E-Alert Case Updates

Attorneys-in-Fact Are Not Real Parties in Interest in Lawsuit Brought on Behalf of Principal for Diversity Purposes

Robert Jordan, et al. v. Susan Osmun, et al.
(September 29, 2016) United States District Court for the Eastern District of Virginia
by Matthew J. McCloskey, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: https://ecf.vaed.uscourts.gov/doc1/18917524795

In a recent opinion, the United States District Court for the Eastern District of Virginia held that attorneys-in-fact who file a lawsuit on behalf of their principal are not real parties in interest for purposes of determining federal diversity jurisdiction.

Plaintiffs, Robert Jordan and Cheryl Anacker, pursuant to their Durable Power of Attorney for Lucille Kelly, filed a lawsuit against Susan Osmun, Ms. Kelly’s former attorney-in-fact, for breach of fiduciary duty, conversion, fraud, and unjust enrichment. Plaintiffs’ Complaint stated that: (1) Mr. Jordan was a resident of New Jersey; (2) Ms. Anacker was a resident of Florida; (3) Ms. Kelly was a citizen of Virginia; (4) Ms. Osmun was a citizen of New Jersey. Ms. Osmun moved to dismiss the Complaint for lack of diversity because both she and Mr. Jordan were from New Jersey. Plaintiffs thereafter filed an Amended Complaint stating that Mr. Jordan was an “individual resident, citizen, and domiciliary of Maryland.” The Amended Complaint further added Mrs. Osmun’s husband, also a New Jersey resident, as a defendant.

Defendants separately moved to dismiss the Amended Complaint for lack of jurisdiction. For purposes of the motions, it was undisputed that Mr. Jordan owned a home in New Jersey where he lived during the week with his seven (7) year old daughter, and that Mr. Jordan intended to continue this arrangement until the end of his daughter’s school year. Mr. Jordan’s wife had lived and worked in Maryland since March 2016, and Mr. Jordan’s employer had approved his request to transfer his employment to Maryland since March 2016 as well. Further, Mr. Jordan signed a lease for a property in Maryland in April 2016 and lives there with his wife on weekends. Mr. Jordan had, however, not yet voted or paid taxes in Maryland.

In resolving the motions to dismiss, Judge Liam O’Grady was required to address who constituted the parties in interest for purposes of determining diversity jurisdiction. Plaintiffs argued that they were not parties in interest to this controversy, as the lawsuit was brought by Plaintiffs solely in their capacity as attorneys-in-fact for the actual party in interest, Ms. Kelly. Defendants countered that, as the named parties authorized to bring this lawsuit for Ms. Kelly’s benefit, Plaintiffs were parties in interest for diversity purposes. In pertinent part, Defendants argued that: (1) Plaintiffs were real parties in interest because could bring this lawsuit independent of their attorney-in-fact status due to the fact that they had an interest in Ms. Kelly’s estate; (2) as Ms. Kelly’s former attorney-in-fact, if Plaintiffs had the same citizenship as Ms. Kelly, so did Mrs. Osmun; and (3) because Ms. Kelly was not identified as incompetent, Ms. Kelly’s citizenship was not imputed to Plaintiffs.

The Court sided with Plaintiffs. Judge O’Grady noted that the Eastern District of Virginia had noted in other contexts that “agents of the real party in interest are not themselves the real parties in interest for the purpose of determining diversity jurisdiction.” Thus, for example, the Court had previously held that two (2) brothers who had filed a malpractice lawsuit on behalf of their mother had failed to establish diversity jurisdiction, as both their mother and the defendant were citizens of Virginia and their mother was the real party in interest. Moreover, although the Fourth Circuit had never addressed the particular scenario at issue in this case, courts in other circuits had explicitly held that attorneys-in-fact were not the real parties in interest for purposes of diversity jurisdiction. Thus, Plaintiffs were not the real parties in interest in this case, and their citizenship was irrelevant to the Court’s diversity inquiry.

The Court rejected Defendants’ arguments. First, Defendants had failed to substantiate their bare allegations that Plaintiffs were direct beneficiaries of Ms. Kelly’s estate. Second, Mrs. Osmun was not entitled to rely on her former status as Ms. Kelly’s attorney-in-fact to defeat diversity. Finally, Ms. Kelly’s competence did not bear on the analysis above. Accordingly, the Court denied Defendant’s motion to dismiss.

As a final note, the Court also noted that, in any event, Mr. Jordan was a citizen of Maryland. An individual’s domicile is established when they take up residence in a particular place with the intent to remain there permanently. The undisputed facts regarding Mr. Jordan’s living arrangements constituted “compelling evidence of intent to remain” in Maryland. Consequently, even if Plaintiffs were real parties in interest in this lawsuit, diversity of citizenship would still be present.