A Prudential Exercise: Abstention and the Probate Exception to Federal Diversity Jurisdiction

Ann-Marie Brege’s parents established an irrevocable trust in 1985, with Ann-Marie as sole beneficiary. When Merrill Lynch Trust Co. took over as trustee years later, however, the trust’s principal dropped sharply, losing over half its value in just a few years. Ann-Marie sued in Michigan probate court, alleging that Merrill Lynch had violated its legal duties in administering the trust. Since Ann-Marie was from New York and Merrill Lynch had its headquarters in New Jersey, Merrill Lynch had an apparently easy argument for diversity jurisdiction. In an unremarkable turn of events, Merrill Lynch filed a notice of removal to federal district court. Ann-Marie didn’t take Merrill Lynch’s removal sitting down. She filed a motion to remand to state probate court, arguing, inter alia, that the federal court lacked subject matter jurisdiction because of the probate exception to federal jurisdiction. Merrill Lynch was taken aback-no court, Merrill Lynch argued, had ever applied the probate exception to a case that didn’t involve a will, estate, or some equivalent substitute. The federal court brushed Merrill Lynch’s argument aside and instead followed a line of case law that looks to the jurisdiction of probate courts under state law to determine the extent of the probate exception. Finding that Michigan gave its probate courts exclusive jurisdiction over claims involving the administration of trusts, the court granted Ann-Marie’s motion to remand.