, any right to common law punitive damages is lost once the injured party
has died[,]’ and a request for punitive damages will survive the injured party’s death
only if it is expressly authorized by statute.” [Id.] 2 (quoting Vincent v. Alden-Park
Strathmoor, Inc., 948 N.E.2d 610, 617 (Ill. 2011)). Because plaintiffs’ claim rested on
26
the common law, and because they had not cited a statute that expressly authorized
punitive damages, the Court held that plaintiffs would not be entitled to punitive
damages if they prevailed on the breach-of-fiduciary-duty claim.10
Discussion
I.
Subject-Matter Jurisdiction
In her post-trial brief, defendant renews her argument that the Court lacks
subject-matter jurisdiction over plaintiffs’ breach-of-fiduciary-duty claim because the
claim “ask[s] an Illinois District Court to probate an Arizona trust, in violation of the
probate exception to federal jurisdiction[.]” [462] 7. For the reasons that follow, the
Court concludes that it has subject-matter jurisdiction over plaintiffs’ claim.
A.
The Probate Exception
The probate exception to federal subject-matter jurisdiction “precludes federal
courts from interfering with persons and property that are in the custody of a state
probate court.” Sykes v. Cook Cnty. Circuit Court Probate Div., 837 F.3d 736, 741 (7th
Cir. 2016).
The exception applies in only two situations. “First, the exception ‘reserves to
state probate courts the probate or annulment of a will and the administration of a
decedent’s estate.’” Allian v. Allian, No. 18 C 3825, 2018 WL 6591422, at *3 (N.D. Ill.
Dec. 14, 2018) (quoting Marshall v. Marshall, 547 U.S. 293, 311 (2006)). Second, and
“in line with ‘the general principle that, when one court is exercising in rem
This decision was without prejudice to plaintiffs’ ability to file a memorandum “setting
forth the basis for any assertion that a claim for punitive damages survives” Anna’s death.
[348] 3. Plaintiffs filed a memorandum arguing that the availability of punitive damages was
governed by Arizona law [361], to which defendant did not respond.
10
27
jurisdiction over a res, a second court will not assume in rem jurisdiction over the
same res,’ the exception ‘precludes federal courts from endeavoring to dispose of
property that is in the custody of a state probate court.” Id. (quoting Marshall, 547
U.S. at 311-12).
“The exception ‘does not bar federal courts from adjudicating matters outside
those confines and otherwise within federal jurisdiction.’” Allian, 2018 WL 6591422,
at *3 (quoting Marshall, 547 U.S. at 312). Moreover, “as a judicially created exception
to the statutory grant of diversity jurisdiction, the probate exception should be
narrowly construed.” Sykes, 837 F.3d at 741.
B.
The Probate Exception Does Not Apply to a Claim Challenging
the Authenticity of a Trust Instrument.
The probate exception does not bar this Court from adjudicating the breach-offiduciary-duty claim because that claim does not seek to probate or annul a will, nor
does it seek to dispose of or otherwise affect property in the custody of a state probate
court. Rather, plaintiffs’ claim for breach of fiduciary duty is an “in personam claim
[ ]” that “seek[s] only compensatory and punitive damages from [defendant]
personally.” Allian, 2018 WL 6591422, at *3. Such a claim falls outside the narrow
scope of the probate exception. See id. (rejecting argument that breach-of-fiduciaryduty claim against trustee fell within probate exception); Stiles v. Whalen, No. 13 C
3516, 2013 WL 6730797, at *4 (N.D. Ill. Dec. 20, 2013) (breach-of-fiduciary-duty claim
alleging defendant “breached his fiduciary duty to the trusts” and “seeking only an
accounting and damages from [defendant] personally” was outside scope of probate
exception).
28
Importantly, defendant has introduced no evidence that the assets of the
Robert Trust have ever been in the custody or under the control of the Arizona probate
courts. When the Court rejected defendant’s argument about the probate exception
earlier in the litigation, the Court emphasized that it had “not been provided with the
factual information that I find necessary to fully address the argument,” such as
whether the Robert Trust “was handled through state probate courts[.]” [193] 7. To
this day, the record remains empty on the question whether the Arizona probate
courts ever handled the Robert Trust, and this hole in the record supports the Court’s
conclusion that the probate exception does not apply. See Stiles, 2013 WL 6730797,
at *4 (finding that claim was not within probate exception, in part because “there are
no pending probate or other state court proceedings involving the wills or trusts” that
were subject of plaintiff’s claims).
The Court acknowledges that it cannot resolve plaintiffs’ claim without
deciding which version of the Robert Trust is genuine and which is counterfeit. If
plaintiffs’ claim had raised a similar issue about the authenticity of competing
versions of Robert Richert’s will, for example, the probate exception might apply.
Cf. Dragan v. Miller, 679 F.2d 712, 716-17 (7th Cir. 1982) (challenge to validity of a
will, although pleaded as a tort claim of undue influence, was in substance a will
contest that was barred by probate exception); see, e.g., Wisecarver v. Moore, 489 F.3d
747, 751 (6th Cir. 2007) (claims seeking “money damages and other remedies relating
to the procurement and promotion of a false will, are barred by the probate exception”
because they “challenge the validity of [the] will and would require the district court
29
to ‘disturb or affect the possession of property in the custody of a state court’ because
the state court already probated [the decedent’s] estate”) (quoting Jones v. Brennan,
465 F.3d 304, 307-08 (7th Cir. 2006)).
But the Court is not persuaded that the probate exception requires a similar
result in this case, which concerns the authenticity of a trust rather than a will. Most
importantly, the Supreme Court’s decision in Marshall limited the probate exception
to cases involving “the probate or annulment of a will and the administration of a
decedent’s estate,” which are not at issue here. Marshall, 547 U.S. at 311. Nor, given
defendant’s failure to introduce evidence that the Arizona probate courts are
exercising, or have ever exercised, jurisdiction over Robert’s estate, is this a case
where two courts are exercising jurisdiction over the same res. See id. at 312.
C.
Storm v. Storm Does Not Require a Different Result.
Moreover, the Court is unaware of a post-Marshall decision from the Seventh
Circuit holding that the probate exception applies to a tort claim involving the
validity of a trust document. Before Marshall, the Seventh Circuit held that a claim
for tortious interference with an inheritance expectancy, which alleged that the
defendant exerted undue influence on his mother by persuading her to change the
terms of her will and trust, fell within the probate exception. Storm v. Storm, 328
F.3d 941, 945-47 (7th Cir. 2003). Because the claim sought “a legal determination
that the terms of the [testator’s] final will and trust . . . [were] invalid because they
were allegedly procured through the exertion of undue influence,” the Seventh Circuit
concluded that “the practical effect of [the plaintiff’s] lawsuit would be similar to that
30
of a will contest” and was thus barred by the probate exception. Id. at 945 (emphasis
supplied).
In so holding, the Seventh Circuit took “a practical approach to determining
the boundaries of the probate exception” and considered “the policy goals underlying
the exception.” Storm, 328 F.3d at 944. Those goals included the need “to encourage
legal certainty,” “promote judicial economy,” and acknowledge the relative expertise
of state court judges in probate law. Id.
After Marshall, however, it is unclear whether a court should apply Storm’s
“practical approach” to the probate exception. In this respect, the Court observes that
Marshall cited Storm as an example of a case that applied–improperly, Marshall
implies–the exception “to block federal jurisdiction over a range of matters well
beyond probate of a will or administration of a decedent’s estate.” Marshall, 547 U.S.
at 311. Decisions from the Northern District of Illinois have thus questioned Storm’s
continued vitality after Marshall. See Singer v. Massachusetts Mut. Life Ins. Co., 335
F. Supp. 3d 1023, 1029 (N.D. Ill. 2018) (“The Storm framework, however, has given
way to the clearer skies of Marshall v. Marshall[.]”); In re Emerald Casino, Inc., 223
F. Supp. 3d 740, 749 (N.D. Ill. 2016) (“Indeed, although the Seventh Circuit has
continued, since Marshall, to cite the Storm factors, their importance appears to have
been diminished in the wake of Marshall’s more straightforward rule that the probate
exception is intended to prohibit concurrent jurisdiction over a res.”). At the same
time, however, the Seventh Circuit has continued to cite the Storm factors in post-
31
Marshall cases when considering whether the exception applies to “an issue that is
ancillary to a core probate matter.” Sykes, 837 F.3d at 741.
For the sake of completeness, the Court has considered whether plaintiffs’
claim implicates the probate exception as understood by Storm. But the Court
concludes that, even under this “practical approach,” the probate exception does not
apply. To begin, which version of the Robert Trust document is the authentic version
“has nothing to do with probate law.” Sykes, 837 F.3d at 944. Rather, that issue is
nothing more than a credibility dispute that depends, not on the finer points of
Arizona probate law, but on the Court’s evaluation of the trial testimony and the
documentary evidence concerning which trust instrument is authentic. Furthermore,
there is no evidence in this case that the Arizona probate courts ever exercised
jurisdiction over the Robert Trust. Consequently, there is no danger that the Court’s
decision here would “create dissonance in probate . . . rulings” in Arizona. Id.
The Court therefore concludes that the probate exception is inapplicable and
the Court’s subject-matter jurisdiction over plaintiffs’ claim is secure.
II.
Power of Attorney
On September 30, 2013, Anna White, using the Illinois Statutory Short Form
Power of Attorney, executed a power of attorney that named her daughter Kathleen
as her attorney-in-fact. [PX 27] 3. Among other things, the power of attorney
authorized Kathleen to act for Anna with respect to “[c]laims and litigation” and to
“investigate, manage, acquire information and receive the distributions from the
32
Estates of Robert Richert Trust and the Elizabeth Richert Trust on behalf of” Anna
White. [PX 27] 2, 3.11
In the parties’ proposed final pretrial order, defendant asserted that the power
of attorney was invalid because of Anna’s alleged “inability to understand what she
was signing when the power of attorney was executed.” [280] 19. Defendant also
asserted, without elaboration, that the power of attorney was “unlawfully obtained.”
[Id.] 2. At the final pretrial conference on July 9, 2019, the Court explained that it
would “allow evidence concerning the power of attorney at trial” and suggested that,
in filing their proposed conclusions of law, the parties “cite whatever legal authority
they have on either side of the question of the power of attorney.” [311] 20-21.
In her proposed findings of fact and conclusions of law, defendant argued that
the evidence would show that plaintiffs believed that Anna “was not competent prior
to the filing of this lawsuit.” [329] 3, ¶¶ 12, 13. Defendant also claimed that plaintiffs
“fraudulently withheld the true nature of [Anna] White as Petitioner in this matter.”
[Id.] 3, ¶ 17. Defendant did not suggest what conclusion the Court should draw from
these proposed findings or explain how they would affect the Court’s resolution of the
case. See [id.] 1-5. Defendant’s post-trial brief all but ignores this issue, as it does not
mention the power of attorney at all, see [462] 1-14, and refers to Anna White’s
competency only in connection with a vague request that the Court sanction
plaintiffs, see [id.] 2.
Although the copy of the power of attorney admitted at trial as PX 27 is not notarized,
defendant used a notarized version of the power of attorney as an exhibit during her crossexamination of Kathleen White Murphy. [455] 18.
11
33
The Court concludes that defendant, by failing to develop any meaningful
argument about the validity of the power of attorney or Anna White’s capacity, has
forfeited those arguments. See Rezko v. Sirazi, No. 08 C 5433, 2009 WL 1507660, at
*5 (N.D. Ill. May 29, 2009) (“A party’s ‘failure to develop [an] argument in any
meaningful way’ may lead a court to conclude that the party has forfeited it.”)
(quoting Bell v. DaimlerChrysler Corp., 547 F.3d 796, 807 (7th Cir. 2008)).12
Nevertheless, even if defendant had preserved an argument relating to the power of
attorney or Anna White’s competency, such argument would not afford defendant any
relief.
