Trusts and Estates

Silk v. Bond

Cite as No. 21-56286
Filed April 10, 2023
U.S. Court of Appeals, Ninth Circuit

By Jaime B. Herren
Holland & Knight LLP

Headnotes:     Federal Subject-Matter Jurisdiction —Probate Exception

Summary:  The narrow probate exception did not apply to strip the federal court of jurisdiction over an in personam breach of contract action brought after disallowance of a creditor’s claim even though valuing the estate would be necessary to compute an award of damages. 

Silk was Bond’s lifetime tax- and estate-planner.  Silk, while located in California, worked exclusively for Bond for several years and his compensation structure included incentive fees based on savings realized by Bond’s estate. After Bond’s death, Silk filed a $3.1 million creditor’s claim against the estate in Maryland, which the estate disallowed.  Silk sued in federal court in California, under diversity jurisdiction, for breach of contract, unjust enrichment and promissory estoppel, as well as seeking an accounting to calculate the amount of incentive fees owed under the contracts.  The District Court dismissed for lack of subject matter jurisdiction under the probate exception rule stating that the claim could not be resolved without determining the value of the estate, which in its view was a function of the Maryland court that had in rem jurisdiction over estate property.

The Ninth Circuit Court of Appeals reversed.  The probate exception does not strip the federal court of jurisdiction on these facts.  The probate exception is narrow, reserving to state courts the exclusive power to: (1) probate or annul a will; (2) administer a decedent’s estate; and (3) assume in rem jurisdiction over property in probate.  First, Silk’s suit did not seek to probate or annul a will.  Second, valuing the estate to calculate contract damages does not amount to administering the estate.  Also, any factual overlap in obtaining accounting and appraisals would not interfere with estate administration.  Finally, the appellate court found that the suit involves standard in personam jurisdiction for breach of contract against a contracting party, who is now deceased.  The need for an accounting and appraisals, which are specifically contemplated by the contracts at issue, does not transform the in personam action into an in rem action.  Further, any resulting award of damages would be an in personam judgment that does not amount to an order disposing of estate property.

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