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Bell v. Jefferson

United States District Court, E.D. Kentucky, Central Division, Lexington

August 26, 2019

MAC ROLLINS BELL and RICHARD MCMURTRY BELL, Plaintiffs,
v.
CHRISTINA BELL JEFFERSON, as Executrix of the Estate of Carol S. Bell, Defendant.

          MEMORANDUM OPINION AND ORDER

          CLARIA HORN BOOM, UNITED STATES DISTRICT COURT JUDGE

         Although Macky Bell moved to North Carolina decades ago, she left her pocketbook in Cynthiana, Kentucky. Macky Bell maintained her entire financial life in Cynthiana - including her bank account, her CPA, her lawyer, and her life savings, invested in several accounts held with an Edward Jones Investment advisor located in Cynthiana, Kentucky. When Macky Bell finally moved her investment accounts from Cynthiana to North Carolina in late 2016 and removed her sons (the Plaintiffs) as POA on those accounts, they sued her, claiming breach of fiduciary duty and conversion. Macky Bell[1] moved to dismiss this lawsuit alleging that this Court has no personal jurisdiction over her, or in the alternative, she requested this action be transferred to North Carolina. [R. 4] Plaintiffs responded in opposition, and Defendant replied. [R. 5; R. 6.] The Court held an evidentiary hearing on the issues. See [R. 24; R. 31] For the reasons stated herein, the Court will DENY Defendant's Motion to Dismiss and will DENY Defendant's alternative Motion to Transfer.

         I. Background

         Plaintiffs Mac Rollins Bell (“Mac Bell”) and Dr. Richard McMurtry Bell (“Dr. Rick Bell”) sued their mother, Carol S. Bell (“Macky Bell”) and their daughter/niece, Christina Bell Jefferson (“Jefferson”) in Kentucky state court claiming conversion and breach of fiduciary duty related to an investment account held with a local Edward Jones financial advisor in Cynthiana (the “Farm Account” or “Account”). [R. 1-1] After removing to this Court, Defendant filed this Motion. [R. 2]. Macky Bell died on September 3, 2018 during the pendency of this Motion.[2]On May 15, 2019, the Court granted the Plaintiffs' renewed Motion to Substitute Party [R. 21], and Ordered Jefferson, Executrix of the Estate of Macky Bell, to substitute for Defendant Macky Bell. [R. 18; R. 23] Plaintiffs voluntarily dismissed their claims against Jefferson in her individual capacity [R. 28], and she remains in this lawsuit solely as the Executrix of the Estate of Macky Bell.

         Many of the facts pertinent to the instant Motion are not in dispute. Mac Bell is the only Kentucky resident in this action. [R. 1-1, at ¶ 1]. Dr. Rick Bell is a South Carolina resident. Id. at ¶ 2. Macky Bell resided in North Carolina since at least the late 1980s, and her estate is being administered in Hyde County, North Carolina. Id. at ¶ 3; [R. 2-1, Ex. A., Aff. Macky Bell, at ¶ 4; R. 10-1, Ex. A., North Carolina Estate Filings] Jefferson is a Virginia resident. Id. at ¶ 4; [R. 2-3, Ex. B., Aff. Jefferson, at ¶ 4; R. 10-1, Ex. A., North Carolina Estate Filings].