Under Illinois law, “[p]ersons of mature age are presumed to be mentally
competent; their incompetence cannot be inferred merely from old age, physical
illness or defective memory.” In re Estate of Gruske, 534 N.E.2d 692, 695 (Ill. App.
1985). “The burden of proving mental incompetence is on the party seeking to set
aside a transaction.” Id.
Defendant failed to prove that Anna White was incompetent to execute the
power of attorney in September 2013. To the contrary, the most credible evidence
touching on this issue established that Anna was competent. Kathleen White
Murphy, who accompanied her mother to an attorney’s office where the power of
attorney was executed, testified that she believed Anna was “of sound mind when she
The Court recognizes that defendant, who was represented by five different attorneys
during various stages of pretrial proceedings, acted pro se at trial and during post-trial
litigation. As the Court has previously concluded, however, “even pro se litigants are
generally ‘subject to the same waiver rules that apply to parties who are represented by
counsel.’” White v. Richert, No. 15 C 8185, 2019 WL 4062539, at *11 (N.D. Ill. Aug. 28, 2019)
(quoting Kathrein v. City of Evanston, Ill., 752 F.3d 680, 689 n.6 (7th Cir. 2014)).
12
34
signed” the document. [451] 88. She based this opinion on “taking care of [Anna] for
a long time” and by “[b]eing with her.” [455] 24. Kathleen acknowledged that her
mother’s memory started to decline in 2011, but she reiterated that Anna “knew what
she was signing” when she executed the power of attorney. [Id.] 29. Furthermore, a
witness to the execution of the power of attorney “certifie[d]” that she believed Anna
“to be of sound mind and memory,” and that her signing of the power of attorney was
a “free and voluntary act.” [PX 27] 5. The Court credits Kathleen’s testimony on this
issue, as corroborated by the witness’s attestation that Anna appeared competent to
execute the power of attorney.
In contrast, only defendant testified that Anna was not competent to execute
the power of attorney. Defendant based her opinion that Anna’s memory was
“diminished” by September 2013 on a conversation she had with Anna White where
Anna told her that Kathleen wanted her to execute a power of attorney so that
Kathleen could help Anna manage her credit card bills. [449] 64-65. But it is not clear
to the Court that this testimony sheds any light on Anna White’s competence, and in
any event diminished memory alone does not support an inference that Anna was
incompetent to execute the power of attorney. See Estate of Gruske, 534 N.E.2d at
695.
More to the point, the Court rejects defendant’s testimony as biased and selfserving. As the Court explains below, defendant created a fake version of the Robert
Trust to steal $287,552.79 of the trust’s assets to which she was not entitled,
including $95,850.83 that belonged to Anna White. Defendant therefore had a
35
powerful reason to testify that her elderly aunt was incompetent to execute the power
of attorney because that testimony, if credited, might have called into question
Kathleen’s ability to help her mother vindicate a successful claim of breach of
fiduciary duty by defendant. And while the Court recognizes that Kathleen’s
testimony about her mother’s competency could be viewed as similarly self-serving,
the Court found Kathleen to be a credible witness who, unlike defendant, engaged in
no egregious misconduct that came at the expense of Anna White.
Because defendant has not established that the power of attorney is invalid,
the Court has no basis to question Kathleen White Murphy’s involvement in assisting
her mother file this suit and litigate it. Nor does the Court have any basis to question
Thomas White’s role in controlling, managing, or helping to control and manage the
litigation before he became a plaintiff. On April 20, 2017, Kathleen executed a
“Limited Delegation of power of attorney for the care of Anna White to Thomas
White.” [PX 27] 7. By this delegation, Kathleen (1) appointed Thomas as her designee
“to assist in the prosecution of the claims against Elizabeth Richert (‘Richert’) and
defense of claim by Richert”; and (2) delegated to Thomas “full power to assist me in
prosecuting the claim of Anna White against Richert and defending the claim of
Richert against Anna White filed in the Circuit Court of Lake County, Illinois and
removed to the Federal District Court for the Northern District of Illinois, Eastern
Division, identified as case number 15 CV 8185.” [Id.]. While defendant claims that
this was an improper delegation [280] 19, she neither cited authority to support this
claim nor presented any evidence to substantiate it.
36
The Court recognizes that Kathleen testified that she believed her mother was
no longer competent by 2015, when this litigation began. See, e.g., [455] 36; see also
[id.] 44 (Kathleen agreeing that “Anna White was not competent and of sound mind
in 2015 when [we] retained [attorney] Saternus for this case”).13 The Court doubts
that this testimony would suffice to prove that Anna was legally incompetent under
Illinois law. See Fed. R. Civ. P. 17(b)(1) (law of individual’s domicile determines
capacity to sue); see also O’Toole v. Vill. of Downers Grove Police Dep’t, No. 85 C 7380,
1986 WL 8732, at *5 (N.D. Ill. Aug. 1, 1986) (“Under Illinois law, a person who is
suffering from a mental illness has the capacity to sue provided that he has not been
divested of his power to sue through an adjudication of incompetency and
appointment of a guardian.”) (citing Logsdon v. Nolen, 248 N.E.2d 525, 529 (Ill. App.
1969) and Kirkland v. Kirkland, 186 N.E.2d 794, 796 (Ill. App. 1962)). But even
assuming that Kathleen’s testimony were sufficient to establish that Anna was not
competent, this evidence would have raised the question whether it would have been
proper for Kathleen to bring the suit on Anna’s behalf under the power of attorney.
Because Kathleen held a valid power of attorney designating her as Anna’s agent for
litigation and claims, the Court sees no basis why, had there been a successful–and
The Court also recognizes that, in January 2017, the Circuit Court of Lake County entered
an order declaring Anna White to be a disabled person. [328] 2, at ¶ 7; see also [DX 26] (report
of guardian ad litem). But that court declined to appoint a guardian ad litem for Anna because
“Anna’s interests are being well served with Kathy acting under the POA[.]” [DX 26] 4.
13
37
more timely–challenge to Anna’s competency, Kathleen could not have brought this
suit in her capacity as Anna’s attorney-in-fact.14
For these reasons, the Court holds that defendant forfeited her arguments
based on the power of attorney and Anna White’s incompetency, and that such
arguments provide no basis for relief.
III.
Breach of Fiduciary Duty
Plaintiffs’ sole claim for adjudication at the bench trial was their claim that
defendant breached her fiduciary duty to Anna White by creating a counterfeit
version of the Robert Trust and failing to distribute to Anna White her share of the
forty-seven percent of the trust assets not distributed to a named beneficiary.
A.
Choice of Law
“A federal court exercising diversity jurisdiction must apply the choice-of-law
rules used by the state in which the court sits.” Kolchinsky v. W. Dairy Transp., LLC,
949 F.3d 1010, 1013 n.2 (7th Cir. 2020). Under Illinois law, a court will engage in a
choice-of-law analysis only “if there is a conflict between Illinois law and the law of
another state such that ‘a difference in law will make a difference in the outcome.’”
If a suit is filed by an incompetent person, a district court should dismiss the case without
prejudice. See Johnson v. Collins, 5 F. App’x 479, 485 (7th Cir. 2001). A general guardian, a
committee, a conservator, or “a like fiduciary” may sue on behalf of an incompetent person.
See Fed. R. Civ. P. 17(c)(1). Under Illinois law, “[a]n individual holding a power of attorney
is a fiduciary as a matter of law.” Estate of Alford v. Shelton, 89 N.E.3d 391, 397 (Ill. 2017).
Absent an express statement to the contrary, moreover, a power of attorney authorizes an
attorney-in-fact to act while the principal is incompetent. In re Estate of Beetler, 83 N.E.3d
1136, 1141 (Ill. App. 2017); see also 755 ILCS 45/2-5 (“Unless the agency states an earlier
termination date, the agency continues until the death of the principal, notwithstanding any
lapse of time, the principal’s disability or incapacity or appointment of a guardian for the
principal after the agency is signed.”). Because the power of attorney held by Kathleen
contains no such limitation, see [PX 27] 2-4, Kathleen had authority to sue on Anna’s behalf.
14
38
W. Side Salvage, Inc. v. RSUI Indem. Co., 878 F.3d 219, 223 (7th Cir. 2017) (quoting
Townsend v. Sears, Roebuck & Co., 879 N.E.2d 893, 898 (Ill. 2007)). Absent any such
outcome-determinative conflict, “the court applies the law of the forum state.” Id.
Neither side has identified a difference in the relevant laws of the three states
that could apply to the breach-of-fiduciary-duty claim: Illinois (where Anna White
resided), Arizona (where the trust was created and its assets were formerly located),
or Florida (where defendant resides and Version C of the trust was held). The absence
of such a conflict would ordinarily lead the Court to apply Illinois law, but the Court
observes that all versions of the Robert Trust contain a choice-of-law provision stating
that “[t]his Agreement shall be construed under and regulated by the laws of the
State of Arizona as now or hereafter in effect.” [PX 26] 30 (Version A); [id.] 63 (Version
B); [PX 29] 17 (Version C).
Because Illinois courts generally honor choice-of-law provisions, see Belleville
Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 770 N.E.2d 177, 194 (Ill. 2002), and
because the parties have not given the Court any reason to think an Illinois court
would not enforce the Robert Trust’s choice-of-law provision, the Court will apply
Arizona law in deciding plaintiffs’ fiduciary-duty claim. See Life Plans, Inc. v. Sec.
Life of Denver Ins. Co., 800 F.3d 343, 357 (7th Cir. 2015) (“Under Illinois choice-oflaw rules . . . a court must honor a contractual choice of law unless the parties’ choice
39
of law would violate fundamental Illinois public policy and Illinois has a materially
greater interest in the litigation than the chosen state.”).15
B.
Standard of Proof
Before trial, the Court ruled that plaintiffs needed to prove their claim by a
preponderance of the evidence. [449] 21-22. Defendant moved for reconsideration,
arguing that plaintiffs’ claim must be proved by clear and convincing evidence. [447].
The Court entered and continued the motion and instructed the parties to address
the issue in their post-trial briefs. [453].
The Court adheres to its pretrial determination. Arizona law provides that “the
typical evidentiary standard in civil cases is by a preponderance of the evidence[.]” 16
Rasmussen by Mitchell v. Fleming, 741 P.2d 674, 691 (Ariz. 1987) (internal quotation
marks omitted). Defendant cites (and the Court’s research has uncovered) no Arizona
case law holding that a breach-of-fiduciary-duty claim must be proved by clear and
convincing evidence. [447] 1-3.
Furthermore, defendant’s argument that a provision in the Robert Trust
requires the Court to apply a clear-and-convincing standard has no merit. Paragraph
6.13 of all versions of the Robert Trust provides that:
Where the Trustee is related to the Settlor, the Settlor anticipates that
the Trustee may have to exercise powers with respect to any business in
which the Trustee will be individually interested as director,
stockholder, officer, employee, creditor, partner, or otherwise, and that
In White III, the Court applied Illinois law in holding that defendant was not entitled to
summary judgment on the breach-of-fiduciary duty claim. 2018 WL 4101512, at *7-8. At that
time, however, the parties did not engage in a choice-of-law analysis.
15
Because the standard of proof is a substantive aspect of a claim, see Raleigh v. Ill. Dep’t of
Rev., 530 U.S. 15, 20-21 (2000), the Court looks to Arizona law to resolve this issue.
16
40
the Trustee may, as a result, directly or indirectly benefit therefrom.
The Settlor also anticipates that it may be desirable for the Trustee to
make decisions, or refrain from making decisions, with respect to
interests in any business, which are adverse in some respects to the
short-term interests of the income beneficiaries. Accordingly, the Settlor
fully authorizes the Trustee to act with respect to matters in which the
Trustee may be individually interested, or the resolution of which is in
some respects adverse to the short-term interests of some or all of the
Trust beneficiaries, and that actions taken in these respects, absent
clear and convincing evidence that establishes beyond a doubt that the
Trustee is intentionally placing the Trustee’s own interests above those
of the Trust, shall be as conclusive as if no such relationship or conflict
of interest existed.
