Indispensable Sister Defeats Diversity

After nearly a century of state court feuding over Luray Caverns-related assets, the Harrisonburg U.S. District Court dismisses an action by three Virginia heirs to invalidate the shares of two heirs outside Virginia; the Virginia heirs cannot create diversity by omitting another Virginia heir who historically sided with the nonresident heirs; her joinder is required and defeats diversity.

Luray Caverns was founded in 1905 by a colonel who with his wife created two trusts upheld in state court litigation in the 1920s; a grandson became beneficiary until the trusts terminated at his death in 2010. The grandson managed Luray Caverns from the early 1950s until 2008; he and his wife created two inter vivos trusts; their five children divided over control of the business, particularly over who should serve as co-trustees of the founder’s trusts. In 2004, a co-trustee resigned and filed suits relating to these trusts. Grandson and his wife supported a co-trustee opposed by two of their daughters. In 2006, the inter vivos trusts were amended to add no contest clauses related to appointment of trustees. The opposed co-trustee was appointed. In 2009, grandson and wife petitioned for appointment of another co-trustee, again opposed by two daughters who withdrew their opposition on learning of the no contest clauses. The new trustee was appointed but did not qualify before the founder trusts terminated on grandson’s death in 2010. State court litigation ensued over trust assets, with three daughters opposing their mother and two other siblings. In 2011, the state court divided disputed assets equally among the children. After mother’s death in 2012, two children sued in federal court to nullify the interests of two daughters residing in France and Montana in their parents’ trusts.

The district court granted nonresident daughters Fed. R. Civ. P. 12(b)(7) motion to dismiss for failure to join an indispensable party, a daughter residing in Virginia who historically sided with defendant daughters in family disputes. The court rejected plaintiff siblings’ argument that the omitted daughter would benefit from the litigation based on a 2.5 percent remainder interest. Fed. R. Civ. P. 19 requires a pragmatic, contextual evaluation whether a party’s omission requires dismissal. The court’s ability to grant complete relief and protect the absent party’s interest is considered. Plaintiff siblings cannot cure resident daughter’s omission by cleverly stipulating she will not forfeit her interest. Omitted daughter historically sided with the opposing daughters in litigation; the court cannot adequately protect her interest, grant complete relief or enter a binding judgment without her. Her joinder is not feasible under Fed. R. Civ. P. 19(a) because it will defeat diversity. The public interest in efficient dispute resolution supports dismissing the federal action without prejudice to refiling in the state court that has handled nearly a century of family litigation. The district court cannot proceed in equity and good conscience without omitted daughter who is an indispensable party under Rule 19(b).

Action dismissed without prejudice.

Graves v. Vitu (Urbanski) No. 5:cv065, Feb. 8, 2013; USDC at Harrisonburg, Va. VLW 013-3-081, 14 pp.