         Plaintiffs' claimed interest in the Farm Account traces back to the 1998 sale of the family farm located in Harrison County (Cynthiana), Kentucky (the “Family Farm”). Macky Bell held a life estate in the Family Farm, and Plaintiffs held the remainder interest by virtue of certain bequests under the wills of Kathryn M. Stanton (Macky Bell's mother and Plaintiffs' grandmother) and Richard M. McMurtry (Macky Bell's uncle and Plaintiffs' great uncle). [R. 1-1, Complaint, at ¶¶ 6-7; R. 30, Pls. Exs. 1, 2, 3] The Parties sold the Family Farm in January 1998, and all the Parties to this action (along with relevant spouses) signed the transfer deeds by virtue of the life estate and remainder interest. Id. at ¶ 8; [R. 30, Pls. Exs. 1, 2, 3; R. 2-4, Letter from Katherine S. Parker-Lowe to S. Chad Butcher (“Parker-Lowe Letter”) (Aug. 22, 2017);] The proceeds from the sale (about $763, 00 at the time) “representing both the life estate and the remainder, were invested jointly in the name of [Macky] Bell” in the Farm Account. See id. at ¶ 9; [R. 2-4, Parker-Lowe Letter] Plaintiffs claim the investment in the Farm Account constitutes a “joint venture” by express or implied agreement, or a “constructive trust” under Kentucky law, although the Farm Account remained solely in the name of their mother. See Id. at ¶¶ 25-31; ¶¶ 36-43. The proceeds remained in the Farm Account about 18 years until late 2016 and earned substantial interest. Id. Around November 2016, Macky Bell and her sons had a falling out. Macky Bell called her long-time Cynthiana Edward Jones advisor, Mark Trachsel (“Trachsel”), and directed him to remove her sons as power of attorneys (“POA”s) on the Account and to move it (along with her other accounts) to an Edward Jones advisor located in North Carolina. [R. 2-4, Parker-Lowe Letter; R. 1-1, Compl., at ¶¶ 10-11] At the time Macky Bell moved the various accounts to North Carolina, they totaled around $1, 800, 000, representing the vast majority of her life savings.

         After being denied access to the Farm Account and removed as POA, Plaintiffs sought an accounting of the Farm Account, but were “denied at every turn.” [R. 1-1, Compl., at ¶ 12] A letter dated August 22, 2017 from Katherine S. Parker-Lowe, Macky Bell's North Carolina attorney, denied Plaintiffs' request for an accounting, explaining that these accounts were in “Mrs. [Macky] Bell's individual name . . . ” and that “Mrs. Bell lives here in North Carolina [and] the accounts have now been moved to North Carolina.” Id.; [R. 2-4, Parker-Lowe Letter] Plaintiffs claim that Macky Bell's refusal to provide an accounting and return of their investment constitutes conversion and breach of fiduciary duty. [R. 1-1, Compl., at ¶¶ 15-48]

         Defendant argues that the Plaintiffs have not established either general or specific jurisdiction over her. [R. 2-1, Def. Mem. in Supp.] In support of the Motion to Dismiss, Macky Bell submitted an affidavit, stating that: 1) she was a North Carolina resident; 2) she owned no real property or business interests in Kentucky; 3) she had been to Kentucky once over the last five years; 4) she had not visited Kentucky since October 2016; 5) she spoke with an Edward Jones representative to change the financial advisor listing from an individual in Cynthiana, Kentucky, to an individual in North Carolina; and 6) she had not traveled outside of the Outer Banks area of North Carolina since December 2016. [R. 2-2, Ex. A, Macky Bell Aff.]

         The Court held an evidentiary hearing on July 10, 2019. [R. 31] At the hearing both Plaintiffs both testified and also called the following witnesses: Michelle Berger (“Berger”), who works for City National Bank in Cynthiana, Kentucky; James Ingram (“Ingram”), Macky Bell's Certified Public Accountant (“CPA”) who works in Cynthiana, Kentucky; and Trachsel, Macky Bell's former Edward Jones financial advisor, who works in the Cynthiana, Kentucky branch of Edward Jones.[3] Defense counsel called Jefferson.[4]

         The testimony at the evidentiary hearing established that from 1998 until late 2016, Macky Bell maintained multiple accounts with Trachsel, including the Farm Account. Macky Bell and her late husband signed the account opening documents in Kentucky, and after his death, she solely directed all transactions in and out of the Farm Account through her financial advisor, Trachsel.[5] According to Trachsel, Macky Bell would call him from North Carolina at his office in Kentucky “daily” if a particular need arose, but certainly monthly, to manage her investments. Per the testimony of Trachsel, Dr. Rick Bell, and Jefferson, the Farm Account grew considerably over the years, and Macky Bell's total investments with Edward Jones grew to over $1, 800, 000 by the time of her death, representing the vast majority of her life savings. Until her death, Macky Bell also kept her primary checking account with what was originally a local Cynthiana bank, now owned by City National Bank. She had her monthly teacher's retirement, social security, and interest income from the Farm Account transferred to this bank account, which she used to pay everyday living expenses.

         Macky Bell also regularly visited Kentucky until the years just before this lawsuit. When she visited, she almost always visited her local bank, her CPA (Ingram), her Edward Jones advisor (Trachsel), and ate at Biancke's Restaurant[6], all of which were located within a couple blocks of one another in Cynthiana, Kentucky. Ingram continued to prepare her federal and state taxes (both North Carolina and Kentucky) until her death in 2018. Macky Bell also visited and consulted regularly with her long-time Cynthiana lawyer, John Swinford, until his death prior to this lawsuit.