[PX 26] 17-18 (Version A); [id.] 48-49 (Version B); [PX 29] 8-9 (Version C).
Although defendant cites this language in her motion, she makes no argument
as to why it requires plaintiffs to prove their claim by clear and convincing evidence.
Her “perfunctory and undeveloped” contention that plaintiffs’ claim implicates
Section 6.13 and is therefore subject to a clear-and-convincing standard of proof is
forfeited. Oneida Nation v. Vill. of Hobart, 968 F.3d 664, 689 (7th Cir. 2020).
Forfeiture aside, plaintiffs’ breach-of-fiduciary-duty claim does not present the
kind of garden-variety dispute to which paragraph 6.13 would apply. The Court reads
that language to govern disputes about the propriety of a trustee’s decision, in the
course of conducting ordinary trust business, that had the effect of favoring the
trustee’s own interests over those of the trust beneficiaries. Plaintiffs’ claim, on the
other hand, involves an allegation that defendant created a fake version of the Robert
Trust to steal nearly half of the trust’s assets to which, absent the forgery, she would
not be entitled. The Court finds that such alleged conduct is far outside the scope of
Section 6.13, and that section’s clear-and-convincing standard is inapplicable.
41
Third, defendant’s reliance on cases holding that a fraud claim must be pleaded
with particularity is also misplaced. [447] 2-3. These cases address only the standard
a plaintiff must meet to advance its claim past the Rule 12 plausibility stage, and this
case long ago passed that threshold. And as noted above, substantive state law, not a
federal pleading rule, determines the standard of proof.
For all these reasons, the Court denies defendant’s motion to reconsider burden
of proof. [447].17
C.
Merits
The Court finds that plaintiffs have proved by a preponderance of the evidence
that defendant breached her fiduciary duty to Anna White to administer the Robert
Trust in accordance with Versions A and B of the Trust, and by counterfeiting Version
C, thereby unlawfully appropriating to herself an additional forty-seven percent of
the trust assets.
1.
Defendant Owed Anna White a Fiduciary Duty.
First, it is undisputed that defendant was the trustee of the Robert Trust at all
times relevant to this case and remains the trustee to this date. It is also undisputed
that Anna White was a beneficiary of the Robert Trust. [PX 26] 9 (Version A); [id.] 40
Even if plaintiff’s claim were subject to the clear-and-convincing standard, the Court’s
judgment would remain the same. As the Court explains below, the plaintiffs proved by clear
and convincing evidence that defendant’s breach of fiduciary duty–creating a fake trust
instrument to steal forty-seven percent of the trust’s assets–involved reprehensible and was
committed with an evil mind. In light of those findings, and the Court’s wholesale rejection
of defendant’s testimony surrounding Version C of the Robert Trust, the Court concludes that
there is clear and convincing evidence to prove that defendant breached her fiduciary duty
by creating a fake trust instrument and failing to distribute to Anna White her share of the
forty-seven percent of the trust assets that Versions A and B did not distribute to a named
beneficiary.
17
42
(Version B); [PX 29] 3 (Version C). A fiduciary duty therefore existed between
defendant and Anna White as a matter of law. See In re Naarden Trust, 990 P.2d
1085, 1088 (Ariz. App. 1999) (“A fiduciary relationship therefore exists between a
trustee and a beneficiary[.]”).
2.
Defendant Breached Her Fiduciary Duty to Anna White.
Second, the Court finds that defendant breached her fiduciary duty to Anna
White by failing to administer the authentic version of the Robert Trust according to
its terms and failing to distribute to Anna White her share of the trust assets. More
specifically, the Court finds that Version C of the Robert Trust is a counterfeit that
defendant created in order to take control of forty-seven percent of the trust estate to
which she was not entitled. As a necessary corollary, the Court finds that Versions A
and B are authentic and identical versions of the Robert Trust. Finally, the Court
finds that defendant failed to distribute to Anna White her one-third share of the
forty-seven percent of the trust estate for which the authentic trust instrument does
not designate a named beneficiary, and to which Anna White was therefore entitled
under Arizona’s intestacy laws.
i.
Version C of the Robert Trust Is a Forgery.
To begin, the Court is convinced that Version C of the Robert Trust is a forgery
that defendant created to steal the forty-seven percent of the trust estate for which
Version A did not identify a named beneficiary. This finding is based primarily on the
Court’s conclusion that defendant’s testimony about the supposed disappearance and
re-emergence of Version C is completely incredible and entirely fabricated.
43
Defendant testified that, after she discovered Version C in a floor safe in her
late uncle’s home, she maintained that document at her home in Florida. At some
date she could not remember, defendant testified, one of her clients stole the original
Version C from her house. Defendant decided not to report the burglary to police,
supposedly because of her need to keep her address secret due to her past involvement
in an abusive relationship. Then, one day in early 2017, a copy of Version C appeared
in defendant’s mailbox, contained in a plastic grocery bag.
The Court does not believe a single piece of this testimony.
First, there is absolutely no evidence in the record to corroborate defendant’s
account about the creation of Version C, her possession of that document in her house
in Florida, or the theft of that document from and its fortuitous return to her home.
Second, the Court finds it incredible that defendant would not remember the date of
the burglary–or even roughly when it had occurred–given her testimony that this was
“the only time [her] home was subject to a theft,” [451] 50, and the significance that
such an event is likely to have for a homeowner. Third, the Court rejects as
unconvincing defendant’s claim that she could not report the burglary to police
because of her past involvement in an abusive relationship–particularly when
coupled with the fact that defendant must have disclosed her address to her former
client-turned-burglar. While the Court has no reason to doubt defendant’s claim that
she had a genuine fear for her safety, the Court does not find that this fear would
explain why defendant could not or would not report the crime to police. Fourth, the
Court emphasizes the fantastical nature of defendant’s claim that Thomas White
44
found the copy of Version C that defendant had allegedly sent to Anna White, hired
a private investigator to find defendant’s address, and planted the copy of Version C
to “set [defendant] up.” But this claim is not just fantastical; it is illogical. Based on
their conversations with defendant, plaintiffs believed that Anna White was entitled
to half of the Robert Trust’s assets, including a one-half interest in the Carefree home.
Under Version C, however, plaintiffs were in a worse position because that document
distributes the Carefree home to defendant alone. The Court fails to see how plaintiffs
stood to gain from “planting” a copy of Version C in defendant’s mailbox, and the
Court’s concludes that defendant’s preposterous account of the re-emergence of
Version C only underscores her false and misleading testimony on this subject.
The Court also bases its credibility finding on the circumstances surrounding
the production of Versions A and B of the Robert Trust. Fidelity Investments, the
custodian of Robert’s trust account, produced only these versions of the trust
documents in response to plaintiffs’ subpoena in May 2017. The Court concludes that
Version A is the version Robert provided to Fidelity in order to open the trust account,
while Version B is the version that defendant faxed to Fidelity in order to be
recognized as the successor trustee after Robert was incapacitated. That Robert,
defendant, and Fidelity all possessed the same version of the trust documents
supports the Court’s finding that Versions A and B are genuine, while Version C–
which only defendant possessed–is a fake.
The Court recognizes that defendant testified that she did not discover Version
C until “months after” her uncle died, and that defendant believed that Robert had
45
simply substituted a new version of paragraph 5.4.1 into the version of the trust he
originally executed in June 2008. But there is no credible evidence to link Version C
to Robert Richert; only defendant’s testimony places Version C in Robert’s house, and
the Court does not find any part of defendant’s testimony respecting Version C to be
credible. Moreover, paragraph 4.1 of all versions of the Robert Trust provides that
the trust could be amended “by an instrument in writing signed by the Settlor and
delivered to the Trustee.” [PX 26] 5 (Version A); [id.] 37 (Version B); [PX 29] 1 (Version
C). There is no evidence that Robert ever sought to amend the trust in this fashion,
and defendant’s testimony that Robert decided to make a page substitution “rather
than go to the trouble of re-executing a document and finding witnesses and a notary”
[458] 37, is rejected as entirely self-serving and speculative.
The Court also finds that defendant’s failure to disclose the existence or
whereabouts of any version of the Robert Trust during the first year-and-a-half of the
litigation further undermines the credibility of her testimony about Version C and
supports the Court’s finding that Version C is counterfeit. Defendant admitted that
she never contacted Fidelity to obtain copies of the trust [450] 155-57, despite the
Court’s order of September 15, 2016 directing her to produce any copies of the trust
that were in her possession, custody, or control. [71] 2-3. Likewise, defendant
acknowledged at trial [451] 49-50, that none of her discovery responses mentioned
the existence of Version C or defendant’s contention that Version C had been taken
during a burglary of her home. Defendant’s failure to mention or produce Version C
during the first seventeen months of this litigation is likewise consistent with the
46
Court’s finding that defendant forged Version C in an effort to steal forty-seven
percent of the trust assets.
Finally, although both sides submitted opinions from forensic document
examiners as to the authenticity of Version C, the Court finds that these dueling
opinions essentially cancel each other out.18
These examiners–Robin D. Williams for plaintiffs and Thomas W. Vastrick for
defendant–compared known samples of Robert Richert’s initials to the initials on
page 3 of Version C, which contains what the Court has found to be the counterfeited
paragraph 5.4.1 distributing an additional forty-seven percent of the trust estate to
defendant. Williams opined that there were “differences” in “the initials on the bottom
right of each page 3” (that is, of the authentic and counterfeit versions). [315-3] 2. In
light of those differences, and the different dispositional language used in the two
versions of paragraph 5.4.1 itself, Williams concluded that there had been a “page
substitution” of page three. [Id.]. Vastrick, for his part, opined that “there are
indications” that Robert Richert wrote the initials on page 3 of Version C. [314-1] 3.
In support, Vastrick pointed to ten supposed similarities between the initials on page
3 of Version C and Robert’s known initials. [Id.] 3-4. Vastrick’s report acknowledged,
however, that the term “indications” represents the lowest level of confidence of
associative conclusions”–and is more or less synonymous with a “weak” conclusion–
By stipulation, the parties presented this testimony via written expert reports in lieu of
live testimony. [296]. During pretrial proceedings, the Court denied defendant’s motion to
strike plaintiff’s expert under Daubert and granted in part and denied in part plaintiff’s
similar motion to strike defendant’s expert report. White v. Richert, No. 15 C 8185, 2019 WL
4062539 (N.D. Ill. Aug. 28, 2019) (White IV).
18
47
under the standards for stating conclusions prescribed by the Scientific Working
Group for Forensic Document Examination. [Id.] 3.
Given the limitations inherent in Vastrick’s opinion, as well as the absence of
any explanation by Williams to support his conclusion, the Court does not find this
evidence helpful in deciding whether Version C is counterfeit. Based on its own
examination of the known and questioned initials, the Court observes that the initials
on Version C lack a forward slant that is present and quite obvious on Robert
Richert’s known initials, see [315-3] 2, and the Court believes that this difference is
consistent with someone other than Robert Richert having placed his initials on page
3 of Version C. The Court emphasizes, however, that its own comparison of the known
and questioned initials is merely corroboration of the Court’s finding, based primarily
on defendant’s incredible testimony and the fact that Fidelity did not possess Version
C, that defendant forged Version C to steal forty-seven percent of the trust assets.
Having determined that Version C of the Robert Trust is a counterfeit, the
Court necessarily finds that Versions A and B of the Robert Trust are authentic. As
noted above, Fidelity Investments possessed both Version A, which Robert must have
provided to Fidelity to open his trust account, and Version B, which defendant
provided to Fidelity to assume the trusteeship following Robert’s incapacitation. The
language of these documents is identical, and the fact that Robert, defendant, and
Fidelity all possessed the same version of the trust documents corroborates their
authenticity.
