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Kirgan v. Manufacturers and Traders Trust Co.

United States District Court, D. Maryland

August 30, 2019

MARY ANNE KIRGAN, et al. Plaintiffs,
v.
MANUFACTURERS AND TRADERS TRUST COMPANY Defendant.

          MEMORANDUM OPINION

          RICHARD D. BENNETT UNITED STATES DISTRICT JUDGE

         Plaintiffs, Mary Anne Kirgan and Robert S. Kirgan (“the Kirgans”), filed a Complaint on January 22, 2019, seeking a Declaratory Judgment, under 28 U.S.C. §§ 2201, et seq., that would require Defendant, Manufacturers and Traders Trust Company, doing business as M&T Bank (“M&T”), to release funds from the Clarence Manger and Audrey Cordero Plitt Trust (“the Trust”) to pay attorneys' fees incurred by the Kirgans acting as trustees with respect to administration of the Trust. (Compl., ECF No. 1.) All parties are successor trustees of the Trust, which is a charitable trust created under the will of Clarence Manger Plitt. M&T has filed a counterclaim seeking a judgment declaring that M&T is entitled to reimbursement of attorneys' fees from the Trust. (Countercl., ECF No. 5.) Now pending before this Court are the parties' Cross-Motions for Summary Judgment (ECF Nos. 10, 11).[1] For the reasons that follow, this Court shall GRANT IN PART and DENY IN PART The Kirgans' Motion for Summary Judgment (ECF No. 10) and shall GRANT IN PART and DENY IN PART Defendant's Cross-Motion for Summary Judgment (ECF No. 11). Specifically, this Court GRANTS the Defendant's motion in its entirety with respect to fees and costs, but DENIES its motion opposing any and all fees to be accorded to the Plaintiffs. Accordingly, this Court shall direct payment by the Trust of fees and costs incurred by the Kirgans in the amount of $756, 348.79 and shall direct payment by the Trust of all fees and costs incurred by M&T amounting to $940, 278.90.

         BACKGROUND

         I. The Trust and Trustees

         In 1976, a testamentary charitable trust (“the Trust”) was created under Maryland law pursuant to Clarence Plitt's Will. (Compl. ¶ 7, ECF No. 1.) The Trust's purpose is to donate funds to educational institutions that agree to use the funds for educational loans to needy students. (Id.) The Trust has assets of about $15 million. (Countercl. ¶ 2, ECF No. 5.)

         The Will designated Mary E. McC. Kirgan (“Mary Kirgin”) as the Trust's original individual trustee and First National Bank of Maryland as the original corporate trustee. (Compl. ¶¶ 8-9, ECF No. 1.) Mary Kirgan was Clarence Plitt's long-time partner, and he raised Mary Kirgan's children, Mary Anne Kirgan and Robert Kirgan, from the time they were ages five and ten respectively. (Mot. Ex. K, Va. Mem. Op. 2-3, ECF No. 10-13.) After Clarence Plitt's death, Mary Kirgan contested the Will, and the Circuit Court for Baltimore City issued an Order in December 1985 that included the following language:

ORDERED and DECLARED that the individual Trustees acting jointly pursuant to Item Four L. of the Last Will and Testament of Clarence M. Plitt do not have the power to remove the originally named corporate Trustee, except for cause;

(Mot. Ex. B, 1985 Order 2, ECF No. 10-4; Mot. Ex. K, Va. Mem. Op. 3, ECF No. 10-13.) The Will provided that after Mary Kirgan's death, she be succeeded by two individual co-trustees. (Id. at 3.) Mary Kirgan named Mary Anne and Robert Kirgan as her successor individual co-trustees of the Trust. (Id.)

         The First National Bank of Maryland became the FMB Bank in 1998 and Allfirst Bank in 1999. (Compl. ¶ 12, ECF No. 1.) In 2003, M&T acquired Allfirst Bank through a merger, becoming the successor fiduciary to Allfirst Trust Company, N.A. (Id. at ¶ 13.) Mary Kirgan was given notice of the merger and advised of the date by which she must file a complaint if she objected. (Id. ¶ 14.) Mary Kirgan had concerns about M&T, so through her counsel, she negotiated with Kenneth Hornstein (“Hornstein”), a Vice President at M&T.[2] (Id. at ¶ 15.) Before the objection date had passed, Mary Kirgan, through her counsel, sent a letter to Hornstein stating her conditions for not objecting to M&T acting as the successor fiduciary. (Id. at ¶ 15; Mot. Ex. D, ECF No. 10-6.) In return, she received a letter from Susan A. Nachman, Vice President at M&T, stating the bank's agreement. (Compl. ¶ 16; Mot. Ex. E, ECF No. 10-7.) The agreement included:

ITEM FOUR Paragraph L of the Will (“Paragraph L”) grants you, in your capacity as the sole individual co-trustee of the Trust, the power to remove and replace M&T as corporate co-trustee;
. . . .
If a disagreement about the construction of Paragraph L should arise while M&T is serving as co-trustee of the Trust, M&T will join in filing a petition for Will construction and/or reformation seeking relief consistent with the interpretation set forth above, provided you request such an action (or the successor individual co-trustees jointly request such an action); and,
The expenses for the preparation/filing, etc. of any such petition are payable from the Trust as an administration expense.

