A prudential exercise: abstention and the probate exception to federal diversity jurisdiction.

• Author: Grostic, Christian J.

TABLE OF CONTENTS INTRODUCTION I. THE PROBATE EXCEPTION AS ABSTENTION A. Historical Roots 1. The English Courts 2. The Early American Courts B. Modern Practice 1. The Supreme Court 2. The Circuit Courts II. THE ROUTE TEST: THE PROBATE EXCEPTION (AS ABSTENTION) IN ACTION A. Historical Background B. The Erie Doctrine C. Prudential Justifications D. Limits CONCLUSION INTRODUCTION

Ann-Marie Brege's parents established an irrevocable trust in 1985, with Ann-Marie as sole beneficiary. (1) When Merrill Lynch Trust Co. took over as trustee years later, however, the trust's principal dropped sharply, losing over half its value in just a few years. (2) Ann-Marie sued in Michigan probate court, alleging that Merrill Lynch had violated its legal duties in administering the trust. (3) Since Ann-Marie was from New York and Merrill Lynch had its headquarters in New Jersey, Merrill Lynch had an apparently easy argument for diversity jurisdiction. (4) In an unremarkable turn of events, Merrill Lynch filed a notice of removal to federal district court. (5)

Ann-Marie didn't take Merrill Lynch's removal sitting down. She filed a motion to remand to state probate court, arguing, inter alia, that the federal court lacked subject matter jurisdiction because of the probate exception to federal jurisdiction. (6) Merrill Lynch was taken aback--no court, Merrill Lynch argued, had ever applied the probate exception to a case that didn't involve a will, estate, or some equivalent substitute. (7) The federal court brushed Merrill Lynch's argument aside and instead followed a line of case law that looks to the jurisdiction of probate courts under state law to determine the extent of the probate exception. (8) Finding that Michigan gave its probate courts exclusive jurisdiction over claims involving the administration of trusts, the court granted Ann-Marie's motion to remand. (9)

Even those familiar with the probate exception may be surprised at this outcome. At its core, the probate exception stands for the proposition that federal courts do not have the authority to probate wills or administer estates. (10) While the probate exception has expanded to include matters outside of pure probate, (11) the administration of a trust, established by still-living parents, is far removed from pure probate matters involving wills and estates. At first glance, it is difficult to see how this doctrine could have so much strength and flexibility to limit federal subject matter jurisdiction, a generally rigid and inflexible doctrine. (12)

The probate exception is rooted in the Judiciary Act of 1789. Among other things, the Act granted the lower federal courts jurisdiction over "all suits of a civil nature at common law or in equity, where the matter in dispute exceeds ... five hundred dollars, and ... the suit is between a citizen of the State where the suit is brought and a citizen of another State." (13) In early cases, the Supreme Court interpreted this language to mean that federal courts could hear cases that, in 1789, were under the jurisdiction of English courts of common law and equity. (14) But wills, the Court held, were under the jurisdiction of English ecclesiastical courts, and thus federal courts could not hear probate matters. (15) Federal courts have held that the probate exception survived even through a change in the language of Congress's statutory grant of jurisdiction to the federal courts. (16)

Today, it is well settled that federal courts may not hear pure probate matters, i.e., questions of probating a will or administering an estate. (17) Courts have more trouble, however, determining the outer reach of the probate exception. The federal circuit courts of appeals apply three different tests to determine the boundaries of the exception: the "nature-of-the-claim" test, the "route" test, and the "practical" test. (18)

The most common test among the federal circuits is the "nature-of-the-claim" test. (19) This test focuses on the potential claim's effects on a past, current, or impending state probate proceeding. Generally, courts applying the nature-of-the-claim test will entertain claims "if their resolution will not undercut the past probate of a will or result in the federal court assuming general jurisdiction of the probate or control of the property in the custody of the state court." (20) Courts applying this test generally construe the probate exception quite narrowly. (21)

A sizable minority of circuits use the "route" test. (22) This test looks to state law to determine the extent of the probate exception. Federal courts will not hear claims that are within the exclusive jurisdiction of state probate courts under state law. (23) In certain states, therefore, courts applying the route test construe the probate exception quite expansively. (24)