48
ii.
Defendant Failed to Distribute Anna White’s Share
of the Remaining Forty-Seven Percent of the Trust
Estate.
As noted above, Version A of the Robert Trust did not name a specific
beneficiary to receive the remaining forty-seven percent of the trust estate.
Paragraph 5.5 of the Robert Trust states that, should the trust fail to distribute any
portion of the trust estate, Arizona intestacy law would determine how that portion
of the estate should be distributed. Accordingly, under Ariz. Rev. Stat. 14-2103(3)–
which applies because Robert’s wife predeceased him and he did not have children,
see [PX 23]–the descendants of Robert’s parents, i.e., his siblings, were entitled to an
equal share of the undistributed forty-seven percent of the trust assets by
representation. Because Robert had three siblings–Anna White, Mary Jane Richert,
and Thomas Richert, and one of those siblings (Thomas) predeceased Robert–Anna
and Mary Jane were each entitled to a one-third share, while defendant and her
brother, as the children of Thomas Richert, were each entitled to a one-sixth share.
Thus, defendant was obligated by the terms of the Robert Trust to distribute
to Anna White was entitled to receive $95,850.83 ($611,814.45 x 0.47 x 0.33 =
$95,850.83). Because defendant failed to make this distribution, she breached her
fiduciary duty to Anna and caused Anna to suffer damages in the amount of
$95,850.83.
The Court recognizes that defendant distributed $154,823.09 in trust assets to
Anna White in January 2010. [280] 5, ¶¶ 25, 27. However, the Court finds that these
distributions represent payments toward the forty-seven percent of trust assets to
49
which Anna was entitled as a named beneficiary. For one thing, defendant’s theory
of the case is that Version C entitles her–rather than Anna and the other intestate
beneficiaries–to receive the forty-seven percent of the trust assets at issue.
Accordingly, any distribution that defendant made to Anna White must have
represented a payment toward Anna’s share as a named beneficiary. For another,
defendant introduced no evidence–banking records, for example, or a trust
accounting–to show that she made any distributions to the other intestate
beneficiaries. Defendant therefore has no basis to claim–and, indeed, has not
claimed–that any of the $154,823.09 previously distributed to Anna White should be
apportioned toward the $95,850.83 that defendant wrongly withheld from her aunt.
D.
The Receipt and Release Does Not Bar Plaintiffs’ Claim.
The Court further concludes that the Receipt and Release does not bar
plaintiffs’ claim because (1) there was no consideration for Anna White’s promise to
release defendant from liability for any claims relating to disposition of the trust
property, and (2) Anna White did not know that there were multiple versions of the
Robert Trust and could not have released a claim alleging that defendant had created
a counterfeit version that stripped her of a distribution to which she was entitled
under the authentic trust instrument.19
The parties’ briefs do not engage in a choice-of-law analysis with the respect to the
enforceability of the Receipt and Release. Because no outcome-determinative difference
between Illinois law and Arizona law has been shown, the Court applies Illinois law to decide
whether the Receipt and Release in enforceable. See ECHO, Inc., 52 F.3d at 707 (court should
apply law of forum state unless party argues choice-of-law rules require court to apply
another state’s law). In any event, the Receipt and Release would be unenforceable under
Arizona law because (1) Arizona law likewise provides that a promise to do something one is
19
50
1.
There Was No Consideration for Anna White’s Release of
Her Claims Against Defendant.
First, the Court finds that the Receipt and Release is unenforceable because
there was no consideration for Anna White’s promise to release defendant from all
claims relating to defendant’s distribution of the trust assets.
“A release is a contract wherein a party abandons a claim to the person against
whom the claims exist.” Touhy v. Twentieth Century-Fox Film Corp., 387 N.E.2d 862,
865 (Ill. App. 1979). “Since a release is a contract, the interpretation and construction
of it is governed by the rules of contract law.” Id. Accordingly, “[t]o be efficacious in a
court of law,” a release “must be based upon consideration.” White v. Vill. of
Homewood, 628 N.E.2d 616, 618 (Ill. App. 1993). “Valuable consideration for a
contract consists either of some right, interest, profit or benefit accruing to one party,
or some forbearance, detriment, loss of responsibility given, suffered or undertaken
by the other.” Id.
At trial, defendant did not testify about the consideration, if any, she gave in
exchange for Anna White’s promise to release her from all claims arising from the
distribution of the Robert Trust’s assets. [458] 20-21. The only consideration recited
in the Receipt and Release itself, moreover, was Anna’s acknowledgment that she had
received from defendant “the Property she is entitled to receive under the Last Will
and Testament of Robert Louis Richert and the Robert Louis Richert Revocable Trust
already legally obligated to do is not consideration, see Leone v. Precision Plumbing & Heating
of S. Ariz., Inc., 591 P.2d 1002, 1003 (Ariz. App. 1979); and (2) a beneficiary’s release of a
claim against the trustee for breach of trust is invalid when “the beneficiary did not know of
the beneficiary's rights or of the material facts relating to the breach,” Ariz. Rev. Stat. § 1411009(2).
51
. . . in full payment and satisfaction of the bequest(s) to her[.]” [PX 14] 1. However,
defendant’s distribution to Anna White of the assets to which Anna was entitled
under the terms of the Robert Trust does not constitute consideration for the release
because defendant had a preexisting duty to distribute those assets to Anna.
“The pre-existing duty rule provides that where a party does what it is already
legally obligated to do, there is no consideration as there is no detriment.” White, 628
N.E.2d at 618. Accordingly, “the performance by a party of a duty that he is already
required to perform does not constitute consideration for a contract.” Adams v.
Lockformer Co., 520 N.E.2d 1177, 1180 (Ill. App. 1988).
The decision in Johnson v. Maki & Assocs., Inc., 682 N.E.2d 1196 (Ill. App.
1997), illustrates the point. In Johnson, plaintiff executed a listing agreement with
defendant Maki in connection with a planned sale of plaintiff’s home. Johnson, 682
N.E.2d at 1197. Plaintiff later entered into a separate contract to sell the home to two
buyers, and the buyers deposited $2,000 in earnest money that was held by Maki in
an escrow account. Id. This contract provided that “the plaintiff and buyers needed
only to tender a written request to Maki in order for the earnest money to be
disbursed.” Id. at 1200. When the sale fell through, Maki refused plaintiff’s demand
to return the earnest money unless plaintiff signed a release stating that plaintiff
would “indemnify, save, and hold harmless [Maki] from all claims, litigations,
judgments, and costs arising from the cancellation of the Contract.” Id. at 1198.
Plaintiff signed the release but later sued Maki for various claims arising from the
52
failed sale of her home. Id. The trial court dismissed the suit, holding that the release
barred plaintiff’s claims. Id.
Plaintiff appealed, arguing that the release was unenforceable because she
received no consideration in exchange for releasing her claims against Maki. Johnson,
682 N.E.2d at 1198. According to plaintiff, Maki was “acting as an escrowee and
therefore had a preexisting legal obligation to return the earnest money . . . at
[plaintiff’s] directive,” and its “preexisting legal obligation cannot constitute
consideration for the release.” Id. at 1199.
The Illinois Appellate Court agreed. As the court explained, “[a]n escrowee has
been described as a ‘trustee’ of both the party making the deposit of property and the
party for whose benefit it is made[.]” Johnson, 682 N.E.2d at 1199. “Like a trustee,”
the court continued, “the escrowee owes a fiduciary duty to act only in accordance
with the terms of the escrow instructions.” Id. Because the contract to sell plaintiff’s
home instructed Maki to disburse the earnest money at plaintiff’s written request,
the court held that Maki had “a preexisting legal duty under [that] contract” to
release the escrow money, and that Maki’s agreement to disburse the funds to
plaintiff “could not constitute consideration for the release[.]” Id. at 1200.
Just like the escrowee in Johnson had a preexisting–and fiduciary–obligation
to release the earnest money upon request, here defendant had a preexisting–and
fiduciary–duty under the Robert Trust to distribute to Anna White her share of the
trust assets. Because defendant was bound by the terms of the trust to make that
distribution to Anna, the distribution of those assets does not constitute
53
consideration. Rather, defendant was simply “do[ing] what [she] [wa]s already legally
obligated to do” as the trustee of the Robert Trust, and there was “no consideration
because there [wa]s no detriment.” Gavery v. McMahon & Elliot, 670 N.E.2d 822, 826
(Ill. App. 1996).
Because there was no consideration for Anna White’s release of her claims
against defendant, the Receipt and Release is invalid and unenforceable. See
Johnson, 682 N.E.2d at 1199-1200. Consequently, the Receipt and Release does not
bar plaintiffs’ claim for breach of fiduciary duty.
2.
Anna White Did Not Know She Had a Claim for Breach of
Fiduciary Duty Based on Multiple Versions of the Trust
Documents.
Even setting aside the absence of consideration, the Receipt and Release would
not bar plaintiffs’ breach-of-fiduciary-duty claim because it is undisputed that, when
Anna White executed that document, she did not know that multiple versions of the
Robert Trust existed. Anna thus did not know she had a potential claim for breach of
fiduciary duty against defendant for forging Version C and failing to distribute her
proper share of the trust estate, and the Receipt and Release is not effective to bar
this claim.
i.
The Receipt and Release Must Be Strictly Construed
Against Defendant.
Under Illinois law, a release is “strictly construed against the benefitting party
and must spell out the intention of the parties with great particularity.” Janowiak v.
Tiesi, 932 N.E.2d 569, 586 (Ill. App. 2010) (internal quotation marks omitted). “The
intention of the parties controls the scope and effect of the release, and this intent is
54
discerned from the release’s express language as well as the circumstances
surrounding the agreement.” Id. “[N]o form of words, no matter how all
encompassing, will foreclose scrutiny of a release or prevent a reviewing court from
inquiring into surrounding circumstances to ascertain whether it was fairly made
and accurately reflected the intention of the parties.” Ainsworth Corp. v. Cenco Inc.,
437 N.E.2d 817, 821 (Ill. App. 1982) (internal citation omitted).
More specific to this case, Illinois law provides that “a release between a
trustee and a beneficiary, like all transactions growing out of a fiduciary relationship,
is subject to the closest scrutiny.” Janowiak, 932 N.E.2d at 580. “Fiduciaries are not
prohibited from having direct dealings with their beneficiaries, but such transactions
are subject to special scrutiny by the courts, and the burden is on the fiduciary to
show that the transaction was fair.” Id. (internal quotation marks omitted).
“[I]mportant factors in determining whether a particular transaction is fair include a
showing by the fiduciary (1) that he has made a free and frank disclosure of all the
relevant information which he had; (2) that the consideration was adequate; and (3)
that the principal had competent and independent advice before completing the
transaction.” Id. (internal quotation marks omitted). These factors are known as the
“McFail factors,” after McFail v. Braden, 166 N.E.2d 46, 52 (Ill. 1960). See Monco v.
Janus, 583 N.E.2d 575, 581-82 (Ill. App. 1991).
A defendant’s claim that a release bars a plaintiff’s cause of action is an
affirmative defense. Thornwood, Inc. v. Jenner & Block, 799 N.E.2d 756, 764 (Ill. App.
2003); O’Keefe v. Greenwald, 574 N.E.2d 136, 140 (Ill. App. 1991). The burden of
55
proving that the Receipt and Release barred plaintiffs’ claim was therefore on
defendant. Rosestone Inves., LLC v. Garner, 2 N.E.3d 532, 539-40 (Ill. App. 2013).
The parties have not cited, and the Court has not found, any Illinois cases
discussing what a trustee must prove to establish that a release purporting to bar a
beneficiary’s claim against the trustee is valid. But the Illinois Appellate Court has
looked to the McFail factors, as well as the Restatement (Second) of Trusts, in the
closely related context of deciding what a fiduciary must prove to sustain the
affirmative defense of ratification.
