Evans v. Pearson Enterprises, Inc.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 06a0024p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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Plaintiff-Appellant, -

JANE P. EVANS,

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No. 04-2229

v.

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PEARSON ENTERPRISES, INCORPORATED, a Michigan -

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Michigan Corporation; BANK ONE TRUST COMPANY -

Corporation; ERVIN INDUSTRIES, INCORPORATED, a

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N.A.; BANK ONE NATIONAL ASSOCIATION; JOHN

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PEARSON, an individual; JAMES MERETTA, an

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individual,

Defendants-Appellees. N

Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 03-74821—Avern Cohn, District Judge.

Argued: October 27, 2005

Decided and Filed: January 19, 2006

Before: SILER, CLAY, and ROGERS, Circuit Judges.

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COUNSEL

ARGUED: Dominic J. Campisi, EVANS, LATHAM & CAMPISI, San Francisco, California, for

Appellant. I. W. Winsten, HONIGMAN, MILLER, SCHWARTZ & COHN, Detroit, Michigan, for

Appellees. ON BRIEF: Dominic J. Campisi, EVANS, LATHAM & CAMPISI, San Francisco,

California, Donald J. Gasiorek, James N. McNally, SOMMERS, SCHWARTZ, SILVER &

SCHWARTZ, Southfield, Michigan, for Appellant. I. W. Winsten, HONIGMAN, MILLER,

SCHWARTZ & COHN, Detroit, Michigan, Bruce T. Wallace, Susan T. Cannell, HOOPER,

HATHAWAY, PRICE, BEUCHE & WALLACE, Ann Arbor, Michigan, for Appellees.

ROGERS, J., delivered the opinion of the court, in which SILER, J., joined. CLAY, J. (pp.

12-14), delivered a separate concurring opinion.

1

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 2

_________________

OPINION

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ROGERS, Circuit Judge. This diversity action concerns claims for breach of trust,

shareholder oppression, and common-law fraud and misrepresentation as governed by Michigan law.

It also presents an interesting federal question as to the breadth of the “probate exception” to federal

jurisdiction. Plaintiff Jane Evans has an interest in three trusts, whose primary assets are voting and

nonvoting stock in Ervin Industries, a family-owned corporation. Evans’ family members, who have

interests in two of the three trusts, are the other beneficiaries of the voting-stock trust. In 2001,

Evans sued her siblings, the trust company defendant Bank One, and defendant Ervin Industries in

Michigan probate court. The essence of her claim was that Bank One’s lending relationship with

Ervin Industries caused Bank One to have a conflict of interest and abdicate its responsibilities as

trustee in the course of three business transactions, occurring in 1993, 1996, and 1999. The probate

court dismissed her suit, and the Michigan Court of Appeals recently affirmed.

Before the probate court dismissed her suit, Evans brought similar claims in federal district

court. She alleged tortious conduct in connection with the same three business transactions and sued

Ervin Industries, Pearson Enterprises, Bank One Trust Company, Bank One N.A., her brother John

Pearson, and Bank One trust officer James Meretta. The district court dismissed all of her claims

in response to defendants’ motions to dismiss. The district court held that the “probate exception”

to federal jurisdiction divested it of jurisdiction to entertain Evans’ claim for breach of trust. The

court dismissed all of Evans’ other claims on grounds of collateral estoppel or inadequate pleading.

The lower court also refused or declined to consider Evans’ requests to amend her complaint. Evans

appeals, challenging (1) the dismissal of her claims for breach of trust, shareholder oppression, and

fraud; and (2) the denial of her request to amend her complaint. For the following reasons, we

affirm.

I.

In reviewing the grant of a motion to dismiss under Rule 12(b)(6), we “must accept all

well-pleaded factual allegations of the complaint as true and construe the complaint in the light most

favorable to the plaintiff.” E.g., Benzon v. Morgan Stanley Distribs., Inc., 420 F.3d 598, 605 (6th

Cir. 2005). Doing so, we conclude that dismissal was proper, in part, on collateral estoppel grounds

and, in part, for failure to plead with sufficient particularity.

1. The Trusts and the Parties

There are three trusts involved in this litigation. Two of these trusts are testamentary. The

first testamentary trust was created by John Ervin, who founded defendant Ervin Industries, which

manufactures steel abrasives. Ervin Industries is a Michigan corporation with its principal place of

business in Michigan, and Ervin’s grandson, defendant John Pearson, is its current president, CEO,

and director. The primary asset of Ervin’s testamentary trust was Ervin Industries’ Class A voting

stock. His daughter and four grandchildren are the income beneficiaries, and two of those

grandchildren, plaintiff Evans and defendant Pearson, are parties to this suit. This substantial trust

was divided into five separate trusts in 1987 so that each beneficiary had his or her own trust. The

second testamentary trust was established by Ervin’s wife, and its primary asset was the remaining

Class A voting stock in Ervin Industries. Evans and her siblings have beneficial interests in this

testamentary trust as well.

The final trust at issue in this case is not testamentary. Evans established her own revocable

trust in 1995. The res of the revocable trust is Class B nonvoting stock in Ervin Industries. Evans

named herself the income beneficiary of her revocable trust and another trust company as the

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 3

remainder beneficiary of any trust property in existence at her death. Because Evans’ trust is

revocable, she concedes that she has control over the trust.

Defendant Bank One Trust Company N.A. (Bank One Trust) is the sole trustee of the

testamentary trusts. Therefore, Bank One Trust controls all of the Class A voting stock in Ervin

Industries by acting as trustee of all shareholder-voting rights. Bank One Trust was also the co-

trustee, along with Evans, of the revocable trust. Defendant James Meretta is employed as a trust

officer for Bank One Trust, and he also serves on the board of directors of both defendants Pearson

Enterprises and Ervin Industries. The district court found that Meretta was the trust officer for the

revocable trust. It is unclear from the record whether he is also the trust officer for the other trusts.