The Seventh Circuit has adopted a "practical" test. (25) Using this practical test, federal courts in the Seventh Circuit determine whether a matter is ancillary to probate--and thus within the scope of the probate exception--by determining the extent to which hearing the matter would impair the exception's policy justifications. (26) These justifications include judicial economy, relative expertness, and, to a lesser extent, legal certainty. (27)

Professor Peter Nicolas has suggested a fourth test. Professor Nicolas argues that the historical justifications for the probate exception are generally inaccurate, and thus federal courts should entertain claims that establish a justiciable Article III case or controversy and do not concern property already within the exclusive jurisdiction of a state court in in rem or quasi in rem proceedings. (28) This test construes the probate exception even more narrowly than the nature-of-the-claim test.

Entirely distinct from any consideration of probate matters, federal courts have also developed a complex doctrine of abstention. In these cases, the court indisputably has jurisdiction over the suit; for prudential reasons, however, the court dismisses or stays the proceeding. (29) Courts have developed three categories of abstention doctrine, as well as a number of cases that do not fit in the three categories but rely on the same principles. (30)

Burford abstention stands for the proposition that federal courts should dismiss cases in deference to comprehensive and complex state regulatory programs addressing a distinctly local issue. (31) The Supreme Court has only applied Burford abstention in the context of state-regulated industries. (32) The doctrine applies only to claims for injunctive or declaratory relief. (33)

Younger abstention began with the principle that, absent special circumstances, federal courts should abstain in favor of ongoing state criminal proceedings when asked to find a state criminal statute or prosecution unconstitutional. (34) The Supreme Court famously based Younger abstention on "Our Federalism," a policy of comity, respect, and noninterference in state court proceedings. (35) The Supreme Court has expanded the doctrine to civil cases where the state government is a party or involving important state interests. (36) The Court has even applied Younger abstention in the absence of an ongoing state proceeding. (37)

Pullman abstention requires a federal court to abstain when there is an unclear question of state law that could be dispositive, and the court's other option is to rule on a sensitive and unsettled constitutional question. (38) The court stays the federal proceeding while the parties submit the unclear state law question to a state court. (39) If a state court refuses to rule on the issue because the suit is stayed in a federal court, the federal court must dismiss the suit. (40)

The Supreme Court and lower federal courts have also abstained in a number of other cases that do not fit neatly into these three categories. For example, the Supreme Court held that abstention was required in Louisiana Power & Light Co. v. Thibodaux, (41) a diversity case concerning the relative eminent domain powers of the state and local governments, an important and unsettled issue of state sovereignty. (42) In Colorado River Water Conservation District v. United States, (43) a suit involving water rights, the Court found abstention appropriate because, among other things, abstention would avoid piecemeal litigation, the state forum would be more convenient for the over one thousand named parties, the comprehensive state court proceedings were already underway, and there had been no significant proceedings in federal court. (44) Lower courts have abstained in a variety of cases, including cases involving probate matters, citing such justifications as relative expertise, judicial economy, high state interest, and federalism. (45)

This Note argues that federal courts, informed by abstention principles, should use the route test to determine the boundaries of the probate exception. Part I argues that the probate exception is best understood as a category of abstention doctrine. Part I contends that this understanding is consistent with both the probate exception's historical roots and the modern practice of federal courts. Part II argues that the route test best captures the probate exception as abstention. Part II illustrates that the route test reflects better than any other existing test the historical background, modern developments in relevant areas of law, and the prudential justifications for the probate exception as abstention. Part II also details how courts applying the route test can appropriately limit the expansion or contraction of the probate exception.

1. THE PROBATE EXCEPTION AS ABSTENTION

   This Part argues that the probate exception is best understood as a category of abstention doctrine. Section I.A demonstrates that jurisdiction over probate matters in pre-1789 English courts was a flexible doctrine akin to modern abstention doctrine, a model that early Supreme Court cases adopted and expanded...