In Monco v. Janus, the court held that a ratification defense was available to
an attorney defending against a claim that he had improperly profited from a
business transaction with a client that occurred during the attorney-client
relationship. 583 N.E.2d at 583. Citing the “strong public policy considerations
triggered by these attorney-client transactions,” the court concluded that “an
attorney asserting a ratification defense must make the same showing as he would
in initially overcoming the presumption of undue influence,” meaning that “the same
three McFail factors are relevant to a ratification analysis[.].” Id. In so holding, the
court relied on § 218 of the Restatement (Second) of Trusts, which provides that a
beneficiary’s ratification or affirmation of a transaction undertaken by the trustee in
breach of trust will preclude a claim against the trustee unless “the beneficiary did
not know of his rights and the material facts which the trustee knew or should have
known and which the trustee did not reasonably believe that the beneficiary knew[.]”
Restatement (2d) of Trusts, § 218(2)(b). Thus, “a beneficiary's ratification of a
56
voidable trustee-beneficiary transaction requires at least full knowledge and
fairness.” Monco, 583 N.E.2d at 584.
The Illinois Appellate Court’s decision in Monco that a ratification is not valid
unless a fiduciary proves “at least full knowledge” on the beneficiary’s part–and its
reliance on the Restatement (Second) of Trusts in so holding–convinces the Court that
the Illinois courts would likewise invalidate a beneficiary’s release of claims against
a trustee unless the trustee proved that the beneficiary had full knowledge of her
rights and of the material facts known to the trustee. In analyzing the validity of the
release here, the Court therefore looks, not only to the Illinois cases holding that
releases must be strictly construed, but also to § 217 of the Restatement (Second) of
Trusts. This section, titled Discharge of Liability by Release or Contract, also
emphasizes that a beneficiary’s release of a claim against the trustee is valid only if
the beneficiary knew of her rights and the material facts known to the trustee:
(1) A beneficiary may preclude himself from holding the trustee liable
for a breach of trust by a release or contract effective to discharge the
trustee’s liability to him for that breach.
(2) A release or contract is not effective to discharge the trustee’s liability
for a breach of trust, if
(a) the beneficiary was under an incapacity at the time of making
such release or contract; or
(b) the beneficiary did not know of his rights and of the material
facts which the trustee knew or should have known and which the
trustee did not reasonably believe that the beneficiary knew; or
(c) the release or contract of the beneficiary was induced by
improper conduct of the trustee; or
57
(d) the transaction involved a bargain with the trust which was
not fair or reasonable.
Restatement (Second) of Trusts, § 217.
“Restatements are not binding on Illinois courts unless adopted by [the Illinois
Supreme Court].” In re Estate of Lieberman, 909 N.E.2d 915, 922 (Ill. App. 2009).
Because there is no Illinois Supreme Court case specifically adopting § 217, that
section “merely provides guidance.” Id. But particularly in light of Monco, the Court
is persuaded that the Illinois courts would follow § 217 in considering whether a
release purporting to discharge the trustee’s liability for breach of trust was
effective.20
ii.
Anna White Did Not Know There Were Multiple
Versions of the Robert Trust.
There is no evidence showing that Anna White knew, when she executed the
Receipt in Release in July 2011, that multiple versions of the Robert Trust documents
existed. Defendant testified only that she provided Anna with a copy of Version C
sometime after Robert Richert’s death. [458] 17. Because defendant failed to prove
that Anna White had full knowledge of her rights and of the material facts known to
defendant–namely that she was withholding the genuine trust instrument and had
The Court observes that, on January 1, 2020, the Illinois Trust Code, 760 ILCS 3/101, et
seq., became effective, replacing the Illinois Trusts and Trustees Act, 760 ILCS 5/1, et seq.
Section 1009 of the Trust Code provides that “[a] trustee is not liable to a beneficiary . . . for
a breach of trust if the beneficiary . . . released the trustee from liability for the breach . . .
unless . . . at the time of the . . . release . . . the beneficiary did not know of the beneficiary’s
rights or of the material facts relating to the breach.” 760 ILCS 3/1009(a)(2). Although the
Court does not apply that provision here, it is substantively identical to the Restatement
standard relied on by the Court and consistent with Monco v. Janus.
20
58
created a fake version of the Robert Trust to steal forty-seven percent of the trust
assets–the Receipt and Release is not effective to bar plaintiffs’ claim.
E.
Punitive Damages
Plaintiffs also seek an award of punitive damages for defendant’s “intentional
fraudulent breaches of fiduciary duty against Anna White” and her “intentional
failure to answer discovery honestly.” [328] 47.
As discussed above, the Court previously ruled that plaintiffs’ claim for
punitive damages did not survive Anna White’s death as a matter of Illinois law.
[348]. As the Court explained, “‘[u]nder Illinois law, any right to common law punitive
damages is lost once the injured party has died,’ and a request for punitive damages
will survive the injured party’s death only if it is expressly authorized by statute.”
[Id.] 2 (quoting Vincent v. Alden-Park Strathmoor, Inc., 948 N.E.2d 610, 617 (Ill.
2011)). The Court now reconsiders this issue in light of the memorandum filed by
plaintiffs on September 12, 2019. [361].
Plaintiffs first argue that Arizona law, under which a claim for punitive
damages survives an injured party’s death, governs the request for punitive damages
because the choice-of-law provision in the trust instrument states that the trust “shall
be construed under and regulated by” Arizona law. [361] 1; see also [PX 26] 30
(Version A). Second, and apart from their reliance on the choice-of-law language,
plaintiffs contend that Arizona law or Florida law (which also permits punitives after
the injured party’s death), rather than Illinois law, should apply because those states
have a more significant interest in whether punitive damages should be awarded
59
against defendant. [361] 4-9. Finally, plaintiffs contend that the Court erred in ruling
that their claim for punitive damages did not survive Anna’s death as a matter of
Illinois law. [Id.] 10-11.
1.
Choice of Law
As with the merits of plaintiffs’ claim, the Court need engage in a choice-of-law
analysis respecting punitive damages “only if there is a conflict between Illinois law
and the law of another state such that a difference in law will make a difference in
the outcome.” W. Side Salvage, 878 F.3d at 223 (internal quotation marks omitted).
Here the Court finds that there is an actual conflict between Illinois law and
Arizona law. As already established, Illinois law requires that there “be express
statutory authorization for punitive damages in order for a punitive damage claim to
survive the injured person's death,” Vincent, 948 N.E.2d at 617, and plaintiffs have
not identified a statute authorizing such damages for a breach of fiduciary duty.
Plaintiffs argue that there is an equitable exception to Vincent, such that a court may
award punitive damages in the absence of express statutory authority whenever
there are “very strong equitable reasons” to do so. Marston v. Walgreen Co., 907
N.E.2d 851, 857 (Ill. App. 2009); [361] 10-11. The Court disagrees: such a rule would
be impossible to square with Vincent, and there is no case from the Illinois Supreme
Court holding that punitive damages may be awarded in the absence of statutory
authorization whenever a party can show that “very strong equitable reasons”
supposedly justify an award of such damages.
60
In contrast, Arizona law clearly provides that a claim for punitive damages
survives the injured party’s death. Quintero v. Rogers, 212 P.3d 874, 878 (Ariz. App.
2009) (“Therefore, we hold that actions for punitive damages survive the death of the
plaintiff as well as the death of the tortfeasor.”).
Although the Court is faced with an outcome-determinative conflict between
Illinois and Arizona law, the Court finds that the choice-of-law provision in the Robert
Trust obviates the need to engage in an extended analysis. Illinois’s choice-of-law
rules instruct that “a court must honor a contractual choice of law unless the parties’
choice of law would violate fundamental Illinois public policy and Illinois has a
materially greater interest in the litigation than the chosen state.” Life Plans, 800
F.3d at 357. Defendant has not tried to make either showing, and the Court doubts
that any interest Illinois might have in the litigation would be “materially greater”
than Arizona’s, given that Robert Richert was an Arizona resident, the trust was
created in Arizona, and the trust possessed and provides for the disposition of assets
located in Arizona–namely, the Carefree home and the funds in the Fidelity trust
account.
Accordingly, the Court will apply Arizona law in deciding whether plaintiffs
are entitled to punitive damages.
2.
Punitive Damages Under Arizona Law
“Punitive damages are awarded only in the most egregious of cases, where a
plaintiff proves by clear and convincing evidence that the defendant engaged in
reprehensible conduct and acted with an evil mind.” Medasys Acquisition Corp. v.
61
SDMS, P.C., 55 P.3d 763, 767 (Ariz. 2002) (internal quotation marks and brackets
omitted).
“In deciding whether punitive damages are awardable, the inquiry should be
focused upon the wrongdoer’s mental state.” Linthicum v. Nationwide Life Ins. Co.,
723 P.2d 675, 679 (Ariz. 1986). “To recover punitive damages, something more is
required over and above the ‘mere commission of a tort.’” Id. (quoting Rawlings v.
Apodaca, 726 P.2d 565, 578 (Ariz. 1986)). “The wrongdoer must be consciously aware
of the wrongfulness or harmfulness of his conduct and yet continue to act in the same
manner in deliberate contravention to the rights of the victim.” Id. “A defendant acts
with the requisite evil mind when he intends to injure or defraud, or deliberately
interferes with the rights of others, consciously disregarding the unjustifiable
substantial risk of significant harm to them.” Hyatt Regency Phoenix Hotel Co. v.
Winston & Strawn 907 P.2d 506, 518 (Ariz. App. 1995).
A party seeking punitive damages must support its claim with clear and
convincing evidence. Linthicum, 723 P.2d at 681. Clear and convincing evidence
“reflects a heightened standard of proof that indicates that the thing to be proved is
highly probable or reasonably certain.” Kent K. v. Bobby M., 110 P.3d 1013, 1018-19
(Ariz. 2005).
3.
Punitive Damages Are Warranted in This Case.
The Court concludes that clear and convincing evidence supports plaintiffs’
claim for punitive damages.
62
i.
Defendant’s Conduct Was Truly Reprehensible.
First, the evidence clearly and convincingly proved that defendant’s breach of
fiduciary duty represents truly “reprehensible conduct.” Medasys, 55 P.3d at 767.
As the trustee of the Robert Trust, defendant owed Anna White a duty of
loyalty and was obligated in her dealings with Anna to act with the utmost degree of
fidelity and good faith. Lane Title & Trust Co. v. Brennan, 440 P.2d 105, 111 (Ariz.
1968) (“the trustee owes the beneficiary a duty of undivided loyalty”). Defendant also
had a duty to distribute to Anna the share of the Robert Trust estate to which she
was entitled under the trust documents. Ariz. Rev. Stat. § 14-10801 (“the trustee shall
administer the trust in good faith, in accordance with its terms and purposes and the
interests of the beneficiaries”). Defendant did not simply fail to live up to the high
standards that the law of trusts imposed on her–though fail to do so she surely did.
Defendant actively, purposefully violated those standards by creating a fake version
of the Robert Trust in order to steal forty-seven percent of the trust estate to which
she was not entitled, including $95,850.83 that belonged to Anna White. This conduct
was truly outrageous and truly reprehensible
The reprehensible nature of defendant’s betrayal of Anna White is only
amplified by the close, trusting relationship that existed between aunt and niece.
Kathleen White Murphy [451] 61, 70; Vicki Steciuk [456] 36; and defendant herself
[449] 56, all testified that Anna and defendant were close. Defendant even stipulated
that Anna “shared confidences with her” and that she believed Anna “trusted” her.
[280] 4, at ¶¶ 11-12. Anna White was particularly vulnerable to defendant’s
63
predations, moreover, because of her advanced age and declining mental capacity.
That defendant committed such an egregious breach of her fiduciary duty to a close
and elderly relative who defendant believed trusted her and to whom defendant
professed affection supports the Court’s finding that defendant’s conduct was
thoroughly reprehensible.
ii.
