Carpenters' Pension Trust Fund - Detroit and Vicinity v. Century Truss Company, et al
Filing
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ORDER GRANTING 12 Motion to Dismiss. Signed by District Judge Terrence G. Berg. (Chubb, A)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
CARPENTERS’ PENSION TRUST FUND –
DETROIT AND VICINITY,
Plaintiff,
Case No. 14-11535
HON. TERRENCE G. BERG
v.
CENTURY TRUSS COMPANY d/b/a
BERGERON CORPORATION, and
CENTURY TRUSS COMPANY OF
MICHIGAN L.L.C., and B. GERALD
BARTUSH as personal representative of the
ESTATE OF RANDY M. BERGERON,
Defendant.
/
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS (DKT. 12)
Before the Court is Defendant B. Gerald Bartush’s (“Bartush’s”) motion to
dismiss, (Dkt. 12), filed in his capacity as the personal representative to the estate
of Randy M. Bergeron on June 26, 2014 (“the Estate”).1 Oral argument was heard
on September 17, 2014 and the Court took the motion under advisement on
September 18, 2014. For the reasons set out below, Defendant’s motion to dismiss
for lack of subject matter jurisdiction IS GRANTED. Accordingly, the complaint of
Plaintiff Carpenters’ Pension Fund-Detroit and Vicinity (“Plaintiff”) IS
DISMISSED WITHOUT PREJUDICE.
I. INTRODUCTION
This case raises the question of whether the “probate exception” to federal
jurisdiction bars the plaintiff’s claim against the estate of its alleged former debtor.
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The other defendants, unrepresented corporate entities, are defunct and do not join in this motion.
Plaintiff Carpenters’ Pension Fund-Detroit and Vicinity (“Plaintiff”) claims that Mr.
Randy M. Bergeron and his two alleged alter-ego companies, which are now defunct,
Century Truss Company and Century Truss Company of Michigan (collectively “the
Companies”) failed to make certain required contributions under the Employee
Retirement Income Security Act (“ERISA.”)
Following Mr. Bergeron’s death, Bartush, as the representative of the Estate,
notified Plaintiff that it had four months to bring a claim against the Estate under
Michigan’s probate code. After Plaintiff presented its claim, Bartush denied it in
full and alerted Plaintiff that it had 63 days following the notice of denial to bring
suit. Unfortunately, Plaintiff did not bring suit against the Estate until well past
the 63-day mark. Bartush argues that the suit should be dismissed because it seeks
a judgment in federal court against an Estate currently under the authority of a
state probate action, and the “probate exception” to federal jurisdiction deprives this
Court of jurisdiction to decide this dispute.
II. FACTUAL AND PROCEDURAL HISTORY
Plaintiff is a jointly-trusteed trust fund established under ERISA for the
benefit of its members. (Dkt. 11.) Bartush is the personal representative of the
Estate of Randy M. Bergeron. Mr. Bergeron was the owner of Century Truss and of
Century Truss of Michigan (“the Companies”), defendants in this action.
According to Plaintiff, the Companies were required to make contributions to
the Trust Fund as part of a collective bargaining agreement between the parties.
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(Id.) On or about October 29, 2010, Plaintiff claims that the Companies ceased
operations, laid off all of their employees and stopped making their required
contributions. (Dkt. 17, p.7.) Hence, Plaintiff alleges that the Companies withdrew
from its plan, and as a result incurred withdrawal liability under ERISA in the
amount of $3,511,506. (Id.)
On August 25, 2011, Plaintiff wrote to Mr. Bergeron and the Companies
demanding payment of the alleged withdrawal liability. (Id. at Ex. B.) According to
Plaintiff, Mr. Bergeron refused its demand for payment and stated that the
Companies would also not make any withdrawal liability payments. (Id. at p. 4.) In
addition to refusing to pay the charged withdrawal liability, Plaintiff alleges that
Mr. Bergeron improperly transferred the Companies’ assets to himself. (Dkt. 17, p.
