Doermer et al v. Oxford Financial Group, Ltd.
MEMORANDUM Opinion and Order. Signed by the Honorable Manish S. Shah on 2/28/2017: Oxford's motion to dismiss, 7 , is granted. Doermer's complaint is dismissed without prejudice for lack of capacity. Enter judgment and terminate civil case. [For further detail see attached order.] Notices mailed. (psm, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
RICHARD D. DOERMER, as a beneficiary
and co-trustee of the RICHARD DAVID
DOERMER–KATHRYN DOERMER CALLEN
ISSUE TRUST dated July 28, 2004,
No. 16 CV 8248
Judge Manish S. Shah
OXFORD FINANCIAL GROUP, LTD.,
MEMORANDUM OPINION AND ORDER
Plaintiff Richard D. Doermer and his sister, Kathryn Doermer Callen, are cotrustees and beneficiaries of a trust. When they could not agree on an investment
management plan for the trust, Callen sought the advice of defendant Oxford
Financial Group, Ltd. Doermer thinks Oxford provided Callen with poor advice and
caused the trust to lose money. He brings claims against Oxford in his capacity as
both a beneficiary and a co-trustee of the trust, and Oxford moves to dismiss. For
the following reasons, Oxford’s motion is granted.
A defendant may move to dismiss an action for lack of subject-matter
jurisdiction. Fed. R. Civ. P. 12(b)(1). The plaintiff bears the burden of proving that
jurisdiction is proper, and must allege facts sufficient to plausibly suggest that
subject-matter jurisdiction exists. Silha v. ACT, Inc., 807 F.3d 169, 173–74 (7th Cir.
To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain
factual allegations that plausibly suggest a right to relief. Virnich v. Vorwald, 664
F.3d 206, 212 (7th Cir. 2011) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 558
(2009)). “The purpose of a motion to dismiss is to test the sufficiency of the
complaint, not to decide the merits.” Triad Assocs., Inc. v. Chicago Hous. Authority,
892 F.2d 583, 586 (7th Cir. 1989). On a 12(b)(6) motion, a court may consider only
the allegations in the complaint, documents attached to the complaint, documents
that are both referred to in the complaint and central to its claims, and information
that is subject to proper judicial notice. Geinosky v. City of Chicago, 675 F.3d 743,
745 n.1 (7th Cir. 2012). When analyzing a motion under either Rule 12(b)(1) or
12(b)(6), a court must construe all factual allegations as true and draw all
reasonable inferences in the plaintiff’s favor, but a court need not accept legal
conclusions or conclusory allegations. Virnich, 664 F.3d at 212 (citing Ashcroft v.
Iqbal, 556 U.S. 662, 680–82 (2009)); Silha, 807 F.3d at 174.
In 2004, plaintiff Richard D. Doermer’s father established the Richard David
Doermer–Kathryn Doermer Callen Issue Trust, naming as beneficiaries his
children, Doermer and Kathryn Doermer Callen, his grandchildren, and six
charities. [1-1] ¶¶ 8–9.1 Together with a corporate trustee, Doermer and Callen
serve as co-trustees of that trust. [1-1] ¶ 10. After their father died in 2010,
Doermer and Callen could not agree on how to manage the trust’s assets, and their
Bracketed numbers refer to entries on the district court docket.
dispute resulted in a year-long standstill. [1-1] ¶ 13. In 2012, Callen retained
defendant Oxford Financial Group, Ltd. to advise her with respect to the trust’s
administration and management, as well as her dispute with Doermer. [1-1] ¶ 14.
The trust paid for Oxford’s services. [1-1] ¶ 14. Doermer believes that Oxford’s
advice to Callen caused losses for the trust, and he brings this negligence action
against Oxford on behalf of the trust in his capacity as both a beneficiary and as a
Doermer filed his complaint in Illinois state court, after which Oxford
removed the action on the basis of diversity jurisdiction. 28 U.S.C. §§ 1332(a), 1441.