Defendant Acted with an Evil Mind.
Second, the evidence clearly and convincingly proved that defendant acted
with an evil mind. Defendant’s intent to “injure or defraud” Anna and “deliberately
interfere[ ]” with her rights under the Robert Trust practically leaps off the pages of
the trial record. Hyatt Regency, 907 P.2d at 518. Defendant possessed the authentic
trust instrument and knew that she was entitled only to the Carefree home while
Anna was entitled to both forty-seven percent of the trust estate and a further onethird share of the forty-seven percent of the trust estate not distributed to a named
beneficiary. Nevertheless, or more likely because of this, defendant created a fake
version of the trust document that redirected forty-seven percent of the trust estate
to herself alone. The only conceivable purpose for doing so was to enrich herself at
the expense of the rightful beneficiaries, including Anna White. Defendant could not
but be “consciously aware of the wrongfulness or harmfulness of h[er] conduct,”
Linthicum, 723 P.2d at 679, and yet she has persisted for years in claiming that the
fake document controls. This “[e]vidence of fraudulent and dishonest conduct . . .
support[s] a finding that the ‘defendant’s conduct was guided by evil motives.’” Rhue
v. Dawson, 841 P.2d 215, 227 (Ariz. App. 1992) (quoting Rawlings, 726 P.2d at 579).
64
iii.
Punitive
Damages
Cannot
Be
Defendant’s After-Occurring Conduct.
Based
on
Plaintiffs contend that an award of punitive damages should account for
defendant’s “more recent untoward conduct,” which includes “repeatedly changing
the locks on the Buffalo Grove home, posting a NO TRESPASS note on the front door
requiring visitors to contact her and refusing to allow the recovery of personal
property” from the home that defendant “knows she does not own.” [460] 14. Plaintiffs
also argue that punitive damages should be imposed for defendant’s “intentional
failure to answer discovery honestly.” [328] 47.
Plaintiffs’ contentions, for which they cite no Arizona law, lack merit. Under
Arizona law, “it is the quality of the character of the tortious act itself which gives
rise to the assessing of punitive damages, not the character of the wrongdoer[.]”
Forquer v. Pinal Cnty., 526 P.2d 1064, 1067 (Ariz. App. 1974). “It follows that acts of
the wrongdoer occurring after the liability creating event are normally not material
on the issue of punitive damages unless such acts constitute evidence as to either the
manner in which the liability-creating event occurred or to the aggravation of the
victim’s injuries.” Id.
Nowhere in their briefs do plaintiffs try to show how defendant’s recent conduct
vis-à-vis the Buffalo Grove property, or her alleged misconduct during discovery in
this case, relates to the manner in which she forged Version C or the aggravation of
Anna White’s injury. Nor can the Court conceive of how defendant’s actions in recent
years respecting the Buffalo Grove home “tend to prove that defendant had an ‘evil
65
mind’ when she injured plaintiff[s]” years ago by counterfeiting Version C. Warfel v.
Cheney, 758 P.2d 1326, 1334 (Ariz. App. 1988).
Accordingly, the Court does not base its award of punitive damages on the
conduct post-dating the creation of the fake trust document cited by plaintiffs.
iv.
Arizona Case Law Confirms That Punitive Damages
Are Warranted in This Case.
The Court’s award of punitive damages is consistent with other Arizona cases
awarding such damages for a breach of fiduciary duty.
Punitive damages “may be imposed in . . . breach-of-fiduciary-duty cases.” Sec.
Title Agency, Inc. v. Pope, 200 P.3d 977, 995 (Ariz. App. 2008). To be sure, the Court
has not found another case featuring as bold a breach of fiduciary duty as that
committed by defendant here. But the Arizona cases awarding punitive damages in
more run-of-the-mill cases support the Court’s finding that defendant’s reprehensible
conduct here merits such damages.
In Rhue v. Dawson, the parties formed a partnership to acquire land and
develop the parcels into shopping centers. 841 P.2d at 218. Rhue was the partner
“with shopping center development expertise and was to handle the day-to-day
details,” while Dawson was the “financial partner, contributing the bulk of the capital
and facilitating financing.” Id. Shortly after Dawson obtained an appraisal showing
that the partnership was likely to realize a $3.77 million profit on two properties it
had purchased, Dawson “pressured” Rhue to sign a joint venture agreement. Id. This
agreement, which Rhue signed without reading, contained a buyout provision
allowing Dawson to buy Rhue’s interest in the partnership simply by returning any
66
capital contribution Rhue had made. Id. at 219. “Because Rhue contributed primarily
expertise but not capital and would be entitled to an equal share of the project’s equity
upon dissolution, this provision was highly unfavorable to Rhue.” Id. When Rhue
later sought to contest the provision, Dawson–who had boasted about his plans to
oust Rhue from the partnership–notified Rhue of his intent to exercise the buyout
and locked Rhue out of the partnership offices. Id.
A jury found that Dawson breached his fiduciary duty to Rhue “by failing to
exercise the utmost good faith and by breaching the obligation of loyalty, fairness and
honesty,” and the Arizona Court of Appeals affirmed the jury’s award of punitive
damages. Rhue, 841 P.2d at 226. As the court explained, the circumstances
surrounding the execution of the buyout provision, as well as Rhue’s boasts and his
decision to lock Rhue out of the partnership offices, proved that “Dawson deliberately
misled Rhue and intended to injure Rhue.” Id. at 227. Furthermore, Dawson’s
“deliberate[ ] fail[ure] to disclose that the agreement . . . contained a buyout provision”
constituted “evidence of fraud and dishonest conduct” from which the jury could have
“infer[red] that Dawson acted with an evil mind.” Id.
In Security Title Agency v. Pope, the plaintiff title insurance company suffered
a seventy-percent loss in revenue after a competitor, defendant First American, began
soliciting plaintiff’s clients with the help of co-defendant Pope, who had managed one
of the plaintiff’s most profitable branches. 200 P.3d at 981-82, 986. The evidence
showed that Pope “secretly solicited key managerial employees to join a competitor,”
id. at 992, directed those employees to copy “pending escrow files” and “take them to
67
their homes so Security Title would not discover them,” id. 987, and secured
commitments from Security Title’s clients to do business with First American, id. at
986-87. The evidence further established that First American aided and abetted
Pope’s actions by “substantially assist[ing] Pope to solicit key Security Title
employees by participating in recruiting meetings arranged by Pope,” id. at 992,
discussing potential salaries and benefits the employees would receive if they moved
to First National, and “agreeing to indemnify Pope” for the breaches of fiduciary duty
she had committed “while still employed by Security Title,” id. at 993.
The Arizona Court of Appeals affirmed the jury’s award of punitive damages
against First American for aiding and abetting Pope’s breach of her fiduciary duty to
Security Title. Sec. Title, 200 P.3d at 995-97. Despite knowing that Security Title’s
“loss of Pope and the rest of [her branch’s employees] would be a ‘blow’ to” Security
Title’s parent company and “cause substantial harm to Security Title,” the court
found that First American actively facilitated Pope’s breach of fiduciary duty in order
to “obtain for itself the $8 million in annual revenue generated by” Pope’s branch. Id.
at 995-96. This conduct provided “clear and convincing evidence that First American
committed the outrageous conduct necessary to support an award of punitive
damages.” Id. at 997.
Defendant’s conduct is at least on par with the reprehensible conduct that
warranted punitives in Rhue and Security Title Agency. Like the defendant in Rhue,
who crafted and pressured his partner to sign a one-sided buyout agreement to
assume control over the partnership–and his partner’s nearly $1.9 million share of
68
the partnership’s expected profits–defendant here created a fake trust document to
assume control over forty-seven percent of the trust estate to which she was not
entitled under the authentic trust instrument. And like the corporate defendant in
Security Title Agency, which aided and abetted another’s breach of fiduciary duty
despite knowing that it would be a “blow” and cause “substantial harm” to its rival,
defendant here persisted in defrauding Anna White out of her rightful share of the
trust estate despite the obviously wrongful and injurious nature of her conduct. The
Court is therefore satisfied that an award of punitive damages in this case not only
rests on clear and convincing evidence, but also is consistent with awards of punitive
damages in other Arizona cases involving a breach of fiduciary duty.
v.
A 1:1 Ratio of Compensatory Damages to Punitive
Damages Is Appropriate.
Finally, the Court agrees with plaintiffs that punitive damages should be
awarded on a 1:1 basis with the award of compensatory damages. [460] (asking for
entry of judgment “awarding punitive damages at the ratio of 1:1 based on all
compensatory damages”).
The Court recognizes that “[t]here is no bright-line ratio between
compensatory and punitive damages” because “[a]n appropriate award of damages is
a fact-sensitive inquiry.” Arellano v. Primerica Life Ins. Co., 332 P.3d 597, 605 (Ariz.
App. 2014). But a number of Arizona cases have authorized awards of punitive
damages at a 1:1 ratio with the award of compensatory damages. See, e.g., Sec. Title
Agency, 200 P.3d at 1001 (reducing punitive damages to 1:1 ratio with $6,100,290 in
compensatory damages); Nardelli v. Metro. Grp. Prop. & Cas. Ins. Co., 277 P.3d 789,
69
809 (Ariz. App. 2012) (reducing punitives to 1:1 ratio with $155,000 compensatory
damage award); Hudgens v. Southwest Airlines, Co., 212 P.3d 810, 830 (Ariz. App.
2009) (punitives reduced to 1:1 ratio with $500,000 compensatory damages award).
These cases are not precisely on point because they address the propriety of a punitive
damages award in the context of whether the award was unconstitutionally excessive.
But the endorsement of the 1:1 ratio in other Arizona cases confirms the Court’s
decision that the 1:1 ratio is reasonable–especially because the Court is convinced
that a substantial award of punitive damages is warranted for defendant’s thoroughly
reprehensible conduct.
F.
Prejudgment Interest
Plaintiffs argue that they are entitled to prejudgment interest under Illinois
law at a rate of five percent, calculated from “January 10, 2010 when [defendant]
dissipated the Robert Trust assets into her personal account[.]” [328] 47.21
“Under Illinois law, the general rule is that prejudgment interest cannot be
awarded unless by statute or agreement of the parties.” Sterling Nat’l Bank v. Block,
No. 16 C 9009, 2019 WL 5085715, at *3 (N.D. Ill. Oct. 10, 2019). To be entitled to
prejudgment interest, the amount due must be “a fixed amount or easily computed.”
Bank of Chi. v. Park Nat’l Bank, 640 N.E.2d 1288, 1296 (Ill. App. 1994).
In a diversity case, state law determines whether prejudgment interest is available. Sunny
Handicraft (H.K.) Ltd. v. Envision This!, LLC, 14 C 1512, 2020 WL 1812384, at *2 (N.D. Ill.
Apr. 9, 2020). Because plaintiffs have asked for prejudgment interest under Illinois law only,
the Court need not consider whether plaintiffs would be entitled to prejudgment interest
under Arizona law. Cf. ECHO, Inc., 52 F.3d at 707 (court should apply law of forum state
unless party argues choice-of-law rules require court to apply another state’s law).
21
70
Because there is no agreement in this case respecting prejudgment interest,
the Court looks to the Illinois Interest Act, which provides that:
Creditors shall be allowed to receive at the rate of five (5) per centum
per annum for all moneys after they become due on any bond, bill,
promissory note, or other instrument of writing; on money lent or
advanced for the use of another; on money due on the settlement of
account from the day of liquidating accounts between the parties and
ascertaining the balance; on money received to the use of another and
retained without the owner’s knowledge; and on money withheld by an
unreasonable and vexatious delay of payment.
815 ILCS 205/2.
The Court concludes that an award of prejudgment interest is proper in this
case. Initially, the Court finds that the sum at issue–Anna White’s share of the fortyseven percent of the trust estate–is “liquidated and subject to easy calculation.”