7.)
Plaintiff then brought suit twice against the Defendants. Both suits ended
up being dismissed for failure to prosecute. Plaintiff filed the first suit in this Court
on November 21, 2012.2 On April 25, 2013, this Court dismissed Plaintiff’s
complaint without prejudice for failure to prosecute because Plaintiff failed to
effectuate service within 120 days as required under Federal Rule of Civil
Procedure 4(m). Plaintiff then re-filed its complaint on June 16, 2013. On
December 18, 2013, this Court dismissed Plaintiff’s second suit for failure to
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See E.D. of Michigan Case No. 12-15165.
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prosecute because, remarkably, Plaintiff again failed to effectuate service on the
summonses as required by Rule 4(m).3
Months after Plaintiff filed its second suit, on September 2, 2013, Mr.
Bergeron died.4 On October 10, 2013, Bartush, as personal representative of the
Estate, published a notice to creditors informing them of Mr. Bergeron’s death and
notifying them that they had four months from the date of the notice to present
their claims against the Estate. (Dkt. 12, pp. 4-5.) Plaintiff presented a timely
claim against the Estate on October 30, 2013. (Id. at p. 5.) On December 20, 2013,
two days after this Court had dismissed Plaintiff’s second suit for failure to
prosecute, Bartush issued a notice of disallowance and mailed it to Plaintiff by firstclass mail. (Id. at p. 3.) The notice disallowed Plaintiff’s claim in full and informed
Plaintiff that its claim would be forever barred unless Plaintiff started a civil action
within 63 days of the mailing or delivery of the notice. (Id.) Plaintiff denies ever
receiving the notice of disallowance. (Dkt. 17, p. 14.)
Plaintiff then filed its third suit in this Court against Defendants on April 16,
2014. The suit was filed more than 63 days after the date when Bartush mailed the
notice of disallowance. According to the notice disallowing Plaintiff’s claim,
Plaintiff had until February 23, 2014 to file suit, 63 days after the notice of
disallowance was mailed on December 20, 2013. Unfortunately, Plaintiff waited
See E.D. of Michigan Case No. 13-12701.
The circumstances of Mr. Bergeron’s untimely death are not relevant to this case, but the Court
notes that the cause of his death is not entirely clear. See Macomb Daily News, “Dead Royal Oak
man named in $4m lawsuit”, available at http://www.macombdaily.com/generalnews/20130904/dead-royal-oak-man-named-in-4m-lawsuit.
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nearly four months after the second lawsuit was dismissed for failure to prosecute
in December 2013, to file the instant case. Plaintiff amended its complaint on June
12, 2014, bringing six counts against the Defendants. The six counts include: (1)
withdrawal liability under ERISA; (2) controlled grouped liability; (3) transaction to
evade liability; (4) alter-ego/successor liability; (5) breach of fiduciary duty; and (6)
piercing the corporate veil. (Dkt. 11.) Plaintiff seeks to recover $3,511,506 against
“Defendants and Decedent’s estate…” (Id.)
On June 26, 2014, Bartush filed this motion to dismiss on behalf of the
Estate. (See Dkt. 12.) In his motion, Bartush seeks dismissal under Federal Rule of
Civil Procedure 12(b)(1) and Federal Rule of Civil Procedure 12(b)(6). The Court
heard oral argument on September 17, 2014 and took the motion to dismiss under
advisement on September 18, 2014.
III.
ANALYSIS
A. Standard of Review
Bartush moves to dismiss for lack of subject matter jurisdiction. Where
subject matter jurisdiction is challenged in a Rule 12(b)(1) motion, the plaintiff
bears the burden of proving jurisdiction. See Moir v. Greater Cleveland Reg’l
Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). Rule 12(b)(1) motions to dismiss
for lack of subject matter jurisdiction fall into two general categories: facial attacks
and factual attacks. See Fed. R. Civ. P. 12(b)(1); United States v. Ritchie, 15 F.3d
592, 598 (6th Cir. 1994).