The complaint itself names Callen as an “involuntary plaintiff,” but she is not a
party in this case. See  at 4, Tr. at 4:3–5. The complaint contains two counts:
“Breach of Fiduciary Duty and Negligence” and “Gross Negligence and Wilful [sic]
and Wanton Misconduct Claim for Punitive Damages.”
Oxford moves to dismiss the complaint under Rule 12(b)(1), claiming that
Doermer lacks prudential standing to sue a third party on behalf of the trust either
as a beneficiary or as a co-trustee. The parties first dispute the procedural propriety
of Oxford’s motion—Doermer objects to Oxford’s removing this case to federal court
on the basis of diversity jurisdiction and then, by filing a Rule 12(b)(1) motion,
claiming that this court lacks subject-matter jurisdiction over the case. That
objection makes sense, since prudential standing requirements do not ordinarily
present jurisdictional concerns. See Doermer v. Callen, 847 F.3d 522, 2017 WL
432797, at *2 n.1 (7th Cir. 2017); Rawoof v. Texor Petroleum Co., 521 F.3d 750, 756–
57 (7th Cir. 2008). Oxford argues that a court may dismiss a complaint for lack of
prudential standing on a Rule 12(b)(1) motion. But it also acknowledges that its
arguments might relate to Doermer’s capacity to sue rather than his prudential
standing, and that it could have moved to dismiss under Rule 12(b)(6). Because
neither party relies on materials outside of the pleadings, the label of the motion
makes no difference here. And “when appropriate, a court may treat a motion filed
under Rule 12(b)(1) as if it were a Rule 12(b)(6) motion.” Meyers v. Oneida Tribe of
Indians of Wisconsin, 836 F.3d 818, 820 (7th Cir. 2016) (citing Miller v. Herman,
600 F.3d 726, 732–33 (7th Cir. 2010)). Oxford’s motion to dismiss for lack of
standing will be treated as a Rule 12(b)(6) motion for failure to state a claim based
on Doermer’s lack of capacity to bring suit on behalf of the trust.
The parties also dispute which state’s substantive law should be applied in
determining whether Doermer may bring his claims. Oxford believes that the trust
agreement’s choice-of-law provision dictates that South Dakota law should apply,
while Doermer argues in favor of the law of the forum state, Illinois. The forum
state’s choice-of-law rules apply here. Fed. R. Civ. P. 17(b)(3); see also Gen. Heat &
Power Co. v. Diversified Mortg. Inv’rs, 552 F.2d 556, 557 n.1 (3d Cir. 1977) (noting
that Rule 17(b) incorporates the forum state’s choice-of-law rules); but see Masood v.
Saleemi, 309 F.App’x 150, 152 (9th Cir. 2009) (explaining that capacity is
determined under Rule 17(b) under the forum state’s law before addressing choiceof-law issues). And where an agreement specifies a choice, Illinois courts apply that
state’s law (unless the other state’s law violates Illinois public policy). First Nat’l
Bank of Chicago v. Ettlinger, 465 F.2d 343, 347 (7th Cir. 1972); Belleville Toyota v.
Toyota Motor Sales, U.S.A., 199 Ill.2d 325, 351 (2002) (“Generally, choice of law
provisions will be honored.”). Applying the laws of either South Dakota or Illinois
yields the same outcome, and so there is no Illinois public policy prohibition in
honoring the trust agreement’s selection. South Dakota law applies to questions
concerning the interpretation and administration of the trust, including whether a
beneficiary or co-trustee can bring a lawsuit on behalf of the trust.
Doermer cannot bring claims against a third party on behalf of the trust in
his capacity as a trust beneficiary. In general, a trust beneficiary may not sue a
third party on behalf of the trust. See Restatement (Second) of Trusts §§ 281, 282
(1959). Both South Dakota and Illinois follow the Restatement. See Willers v.
Wettestad, 510 N.W.2d 676, 680 (S.D. 1994); Axelord v. Giambalvo, 129 Ill.App.3d
512, 519 (1st Dist. 1984). There are exceptions to that rule—for example, where the
trustee could maintain an action against a third party but improperly refuses or
neglects to bring the action, the beneficiary can maintain a suit against both the
trustee and the third person. Ready v. Ready, 33 Ill.App.2d 145, 152–53 (1st Dist.