Illinois Nat’l Ins. Co. v. Ace Stamping & Mach. Co., Inc., No. 17 C 7567, 2021 WL
323785, at *1 (N.D. Ill. Feb. 1, 2021). Moreover, while plaintiffs’ briefs do not identify
which section of the Interest Act entitles them to prejudgment interest, the Court
concludes that prejudgment interest is proper under either the “money received to
the use of another and retained without the owner’s knowledge” provision or the
“money withheld by an unreasonable and vexatious delay of payment” provision.
Regarding the former provision, the money that defendant obtained from
Robert Richert’s Fidelity account belonged to the beneficiaries of the Robert Trust,
including Anna White, yet defendant withheld that money without disclosing that
Version C was a forgery or that Anna was entitled to an additional $95,850.83 under
the authentic trust instrument. See Flynn v. Maschmeyer, 156 N.E.3d 540, 563-64
(Ill. App. 2020) (affirming award of prejudgment interest under “money received to
71
the use of another” and “unreasonable and vexatious delay of payment” provisions in
breach-of- fiduciary-duty case where defendant usurped business opportunities that
belonged to partnership).
Regarding the latter provision, defendant–having forged Version C in an
attempt to steal forty-seven percent of the trust’s cash assets–had absolutely no goodfaith basis for withholding Anna White’s share of those funds and has fought for years
to avoid distributing this money to her. Cf. Abellan v. Lavelo Prop. Mgmt., LLC, 948
F.3d 820, 834 (7th Cir. 2020) (recognizing that “a good faith dispute about liability
necessarily defeats a claim for interest” under “unreasonable and vexatious delay of
payment” provision).
Finally, the Court finds that prejudgment interest should be calculated from
January 15, 2010, the date by which defendant transferred all but $94.26 from the
Robert Trust’s Fidelity account into her own account. See [460] 14; [280] 5, ¶¶ 18-23.
By that date, defendant had complete control over the Robert Trust’s cash assets and
was unquestionably able to distribute Anna White’s share of those funds.
Accordingly, for the period from January 15, 2010 until January 15, 2021, plaintiffs
are entitled to $52,717.94 in prejudgment interest ($95,850.53 x .05 = $4,792.54 x 11
= $52,717.94). From January 15, 2021 until May 27, 2021, plaintiffs are entitled to
$1,733.16 in prejudgment interest (annual interest of $4,792.54 / 365 days = $13.13
per day x 132 days = $1,733.16). In total, plaintiffs are entitled to $54,451.10 in
prejudgment interest.
*
*
72
*
In sum, the Court finds that plaintiffs proved by a preponderance of the
evidence that defendant breached her fiduciary duty to Anna White by creating
Version C of the Robert Trust and failing to distribute to Anna White her intestate
share of the forty-seven percent of the trust estate–$95,850.83–not distributed to a
named beneficiary. The Court further finds that plaintiffs proved by clear and
convincing evidence that defendant’s breach involved reprehensible conduct and was
committed with an evil mind, and that punitive damages should be awarded at a 1:1
ratio with the award of compensatory damages. Plaintiffs are therefore entitled to
$95,850.83 in compensatory damages, $95,850.83 in punitive damages, and
$54,451.10 in prejudgment interest.
IV.
Indemnification
Count II of defendant’s first amended counterclaim was her sole claim left for
adjudication at the bench trial. [51] 10-11. Relying on the Receipt and Release,
defendant contends that she is entitled to indemnification from plaintiffs for the
attorney’s fees and costs she incurred in defending this lawsuit.22
A.
Elements of the Claim
Because defendant’s claim alleges that the Receipt and Release agreement
creates an express right of indemnification from plaintiffs, the Court treats this claim
as a claim for breach of contract. See, e.g., Travelers Cas. & Sur. Co. v. Bowman, 893
N.E.2d 583, 589 (Ill. 2008) (“Obligations arising out of indemnification agreements
Because the parties have not made any choice-of-law arguments with respect to this claim,
the Court applies Illinois law. See Burdett v. Miller, 957 F.2d 1375, 1382 (7th Cir. 1992) (“the
district judge . . . will apply the substantive law of the forum state if the case is a diversity
case and neither party argues choice of law”).
22
73
require proof of a breach of contract[.]”). “Under Illinois law, a plaintiff looking to
state a colorable breach of contract claim must allege four elements: (1) the existence
of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a
breach by the defendant; and (4) resultant damages.” Sevugan v. Direct Energy Servs.,
LLC, 931 F.3d 610, 614 (7th Cir. 2019) (internal citations omitted).
The Court is mindful that “indemnity contracts are to be strictly construed,
and any ambiguity is to be construed most strongly against the indemnitee.”
Blackshare v. Banfield, 857 N.E.2d 743, 746 (Ill. App. 2006). “Strictly construing
these provisions not only ‘provides certainty in the law,’ but also gives parties ‘notice
to include precise language on attorney fees when negotiating a contract.’” Tsai v.
Karlik, No. 14 C 5709, 2016 WL 5373075, at *2 (N.D. Ill. Sept. 26, 2016) (quoting
Downs v. Rosenthal Collins Grp., LLC, 895 N.E.2d 1057, 1061 (Ill. App. 2008)).
B.
Defendant Is Not Entitled to Indemnification.
The Court’s resolution of this claim is controlled by its earlier decision granting
in part and denying in part plaintiffs’ motion to dismiss defendant’s first amended
counterclaim. White II, 2016 WL 6139929, at *5. In holding that Count II survived
the motion to dismiss, the Court determined that the Receipt and Release was
ambiguous as to whether the parties intended to indemnify defendant only for claims
raised by third parties or whether they also intended to indemnify her against claims
raised by Anna White:
In this case, the language of the indemnity agreement is ambiguous; we
cannot determine whether it was intended to indemnify Richert for
claims against her that were allegedly caused by her own behavior. It
74
will be for Richert to ultimately offer evidence to show that both parties
intended that result.
Id.
As explained below, however, defendant failed to prove with any evidence–let
alone by a preponderance of the evidence–that she and Anna White intended the
indemnification provision to apply to a claim brought against defendant by Anna
herself. Furthermore, because there was no consideration for Anna’s promise to
indemnify defendant, the indemnification provision is invalid and unenforceable.
1.
Defendant Introduced No Evidence That Anna White
Intended to Indemnify Defendant for Claims Brought By
Anna Herself.
Because of the Court’s earlier ruling that the Receipt and Release was
ambiguous, the Court may consider extrinsic evidence of the parties’ intent.
Lexington Ins. Co. v. RLI Ins. Co., 949 F.3d 1015, 1020 (7th Cir. 2020) (applying
Illinois law). Likewise, the Court was free to consider “preliminary negotiations
between the parties in order to determine the meaning of contract provisions and the
intent of the parties.” Regency Comm. Assocs., LLC v. Lopax, Inc., 869 N.E.2d 310,
316 (Ill. App. 2007). Nevertheless, defendant failed to introduce any evidence on this
critical issue.
Defendant testified that she had discussed the Receipt and Release with Anna
sometime before defendant traveled to Illinois for James’s ninetieth birthday party.
[458] 21. “I asked my aunt if she would sign a release,” defendant testified, “in case
something should happen to her and her children decided to sue me so I would not
have to be involved in another out-of-state lawsuit.” [Id.]. According to defendant,
75
when she brought the release to James’s party, Anna was “happy to execute the
receipt and release for me.” [Id.].
Vicki Steciuk also testified about the execution of the Receipt and Release.
According to Vicki, defendant wanted the Receipt and Release in place “so that there
weren’t any problems in the future” respecting the Robert Trust. [456] 20. She added
that defendant “wanted to protect” herself in the event of a trust-related dispute. [Id.]
21. Regarding Anna White’s intentions, Vicki testified that Anna “didn’t want any
disputes with anything and she wanted to sign [the Receipt and Release] to protect
[defendant] as well.” [Id.] 26.
This evidence comes nowhere close to satisfying defendant’s burden of proof,
especially when Illinois law requires the Court to construe the ambiguity in the
contract “most strongly against” her. Blackshare, 857 N.E.2d at 746.
Defendant testified only that the indemnification provision would apply if
“something should happen” to Anna and “her children decided to sue me.” But this
case was brought by Anna herself, and Anna’s children have continued to litigate the
case only in their representative capacities after Anna’s death.23 Therefore, even if
the Court accepted defendant’s testimony at face value, it would not establish that
The fact that plaintiffs may have assisted Anna bring or manage this litigation before they
were substituted as the named plaintiffs does not bring this case within the scope of the
indemnification agreement as allegedly understood by defendant and Anna White–i.e.,
barring a suit brought by Anna’s children. As discussed above, Kathleen was acting under a
valid power of attorney executed by her mother, and Kathleen’s actions were thus taken in
her mother’s name. [PX 27] 2 (Anna’s execution of power of attorney appointed Kathleen “as
my attorney-in-fact (‘my agent’) to act for me and in my name”).
23
76
the indemnification provision applies: this is not a case where Anna’s “children
decided to sue” defendant; this is a case where Anna herself sued defendant.
More importantly, the Court does not credit defendant’s self-serving and
biased testimony on the scope of the indemnification provision. Having found that
defendant created a fake version of the Robert Trust in a deliberate attempt to steal
more than $95,000 from Anna White, the Court simply cannot believe that defendant
forthrightly disclosed to Anna that, in the event Anna herself brought a claim against
defendant–including a claim based on defendant’s forging of the trust instrument–
the indemnification provision would oblige Anna to fund defendant’s defense.
Nor does defendant’s testimony clarify the kind of claims to which the
indemnification provision was meant to apply: did it apply only to claims challenging
decisions made by the trustee in the ordinary course of managing the trust, or did it
also extend to a beneficiary’s claim that the trustee created a fake version of the trust
in order to strip a beneficiary of her lawful share of the trust estate? Defendant simply
failed to address this question.
For her part, Vicki understood from a single conversation between Anna and
defendant that Anna “didn’t want any disputes with anything” and wanted to
“protect” defendant. But how much protection did Anna want defendant to have, and
from what? Did she want defendant protected in the event defendant incurred costs
and fees defending against a run-of-the-mill suit challenging a distribution from the
Robert Trust? Or did Anna also want to pay for defendant’s defense in the event–now
realized–Anna sued defendant to recover the $95,850.83 that defendant stole from
77
her by creating a counterfeit version of the Robert Trust documents? Based on her
trial testimony, Vicki Steciuk has no answers to these questions. Despite witnessing
the execution of the Receipt and Release, moreover, Vicki did not corroborate
defendant’s claim that she told Anna that the indemnity provision would bar a suit if
“something should happen” to Anna and “her children decided to sue me.”
Finally, Anna’s statement that she “didn’t want any disputes with anything”
is not inconsistent with agreeing to indemnify defendant only against claims brought
by third parties. In other words, while Anna may very well have hoped there would
be no disputes over the distributions from the Robert Trust, this fact sheds absolutely
no light on what Anna did want vis-à-vis the indemnification provision once a dispute
with defendant concerning the validity of the Robert Trust documents arose.
The Court accordingly finds that defendant failed to prove that the Receipt and
Release obligates Anna White to indemnify defendant for costs and fees she incurred
in this litigation, which involves Anna’s proved claim that defendant breached her
fiduciary duty to Anna by creating a forged trust document and refusing to distribute
Anna White’s lawful share of the trust estate. The Court will enter judgment in favor
of plaintiffs and against defendant on Count II of defendant’s first amended
counterclaim.24
After the trial concluded, and simultaneously with the filing of their post-trial brief,
plaintiffs moved under Fed. R. Civ. P. 52(c) for judgment based on partial findings on the
indemnification claim. [459]. A Rule 52(c) motion, which is “the bench trial equivalent of its
more well-known cousin, a motion for judgment as a matter of law (or a directed verdict)
under Rule 50(a),” allows a trial court to “resolve an issue after a party has been fully heard
but before the trial has concluded.” Stop Illinois Health Care Fraud, LLC v. Sayeed, 957 F.3d
743, 748 (7th Cir. 2020). Because the purpose of a Rule 52(c) motion is to resolve an issue
24
78
2.
