Jo Ann Howard and Associates, P.C. et al v. Cassity et al

Filing 1171

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Certain Trustee Defendants' Motion to Strike Plaintiffs' Jury Demand [ECF No. 1147 ] is DENIED. Signed by District Judge E. Richard Webber on February 22, 2013. (BRP)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
JO ANN HOWARD &
ASSOCIATES, P.C., et al.,
Plaintiffs,
vs.
J. DOUGLAS CASSITY, et al.,
Defendants.

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Case No. 4:09CV01252 ERW

MEMORANDUM AND ORDER

This matter comes before the Court on Certain Trustee Defendants’ Motion to Strike
Plaintiffs’ Jury Demand [ECF No. 1147]. Defendants American Stock Transfer and Trust
Company, LLC; Bank of America, N.A.; BMO Harris Bank, N.A.; Bremen Bank and Trust
Company; Marshall & Ilsley Trust Company, N.A.; National City Bank; PNC Bank, N.A.;
Southwest Bank; and U.S. Bank, N.A. (collectively, the “Trustee Defendants”) move, pursuant to
Federal Rule of Civil Procedure 39(a)(2), to strike Plaintiffs’ Jury Demand with respect to
Plaintiffs’two remaining claims against Trustee Defendants: one for breach of fiduciary duty
(Count 19); and one for negligence or gross negligence (Count 20).
In their Motion, Trustee Defendants argue that Plaintiffs have no right to a jury trial on
these remaining claims, because, although the claims are labeled as claims for breach of fiduciary
duty and negligence, the claims are, as a matter of law, equitable claims for breach of trust, which
are traditional claims in equity. They contend that, pursuant to the Seventh Amendment to the
U.S. Constitution, a jury trial may be a matter of right only when a federal civil action is at law,
not when it is in equity. Trustee Defendants assert that breach of trust claims fall exclusively
within equity’s jurisdiction, and that Plaintiffs’ predicating these claims on the defendants’

alleged negligent performance of their fiduciary duties does not convert their action into one
cognizable at law. Trustee Defendants also argue that it does not matter that Plaintiffs seek only
to recover money damages.
In their “Opposition to Banks’ Motion to Strike Jury Demand” [ECF No. 1152], Plaintiffs
argue that, where conduct breaching a fiduciary duty is alleged to also violate another legal
principle, case law treats claims by or against trustees as actions at law. Plaintiffs contend they
have alleged that the Trustee Defendants’ actions and failures to act were negligent and grossly
negligent, separately from, and in addition to, allegations that those actions breached the Trustee
Defendants’ fiduciary duties. They further argue that they are entitled to a jury trial because they
are seeking money damages, including punitive damages, for violations of legal duties
“The Seventh Amendment preserves, ‘[i]n Suits at common law, . . . the right of trial by
jury.’ U.S. Const. amend. VII.” Taylor Corp. v. Four Seasons Greetings, LLC, 403 F.3d 958,
968 (8th Cir. 2005). When determining whether a party seeking to enforce a statutory right is
entitled to a jury trial, courts employ a two-prong test, in which they: 1) “compare the statutory
action to 18th-century actions brought in the courts of England prior to the merger of the courts
of law and equity”; and 2) examine whether the remedy sought is legal or equitable in nature. Id.
(quoting Tull v. United States, 481 U.S. 412, 417-18 (1987)). “The Supreme Court has stressed
the second inquiry of this test is the more important of the two.” Taylor Corp., 403 F.3d at 968
(citing Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565 (1990)).
See also GranFinanciera v. Nordberg, 492 U.S. 33, 42-43 (1989).
The Court finds that the claims brought by Plaintiffs allege breaches of fiduciary duties
predicated upon underlying negligence, which is actionable at law. Among other things,
Plaintiffs allege that Trustee Defendants failed to ensure that promissory notes were adequately

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secured by assets, that security interests were properly recorded, and that interest due under
promissory notes was paid [ECF No. 916 at pp. 183-87]. Plaintiffs also allege that Trustee
Defendants failed to keep and review adequate records of trust transactions; failed to
independently verify trust account records; “rubber-stamped” the accounting of trust funds
presented to them by other defendants; and allowed other defendants to indiscriminately
withdraw trust funds without appropriate documentation, commitments to repay the funds, or
requiring a reasonable interest rate on those defendants’ use of trust funds. “[W]here a claim of
breach of fiduciary duty is predicated upon underlying conduct, such as negligence, which is
actionable in a direct suit at common law, the issue of whether there has been such a breach is,
subject to appropriate instructions, a jury question.” Halladay v. Verschoor, 381 F.2d 100, 109
(8th Cir. 1967). Moreover, Plaintiffs’ action seeks money damages, a form of relief, although not
necessarily determinative of the method of trial, that is a significant factor characterizing issues
in this case as legal, rather than equitable. See Entergy Ark., Inc. v. Neb., 358 F.3d 528, 544-46
(8th Cir, 2004); Klein v. Shell Oil Co., 386 F.2d 659, 663 (8th Cir. 1967). The Court will deny
Trustee Defendants’ Motion to Strike Plaintiffs’ Jury Demand.
Accordingly,
IT IS HEREBY ORDERED that Certain Trustee Defendants’ Motion to Strike
Plaintiffs’ Jury Demand [ECF No. 1147] is DENIED.
Dated this 22nd day of February, 2013.

E. RICHARD WEBBER
SENIOR UNITED STATES DISTRICT JUDGE

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