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A facial attack challenges the sufficiency of the pleading itself. Where the
Rule 12(b)(1) motion presents a facial attack, the Court accepts the material
allegations in the complaint as true and construes them in the light most favorable
to the nonmoving party, similar to the standard for a Rule 12(b)(6) motion. Id.
(citing Scheuer v. Rhodes, 416 U.S. 232, 235–37 (1974)).
In contrast, a factual attack is “not a challenge to the sufficiency of the
pleading's allegation, but a challenge to the factual existence of subject matter
jurisdiction.” Id. Where the motion presents a factual attack, the allegations in the
complaint are not afforded a presumption of truthfulness and the Court weighs the
evidence to determine whether subject matter jurisdiction exists. On a factual
attack, the Court has broad discretion to consider extrinsic evidence, including
affidavits and documents, and can conduct a limited evidentiary hearing if
necessary. See DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir. 2004); Ohio Nat'l
Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990). In this case,
Bartush is making a factual challenge to the Court's jurisdiction.
Bartush also moves to dismiss the Amended Complaint pursuant to Rule
12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a
matter of law, the plaintiff is entitled to legal relief if all the facts and allegations in
the complaint are taken as true.” Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416,
419 (6th Cir. 2001) (citing Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993)).
Under Rule 12(b)(6), the complaint is viewed in the light most favorable to the
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plaintiff, the allegations in the complaint are accepted as true, and all reasonable
inferences are drawn in favor of the plaintiff. See Bassett v. Nat'l Collegiate Athletic
Ass'n, 528 F.3d 426, 430 (6th Cir. 2008). “[A] judge may not grant a Rule 12(b)(6)
motion based on a disbelief of a complaint's factual allegations.” Saglioccolo v.
Eagle Ins. Co., 112 F.3d 226, 228–29 (6th Cir. 1997) (quoting Columbia Nat'l Res.,
Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995)). “However, while liberal, this
standard of review does require more than the bare assertion of legal conclusions.”
Tatum, 58 F.3d at 1109; Tackett v. M & G Polymers, USA, L.L.C., 561 F.3d 478, 488
(6th Cir. 2009). “To survive a motion to dismiss, [a plaintiff] must plead enough
factual matter that, when taken as true, state[s] a claim to relief that is plausible on
its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (internal quotations
omitted). Plausibility requires showing more than the “sheer possibility of relief but
less than a probab[le] entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (internal quotations omitted); Fabian v. Fulmer Helmets, Inc., 628 F.3d 278,
280 (6th Cir. 2010). “Where a complaint pleads facts that are ‘merely consistent
with’ a defendant's liability, it ‘stops short of the line between possibility and
plausibility of entitlement to relief.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550
U.S. at 557). Consideration of a motion to dismiss under Rule 12(b)(6) is confined to
the pleadings. See Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008).
Assessment of the facial sufficiency of the complaint ordinarily must be undertaken
without resort to matters outside the pleadings. See Wysocki v. Int'l Bus. Mach.
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Corp., 607 F.3d 1102, 1104 (6th Cir. 2010). However, “documents attached to the
pleadings become part of the pleadings and may be considered on a motion to
dismiss.” Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335
(6th Cir. 2007) (citing Fed. R. Civ. P. 10(c)); see also Koubriti v. Convertino, 593 F.3d
459, 463 n. 1 (6th Cir. 2010).
B. Discussion
1. The Court Lacks Jurisdiction over the Case because the Probate
Exception Plainly Applies.
Defendant argues that the probate exception to federal jurisdiction deprives
the Court of jurisdiction over the complaint. After carefully reviewing the case law,
the Court concludes that Defendant is correct: the complaint must be dismissed
because the probate exception to federal jurisdiction applies.
In Markham v. Allen, 326 U.S. 490, 494 (1946), the Supreme Court declared
that under the probate exception, “a federal court has no jurisdiction to probate a
will or administer an estate.” This restriction on federal jurisdiction was limited.
