A Primer on Personal Jurisdiction over a Trustee

Holland & Hart - Fiduciary Law Blog

Holland & Hart - Fiduciary Law Blog

No trustee wants to be forced to litigate a dispute in a far-off venue.  Nonetheless, the intricate relationship that a trustee has with a beneficiary can certainly cause some concern that the trustee may have subjected themselves to a foreign jurisdiction.  What standards apply and what guidance exists for trustees on this matter?

First, a trustee may be subject to personal jurisdiction of a given forum in one of two ways: general jurisdiction or specific jurisdiction.  Personal jurisdiction is “general,” allowing the assertion of any claim against the defendant, where the defendant’s contacts with the forum state are “so ‘continuous and systematic’ as to render them essentially at home in the forum.”  Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 317 (1945))(emphasis added).

Specific jurisdiction is “very different.”  Bristol-Meyers, 137 S. Ct. at 1781. First, the defendant must “purposefully avail itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958).  Next, the plaintiff’s claim must “arise out of or relate to” the defendant’s forum conduct.  Burger King, 471 U.S. at 472 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984).  Last, the exercise of specific jurisdiction must be reasonable.  Id. at 477.

General jurisdiction over a trustee is typically limited to the trustee’s home state or domicile.  This is an easy test to apply and should come as no surprise that a trustee may be sued for anything and everything where they live (or in the case of a corporation, its principal place of business or incorporation).  However, it’s also possible for general jurisdiction to exist where the trustee’s contacts with a given state are “so substantial and of such a nature as to render” the defendant “at home” in a foreign jurisdiction despite their legal out-of-state domiciles.  See Daimler AG v. Bauman, 571 U.S. 117, 139 n.19 (2014).  The case law depicting when such circumstances exist is limited, but the U.S. Supreme Court has noted that circumstances must be left for the “exceptional case.”  Id.

Alternatively, to exercise specific jurisdiction over an out-of-state trustee, the trustee must “purposefully avail” himself or herself of the privilege of conducting activities within a forum.  This relationship with a particular forum must arise out of contacts the “defendant himself” creates with the forum, Burger King, 471 U.S. at 475 (emphasis in original), and the Supreme Court has “consistently rejected attempts to satisfy the defendant-focused ‘minimum contacts’ inquiry by demonstrating contacts between the plaintiff (or third parties) and the forum State.”  Walden v. Fiore, 571 U.S. 277, 284 (2014).  This is an important distinction given a trustee may engage in transactions with beneficiaries in many different states.

So, what type of contact by a trustee might be enough for specific jurisdiction?  The answer is best highlighted in the United States Supreme Court’s jurisdictional analysis in Hanson v. Denckla, 357 U.S. 235 (1958).  In Hanson, a Pennsylvania settlor established a trust for her benefit in Delaware and appointed a Delaware trustee to administer the trust.  Id. at 238.  The settlor then moved to Florida and the Delaware trustee continued to make distributions from the trust to the settlor. Id. at 238-39, 252.  After the settlor’s death, the settlor’s heirs sued the Delaware trustee in a Florida court seeking to declare a provision of the trust and various appointments made by the settlor invalid.  Id. at 241-42.  The ability of a Florida court to exercise personal jurisdiction over the Delaware trustee was subsequently challenged.

At the Supreme Court, the heirs urged the Court to recognize Florida’s exercise of personal jurisdiction over the nonresident trustee given the trustee’s continued administration of the trust after the settlor’s relocation to Florida and the settlor’s connections with and physical presence in Florida.  Id. at 241-44.  However, noting the settlor’s unilateral activities and decision to reside in Florida, the Court held that the nonresident trustee had done nothing to purposely avail itself of the benefits of doing business in Florida – other than to continue sending trust payments and related documents to the settlor after she relocated to Florida – and accordingly the Florida court lacked personal jurisdiction over the Delaware trustee.  Id. at 252.

While Hanson seems to provide a good deal of protection for a trustee to administer a trust without fear of being hauled into a distant courtroom, personal jurisdiction is a fact-based sliding scale, and each additional action with a beneficiary in a foreign jurisdiction increases the possibility that personal jurisdiction might exist.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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