Hall v. Hall

Filing 17

MEMORANDUM AND ORDER Granting Defendant's Motion to Dismiss 6 , and the Complaint is Dismissed without prejudice. LET JUDGMENT BE ENTERED ACCORDINGLY. (Written Opinion). Signed by The Hon. Paul A. Magnuson on 01/08/2015. (LLM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Barbara Jeanne Hall,

Civ. No. 14-4602 (PAM/FLN)
Plaintiff,

v.

MEMORANDUM AND ORDER

Margaret Burrell Hall, as
Trustee of the Robert L. Hall
Living Trust,
Defendant.

This matter is before the Court on Defendant’s Motion to Dismiss. For the reasons
that follow, the Motion is granted.
BACKGROUND
In November 2012, Robert Hall filed a state-court lawsuit against his daughter,
Barbara Hall, and her children, Kevin and Grace Barry, seeking a declaration regarding
Robert’s ownership interest in a limited liability company (LLC) that owns a senior-living
center called the Cottages of Vadnais Heights. (Compl. ¶ 11.) Barbara contended in that
lawsuit that Robert had transferred his interest in the LLC to her and her children in 1997.
Ramsey County Judge John H. Guthmann eventually determined, in a November 2013
summary-judgment ruling and after a June 2014 bench trial, that Robert did not transfer his
interest in the LLC and that he therefore retained a 51% interest in the LLC. He awarded
Robert nearly $1.8 million in unpaid distributions, attorney’s fees, and interest. (Id. ¶ 13.)
Barbara and her children have appealed that ruling; that appeal is currently pending before

the Minnesota Court of Appeals, awaiting a hearing date. The parties are negotiating a stay
of the judgment pending the appeal and have agreed to a “standstill” until they agree to the
terms of that stay.
In October 2014, Robert died, leaving his interest in the Cottages LLC to the Robert
L. Hall Living Trust. (Id. ¶ 14.) Margaret Burrell Hall is the Trustee of the Trust and is the
named Defendant in this case. The Trust has been substituted for Robert in the state-court
case as well.
On October 31, 2014, Barbara brought this declaratory-judgment action, seeking a
declaration regarding the legal effect of Robert’s death on the Cottages LLC. Barbara
contends that Robert’s death resulted in the termination of his membership interest and
governance rights in the Cottages LLC, so that all governance rights in the LLC are now
Barbara’s exclusively. (Id. ¶ 15.) The Trustee contends that under the LLC’s Articles of
Organization, Robert’s death means that the LLC must be dissolved and liquidated to satisfy
its debts, including the Ramsey County judgment, and that she retains Robert’s governance
rights until the dissolution. (Id. ¶ 16.)
The Trustee seeks dismissal of this action contending that the Court should decline
to exercise jurisdiction in light of the pending state litigation. Barbara contends that the state
court will not address the legal effect of Robert’s death, making abstention inappropriate.

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DISCUSSION
Four days after Barbara filed this declaratory-judgment action in federal court, the
state court held a hearing on the Trustee’s request that Barbara file a supersedeas bond to
secure a stay of enforcement of the judgment pending the appeal. At that hearing, the
Ramsey County court learned for the first time that Barbara had filed this federal-court
action. Discussing his jurisdiction over the matter in light of the pending appeal, Judge
Guthmann said that he believed he had jurisdiction to consider matters collateral to the
judgment, such as the supersedeas bond, but that it was not “apparent . . . that I have the
jurisdiction without a separate motion or separate lawsuit to decide whether the governance
rights survive [Robert’s death].” (Schwartz Aff. Ex. A (Tr. of Nov. 3, 2014, hrg.) at 6-7.)
According to Barbara, this comment means that neither Judge Guthmann nor the
Minnesota Court of Appeals will address the legal effect of Robert’s death on the continuing
viability and governance of the LLC. Thus, Barbara argues, there is no parallel state court
litigation, and the Court therefore has less discretion to decline to consider her declaratory
judgment action. But Barbara overstates the meaning of Judge Guthmann’s comments.
Judge Guthmann said that he would not consider the legal effect of Robert’s death in the
absence of a motion or separate lawsuit requesting he do so. He did not indicate that the
issue was beyond the scope of the pending state-court action, nor did any party raise the
possibility of moving the Court of Appeals to supplement the record or to stay the appeal
pending the district court’s consideration of the issue.

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As the Trustee argues, the pending appeal is a parallel state action.
If the pending state court proceeding would better settle the issues, “the district
court must dismiss the federal action because it would be uneconomical as
well as vexatious for a federal court to proceed in a declaratory judgment suit
where another suit is pending in a state court presenting the same issues, not
governed by federal law, between the same parties.”
Evanston Ins. Co. v. Johns, 530 F.3d 710, 713 (8th Cir. 2008) (quoting Brillhart v. Excess
Ins. Co., 316 U.S. 491, 495 (1942)). Thus, the Court must decline to exercise jurisdiction
over this lawsuit.
Moreover, the Court has serious doubts about whether it has subject-matter
jurisdiction over the dispute in any event. Indeed, Barbara’s counsel seemed to recognize
as much, stating at the hearing on the instant Motion that a stay of the federal action would
be appropriate pending the Minnesota Court of Appeals’ ruling. If the Court of Appeals
reverses the Ramsey County judgment, there will be no need to determine the effect of
Robert’s death—the LLC will revert to Barbara and her children and that will be the end of
the matter. Until the appellate court rules on the appeal, the issues raised in this lawsuit are
simply not ripe for adjudication. See Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967)
(Ripeness doctrine “prevent[s] the courts, through avoidance of premature adjudication, from
entangling themselves in abstract disagreements . . . .”).
Because there is pending parallel state-court litigation and because the issues
presented in this case are not ripe for resolution, the Court must dismiss the Complaint.

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Accordingly, IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss
(Docket No. 6) is GRANTED and the Complaint is DISMISSED without prejudice.

LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: January 8, 2015

s/ Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge

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