Mary Scanlan v. Marshall Eisenberg
669 F.3d 838
7th Cir.2012Background
- Scanlan is a discretionary-trust beneficiary and sue in federal court for breach of fiduciary duty and related relief.
- Trustee is General Trust Company; law firm Neal, Gerber & Eisenberg represented both Trustee and GGP; Eisenberg and Melamed are officers/directors of Trustee and own GGP stock.
- Trusts purchased substantial GGP stock in 2007–2008 financed by a loan secured by Trust assets; GGP later declared bankruptcy in 2009 with substantial losses.
- Scanlan and minors (her children) sue Trustee and lawyers for breach of fiduciary duty, legal malpractice, and related equitable relief.
- District court dismissed the case for lack of Article III standing, concluding no injury-in-fact unless Trust corpus would be insufficient to fund potential distributions.
- Seventh Circuit reverses, holding discretionary beneficiaries have Article III standing to enforce a trust under Illinois law and remands for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Scanlan has Article III standing as a discretionary trust beneficiary. | Scanlan has an equitable interest and fiduciary rights; injury arises from mismanagement harming the trust corpus. | Discretionary beneficiaries lack standing unless there is a probable insufficiency to fund distributions. | Yes; Scanlan has standing; district court erred and case is remanded. |
Key Cases Cited
- Sprint Commc’n Co., L.P. v. APCC Services, Inc., 554 U.S. 269 (U.S. 2008) (history guides standing; long permitted to bring such suits; state-law rights may create standing in federal court)
- Boesky, FMC Corp. v. Boesky, 852 F.2d 981 (7th Cir. 1988) (injury can arise from invasion of a state-law right; standing aligns with Warth v. Seldin)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (U.S. 1992) (standing elements: injury, causation, redressability)
- Baker v. Carr, 369 U.S. 186 (U.S. 1962) (standing framework and concrete adverseness for judicial review)
- Wis. Right to Life, Inc. v. Schober, 366 F.3d 485 (7th Cir. 2004) (standing when injury is concrete and imminent; not conjectural)