Bank One Trust, Bank One, and Meretta have the same counsel and are referred to collectively as

the “Bank One defendants.”

Pearson Enterprises was incorporated in Michigan in 1993 and has its principal place of

business there. Pearson Enterprises was a participant in two of the three transactions at issue in this

case. John Pearson is also the president, CEO, and director of Pearson Enterprises. John Pearson,

Pearson Enterprises, and Ervin Industries have the same counsel and are referred to collectively as

the “Pearson defendants.”

2. The Three Business Transactions at Issue

Evans’ claims arise out of three business transactions. The first transaction was a 1993

acquisition of Barton Abrasives, a company located in the United Kingdom, for $17.65 million. The

defendants created a limited partnership to complete this transaction. The general partner was the

then-newly incorporated Pearson Enterprises, and the limited partner was Ervin Industries. Evans

purchased more than 25,000 shares of stock in Pearson Enterprises with over $1.5 million that she

had received in trust distributions. Evans alleges that she ultimately lost all of this investment.

Evans’ complaint alleged that the defendants had false valuation reports prepared, made false

descriptions of write-offs, charged her an excessive price in the acquisition, failed to supervise

agents, failed to perform due diligence, concealed material facts, and negotiated unreasonably.

Evans alleged that Bank One and Meretta approved this transaction. She also alleged that the

defendants concealed their misrepresentations until 2001.

The second transaction was Ervin Industries’ and Pearson Enterprises’ 1996 acquisition of

a 40% interest in Ervin Leasing Company from Great Lakes Bancorp. Evans alleged that she

purchased an additional $500,000 worth of Pearson shares to help finance the acquisition.

According to her complaint, she invested her $500,000 “directly and through” her revocable trust.

Evans alleges that she also lost this entire investment because of the defendants’ misrepresentations

and concealment. She also alleged that the defendants failed to disclose that the acquisition was a

“poor investment” and that Evans would not receive “dividend income for the foreseeable future.”

Her allegations continue that the defendants failed to engage in due diligence and that Bank One

failed to inform her of its conflict of interest, which resulted from its and its affiliates’ loans to Ervin

Leasing Company. Evans again alleged that the defendants concealed the misrepresentations until

2001.

The final transaction at issue is Ervin Industries’ 1998 acquisition of the Barnsteel Company

for $15 million. Evans alleged that Bank One Trust and Meretta failed to perform due diligence,

disclose that the terms of the transaction were unreasonable and imprudent, and disclose that Bank

One Trust had a conflicting lending relationship. Barnsteel’s closure in 2001 resulted in a

substantial loss to Ervin Industries and to the value of Evans’ stock. Evans has not alleged that she

invested any of her own money in this transaction.

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 4

3. Procedural History

Evans first brought suit in Michigan probate court on August 31, 2001, for the removal and

surcharge of Bank One Trust as the trustee of the testamentary trusts. Ervin Industries and John

Pearson were also parties to the suit. In connection with the three transactions described above,

Evans alleged that she suffered substantial lost income because Bank One Trust (1) had a conflict

of interest due to its lending relationship with Ervin Industries, (2) failed to perform due diligence,

and (3) administered the trusts in contravention of its fiduciary duties. The parties filed cross-

motions for summary judgment.

The probate court, on December 30, 2003, ruled in favor of Bank One Trust. The probate

court held that Bank One Trust’s loans to Ervin were proper under Michigan law. That court also

determined that Evans’ claims were barred by the applicable statutes of limitation and by principles

of res judicata because the probate court had entered orders approving Bank One’s accounts. As for

Evans’ argument that the statute of limitations should be tolled because of fraudulent concealment,

the probate court held that she failed to allege fraud or fraudulent concealment in her petition and

that, in any case, she had notice of the significant transactions years before filing suit. Evans

appealed, and the Michigan Court of Appeals affirmed on February 24, 2005. See Evans v. Bank

One Trust Co. N.A., Nos. 249974, 253745, 253824, 2005 WL 433573 (Mich. Ct. App. Feb. 24,

2005). The Michigan Supreme Court recently denied leave to appeal. See In re John F. Ervin

Testamentary Trust, 706 N.W.2d 14 (Mich. Nov. 9, 2005) (Table).

Evans filed the case at bar in the district court below on November 26, 2003. She brought

seven state-law claims relating to the three business transactions: (1) improper discharge of

corporate duties in violation of M.C.L. § 450.1541a, (2) shareholder oppression under M.C.L.

§ 450.1489, (3) breach of trust, (4) fraud, (5) silent fraud, (6) innocent misrepresentation, and (7)

civil conspiracy. On April 30, 2004, the district court, in response to the defendants’ motion to

dismiss, dismissed most of Evans’ claims.

First, the court dismissed the claim for improper discharge of corporate duties because the

statute of limitations had run. Second, the court dismissed the shareholder-oppression claims based

on the 1993 Barton Abrasives and 1996 Ervin Leasing transactions because the applicable statute

of limitations had run against Evans. The court held, however, that Evans met the limitations period

regarding her claim based on the 1998 Barnsteel transaction. Third, the court held that the “probate

exception” to federal subject-matter jurisdiction deprived the court of jurisdiction to hear Evans’

claim for breach of trust. Fourth, the district court disposed of the fraud and misrepresentation

claims together and determined that the statute of limitations barred the claims concerning the 1993

Barton Abrasives and 1996 Ervin Leasing transactions. The court also determined that Evans had

not pled sufficient facts of fraudulent concealment to toll the statute, and, even if she had, she failed

to qualify for Michigan’s two-year grace period in the case of fraudulent concealment because she

should have discovered the concealment by the time she filed her 2001 probate action. Fifth, the

district court dismissed her fraud claim concerning the 1998 Barnsteel transaction, but the court did

not expressly state its rationale. Presumably the court accepted the defendants’ argument, which the

court described in its order, that Evans failed to plead reliance. Finally, the court allowed her claim

for civil conspiracy to proceed because “at least one of [her] other claims (Count Two) survives

. . . .”

