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Winner Road Properties, LLC v. BMO Harris Bank, N.A.

United States District Court, E.D. Missouri, Eastern Division

May 16, 2018

WINNER ROAD PROPERTIES, LLC, Plaintiff,
v.
BMO HARRIS BANK, N.A., as trustee of Mount Washington Cemetery Trusts, and individually, Defendant.

          MEMORANDUM AND ORDER

          CHARLES A. SHAW UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on defendant BMO Harris Bank, N.A.'s Motion to Join Jo Ann Howard & Associates, P.C., in its capacity as Special Deputy Receiver (the “SDR”) for Lincoln Memorial Life Insurance Company, Memorial Service Life Insurance Company, and National Prearranged Services, Inc., pursuant to Rule 19(a) or Rule 20 of the Federal Rules of Civil Procedure. Plaintiff Winner Road Properties, LLC filed a response stating that it does not oppose the motion. Also before the Court is a joint motion to stay the Court's Order dated April 30, 2018, referring this case to Alternative Dispute Resolution (“ADR”). For the following reasons the Court will deny, without prejudice, BMO Harris Bank N.A.'s motion to join the SDR as a party to this suit, and the motion to stay ADR

         I. BACKGROUND

         On June 13, 2016, Plaintiff Winner Road Properties, LLC (“Winner Road”) filed this action in the Circuit Court of Jackson County, Missouri, against Defendant BMO Harris Bank, N.A. (“BMO”), seeking declaratory relief and restitution. BMO removed the case to the United States District Court for the Western District of Missouri. The case was transferred to this district on a motion for change of venue pursuant to 28 U.S.C. § 1404(a), based primarily on the fact that there has been ongoing, related litigation in this district, including Jo Ann Howard & Assocs., P.C. v. Cassity, 4:09-CV-1252 ERW (E.D. Mo. filed Aug. 6, 2009) (the “Jo Ann Howard” litigation).

         The case at bar case arises from the aftermath of the criminal prosecution of the Cassity family and their scheme to defraud consumers through the sale of pre-need funeral contracts, and the misuse of those proceeds. At issue in this case are three preneed cemetery trusts from the Mount Washington Cemetery in Kansas City, Missouri: the Third Amended and Restated Agreement for Mount Washington Cemetery Preneed Trust (the “Merchandise and Services Trust”); the Second Amended and Restated Agreement for Mount Washington Cemetery Endowed Care Trust (the “Endowed Care Trust”); and the Mount Washington Forever, LLC Custody Account (5012) (the “Special Care Trust”), together referred to as “the Mount Washington Trusts.”

         In its petition, Winner Road alleges that it is a beneficiary to the Mount Washington Trusts, and defendant BMO is the trustee. Winner Road claims that as trustee, BMO breached its fiduciary duties, failed to maintain effective operations of the trusts for their intended purposes, failed to ensure that the trust corpuses were maintained, and failed to pay out on contractual obligations. In its petition, Winner Road brings the following claims against BMO: Determination of Rights in and Representation for the Merchandise and Services Trust: Request for Restoration of Trust Assets and Other Relief (Count I); Determination of Rights in and Representation for the Endowed Care Trust and Request for Trust Administration Rulings (Count II); Determination of Rights in and Representation for the Special Care Trust and Request for Trust Administration Rulings (Count III); and Petition for Restitutionary Award Against Trustees for Breaching Trustee Duties Relating to the Mount Washington Trusts (Count IV).

         BMO answered the petition and filed a counterclaim against Winner Road. In its counterclaim, BMO admits that it is trustee for the Mount Washington Trusts but asks, pursuant to Mo. Rev. Stat. § 456.2-202, that the Court approve BMO's accounts, remove BMO as a trustee, and approve the appointment of a successor trustee for the Mount Washington Trusts. BMO also asks that the Court resolve whether Winner Road is the only beneficiary of the Mount Washington Trusts, and whether BMO must release the trusts from any purported freeze by virtue of ongoing litigation in Texas state court.

         As background, in 2008 a Texas Court entered an order approving a joint liquidation plan with respect to three Cassity family businesses: Lincoln Memorial Life Insurance Company, Memorial Service Life Insurance Company, and National Prearranged Services, Inc. (Doc. 91 at 35). That plan and underlying Texas statutes established the authority of the SDR, Jo Ann Howard & Associates, P.C., to collect monies and pay creditors as a result of the Cassity fraud scheme. Id. Under the liquidation plan, state guaranty associations, who had guaranteed payments under the insurance policies, were assigned all claims by present or future recipients of benefits under the insurance policies in trust accounts.[1] (Doc. 51, Ex. H at 13-14).

         According to BMO, the SDR has instructed BMO that the Texas liquidation order operated as a freeze on all accounts associated with the Mount Washington Cemetery, because they are potential property of the estates of the three Cassity-owned businesses. (Doc. 98 at 4-5). BMO complied with the SDR's instructions and froze the Mount Washington Trusts. Despite Winner Road's repeated requests, BMO has not allowed withdrawals from or deposits to any of the trust accounts.

         In its present motion, BMO moves to add the SDR as a party to this suit pursuant to Federal Rule of Civil Procedure 19(a) or, in the alternative, Federal Rule of Civil Procedure 20. (Doc. 97). In its motion, BMO argues that the SDR is a necessary party to this suit, and in the SDR's absence, the Court may not be able to grant complete relief because the SDR has asserted claims to assets of the Mount Washington Trusts. BMO also argues that without the SDR, there is a substantial risk that BMO might be subject to conflicting obligations.

         II. DISCUSSION

         Federal Rule of Civil Procedure 19(a) “governs when joinder of a particular person is compulsory.” Gwartz v. Jefferson Mem'l Hosp. Ass'n, 23 F.3d 1426, 1428 (8th Cir. 1994).[2] There are three independent situations in which this Court may find that a person or entity must be joined as a party under Rule 19(a)(1): (1) complete relief cannot be accorded among existing parties; (2) prejudice to the absent person's interest; or (3) prejudice to an existing party from the absent person's claimed interest. Fed.R.Civ.P. 19(a)(1)(A), (B)(i), and (B)(ii). See also Gwartz, 23 F.3d at 1428. The compulsory joinder analysis is “predicated on the policies of ‘avoiding multiple litigation, providing the parties with complete and effective relief in a single action and protecting the absent person from the possible prejudicial effect of deciding the case without them.'” Lion Petroleum of Mo., Inc. v. Millennium Super Stop, LLC, 467 F.Supp.2d 953, 956 (E.D. Mo. 2006).

         Federal Rule of Civil Procedure 20(a), on the other hand, addresses permissive joinder, that is, when an absentee party may be joined ...


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