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Thea v. Kleinhandler

United States Court of Appeals, Second Circuit

November 3, 2015

DONALD M. THEA, DEBORAH L. THEA, Plaintiffs-Appellants,
v.
NEIL C. KLEINHANDLER, As Trustee of the Frederica Fisher Thea Revocable Trust, NEW SCHOOL UNIVERSITY, ERIC T. SCHNEIDERMAN, Attorney General of the State of New York, Defendants-Appellees

Argued March 26, 2014.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. Appeal from a judgment of the United States District Court for the Southern District of New York (Castel, J.), denying plaintiffs' motion for leave to file a second amended complaint. The district court concluded that allowing plaintiffs to amend their complaint would be futile, because they lacked standing to sue in their individual capacities and their claims on behalf of the estate were time-barred under California's one-year statute of limitations. We affirm on the grounds that all the claims are time-barred.

ANTHONY J. VIOLA (Zachary W. Silverman, on the brief), Edwards Wildman Palmer LLP, New York, New York, for Plaintiffs-Appellants.

BRUCE J. TURKLE (Perry S. Galler, on the brief), Phillips Nizer LLP, New York, New York, for Defendant-Appellee Neil C. Kleinhandler, Individually and as Trustee of the Frederica Fisher Thea Revocable Trust.

MARCY RESSLER HARRIS, Schulte Roth & Zabel LLP, New York, New York, for Defendant-Appellee New School University.

JASON HARROW, Assistant Solicitor General (Barbara D. Underwood, Solicitor General, and Claude S. Platton, Assistant Solicitor General, on the brief), for Eric T. Schneiderman, Attorney General of the State of New York, New York, New York, for Defendant-Appellee Attorney General of the State of New York.

Before: JACOBS and CHIN, Circuit Judges, and WOLFORD, District Judge.[*]

OPINION

Appeal from a judgment of the United States District Court for the Southern District of New York (Castel, J. ), denying plaintiffs' motion for leave to file a second amended complaint. The district court concluded that allowing plaintiffs to amend their complaint would be futile, because they lacked standing to sue in their individual capacities and their claims on behalf of the estate were time-barred under California's one-year statute of limitations. We affirm on the grounds that all the claims are time-barred.

Page 493

Chin, Circuit Judge :

In this case, Stanley Thea (" Stanley" ) and Frederica Thea (" Frederica" ) agreed to and did execute mutual wills providing

Page 494

for each other's assets to pass to the survivor and, upon the death of the survivor, to Stanley's children from a prior marriage, Donald Thea and Deborah Thea (the " Theas" ). After Stanley died, however, Frederica transferred substantially all of her assets to a trust (the " Trust" ), leaving the remainder interest not to the Theas but to defendant-appellee New School University (the " New School" ).

The Theas commenced this action against the New School as well as defendants-appellees Neil Kleinhandler, as trustee of the Trust, and Eric Schneiderman, as Attorney General of New York, contending that they were entitled to the Trust's assets and seeking, inter alia, declaratory and equitable relief. On May 12, 2014, the district court dismissed the Theas' claims without prejudice, on the grounds that it was unable to adjudicate the claims because no representative of Frederica's estate (the " Estate" ) was a party to the action. After being appointed special administrators of the Estate, the Theas sought leave to file a second amended complaint. On August 1, 2014, the district court denied the Theas' motion on grounds of futility, concluding that the claims alleged in the proposed second amended complaint would not withstand a motion to dismiss. The Theas appeal. We affirm.

BACKGROUND

A. The Facts

For the purposes of this appeal, the facts alleged in the proposed second amended complaint are assumed to be true. They may be summarized as follows:

The Theas are the only children of Stanley and his first wife. In 1985, Stanley married his third wife, Frederica. Stanley and Frederica had no children together. On April 13, 1995, Stanley and Frederica entered into an agreement (the " Agreement" ) to execute mutual wills providing that the surviving spouse would receive the deceased spouse's property and, upon the surviving spouse's death, the surviving spouse's property would pass to the Theas.[1] Stanley and Frederica executed wills in accordance with the Agreement. Frederica's will provides that when Stanley died, the Theas would be the sole executors.

Stanley predeceased Frederica in 1998. Thus, in accordance with Stanley's will and the Agreement, Frederica inherited Stanley's assets, including two apartments in New York City -- one in Manhattan and one in Astoria. Neil Kleinhandler and his firm represented Frederica in connection with the probate of Stanley's estate.

In December 2002, Frederica created the Trust, which was governed by New York law and was revocable. Frederica and Kleinhandler were designated as co-trustees. The New School, a university based in New York City, was designated as the sole remainder beneficiary of the Trust. On or about December 17, 2002,

Page 495

Frederica transferred the New York City apartments and substantially all of her other property and assets into the Trust. For the remainder of Frederica's life, the Trust managed the assets for her benefit.

In 2007, the Trust sold the Manhattan apartment for approximately $1.65 million. The Astoria apartment was also sold for an undisclosed amount. The proceeds of both apartments remained in the Trust. On or about June 15, 2011, the Trust purchased a residence in Carmel, California for approximately $1.9 million. Frederica moved into the Carmel residence and resided there for the remainder of her life. The Trust also owns securities and capital, located in various bank and brokerage accounts in New York, valued at approximately $500,000.

On February 4, 2012, Frederica died of an apparent suicide. Law enforcement officials discovered a suicide note with instructions to contact Kleinhandler, her real estate agent, and her accountant. After Kleinhandler was notified of Frederica's death, he represented to law enforcement officials that he was authorized to act on behalf of the Estate.

Kleinhandler did not inform the Theas of their stepmother's death, nor did he publish an obituary or otherwise publicize her passing.[2] Within a week of Frederica's death, the Carmel residence was listed for sale with a real estate broker, but it ...


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