The filings leading up to the district court’s order included one styled “Plaintiff’s Response

to the Ervin Defendants’ Motion to Dismiss . . . and Plaintiff’s Counter-Motion for Leave to

Amend.” The “counter-motion” stated in its entirety, “In the alternative, Plaintiff respectfully moves

this Court to grant her Counter-Motion for Leave to Amend her Complaint and Jury Demand

pursuant to Fed. R. Civ. P. 15.” The district court denied the motion “as futile” because Evans had

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 5

not offered an amended complaint or specifically stated how the amendments would create causes

of action that could survive the limitation periods or the court’s limited jurisdiction.

On August 26, 2004, the district court considered the remaining claims for shareholder

oppression and civil conspiracy concerning the 1998 Barnsteel transaction. The Pearson defendants

brought a motion to dismiss. The Bank One defendants submitted a motion for summary judgment.

The district court dismissed both of the remaining claims on August 26, 2004, pursuant to

the motion to dismiss. The court held that Evans could not satisfy any of the statutory requirements

for a claim of stockholder oppression under M.C.L. § 450.1489. The court first held that the probate

court’s earlier order collaterally estopped Evans from arguing that the defendants’ lending

relationship was illegal. The court then held that Evans’ shareholder claim was defective because,

without investing in the Barnsteel transaction, she could not plead reliance. Last, the court held that

Evans could not maintain a claim for “willfully unfair and oppressive acts” because she was

collaterally estopped from arguing that Bank One acted illegally and because she failed to plead a

separate and distinct injury regarding the Barnsteel transaction. Because the court had determined

that all other claims had to be dismissed, it ruled that Evans’ conspiracy claim failed as a matter of

law.

In two filings styled “Response,”1 each accompanied by a brief, Evans provided the

following short request: “In the alternative, Plaintiff respectfully moves this Court to grant her

Counter-Motion for Leave to Amend her Complaint and Jury Demand pursuant to Fed. R. Civ. P.

15.” An amended complaint was attached as an exhibit to Evans’ response to the Ervin defendants’

motion to dismiss, but it was only mentioned on page ten and in footnote five of her brief. The

parties disagree as to whether Evans’ request constituted a “motion.” In the section of its opinion

denying the remaining motions, the court did not mention Evans’ requests for leave to amend. The

district court mentioned in a footnote to its order that it would not consider any of Evans’ references

to her proposed amended complaint because the court determined that Evans was attempting to

“circumvent the Court’s [earlier] Order” denying her original, general request for leave to amend.

On appeal, Evans challenges the district court’s rulings as to her claims for breach of trust,

shareholder oppression, and common-law fraud. She also challenges the district court’s denial of

her requests for leave to amend.

The district court properly dismissed all of Evans’ claims. Although the district court had

federal subject-matter jurisdiction to decide whether Bank One breached its fiduciary duties, Evans’

claim was properly dismissed because she is collaterally estopped from arguing fraudulent

concealment and thus that her claim survives the applicable statute of limitations. Evans’

shareholder claims based on the 1993 and 1996 transactions are barred by the statute of limitations

because Evans failed to plead fraudulent concealment with particularity and because collateral

estoppel bars Evans from arguing fraudulent concealment. Her shareholder-oppression claim

concerning the 1998 transaction also fails because collateral estoppel precludes her from alleging

the facts that support her claim. Evans’ fraud claims concerning the 1993 and 1996 transactions fail

because, as she did not plead fraudulent concealment with particularity, she cannot satisfy the statute

of limitations. Her fraud claim relating to the 1998 transaction fails because she did not plead

reliance with particularity. Finally, the district court did not improperly deny Evans’ requests for

leave to amend.

1

The response to the Ervin defendants’ motion to dismiss was styled “Plaintiff’s Response to the Ervin

Defendants’ Motion to Dismiss and for Summary Judgment on Counts II and VII.” The other response was styled

“Plaintiff’s Response to the Bank One Defendants’ Motion for Summary Judgment.”

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 6

II.

We review de novo the district court’s order to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).

See Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). We must accept Evans’

factual allegations as true and construe all reasonable inferences in her favor. See id. On the2other

hand, this liberal standard of review requires more than recitation of bare legal conclusions. Id.

III.

The district court had jurisdiction to decide Evans’ claim against the Bank One defendants

for breach of trust because the “probate exception” is not applicable to Evans’ claim. Evans’ claim

involves only an action in personam regarding her revocable trust, an inter vivos trust that is

unrelated to any probate proceedings. The probate exception to federal jurisdiction is defined by

federal law. The Supreme Court, appropriately, has shaded its contours. In Markham v. Allen, the

key Supreme Court case on the subject, the Supreme Court explained that the equity jurisdiction of

the courts does not extend to claims requiring (1) interference with probate proceedings,

(2) assumption of general jurisdiction over probate, or (3) assumption of control over property in

the custody of a state court. 326 U.S. 490, 494 (1946). Because Evans’ claim does not require the

federal court to interfere with probate proceedings, assume general jurisdiction over probate, or

assume control over property in the custody of a state court, the district court has jurisdiction to

consider her claim.

Evans’ claim for breach of inter vivos trust does not concern probate issues and therefore

does not interfere with any probate matters. First, Evans’ claim does not interfere with any probate

proceedings because it concerns business transactions and stock that are not tied to any probate

proceedings. She did not place her nonvoting stock into trust until 1995, and the administration of

the revocable trust has no relation to any decedent or decedent’s estate. Unlike other cases in which

courts have found interference, Evans’ claim is not a disguised probate claim. See Marshall v.

