The U.S. District Court for the Northern District of New York has ruled that the so-called “probate exception” to federal jurisdiction precludes federal courts from adjudicating cases implicating federal question jurisdiction, including cases arising under ERISA. In so doing, the N.D.N.Y. joins ranks with a small but growing number of federal district and circuit courts that recognize the “probate exception” as an absolute bar to federal jurisdiction over any in rem action in the custody of a state probate court.
The case, captioned In re Boisseau, 2017 U.S. Dist. LEXIS 11964 (N.D.N.Y. Jan. 30, 2017), came before the N.D.N.Y. by way of a notice of removal filed by Hanover HHR Employee Benefit Plan. The Plan sought removal of a “Petition to Extinguish Claim” that was filed by Brenda M. Boisseau, individually and as Executor of the Estate of Edward Boisseau in the Surrogate’s Court for the State of New York, Oswego County.
The decedent, Mr. Boisseau, was a beneficiary of the Plan who had prostate cancer. Upon Mr. Boisseau’s passing, his wife commenced a personal injury action against Mr. Boisseau’s treatment providers. That lawsuit was settled, at which time the Plan asserted a lien against the settlement fund for $299,975.73 in medical expenses it had paid on Mr. Boisseau’s behalf.
The Estate then filed a “Petition to Extinguish Claim” in Probate Court, seeking a declaration that the Plan’s lien was “null and void” and that the Plan possessed no “claimed subrogation right, lien, or other reimbursement claims … against the Estate.” The Plan removed the Petition to federal court based on federal question (ERISA) jurisdiction, and the Estate, in turn, filed a motion to remand the matter back to Probate Court on the ground that removal to federal court was procedurally and jurisdictionally improper. The Plan objected, arguing that regardless of how the Estate characterized the Petition, the district court possessed concurrent, if not exclusive, jurisdiction over the Plan’s pursuit of its equitable lien rights under ERISA.
In a decision authored by District Judge Lawrence E. Kahn, the Northern District of New York sided with Estate, though “on a separate basis” than the Estate had argued: the probate exception to federal jurisdiction. In re Boisseau, 2017 U.S. Dist. LEXIS 11964, at *4.
The probate exception is a judicially created doctrine, stemming in large measure from “misty understandings of English legal history.” Id. at *5 (quoting Marshall v. Marshall, 547 U.S. 293 (2006)). Its origins trace back to the Judiciary Act of 1789, and cases construing the law’s meaning. The original rationale for the probate exception was that “the equity jurisdiction conferred by the Judiciary Act of 1789[,] which is that of the English Court of Chancery in 1789, did not extend to probate matters.” Marshall v. Marshall, 547 U.S. at 308 (quoting Markham v. Allen, 326 U.S. 490, 494 (1946)). The actual scope of English chancery jurisdiction, however, had long been a subject of academic debate and judicial uncertainty. Id.
In 2006, the U.S. Supreme Court determined that the probate exception “reserves to state probate courts the probate or annulment of a will and the administration of a decedent’s estate; it also precludes federal courts from endeavoring to dispose of property that is in the custody of a state probate court. But it does not bar federal courts from adjudicating matters outside those confines and otherwise within federal jurisdiction.” Marshall v. Marshall, 547 U.S. at 311-12.
In 2007, the Second Circuit held that the probate exception “holds ‘probate matters’ are excepted from the scope of federal diversity jurisdiction.” In re Boisseau, 2017 U.S. Dist. LEXIS 11964, at *4 (quoting Lefkowitz v. Bank of New York, 528 F.3d 102, 105 (2d. Cir. 2007)).
Noting that it was “clear that the probate exception applies to diversity jurisdiction,” Judge Kahn commented that it was less clear “whether it also applies to federal question jurisdiction. Id. (stating that Second Circuit had yet to rule on the issue, and referencing a “split among circuits that have”). Compare Jones v. Brennan, 465 F.3d 304, 306-07 (7th Cir. 2006) (applying probate exception to both federal question and diversity jurisdiction cases) and In re Marshall, 392 F.3d 1118, 1131-32 (9th Cir. 2004) (same), rev’d on other grounds sub nom, 547. U.S. 293 (2006), and Tonti v. Petropoulous, 656 F.2d 212, 215 (6th Cir. 1981) (same), with In re Goerg, 844 F.2d 1562, 1565 (11th Cir. 1988) (finding that the probate exception “relates only to 28 U.S.C. § 1332 … and has no bearing on federal question jurisdiction”).
Judge Kahn adopted the “Seventh and Ninth Circuits’ reasoning and f[ound] that the probate exception applies to cases arising out of both federal question and diversity jurisdiction” and further determined that “there is no carve out for cases arising under ERISA.” In re Boisseau, 2017 U.S. Dist. LEXIS 11964, at *7. In so doing, the N.D.N.Y. becomes the most recent district court to hold that where the probate exception applies, federal courts lack jurisdiction to consider ERISA preemption. See Carpenters’ Pension Tr. Fund-Detroit & Vicinity v. Century Truss Co., 2015 WL 1439868, at *6 (E.D. Mich. Mar. 27, 2015); In re Estate of Lewis, 128 F. Supp. 2d 573, 574 (N.D. Ill. 2001).
In re Boisseau builds upon the foundation set by the Supreme Court in Marshall, and highlights the jurisdictional line that federal courts may continue to recognize between in rem and in personam actions. Even in the context of equitable actions brought under ERISA’s broadly construed civil enforcement provisions, health and welfare benefit plans holding equitable liens against property held by a beneficiary’s estate may increasingly find themselves limited to the confines of state probate litigation.