FPE Foundation v. Cohen
801 F.3d 25
1st Cir.2015Background
- Maurice M. Cohen created a revocable trust (Maurice Trust) in 1989; after his death assets passed through a QTIP trust to the Fund for Philanthropy and Education (Fund); Lewis and Martin were co-trustees and J. Robert Casey an advisor.
- After Marilyn Cohen’s death in 2010, remaining QTIP assets rolled to the Fund; disputes among family members led to a 2010 settlement that transferred roughly half the Fund assets to C‑S Foundation (C‑S), run by Betsy; Martin resigned as co‑trustee and Lewis managed FPE.
- Parallel state probate litigation (Suffolk and Norfolk suits) followed involving Betsy, Lewis, and Casey; Lewis later filed federal suit on behalf of FPE alleging trustees exceeded QTIP powers and Casey breached fiduciary duties; Lewis also asserted cross‑claims against Casey.
- C‑S intervened in federal court asserting it is successor‑in‑interest to the Fund under the 2010 settlement and sought a share of any recovery; defendants (except Lewis) moved to compel arbitration based on the Maurice Trust arbitration clause.
- The district court compelled arbitration and dismissed; Lewis and FPE appealed claiming (1) defendants waived arbitration by prior litigation conduct and (2) C‑S’s counterclaim is not covered by the Maurice Trust arbitration clause but governed by the settlement agreement’s Massachusetts forum‑selection clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants waived the right to arbitrate by participating in prior state litigation | Lewis: defendants’ conduct in Suffolk and Norfolk suits and related statements amounted to a conduct‑based waiver; judicial estoppel also asserted | Defendants: their state litigation addressed different instruments/claims; they did not invoke litigation machinery on the federal QTIP claims and suffered no prejudice | No waiver; arbitration preserved |
| Whether C‑S’s counterclaim is subject to arbitration under the Maurice Trust or governed by the 2010 settlement forum‑selection clause | FPE/Lewis: C‑S’s claim derives from the settlement agreement, whose forum‑selection clause requires Massachusetts court resolution | C‑S/Defendants: C‑S’s claim materially depends on interpretation of the Maurice Trust (powers of QTIP trustees) so it "relates to" the trust and is arbitrable under its arbitration clause | C‑S’s counterclaim is covered by the Maurice Trust arbitration clause; settlement did not amend/override the trust arbitration provision |
Key Cases Cited
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (resolve doubts in favor of arbitration)
- AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011) (federal policy favoring arbitration)
- Restoration Preservation Masonry v. Grove Eur. Ltd., 325 F.3d 54 (1st Cir. 2003) (factors for conduct‑based waiver of arbitration)
- McCarthy v. Azure, 22 F.3d 351 (1st Cir. 1994) (party must show agreement to arbitrate specific claims)
- Creative Solutions Grp., Inc. v. Pentzer Corp., 252 F.3d 28 (1st Cir. 2001) (no waiver despite some litigation activity)
- Applied Energetics, Inc. v. Newark Capital Mkts., LLC, 645 F.3d 522 (2d Cir. 2011) (later agreement can supersede arbitration clause where parties clearly intended amendment)