Marshall, 392 F.3d 1118, 1135 (9th Cir. 2004), cert. granted, 74 U.S.L.W. 3199 (U.S. Sept. 27,

2005) (No. 04-1544) (declaring the plaintiff’s claim a “thinly veiled will contest”); Storm v. Storm,

328 F.3d 941, 945 (7th Cir. 2003) (same). That the claim Evans brought in federal court shares

similar facts and allegations with her earlier claims regarding her interest in the testamentary trusts

is insufficient to demonstrate that her claim in federal court interferes with probate proceedings.

The question is not of similarity but of interference; Bank One proffers no explanation of how the

exercise of federal jurisdiction will obstruct the state probate court.

Second, the district court would not assume general jurisdiction over probate by hearing

Evans’ claim. Evans’ claim does not require the court to administer an estate, evaluate the validity

of a document, or determine the rights of interested parties to property. Because no general probate

is occurring or envisioned regarding this claim, this is not a case of the district court’s usurping the

general jurisdiction of the probate court.

Last, Evans’ action is in personam and does not require the federal court to take custody of

any property already in state custody. Because the revocable trust has never, as far as the record

demonstrates, been the subject of any litigation or other legal proceedings, the state courts have no

custody of any property in the revocable trust. But even if the state courts had property in custody,

there is no conflict over the custody of trust property because Evans has not brought an action in rem

or quasi-in-rem, asking the federal court to take custody of property away from state court to

2

Although a motion for summary judgment was before the district court regarding the shareholder-oppression

claim concerning the 1998 transaction, the court based its dismissal of all claims on the motion to dismiss. Thus, this

court is not reviewing a decision of summary judgment, and Evans’ arguments concerning whether she created a genuine

issue of material fact and whether she is entitled to discovery are misplaced.

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 7

determine the rights of interested parties in that property. In Rogers v. Girard Trust Co., 159 F.2d

239, 242 (6th Cir. 1947), we held that the probate exception did not extend to an in personam action

for breach of a testamentary trust where the action did not affect the possession of property already

in the control of the probate court. Evans’ claim, accordingly, implicates none of Markham’s three

forbidden infringements on exclusively state probate jurisdiction.

To argue, as Bank One does obliquely, that state legislation always defines the boundaries

of the probate exception, and thus federal jurisdiction, would contravene Markham and misinterpret

precedent from this circuit that is wholly consistent with Markham. Bank One contends that federal

courts have no jurisdiction to hear Evans’ claim for breach of trust because this circuit has examined

a probate court’s exclusive jurisdiction when mapping the contours of the probate exception and

because Michigan law places issues regarding all trusts (not simply testamentary trusts) within the

exclusive jurisdiction of the probate court, see M.C.L. § 700.1302(b). Although this court has held

that “[t]he standard for determining whether federal jurisdiction may be exercised is whether under

state law the dispute would be cognizable only by the probate court,” Lepard v. NBD Bank, 3843F.3d

232, 237 (6th Cir. 2004) (citing McKibben v. Chubb, 840 F.2d 1525, 1529 (10th Cir. 1988)), this

court has examined the exclusive jurisdiction of probate courts only when a claim concerned a

decedent’s estate. See, e.g., Bedo v. McGuire, 767 F.2d 305 (6th Cir. 1985); Starr v. Rupp, 421 F.2d

999, 1005 (6th Cir. 1970). These examinations of probate jurisdiction are consistent with Markham

because we were ensuring that federal jurisdiction did not interfere with probate administration.

Because the Supreme Court, in determining that a suit could proceed despite its relationship with

estate administration, held that federal equity jurisdiction cannot be “curtailed by state legislation

as to its [the state’s] own courts,” Waterman v. Canal-Louisiana Bank & Trust Co., 215 U.S. 33, 45-

46 (1909), it follows that state legislatures cannot circumscribe federal jurisdiction over trusts. See

Golden v. Golden, 382 F.3d 348, 360 (3d Cir. 2004).

Trusts as a general matter have historically been subject to federal jurisdiction, and “[m]any,

if not most, courts have held that the probate exception does not apply to actions involving trusts.”

Sianis v. Jensen, 294 F.3d 994, 999 (8th Cir. 2002); see also Peter Nicolas, Fighting the Probate

Mafia: A Dissection of the Probate Exception to Federal Court Jurisdiction, 74 S. Cal. L. Rev.

1479, 1493 & n.70 (2001). Congress granted federal courts jurisdiction over suits that could have

been brought in that English chancery court, see Nicolas at 1500, and, in colonial times, the English

High Court of Chancery had exclusive jurisdiction over trusts, see id. at 1513-14. In contrast, the

probate exception exists, in part, because probate matters, as opposed to trusts, were not heard in the

English High Court of Chancery or common-law courts. See Markham, 326 U.S. at 494.

Although it is true that federal courts have properly applied the probate exception to claims

concerning trusts that act as will substitutes, the revocable trust in this case is not a will substitute.

Refusing to hear cases regarding will substitutes is consistent with Markham because adjudication

concerning will substitutes would frequently interfere with probate administration. The cases to

which Bank One refers for the proposition that federal courts do not have jurisdiction to hear any

claim regarding inter vivos trusts involve deaths and trusts that were will substitutes. See Storm v.

Storm, 328 F.3d 941; Marshall, 392 F.3d 1118; Golden, 382 F.3d 348; Georges v. Glick, 856 F.2d

971 (7th Cir. 1988). Evans’ claim does not involve any death or estate management. Instead, Evans

is the settlor, who controls the res of her revocable trust and brings an in personam action against

the trustee for damages. The circumstances surrounding the revocable trust do not impinge the

concerns of a trust acting as a will substitute, and there is no justification, therefore, for the federal

courts to invoke the probate exception to avoid hearing her claim for breach of revocable trust.

3

The facts in Lepard are not clear, and Lepard thus does not define the breadth of the probate exception. This

court noted that the plaintiff proceeded pro se and drafted an unclear complaint. Lepard, 384 F.3d at 234, 235. Although

it appears that the conflict concerned distributions from two testamentary trusts of the plaintiff’s deceased father, the

court did not discuss the nature of the trusts or whether the father was living.