There Was
Agreement.
No
Consideration
for
the
Indemnity
Even if defendant had carried her burden of proof on this issue, plaintiffs would
still be entitled to judgment in their favor because there was no consideration for
Anna White’s promise to indemnify defendant. As the Court explained above,
defendant did not testify about any consideration she gave Anna in exchange for Anna
entering into the Receipt and Release, and the Receipt and Release itself refers only
to defendant’s pre-existing legal duty to distribute Anna White’s share of the Robert
Trust estate. Because there was no consideration, the indemnity provision in the
Receipt and Release is invalid and unenforceable. Corroon & Black of Illinois, Inc. v.
Magner, 494 N.E.2d 785, 792 (Ill. App. 1986) (“A promise to do something one is
already obligated to do is no consideration and creates no new obligation.”).
V.
Plaintiffs’ Requests for Additional Damages
In their proposed findings of fact and conclusions of law, as well as in their
post-trial brief, plaintiffs request that the Court award them the following forms of
relief beyond the damages associated with defendant’s breach of her fiduciary duty
based on her creation of the forged trust instrument:
•
An order directing defendant to prepare and record a quitclaim deed
transferring the Buffalo Grove property to plaintiffs;
•
An order appointing a receiver to take custody of and sell Robert Richert’s
home in Carefree, Arizona, thereafter remitting half the net proceeds to
plaintiffs and half to defendant; and
during trial, the Court doubts that plaintiffs’ motion is timely. In any event, the Court will
deny the motion as moot based on the findings and conclusions set forth herein that
defendant failed to prove that she is entitled to indemnification.
79
•
$228,550.63 in compensatory damages, “which represents Anna White [sic]
entitlement to forty-seven percent of the Robert Trust.”
[328] 39; [460] 14-15.
Plaintiffs are not entitled to any of this relief. First, title to the Buffalo Grove
home was the subject of count one of plaintiffs’ first amended complaint [1-1] 5, but
the Court dismissed that claim as time-barred nearly three years ago. See White III,
2018 WL 4101512, at *5-6.25
Second, plaintiffs have never sought control of the Carefree home during the
litigation. To the contrary, plaintiffs represented to the Court when the first amended
complaint was filed that the home was “off the table” because it “goes to the defendant
whether–under any of the three scenarios” established by the different versions of
the trust documents. [192] 16. In their post-trial brief, plaintiffs announced that they
would “make [an] equitable estoppel claim for half the value of the Carefree home,”
and that this claim would be asserted in an “imminent motion to amend the pleadings
to conform to the proofs shown at trial[.]” [460] 7; see also [id.] 13. The bench trial
concluded more than six months ago, however, and no such motion has been filed.
Accordingly, nothing before the Court affords plaintiffs any relief respecting the
Carefree home.
The Court acknowledges that it permitted plaintiffs to introduce a significant amount of
evidence concerning Anna White’s purchase of the Buffalo Grove home, defendant’s
involvement in that transaction, and other matters related to the Buffalo Grove home. While
this evidence might have had some relevance to establishing the relationship between
defendant and Anna White, and the trust Anna placed in defendant when it came to financial
matters, the Court’s summary-judgment ruling clearly foreclosed plaintiff from obtaining
title to the Buffalo Grove home.
25
80
Third, plaintiffs cannot recover the forty-seven percent of the Robert Trust’s
assets to which Anna White was entitled as a named beneficiary because that relief
is not causally connected to the breach of fiduciary duty that plaintiffs proved in this
case. Rather, defendant’s breach of fiduciary duty–creating a fake version of the trust
and using it to steal nearly half of the Robert Trust’s assets–caused Anna White to
lose only her one-third share of the forty-seven percent of the trust estate that the
Robert Trust did not distribute to a named beneficiary. See [173] 3 (requesting entry
of judgment “disgorging the trust proceeds to which Elizabeth Richert was not
entitled”). To the extent plaintiffs sought to recover any portion of Anna White’s fortyseven-percent share of the trust estate that defendant failed to distribute, that relief
was associated with count one of their amended complaint, which the Court dismissed
as time-barred. See [1-1] 5 (prayer for relief requesting “an accounting for the Robert
L. Richert Trust”). Because the only claim that might have entitled plaintiffs to
recover the outstanding portion of Anna White’s share as a named beneficiary of the
Robert Trust was dismissed with prejudice, plaintiffs are not entitled to the requested
relief.
VI.
Defendant’s Motion for Sanctions
When the parties filed the proposed final pretrial order in June 2019, each side
stated that it would seek sanctions against the other side for alleged misconduct
during pretrial proceedings. [280] 12. At the final pretrial conference on July 9, 2019,
the Court stated that it would defer the issue of sanctions until after trial so that the
parties could focus on getting the case trial-ready. [311] 14. “If, after the trial,
81
somebody wants to raise” the issue of sanctions, the Court continued, “you can raise
that issue then.” [Id.].
Two months later, however, plaintiffs sought a default judgment against
defendant based on alleged misconduct relating to defendant’s request to continue
the trial date due to a medical condition. [355] 10. In denying that request, the Court
stated that it would “not entertain any further motions or requests for sanctions or
dismissal based on alleged misconduct prior to trial, and we will entertain any such
motions after trial only with leave of Court on a showing of good cause.” [359] 4.
Defendant’s post-trial brief renews her sanctions request, but the Court finds
that there is no basis to impose sanctions on plaintiffs. First, to the extent that
defendant’s sanctions request is based on plaintiffs’ alleged pretrial misconduct,
defendant has not sought leave of Court or made a showing of good cause for renewing
the motion, as required by the Court’s order of September 11, 2019. [359] 4. Second,
and setting aside this procedural deficiency, defendant’s request for sanctions has no
merit.
Defendant contends that “the Court found that Plaintiff’s [sic] lied in their July
17, 2015 Petition for Production of Deed and Accounting, when they alleged that
Defendant was an attorney licensed to practice in the state of Illinois.” [462] 2.
Defendant contends that this “lie” was the “only basis” for plainiffs’ filing this suit in
Illinois and claiming that defendant had acted as Anna White’s attorney. [Id.]
(emphasis in original). This sanctions request is based on a misrepresentation of a
statement by the Court during the July 18, 2017 hearing. At that hearing the Court
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observed that both parties have “accused every–each other of all sorts of things, you
know, lying about the–Ms. Richert being an attorney in Illinois.” [192] 20 (emphasis
supplied). Furthermore, plaintiffs’ allegation that defendant was licensed to practice
law in Illinois was hardly the only basis supporting the plaintiffs’ decision to bring
this case in Illinois: Anna White resided here, and some of the most important events
underlying plaintiffs’ original petition–the signing of the loan agreement, the
purchase of the Buffalo Grove home, and the execution of the Receipt and Release–
all occurred here.
Next, defendant argues that plaintiffs should be sanctioned for the
circumstances under which they obtained copies of Versions A and B of the Robert
Trust. [462] 3-6. Because Judge Schenkier addressed this issue multiple times and
found that no sanctions were warranted, the Court denies this request. See, e.g., [357]
2 (“The issues raised by Ms. Richert regarding the Fidelity subpoenas have been
raised and ruled upon over the long course of this litigation, and we have found
nothing sanctionable with respect to the subpoenas.”).
Defendant also argues that plaintiffs “suborned the perjury of Gary Steciuk.”
[462] 11. Yet nothing in defendant’s post-trial brief shows that Gary’s testimony
concerning an August 8, 2016 email he sent to one of plaintiffs’ attorneys was false,
nor does defendant explain how plaintiffs supposedly suborned this perjured
testimony.
Defendant next claims that plaintiffs violated Fed. R. Civ. P. 11 by filing a
motion to admit Plaintiffs’ Exhibit 15 at trial. [462] 11-12. The proposed exhibit was
83
an envelope containing copies of Anna and James White’s estate documents that
defendant allegedly mailed to Anna in 2006. [436] 1. At the final pretrial conference,
Judge Schenkier excluded this exhibit as cumulative [id.], and the Court adhered to
that ruling and denied the motion to admit the exhibit. [439]. Defendant contends
that Thomas White tampered with this exhibit, but she provides neither evidence to
support this claim nor a basis to impose sanctions–especially given that this evidence
was not admitted at trial.
Defendant also contends that Thomas White lied when he testified that his
father’s ninetieth birthday party took place on July 31, 2011, as opposed to July 30,
2011. [462] 12. But defendant offers nothing to establish that Thomas’s testimony on
this collateral issue was purposefully untruthful, as opposed to being honest but
mistaken. Defendant takes issue with the accuracy and credibility of other parts of
Thomas’s testimony [id.], but the Court again finds that defendant has not shown
that any part of Thomas’s testimony warrants imposing sanctions.
Finally, defendant contends that plaintiffs “engaged in a multitude of breaches
of the Stipulation during trial” and “poured out inadmissible, hearsay testimony, to
their heart’ [sic] content.” [462] 13. The “Stipulation” at issue was an agreement
executed by plaintiffs and defendant (at a time during the litigation when she was
represented by counsel) under which Anna White “will not be called as a witness in
this matter and no testimony from Anna White will be proffered or introduced at any
trial or hearing in this matter,” in exchange for which “Defendant agrees not to depose
Anna White.” [PX 35] 1-2. Because defendant has not cited the trial record to support
84
her contention that plaintiffs repeatedly breached this Stipulation by introducing
hearsay statements from Anna White, the Court need not consider the issue any
further. See United States v. Rodgers, 89 F.3d 1326, 1339 (7th Cir. 1996) (“King cites
no portion of the record nor any authority to support his claim, and we will therefore
not address the merits of his argument.”).26
For all of these reasons, the Court denies defendants’ request to sanction
plaintiffs.
Conclusion
In accordance with the foregoing findings of fact and conclusions of law, the
Court finds that plaintiffs proved by a preponderance of the evidence that defendant
breached her fiduciary duty to Anna White and that plaintiffs are entitled to
$95,850.83 in compensatory damages. The Court further finds that plaintiffs proved
by clear and convincing evidence that defendant’s breach of fiduciary duty involved
reprehensible conduct and was committed with an evil mind, entitling plaintiffs to
punitive damages at a 1:1 ratio with compensatory damages, in the amount of
$95,850.83. The Court also finds that plaintiffs are entitled to prejudgment interest
in the amount of $54,451.10. Accordingly, the Clerk of Court is directed to enter
judgment on Count II of plaintiffs’ first amended complaint in favor of plaintiffs and
against defendant in the amount of $246,152.76.
In any event, the Court is not persuaded that the stipulation, which forbade only the
introduction of Anna White’s “testimony,” applied to the statements attributed to Anna White
that were admitted at trial either because they were non-hearsay statements (i.e., they were
statements of a party-opponent) or subject to a hearsay exception. Notably, defendant herself
elicited testimony from several witnesses that called for the witness to recount a statement
by Anna White.
26
85
The Court also finds that defendant failed to prove by a preponderance of the
evidence that plaintiffs are required to indemnify her for the costs and fees she
incurred in this litigation. The Clerk of Court is therefore directed to enter judgment
on Count II of defendant’s first amended counterclaim in favor of plaintiffs and
against defendant.
Plaintiffs’ request for leave to file a petition for attorney fees under Fed. R. Civ.
P. 54(d)(2), [460] 14, is granted. The motion shall be filed by June 10, 2021,
defendant’s response shall be filed by July 10, 2021, and plaintiffs’ reply shall be filed
by July 24, 2021. Plaintiffs’ related request to file their attorney time entries in
camera is denied, and all materials supporting the petition for fees must be filed on
the Court’s docket.
_____________________________________
HEATHER K. McSHAIN
United States Magistrate Judge
DATE: May 27, 2021
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