         After the falling out with her sons in late 2016, Macky Bell transferred the Farm Account to North Carolina. To accomplish this, she called Trachsel in Kentucky and directed him to transfer her Edward Jones accounts, including the Farm Account, to an Edward Jones advisor in North Carolina. She also directed Trachsel to change the POA designations on her accounts from the Plaintiffs to her granddaughter, Jefferson. Until removed as POAs, the Plaintiffs had access to the Farm Account. In fact, Trachsel testified that when the Plaintiffs were “active power of attorneys, ” he spoke with them as frequently as he would have spoken with Macky Bell.

         II. Discussion

         A. Personal Jurisdiction

         In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(2), Plaintiffs bear the burden of establishing that personal jurisdiction exists. Air Prods. & Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir. 2007). When the Court resolves a motion to dismiss for lack of personal jurisdiction, the Court may (1) rule on the motion on the basis of affidavits alone; (2) permit discovery on the motion; or (3) hold an evidentiary hearing on the motion. See Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998) (citing Serras v. First Tennessee Bank Nat. Assn., 875 F.2d 1212, 1214 (6th Cir. 1989)). Regardless of the approach, the plaintiff bears the burden of establishing that such jurisdiction exists. See CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1261 (6th Cir. 1996). When the Court conducts an evidentiary hearing, as it did in this case, the “plaintiff must prove jurisdiction by a preponderance of the evidence.” Modern Holdings, LLC v. Corning Inc. (“Modern Holdings”), 2015 WL 1481443, at *3 (E.D. Ky. Mar. 31, 2015) (citing Motel 6 Operating L.P., 134 F.3d 1269) (other citation omitted). The Court must ultimately “depend upon a common sense analysis, giving the benefit of the doubt in favor of jurisdiction.” Caesars Riverboat Casino, LLC (“Caesars”) v. Beach, 336 S.W.3d 51, 59 (Ky. 2011).

         A federal court sitting in diversity “may exercise personal jurisdiction over an out-of-state defendant only if a court of the forum state could do so.” Newberry v. Silverman, 789 F.3d, 636, 641 (6th Cir. 2015). Under Kentucky law, this Court may exercise specific jurisdiction over Defendant Jefferson only if: “(1) jurisdiction is proper under a long-arm statute [of Kentucky] . . .; and (2) the Due Process Clause also allows for jurisdiction under the facts of the case.” Conn v. Zakharov, 667 F.3d 705, 711 (6th Cir. 2012). If either part of this test is not met, the analysis ends, and the Court may not exercise personal jurisdiction over the defendant. See Id. at 711-12.

         1. Kentucky Long-Arm Statute

         Kentucky's long-arm statute enumerates nine specific instances in which a non-resident defendant may be subject to personal jurisdiction. Ky. Rev. Stat. § 454.210(2)(a). Further, this Court may only exercise personal jurisdiction over non-resident defendants “if the cause of action arises from conduct or activity of the defendant[s] that fits into one of the statute's enumerated categories.” Caesars, 336 S.W.3d at 57. A claim “arises from” certain conduct when there is a “reasonable and direct nexus” between the conduct causing injury and the defendants' activities in the state. Id. at 59. The Caesars Court clarified that Kentucky's long arm statute is not co-extensive with federal due process. Id. at 56-57. In other words, there may be sufficient contacts to satisfy jurisdiction under the Due Process Clause, but such contacts are insufficient for purposes of Kentucky's long arm statute. Id.

         Kentucky's long-arm statute provides in pertinent part: “A court may exercise personal jurisdiction over a person who acts directly or by agent, as to a claim arising from the person's …. (1) [t]ransacting any business in this Commonwealth … [or] (3) [c]ausing tortious injury by an act or omission in the Commonwealth.” Ky. Rev. Stat. §§ 454.210(2)(a)(1), (3)). Plaintiffs originally argued jurisdiction was proper under both subsections (1) and (3). [R. 5, Pls. Resp., at p. 3] Although Plaintiffs appeared to back away from their argument under subsection (3) at the hearing, the Court will address both.

         a. ...


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