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 8

If, in contrast, exclusive probate jurisdiction under state law were to determine federal

jurisdiction, nothing would prevent a state from purposefully moving whole bodies of law into its

probate courts to constrict federal diversity jurisdiction. Moreover, such a holding would create a

perverse incentive for parties to structure transactions with trusts to avoid federal jurisdiction. For

these reasons, the district court had jurisdiction to hear Evans’ claim for breach of the revocable

trust.

Although we conclude that the district court had jurisdiction, we need not remand Evans’

claim because Evans is collaterally estopped from arguing that her claim satisfies the applicable

statute of limitations. Federal courts sitting in diversity “must give to a state-court judgment the

same preclusive effect as would be given that judgment under the law of the State in which the

judgment was rendered.” Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81 (1984).

Under Michigan law, “[c]ollateral estoppel precludes relitigation of an issue in a subsequent,

different cause of action between the same parties where the prior proceeding culminated in a valid,

final judgment and the issue was (1) actually litigated, and (2) necessarily determined.”4 See People

v. Gates, 452 N.W.2d 627, 630 (Mich. 1990). All of the requirements for issue preclusion under

Michigan law are satisfied in this case.

Despite Evans’ argument to the contrary, the facts underlying Evans’ claims for breach of

trust are the same for all three trusts. In both suits, she alleged that the Bank violated its fiduciary

duty by having a conflict of interest, failing to invest prudently, failing to be loyal, and failing to

disclose information to her. Evans’ federal suit concerns Bank One’s actions in the same three

business transactions that were at issue in the state proceeding. That Evans now sues for breach of

her revocable trust that contained nonvoting stock and over which the probate court determined that

it lacked jurisdiction (as opposed to her grandfather’s trust that contained voting stock and was

testamentary) is a distinction without a difference for purposes of collateral estoppel. Because the

factual issues and the applicable statutes of limitation are the same in both suits, collateral estoppel

is relevant.

All of the requirements for collateral estoppel are satisfied in this case, and Michigan law

therefore precludes Evans from asserting her claim for breach of trust. Bank One5 and Evans,

parties to this suit, were parties to the 2001 probate proceeding, which resulted in a valid, final

judgment in the probate court against Evans. The Michigan Court of Appeals affirmed the judgment

in February 2005, see Evans v. Bank One Trust Co. N.A., Nos. 249974, 253745, 253824, 2005 WL

433573 (Mich. Ct. App. Feb. 24, 2005), and the Michigan Supreme Court has since denied leave to

appeal, see In re John F. Ervin Testamentary Trust, 706 N.W.2d 14 (Mich. Nov. 29, 2005) (Table).

The issue of whether Bank One breached its fiduciary duties in the course of the three acquisitions

was decided in the probate court and on appeal and thus actually litigated. See Monat, 677 N.W.2d

at 847 n.2. As for the final requirement that the issue be necessarily determined, Evans alleged in

her complaint to the probate court that Bank One breached its fiduciary duties regarding the

testamentary trusts because of its lending activities concerning the three major acquisitions. The

state appellate court held that all of Evans’ claims were barred by the applicable three-year statute

of limitation used for “breaches of fiduciary duty.” Evans, 2005 WL 433573, at *6. The appellate

court also held that, because Evans “was presented with sufficient evidence to place her on notice

4

Although “mutuality” is generally also a requirement for collateral estoppel under Michigan law, the Michigan

Supreme Court recently held that mutuality is not required when collateral estoppel is used defensively. Monat v. State

Farm Ins. Co., 677 N.W.2d 843, 852 (Mich. 2004).

5

Although Meretta was not a party to the state proceeding, he is in privity with Bank One as an employee. All

claims against Meretta concern his role as trust officer for Bank One and involve the same transactions as the claims

against the corporate entities. Therefore, Meretta’s presence in the current suit does not prevent the application of issue

preclusion. See Gates, 452 N.W.2d at 630 (holding that privity fulfills the “same party” requirement).

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 9

of the now-challenged events[,]” she was not entitled to plead fraudulent concealment. Id. at *7.

Deciding this limitations issue was necessary to the suit because it concerned the timeliness of her

claim and thus whether Evans could state a cause of action. Accordingly, all four criteria for issue

preclusion have been met in this case, and the district court therefore properly dismissed Evans’

claim for breach of trust.

IV.

Evans’ claims for shareholder oppression against the Bank One defendants and John Pearson

concerning the 1993 and 1996 transactions are barred by Michigan’s six-year statute of limitations,

and she is not entitled to an extended limitations period by alleging fraudulent concealment. None

of the parties challenge the district court’s ruling that M.C.L. § 600.5813, providing a six-year

limitations period, applies to Evans’ claims. Evans argues, however, that her claims are not barred

because she alleged fraudulent concealment pursuant to M.C.L. § 600.5855, which gives her two

years after discovery of the concealment to bring her claim. Evans cannot rely on fraudulent

concealment because she failed to plead fraudulent concealment with particularity, as required by

Fed. R. Civ. P. 9(b). The decision of the Michigan Court of Appeals in the probate litigation also

collaterally estops Evans from arguing that she did not have the information to uncover the

oppression relating to the 1993 and 1996 transactions.

Evans did not sufficiently plead all of the required elements of fraudulent concealment. The

Federal Rules of Civil Procedure, which control pleading in diversity cases, see 5A Charles Alan

Wright & Arthur R. Miller, Federal Practice and Procedure § 1297 (3d ed. 2005), require that the

acts constituting fraudulent concealment of a claim be pled in the complaint. See Fed. R. Civ. P.

9(b). The acts constituting concealment are “(1) wrongful concealment of their actions by the

defendants; (2) failure of the plaintiff to discover the operative facts that are the basis of his cause

of action within the limitations period; and (3) plaintiff’s due diligence until discovery of the facts.”