(Id.) Mary Kirgan submitted a bill for the attorneys' fees she incurred related to the merger negotiations, and it was paid by the Trust. (Compl. ¶ 17, ECF No. 1.)

         Mary Kirgan died in 2004, and she was succeeded by her children, Mary Anne Kirgan and Robert S. Kirgan (“the Kirgans”) as the Trust's successor individual co-trustees. (Id. at ¶¶ 17-18.)

         II. The Dispute & Prior Litigation

         In July 2005, the Kirgans requested an opinion from Venable LLP regarding compensation to be paid to the Kirgans by the Trust for performing duties as co-trustees. (Mot. Ex. K, Va. Mem. Op. 11-12, ECF No. 10-13.) Prior to that time, Mary Kirgan had received a total annual compensation of $70, 820, and the Kirgans each received compensation of $37, 000 in fiscal years 2004 and 2005. (Id. at 12.) The Venable Opinion proposed that the Kirgans each receive total compensation of $62, 750 and that they increase their level of activity as co-trustees. (Id.)[3]

         Beginning in 2015, M&T raised concerns that certain sections of the contracts between the Trust and the schools receiving funding violated the Will's intent and needed to be adjusted. (Mot. Ex. K, Va. Mem. Op. 8, ECF No. 10-13.) The concerns were communicated to the Kirgans and various terms were adjusted. (Id. at 8-10.) In November 2016, M&T communicated to the Kirgans that it wished to retain someone to give an opinion regarding appropriate trustee compensation, but the Kirgans did not identify anyone to perform the analysis or permit M&T to retain someone to do the analysis. (Id. at 13.) On November 16, 2016, the Kirgans notified M&T that they had jointly elected to remove M&T as a successor corporate trustee and replace it with a local bank, Sandy Spring Trust. (Compl. ¶ 20, ECF No. 1; Mot. Ex. H, ECF No. 10-10.) M&T refused to step aside on the basis that it could only be removed for cause. (Compl. ¶ 21, ECF No. 1; Countercl. ¶ 3, ECF No. 5.)

         During a negotiation meeting between M&T and the Kirgans on or about March 22, 2017, the Kirgans' counsel notified M&T's counsel that the Kirgans had filed suit on March 21, 2017 in the United States District Court for the Eastern District of Virginia (“the Virginia Complaint”). (Compl. ¶ 22, ECF No. 1; Counterclaim ¶¶ 3-4, ECF No. 5.) The Virginia Complaint, as amended, alleged five counts against M&T: (1) Declaratory Judgment for Plaintiffs Right to change the Corporate Trustee; (2) Removal of M&T Bank as Corporate Trustee; (3) Breach of Contract; (4) Breach of Fiduciary Duty; and (5) Fraud. (Mot. Ex. K, Va. Mem. Op. 1-2, ECF No. 10-13.)

         On May 4, 2017, M&T sued the Kirgans in this Court for breach of fiduciary duty and seeking a declaratory judgment that the Kirgans were unreasonably and excessively compensated by the Trust and a declaratory judgment regarding the dispute over the terms of funding contracts. (Compl. ¶ 23, ECF No. 1.) On July 17, 2017, Judge Motz of this Court dismissed M&T's claims pursuant to the first-to-file rule. (Id. at 24.) M&T refiled its claims as counterclaims in the Virginia action and also sought removal of the Kirgans as trustees. (Id.)

         Judge Hilton of the U.S. District Court in Virginia granted summary judgment for M&T on the Kirgans Count III (breach of contract) and Count V (fraud) and also ruled that based on the 1985 Order from the Circuit Court for Baltimore City, M&T could only be removed for cause, which dismissed Count I. (Mot. Ex. K, Va. Mem. Op. 2, ECF No. 10-13.) The case then proceeded to a two-day bench trial on February 21, 2018. (Id.) On November 29, 2018, Judge Hilton denied both parties' requests to remove the other as trustee, and ordered that the parties promptly meet and set a schedule for regular meetings for conducting business of the Trust and promptly meet to arrange a study for the proper amount of trustee compensation. (Compl. ¶ 27, ECF No. 1); see also Order, Civil Action No. 1:17-cv-00327 (E.D. Va Nov. 29, 2018).

         On December 13, 2018, the Kirgans filed a motion to compel the release of trust funds to reimburse them for attorneys' fees incurred in the litigation that M&T had refused to pay.[4](Compl. ¶¶ 31-34, ECF No. 1.) Judge Hilton expressed a preference that the issue be decided by a Maryland court, so the parties agreed that the Kirgans' motion would be withdrawn without prejudice and the instant action would be filed in this Court. (Id. at ¶ 34.)

         The Kirgans have appealed the decisions of the U.S. District Court for the Eastern District of Virginia to the United States Court of Appeals for the Fourth Circuit.[5] (Id. at ¶ 28.)

         III. Procedural Setting

         The Kirgans filed the subject action in this Court on January 22, 2019. (Compl. ECF No. 1.) They seek a declaratory judgment under 28 U.S.C. § 2201 et seq.. declaring that M&T must release funds from the Trust to reimburse their attorneys' fees for the Virginia litigation, the earlier Maryland litigation, and the current appeal that is still ongoing. (Id.) In its counterclaim, M&T seeks a judgment declaring that M&T is entitled to reimbursement of attorneys' fees from the Trust that ...


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