The Supreme Court held that federal courts could entertain suits as long as they
did not “interfere with the probate proceedings or assume general jurisdiction of the
probate or control the property in the custody of the state court.” Id.
Post-Markham, federal courts struggled to define what constituted
“interfering with” a state’s probate proceedings. See Allison Elvert Graves,
Marshall v. Marshall: The Past, Present, and Future of the Probate Exception to
Federal Jurisdiction, 59 Ala. L. Rev. 1643 (2008). Lower courts created three basic
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tests to determine whether a claim would “interfere with probate proceedings”, the
“route test”, the “nature of the claim test”, and the “practical test.” Id. at 1645.
Under the route test, courts looked at “whether the suit could have been
brought in a state court of general jurisdiction as well as in a probate court.” If it
could be brought in both courts, the probate exception would not apply. Id.; see also
Reinhardt v. Kelly, 164 F.3d 1296, 1300 (10th Cir. 1999).
Under the nature of the claim test, courts held that the probate exception
applied where the court had to “adjudicate the validity of a will in order to resolve
the claim.” Marshall, 59 Ala. L. Rev. at 1645. Where the validity of the will was
not in question, courts held that the probate exception did not apply. See Rice v.
Rice Found., 610 F.2d 471, 476 (7th Cir. 1979).
Lastly, under the practical test, courts held that the probate exception barred
federal courts from “exercising jurisdiction [where] the claim [was] ‘ancillary to
probate’” Marshall, 59 Ala. L. Rev. at 1646. A claim was ancillary to probate if
“allowing [the suit] to be maintained in federal court would impair the policies
served by the probate exception.” Dragan v. Miller, 679 F.2d 712, 715 (7th Cir.
1986).
Against this backdrop, in Marshall v. Marshall, 547 U.S. 293 (2006), the
Supreme Court revisited the probate exception and provided guidance that helps to
define the contours of the exception. In Marshall, the Court explained that the
probate exception, like the domestic relations exception, is a judicially-created
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doctrine “stemming in large measure from misty understandings of English legal
history.” Id. at 299. The Court then clarified that under the probate exception,
“when one court is exercising in rem jurisdiction over a res, a second court will not
assume in rem jurisdiction over the same res.” Id. at 311. “Thus, the probate
exception reserves to the state probate courts the probate or annulment of a will
and the administration of a decedent’s estate; it also precludes federal courts from
endeavoring to dispose of property that is in the custody of a state probate court.
But it does not bar federal courts from adjudicating matters outside those confines
and otherwise within federal jurisdiction.” Id. at 312.
Hence, under Marshall, the key distinction to determining whether the
probate exception applies is whether an action is in rem, against property, or in
personam, against a person. An action in rem is “[a]n action determining the title to
property and the rights of the parties…a real action.” Black’s Law Dictionary (10th
ed. 2014). An action in personam is “[a]n action brought against a person rather
than property.” Id.
The Sixth Circuit applied this distinction in Wisecarver v. Moore, 489 F.3d
747 (6th Cir. 2007) and held that the probate exception did not apply to the in
personam claims in the case. In Wisecarver, plaintiffs sued alleging that the
defendants had exerted undue influence on the testator leading to an improper
bequest from the testator to the defendants. Id. at 748. The plaintiffs sought to
recover all the assets that the defendants received under the will, as well as assets
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the defendants had received from the testator during his last two years of life. Id.
at 749. The defendants claimed that the federal court lacked jurisdiction to
entertain the suit. Id.
Relying on the Supreme Court’s decision in Marshall, the Sixth Circuit held
that “to the extent that Plaintiffs’ claims seek in personam jurisdiction over the
Defendants, and do not seek to probate or annul a will, the probate exception does
not apply.” Id. at 750.