Dayco Corp. v. Goodyear Tire & Rubber Co., 523 F.2d 389, 394 (6th Cir. 1975). Whatever the

status of the first two requirements, Evans failed to plead that she exercised any due diligence in

discovering the facts that she alleged regarding the 1993 and 1996 transactions. Because Evans

failed to plead fraudulent concealment with particularity, the district court properly dismissed her

shareholder-oppression claims relating to the 1993 and 1996 transactions.

Moreover, even if Evans adequately pled fraudulent concealment, she was collaterally

estopped from relying on it. The state appellate court’s decision squarely determined that Evans

cannot rely on fraudulent concealment because she possessed “sufficient evidence to place her on

notice of the now-challenged events.” See Evans, 2005 WL 433573, at *7. Both suits involved

Evans, Bank One, and John Pearson, and the probate suit progressed to a final, valid judgment that

was affirmed on appeal. The limitations issue was actually litigated and necessarily determined.

Thus, all four collateral estoppel criteria are once again satisfied.

Evans’ shareholder-oppression claims concern the same events as her claims brought in the

probate court. Evans’ argument that the appellate court was considering only whether she had notice

of actions that were “illegal,” but not actions that were “fraudulent, or willfully unfair,” fails because

the nature of the claims and the underlying facts are identical. The relevant distinction between her

shareholder and trust claims is not the description of malfeasance but rather the identity of the

plaintiff: she sues as a shareholder in federal court, while she sued as a beneficiary in state court.

Ultimately, Evans alleged the same facts to support both claims and argues that, contrary to the

appellate court’s conclusion, these facts were concealed. Her claims for shareholder oppression,

therefore, are barred by the six-year statute of limitations, and the exception for fraudulent

concealment is inapplicable.

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 10

V.

Evans’ shareholder-oppression action against the Bank One defendants and John Pearson

concerning the 1998 transaction cannot succeed because she is collaterally estopped with respect

to the facts in her complaint relating to the 1998 transaction. The only allegations Evans makes

regarding the 1998 transaction, which she incorporates into the section of her complaint concerning

the shareholder action, were that (1) the defendants failed to disclose that the trustee failed to

perform due diligence, (2) a conflicting lending relationship existed, and (3) the acquisition was not

reasonable. Because the Michigan Court of Appeals determined that Evans’ three allegations were

meritless, Evans is collaterally estopped from asserting the only facts that she alleged to support her

shareholder claim of illegality, fraud, or oppressive acts regarding the 1998 transaction.

The Michigan Court of Appeals’ decision that (1) the Bank disclosed information, (2) the

lending relationship was proper, and (3) the transactions were reasonable collaterally estops Evans

from alleging the facts upon which she grounds her shareholder-oppression claim. The state

appellate court determined that Evans admitted in her depositions during the probate proceedings

that she did not read the information sent to her, that she attended biannual shareholder meetings in

which few questions were asked, and that Bank One had always attempted to answer her questions

and complied with her requests for information. From these findings, the appellate court determined

that she could not argue that full disclosure in the trust accounts had not been made. See Evans,

2005 WL 433573, at *4. The state court then held that the lending relationship in this case was

proper. See id. at *7-*8. Finally, that court determined that the loans were proper on two statutorily

approved grounds (they were both fair and approved by the directors after the disclosure of material

facts), see id. at *8, and that the investment was prudent because it was an attempt to protect or

increase Ervin’s market share, see id. at *10. The resolution of these issues, as discussed earlier in

this opinion, is binding on Evans: the same factual issues (disclosure, conflict of interest, and

reasonableness) are relevant here, the same parties are involved, and the issues, as central to Evans’

claims in probate court, were necessarily resolved after having been actually litigated. Because

Evans is collaterally estopped from arguing the only facts that she alleged regarding the 1998

transaction, she has no factual basis on which to state her claim, and the district court properly

dismissed Evans’ shareholder-oppression claim relating to the 1998 transaction.

VI.

Evans’ fraud claims against all defendants regarding the 1993 and 1996 transactions are

barred by the six-year statute of limitations, and her fraud claim based on the 1998 transaction is

barred because she insufficiently pled the element of reliance. All parties agree that a six-year

limitations period applies to fraud claims pursuant to M.C.L. § 600.5813. Evans’ claims based on

the 1993 and 1996 transactions are barred by this statute, although Evans argues that, as with her

shareholder-oppression claims, the defendants’ fraudulent concealment allows her claims to proceed

under M.C.L. § 600.5855 for two years after learning facts that put her on notice. But, as with her

claims for shareholder oppression, Evans cannot invoke the “fraudulent concealment” exception as

to her claims concerning the 1993 and 1996 transactions because she insufficiently pled that she

exercised due diligence, as required by Fed. R. Civ. P. 9(b).

As for Evans’ claim regarding the 1998 transaction, Evans failed to plead reliance

sufficiently and therefore is unable to state a claim for fraud. Evans did not allege that she invested

money in the 1998 transaction, as she had done in the prior transactions. Evans unavailingly argues

instead that she alleged in paragraph 49 of her complaint that she “relied implicitly on the

representations” and that she was injured because she did not file suit to prevent the Barnsteel

transaction. As mentioned earlier in this opinion, Fed. R. Civ. P. 9(b) applies to her complaint, and

that rule requires that she plead the circumstances of her fraud and misrepresentations with

particularity. See Fed. R. Civ. P. 9(b). Conclusory statements of reliance are not sufficient to

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 11

explain with particularity how she detrimentally relied on the alleged fraud, see, e.g., Smith v. Mitlof,

198 F. Supp. 2d 492, 504-05 (S.D.N.Y. 2002) (holding that the complaint’s allegation that the

plaintiffs reasonably relied on the fraudulent representations was insufficient to meet the heightened

pleading requirements of Rule 9(b)), and Evans in no way pled in her complaint the forbearance that

she now invokes. Because Evans did not plead detrimental reliance in her complaint, the district

court properly dismissed her fraud claim relating to the 1998 Barnsteel transaction.