1961); Restatement (Second) of Trusts, § 282 cmt. e (1959). But Doermer does not
argue that any exceptions apply, or even address his beneficiary status at all.
Doermer’s failure to respond to Oxford’s argument results in waiver. He cannot
bring this action in his capacity as beneficiary of the trust.
Nor can Doermer sue as co-trustee of the trust, because he does not allege
that a majority of trustees consented to his filing of this action.2 Under the terms of
the trust agreement, “at any time when more than two Trustees are acting, the
action or decision of a majority in number shall control each vote or decision by the
Trustees.” [1-1] at 86, ¶ 8-C(25)(e). The requirement for majority agreement is also
codified under both South Dakota and Illinois law, and those requirements apply
absent any conflicting provision in the trust agreement. 760 ILCS 5/10; S.D.
Codified Laws § 55-4-3. And when there are only two co-trustees, consent must be
unanimous.3 Stuart v. Continental Illinois Nat’l Bank & Trust Co. of Chicago, 68
Ill.2d 502, 523 (1997); S.D. Codified Laws § 55-4-3.
Doermer argues that he and Callen modified the trust agreement to allow
each co-trustee to take unilateral action with respect to Oxford on behalf of the
trust, without seeking the consent of the majority of co-trustees. But he provides no
legal support for his theory, and the only facts alleged are that Callen engaged
Oxford to advise her, and that the trust paid for those services. These allegations do
not suffice to show an amendment to the trust agreement, because it would be
unreasonable to infer that those actions constituted an agreement between the cotrustees that they could take any action related to Oxford on behalf of the trust
without majority consent. It also would not follow that the trust agreement could be
When put to a vote in November 2016 (several months after this action was filed), Callen
objected to Doermer’s prosecuting this action and the corporate trustee abstained. See .
When the trustees consist of one individual and one corporate trustee, the trust
agreement provides that the corporate trustee’s action or decision controls. [1-1] at 86, ¶ 8C(25)(e).
amended in such a manner, given that the agreement provides a mechanism to
reform it in order to resolve ambiguities, and gives that power exclusively to the
corporate trustee. [1-1] at 107–08, ¶ 13-F; see also G.G. Bogert et al., The Law of
Trusts and Trustees § 992 (2016) (“Generally, the trustee has no authority to
change the trust terms by the trustee’s own conduct alone . . . where the instrument
makes no provision for such action.”).
Doermer’s argument that he does not need the consent of either of his cotrustees is unpersuasive. Doermer alleges that Callen and the corporate trustee
withheld their consent to the prosecution of this action, but he does not allege that
their refusal was improper or amounts to an abuse of their discretion as co-trustees,
and he provides no valid reason for that discretion to be disregarded. Because
Doermer seeks to sue a third party, Oxford, on behalf of the trust in his capacity as
co-trustee, but lacks the consent of a majority of the trustees, he cannot bring his
claims. Thus, Oxford’s motion to dismiss is granted.
In opposing Oxford’s motion, Doermer does not request leave to amend or
suggest that he could allege additional facts that grant him the capacity to bring a
claim against Oxford on behalf of the trust. While ordinarily leave to amend should
be granted when dismissing a complaint for the first time, here, there is no
indication that an amendment “might save [Doermer’s] case,” so final judgment will
be entered. Doermer, 847 F.3d 522, 2017 WL 432797, at *3 (citing Runnion v. Girl
Scouts of Greater Chicago & Northwest Indiana, 786 F.3d 510, 519–20 (7th Cir.
2015)). Because this dismissal is based on plaintiff’s lack of capacity, and is not an
adjudication of the merits of the alleged negligence of Oxford, the dismissal is
Oxford’s motion to dismiss, , is granted. Doermer’s complaint is dismissed
without prejudice for lack of capacity. Enter judgment and terminate civil case.
Manish S. Shah
United States District Judge
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