Suit by Heir Over Deceased Parent’s Investment Does Not Fall Under Probate Exception to Diversity, Holds Eleventh Circuit

In Fisher v. PNC Bank, N.A., No. 20-10110 (11th Cir. June 29, 2021), the Eleventh Circuit reverses dismissal of a state-law conversion and fraud action, finding that there is diversity jurisdiction and standing. The panel rejects the bank’s argument that the claim, concerning a joint account with an accountholder who died, falls within the probate exception to diversity jurisdiction.

“Fisher and her mother, Rose Charlap, co-owned an investment account with the Royal Bank of Canada. Both women were account holders, and Fisher was the designated emergency contact on the account. Charlap contacted PNC about securing a $100,000 loan to assist her son Alan. Alan had recently been convicted of fraud and theft, and Charlap wanted to give him some help to keep him out of jail. To arrange the $100,000 loan, Charlap transferred the RBC investment account to PNC. At the time of the transfer, Charlap was in poor mental and physical health, and she needed assistance managing the account.”

PNC allegedly allowed Alan to manipulate the account to withdraw thousands of dollars and increase the size of the loan. Fisher was removed as a co-owner. “At one point, it authorized the sale of $155,000 worth of securities held in the investment account to pay off the $125,000 loan. Fisher later discovered during guardianship proceedings that a PNC bank teller had assisted Alan in withdrawing money from the investment account. Alan continued to extract funds from the account until Charlap died.”

Fisher sued PNC for “(1) civil theft, (2) aiding and abetting civil theft, (3) negligence, (4) fraudulent concealment, and (5) aiding and abetting fraud.” The district court dismissed, “conclud[ing] that Fisher was ‘ultimately attempting to circumvent the normal probate process by bringing an individual claim against PNC Bank.’ The district court also held that Charlap’s sole ownership of the investment account at the time of her death meant that Fisher lacked standing to bring claims relating to the account.”

The Eleventh Circuit reverses. “[A] federal court may not exercise diversity jurisdiction over state probate matters,” otherwise “federal claimants could deprive competing state claimants of their share of an estate by obtaining ‘a premature distribution or valuation of estate assets’ in federal court . . . . But the probate exception does not justify dismissing any case that might impact a decedent’s estate.” The Eleventh Circuit holds that the exception applies only to “[1] the probate or annulment of a will . . . [2] the administration of a decedent’s estate . . . [and] [3] dispos[al] of property that is in the custody of a state probate court.”

“Fisher argues that the district court erred in dismissing her lawsuit because it can adjudicate her claims for damages against PNC without probating her mother’s will, administering the estate, or disposing of the estate’s property. We agree. Even if the district court were correct that Fisher filed this suit to ‘circumvent the normal probate process,’ a plaintiff’s intent does not control the probate exception to federal jurisdiction. Instead, the question under this ‘most mysterious and esoteric branch[] of the law of federal jurisdiction’ is what a lawsuit would require a district court to do . . . . And Fisher’s complaint does not require the district court to do any of the three things that the probate exception prohibits.”

The panel also holds that Fisher is the real party in interest and has standing. Under Fed. R. Civ. P. 17(a)(1), “an action must be prosecuted in the name of the real party in interest.” The panel observes that if she were “suing on behalf of Charlap’s estate, she would be required to demonstrate her capacity to represent the estate under state law . . . . But, accepting the facts alleged in the complaint in the light most favorable to her, Fisher is suing on her own behalf [as a lawful co-owner of the account], not on behalf of Charlap’s estate.” Further, “Fisher repeatedly alleges that PNC injured her because its conduct cost her the money in the account. As to causation: if PNC had retained Fisher as a co-owner, Fisher would not have lost access to her money and, upon Charlap’s death, the investment account would have passed to Fisher as a joint tenant with right of survivorship. And the harms Fisher alleges are redressable in the form of an award of damages against PNC. Accordingly, Fisher has standing.”

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