VII.

We review for abuse of discretion the district court’s denial of Evans’ requests for leave to

amend, even though the district court stated mistakenly that it denied Evans’ motion on the grounds

of futility. When the district court refuses the plaintiff’s request for leave to amend her complaint

on grounds of futility, this court reviews de novo because the decision is based on a legal

conclusion. See Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 569 (6th Cir. 2003). Otherwise, this

court reviews denials of motions to amend under an abuse-of-discretion standard. See Fisher v.

Roberts, 125 F.3d 974, 977 (6th Cir. 1997). In this case, although the district court denied “as futile”

the first request for leave, the abuse-of-discretion standard is appropriate because the court did not

deem proffered allegations useless. The district court, instead, denied the motion for failure to state

the grounds for leave with particularity.

The district court did not abuse its discretion by denying Evans’ first request for leave to

amend her complaint because she failed to state the grounds for relief with particularity, and the

district court did not abuse its discretion by denying her second request for leave because Evans’

motion was not clearly presented as a distinct motion. Requesting leave to amend under Fed. R. Civ.

P. 15(a) is governed by Fed. R. Civ. P. 7(b), which requires that a motion “shall state with

particularity the grounds therefor . . . .” See Moore v. Indiana, 999 F.2d 1125, 1131 (7th Cir. 1993).

In her responses to the defendants’ motions to dismiss and for summary judgment, Evans requested

leave to amend in a single sentence without providing grounds or a proposed amended complaint

to support her request. She, therefore, did not state the grounds with particularity. See Confederate

Mem. Ass’n, Inc. v. Hines, 995 F.2d 295, 299 (D.C. Cir. 1993) (“We agree with several of our sister

circuits that a bare request in an opposition to a motion to dismiss—without any indication of the

particular grounds on which amendment is sought . . .—does not constitute a motion within the

contemplation of Rule 15(a).”); see also PR Diamonds, Inc. v. Chandler, 364 F.3d 671, 699 (6th Cir.

2004); Begala v. PNC Bank, 214 F.3d 776, 783-84 (6th Cir. 2000); accord United States ex. rel.

Willard v. Humana Health Plan of Tex., 336 F.3d 375, 387 (5th Cir. 2003); Credit Chequers Info.

Servs., Inc. v. CBA, Inc., No. 99-7600, 2000 WL 232046, at *1 (2d Cir. Jan. 26, 2000). Because

Evans failed to state her grounds for amending with particularity in her first motion for leave, the

district court did not abuse its discretion in denying Evans’ request for leave to amend.

The district court also did not abuse its discretion in denying Evans’ later requests for leave.

After the district court had denied a clearly presented motion for leave to amend, Evans buried her

subsequent requests for leave in her responses to the defendants’ motions. Nothing in the Federal

Rules of Civil Procedure requires the district court to entertain repeated motions that have already

been denied or review Evans’ requests until one is sufficient to qualify as a proper motion.

VIII.

For the foregoing reasons, we AFFIRM the orders of the district court dismissing all of

Evans’ claims and denying her leave to amend her complaint.

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 12

____________________

CONCURRENCE

____________________

CLAY, Circuit Judge, concurring. I concur in the majority’s opinion, but I write separately

to express my concern over the friction between this Court’s inquiry under the probate exception

and Supreme Court precedent. In my view, the “exclusive jurisdiction” test, to determine whether

this Court’s jurisdiction is barred under the probate exception, conflicts with both Waterman v.

Canal-Louisiana Bank & Trust Co., 215 U.S. 33 (1909), and Markham v. Allen, 326 U.S. 490

(1946).

As the majority recognizes, this Court employs an “exclusive jurisdiction” test to analyze

whether the probate exception is applicable. In Lepard v. NBD Bank, this Court stated:

The standard for determining whether federal jurisdiction may be exercised is

whether under state law the dispute would be cognizable only by the probate court.

This court applied the “probate exception” in Bedo v. McGuire, 767 F.2d 305 (6th

Cir.1985), holding that the district court lacked subject matter jurisdiction over a

claim for breach of fiduciary duty brought by the beneficiaries of the estate against

the executrix because, under Ohio law, “exclusive jurisdiction of probate matters,

including breach of fiduciary duty, is vested in the Probate Court.” Id. at 306.

384 F.3d 232, 237 (6th Cir. 2004) (some internal quotations and citation omitted). The majority

narrows the language of Lepard to apply only when a probate matter is involved;1 in other words,

if a state probate court has exclusive jurisdiction over a non-probate matter, then the probate

exception would not apply. I agree that it would be absurd to preclude federal jurisdiction, under

the probate exception, over, say, all tort matters, simply because the state legislature placed all tort

matters within the exclusive jurisdiction of the state probate courts. I believe, however, that it is also

inconsonant to preclude federal jurisdiction over probate matters simply because of the state

legislature’s bestowment of exclusive jurisdiction to the state probate courts. Two Supreme Court

cases illustrate this point.

In Waterman v. Canal-Louisiana Bank & Trust Co., the plaintiff was the niece of the

testatrix. 215 U.S. at 39. The heart of the plaintiff’s claim was that the testatrix had bequeathed

$3,000 and a pro rata share of the residue of her estate to the Home for the Insane, a charity that the

plaintiff claimed did not exist when the testatrix made her will. Id. at 40. The plaintiff claimed that

she was the sole heir at law to the testatrix, so that she should receive the portion of the estate set

aside for the Home for the Insane. Id. at 41.

The Supreme Court held that the federal courts had jurisdiction over the plaintiff’s case.2

As to suits against estates, the Court found that “the [federal] jurisdiction may be exercised, and is

not subject to limitations or restraint by state legislation establishing courts of probate, and giving

them jurisdiction over similar matters.” Id. at 43. The Court further explained that, “[t]he rule stated

in many cases in this court affirms the jurisdiction of the Federal courts to give relief of the nature

stated, notwithstanding the statutes of the state undertake [sic] to give to state probate courts

exclusive jurisdiction over all matters concerning the settlement of accounts of executros [sic] and

1

Yet, as the majority points out, it is unclear in Lepard whether the trusts in that case were testamentary.

