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In re Corestates Trust Fee Litigation

filed: October 27, 1994; As Corrected November 2, 1994.

IN RE: CORESTATES TRUST FEE LITIGATION; CORNELIA TODD HARRISON BYRD; HOWARD W. HARRISON, III INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED
v.
CORESTATES BANK, N.A., HOWARD W. HARRISON, III AND JAMES D. ROBINS,*FN* APPELLANTS



On Appeal From the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil No. 92-cv-05526).

Before: Becker, Lewis, Circuit Judges and Irenas, District Judge*fn*

Author: Becker

Opinion OF THE COURT

BECKER, Circuit Judge.

Plaintiffs Howard W. Harrison, III and James D. Robins, beneficiaries of fiduciary accounts administered by defendant Corestates Bank, N.A. ("Corestates"), commenced this action in the District Court for the Eastern District of Pennsylvania on their own behalf and on behalf of all those similarly situated. Plaintiffs allege breach of contract and fiduciary duty by Corestates and correspondingly seek refund of allegedly unreasonable trust fees and removal of Corestates as trustee. Jurisdiction was premised on both diversity of citizenship, 28 U.S.C. § 1332, and the putative existence of a federal question based upon violations of the banking laws, 12 U.S.C. § 92a and applicable regulations.

The district court dismissed the diversity claim for lack of subject matter jurisdiction, Fed. R. Civ. P. 12(b)(1), concluding that neither the plaintiffs' claim for punitive damages nor their allegation that the defendants had mismanaged a trust res worth more than $50,000 sufficiently augmented their otherwise minimal claims to satisfy the amount in controversy requirement of the diversity statute. The court dismissed the federal statutory claim, concluding that no private right of action exists for violations of 12 U.S.C. § 92a. The plaintiffs appealed the district court's order of dismissal, but we agree with the district court in both respects, and hence we will affirm.

I. FACTS AND PROCEDURAL HISTORY

Corestates functions as a trustee for a multitude of trusts, managing and investing principal and/or income in exchange for fees. In order to maximize the return on the trust funds, Corestates "sweeps" the fiduciary accounts on a daily basis; "sweeping" refers to the automated collection of idle cash from customer accounts for purposes of temporary collective investment. Corestates transfers the uninvested cash from each account to a temporary collective investment fund. At relevant times, Corestates has charged sweep fees of 60 basis points ($.60 for every $100 of invested cash) for the "service" of sweeping. App. at 33a. In addition, Corestates has imposed an annual regulatory compliance charge of $600 for trusts with principal in excess of $50,000 ($300 for those with less than $50,000 of principal). App. at 19a.

The plaintiffs are beneficiaries of trusts administered by Corestates which are subject to these fees. They allege that Corestate's imposition of the fees constitutes a breach of contract and a breach of fiduciary duty under applicable Pennsylvania law. More specifically, plaintiffs allege Corestates has violated 20 Pa. Cons. Stat. Ann. § 7315.1(b), which permits a Pennsylvania fiduciary to make only a "reasonable charge for services rendered in making [a] temporary investment." Harrison seeks compensatory damages of $2,474.88 ($1,874.88 of sweep fees plus the $600 regulatory compliance fee). Robins seeks compensatory damages of $713.97 ($113.97 of sweep fees plus the $600 regulatory compliance fee). App. at 45a. Because these amounts are far less than the $50,000 required for diversity jurisdiction, plaintiffs assert that the jurisdictional amount is achieved either (1) via their claim for punitive damages; and/or (2) because the value of the trust res, which they allege the trustees have been mismanaging, exceeds the jurisdictional amount. Although plaintiffs have also brought this action "on behalf of all those similarly situated," they have not sought (and therefore have not obtained) class action certification.

In addition, plaintiffs contend that Corestate's imposition of the above mentioned fees constitutes a violation of regulations promulgated pursuant to 12 U.S.C. § 92a. More specifically, plaintiffs contend that a federal private right of action exists for Corestates' alleged regulatory violations. As we have noted, the district court was unpersuaded by both of plaintiffs' theories, and dismissed the case. This appeal followed.

The existence vel non of subject matter jurisdiction is a legal issue over which we exercise plenary review. York Bank & Trust Co. v. Federal Savings & Loan Ins. Corp., 851 F.2d 637, 638 (3d Cir. 1988), cert. denied 488 U.S. 1005, 102 L. Ed. 2d 777, 109 S. Ct. 785 (1989). So is the existence of a private right of action. See Unger v. National Residents Matching Program, 928 F.2d 1392, 1394 (3d Cir. 1991). In making these legal determinations, all facts alleged in the complaint and all reasonable inferences that can be drawn from them must be accepted as true. See Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990).

II. JURISDICTIONAL AMOUNT

Diversity jurisdiction requires an amount in controversy exclusive of interest and costs in excess of $50,000. 28 U.S.C. § 1332(a). In determining whether the jurisdictional amount has been has been properly alleged:

The sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. . . . But if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed, or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that ...


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