As such, the Sixth Circuit held that the probate exception did not bar
plaintiffs’ in personam claims against the defendants for assets transferred to the
defendants during the testator’s lifetime since these assets were not part of the
probate estate. Id. The Sixth Circuit explained that these claims did not implicate
the purposes of the probate exception because “these claims do not interfere with
the res in the state court probate proceedings or ask a federal court to probate or
annul a will.” Id. at 751 (italics in original).
However, the Sixth Circuit held that plaintiffs’ claims against the estate were
barred since these claims “would require the district court to dispose of property in
a manner inconsistent with the state probate court’s distribution of the assets.” Id.
at 751. Since these claims were in rem, they affected the possession of property in
the custody of the state court. Id.
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With these principles in mind, the Court turns to the case at bar. Plaintiff is
suing the Estate seeking recovery of $3,511,506. Plaintiff concedes that these
funds, if they exist, are “currently…in the hands of the state probate court.”
Yet Plaintiff insists that this action is not barred by the probate exception
because it argues that this action is an in personam suit against Mr. Bergeron. This
argument is not well-taken. Unfortunately, Mr. Bergeron is deceased; there is no
person for Plaintiff to sue in personam. Mr. Bergeron is no more; the law recognizes
only his Estate as the entity which may be sued to recover debts. Unlike in
Wisecarver, where the plaintiffs were suing living defendants for undue influence,
here the suit is against the Estate itself. Where there are no living defendants, and
the suit is directed against the property held by the Estate, this action cannot be
construed as an in personam suit. Further, Plaintiff’s suit is not in personam
merely because Plaintiff is suing Bartush as the personal representative of the
Estate. Bartush is representing the Estate as Mr. Bergeron is no longer alive to
represent himself.
Plaintiff next claims that it is not really suing the Estate because the funds
are improperly in the custody of the Estate. Plaintiff alleges that Mr. Bergeron
improperly transferred the Companies’ funds to himself, and consequently, that the
funds should never have been part of the Estate. However, there is no exception to
the probate exception that permits in rem actions against an estate so long as the
property is allegedly improperly in the hands of the estate. In Marshall, the
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Supreme Court drew the distinction between in rem and in personam actions.
According to Marshall, because the state court is exercising jurisdiction over the res
of the Estate, this Court cannot exercise jurisdiction over the same res. The
provenance of the property constituting the corpus of the res is not relevant to
whether the probate exception applies. See Marshall, 547 U.S. at 311.
In sum, Plaintiff’s suit is against the Estate for the recovery of property, i.e.
an action in rem. As an action in rem, the Court’s exercise of jurisdiction here
would implicate the purposes of the probate exception because it would disturb the
state court’s probate proceedings over property in its custody. The Court cannot
exercise jurisdiction over an area where the Supreme Court has expressly
recognized an exception to federal subject matter jurisdiction. As outlined by the
Supreme Court in Marshall, the probate exception plainly applies here. The Court
therefore holds that it is without jurisdiction to decide this matter, and the
Complaint must therefore be dismissed.
2. Since the Probate Exception Applies, Plaintiff’s ERISA
Preemption Argument Must Fail.
Plaintiff next argues that it can properly bring suit because it claims that
ERISA preempts the limitations period of Mich. Comp. Laws § 3804 which bars
suits that commence “more than 63 days after the personal representative delivers
or mails a notice of disallowance to the claimant.” Having decided that the probate
exception applies, the Court concludes that Plaintiff’s argument must fail.
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The few courts that have considered both ERISA preemption and the probate
exception have addressed the question by first determining whether the probate
exception applies, because this determination will govern whether courts have
jurisdiction to decide a dispute in the first place. For example, in May v. JP Morgan
Chase & Co., No. 08-15263, 2009 WL 482719, at *1 (E.D. Mich. Feb. 25, 2009), the
court held that the probate exception did not apply to suits that sought to add funds
to an estate. Similarly in Fluker v. Anderson, No. 4:06-cv-3394, 2008 WL 115103, at
*2 (S.D. Tex. Jan. 10, 2008), the court held that the probate exception was
inapplicable where the plaintiff’s claim sought to recover funds transferred outside
of probate proceedings that were not in the custody of the state.