2

The Court, however, found that to the extent the plaintiff asked the federal courts to exercise general

jurisdiction over the estate, the federal courts did not have jurisdiction. Id. at 45.

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 13

administrators in the distribution of estates.” Id. at 43-44. The Court qualified the exercise of

federal jurisdiction by stating that a federal court could not “seize and control the property which

is in the possession of the state court,” although a federal court could adjudicate a party’s rights to

that property. Id. at 44. The Court also instructed that a federal court could not exercise general

jurisdiction over an estate, as it “could not exercise original jurisdiction to draw to itself the entire

settlement of the estate of the decedent and the account of administration, or the power to determine

all claims against the estate. Id. at 45.

Applied to the facts in that case, the Supreme Court held:

The complainant, it is to be noted, does not seek to set aside the probate of the will,

which the bill alleges was duly established and admitted to probate in the proper

court of the state.

...

The United States circuit court, by granting this relief, need not interfere with the

ordinary settlement of the estate, the payment of the debts and special legacies, and

the determination of the accounts of funds in the hands of the executor, but it may,

and we think has the right to, determine, as between the parties before the court, the

interest of the complainant in the alleged lapse legacy and residuary estate.

Id. at 46.

The preceding case negates this Court’s exclusive jurisdiction test in two respects. First, the

statement of law given by the Supreme Court directs against such an inquiry. The Supreme Court

twice noted that a state legislature could not define the boundaries of federal jurisdiction, specifically

in the context of probate matters; the Supreme Court went further and found that notwithstanding

the state legislature’s demarcation of probate matters as within the exclusive jurisdiction of state

probate courts, the qualified rule was that a federal court could still exercise jurisdiction over such

matters. This would seem to be in direct opposition to the exclusive jurisdiction test. Second, while

under the facts of Waterman the Supreme Court found that federal courts did have jurisdiction over

the plaintiff’s claim, under the exclusive jurisdiction test, the result would be the opposite. The

majority finds that “this court has examined the exclusive jurisdiction of probate courts only when

a claim concerned a decedent’s estate.” Waterman certainly involved a decedent’s estate, so the

exclusive jurisdiction test would apply under the majority’s logic. Thus, if Louisiana, the relevant

state in Waterman, placed exclusive jurisdiction over suits against an estate in the state probate

courts, then federal jurisdiction would be inappropriate under the exclusive jurisdiction test;

however, this was not the conclusion reached by the Supreme Court. Waterman is Supreme Court

precedent directly on point as to why the exclusive jurisdiction test is inappropriate, even when

confined solely to probate matters.

Markham v. Allen also demonstrates that the exclusive jurisdiction of a state probate court

cannot define the reach of federal jurisdiction. In that case, the testatrix was a California resident

whose will named legatees who were German nationals. 326 U.S. at 492. The controversy took

place during World War II. Id. The defendants were heirs-at-law of the testatrix who claimed in

California state court that under California law, the German legatees were ineligible as beneficiaries,

so that the estate should be divided amongst those American heirs-at-law. Id. Shortly after the state

law suit commenced, the plaintiff Alien Property Custodian, acting under federal statute, filed suit

in federal district court, claiming that the plaintiff had acquired the interest of the German legatees,

and that the American heirs-at-law had no interest in the estate. Id. at 493.

The Supreme Court held that the federal courts properly had jurisdiction over the plaintiff’s

suit. The Court found that while a federal court did not have jurisdiction to probate a will or

No. 04-2229 Evans v. Pearson Enterprises, Inc., et al. Page 14

administer an estate, “federal courts of equity have jurisdiction to entertain suits in favor of

creditors, legatees and heirs and other claimants against a decedent’s estate to establish their claims

so long as” (1) the federal court did not interfere with the state probate proceeding; (2) the federal

court did not assume general jurisdiction over the probate proceeding; and (3) the federal court did

not assume control over property within the custody of the state court. Id. at 494 (internal quotations

and citation omitted).

As applied to the facts of that case, the Court found that

[a]lthough in this case [the plaintiff] sought a judgment in district court ordering

defendant executor to pay over the entire net estate to the [plaintiff] . . ., the

judgment declared only that [the plaintiff] is entitled to receive the net estate of the

[testatrix] . . . . The effect of the judgment was to leave undisturbed the orderly

administration of [the testatrix’s] estate in the state probate court and to decree [the

plaintiff’s] right in the property to be distributed after its administration. This, as our

authorities demonstrate, is not an exercise of probate jurisdiction or an interference

with property in the possession or custody of the state court.

Id. at 495.

As to the statement of law, there is no mention of the exclusive jurisdiction of a state probate

court as being the key inquiry under the probate exception. Instead, a federal court must look to

whether federal jurisdiction would interfere with a state proceeding, whether the parties ask the

federal court to assert general jurisdiction, and whether the federal court would interfere with

property in the possession of the state court. One can easily imagine where the requirements of

Markham have been met, but where the exclusive jurisdiction test would preclude federal

jurisdiction. Under the facts of Markham, for example, if California law vested state probate courts

with exclusive jurisdiction over suits against the executor of an estate, then the exclusive jurisdiction

test would lead to the conclusion that federal jurisdiction was inappropriate, despite the Supreme

Court’s holding to the contrary.

In sum, I disagree with the majority’s position that the exclusive jurisdiction test, cabined

to apply only in probate matters, is consistent with Waterman and Markham. That said, I believe

that the principles outlined by the Supreme Court in Waterman and Markham lead to the conclusion

that this Court has jurisdiction over Plaintiff’s non-probate matter, i.e., her claim involving her

revocable trust. This Court having proper jurisdiction of that claim, I concur in the analysis that the

claim is barred by collateral estoppel.