In contrast to these cases, here Plaintiff is bringing an in rem suit against the
Estate, clearly falling within the scope of the probate exception as articulated in
Marshall. Importantly, Plaintiff is not alleging that ERISA preempts the probate
exception itself, or that the probate exception has a carve-out for ERISA claims.
Indeed, these arguments are inconsistent with the role of the probate exception as a
jurisdictional bar and with the Supreme Court’s guidance on the scope of this rule
in Marshall. Plaintiff merely claims that the probate exception is inapplicable here,
but the case law does not support this conclusion. Where the probate exception
applies, the Court lacks jurisdiction to consider this case, including Plaintiff’s
argument that the 63-day filing deadline of Mich. Comp. Laws § 3804 is preempted
by ERISA.
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Moreover, Plaintiff’s preemption argument appears to be an attempt to make
an end run around the probate exception. In essence, Plaintiff alleges that ERISA’s
six-year statute of limitations preempts Michigan’s requirement to bring claims
within 63-days after a notice of disallowance is issued. For support, Plaintiff relies
on the Ninth Circuit’s decision in Bd. of Trs. of Western Conference of Teamsters
Pension Trust Fund v. H.F. Johnson, Inc., 830 F.2d 1009 (9th Cir. 1987). In
Johnson, the Ninth Circuit held that ERISA preempted a Montana probate code
that provided that all claims against an estate had to be brought within four
months of publication of notice to creditors. Id. at 1016. The Ninth Circuit
reasoned that the Montana code plainly related to ERISA because “Congress
expressly provided a period of limitations governing actions to collect withdrawal
liability…”
Though Johnson appears on its face to support the Plaintiff’s position, the
Ninth Circuit did not address the probate exception. Moreover, Johnson was
decided nearly two decades before the Supreme Court’s clarification of the probate
exception in Marshall. Johnson is thus of limited value in the case at bar, because
here the applicability of the probate exception is squarely presented, while the
Johnson court did not even consider the doctrine.
Further, the Court notes that the probate exception specifically bars federal
courts from probating a will or administering an estate. Markham, 326 U.S. 490,
494 (1946). Michigan’s 63-day requirement for initiating suit after a notice of
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disallowance is part of Michigan’s probate framework, part of how Michigan
administers estates. As the Sixth Circuit has explained, the probate exception is a
“practical doctrine designed to promote legal certainty and judicial economy by
providing a single forum of litigation, and to tap the expertise of probate judges by
conferring exclusive jurisdiction on the probate court.” Wisecarver, 489 F.3d at 749.
Were it to hold that the 63-day requirement is preempted, the Court would be
venturing into the domain of the probate administration and disrupting the legal
certainty provided under Michigan’s probate rules by allowing ERISA-related
claims to re-open an estate for up to six years, regardless of the state’s requirement
that such claims be promptly made within 63 days.
Such a venture into the domain of probate administration would be an
excursion undertaken in the absence of any supporting authority. Beyond pointing
to Johnson, which does not address the probate exception, Plaintiff fails to provide
any support for this proposition. Hence, the Court respectfully declines the
invitation to make an end run around the probate exception and effectively become
engaged in the administration of an estate.
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IV. CONCLUSION
For the reasons discussed above, the Court holds that the probate exception
to federal jurisdiction deprives the Court of jurisdiction to entertain Plaintiff’s
complaint. Hence, Defendant Bartush’s motion to dismiss IS GRANTED and
Plaintiff’s complaint IS DISMISSED WITHOUT PREJUDICE.
SO ORDERED.
Dated: March 27, 2015
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
Certificate of Service
I hereby certify that this Order was electronically submitted on March 27,
2015, using the CM/ECF system, which will send notification to all parties.
s/A. Chubb
Case Manager
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