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Seldin v. Seldin

United States District Court, D. Nebraska

December 6, 2016

SCOTT A. SELDIN, Plaintiff,
v.
THEODORE M. SELDIN, STANLEY C. SILVERMAN, and MARK SCHLOSSBERG, Defendants.

          MEMORANDUM AND ORDER

          Joseph F. Bataillon Senior United States District Judge.

         This matter is before the Court on defendant Theodore Seldin's motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1), Filing No. 17, and a motion by the plaintiff, Scott Seldin, for an accounting pursuant to Fed. R. of Civ. P. 3, Filing No. 2.[1] The plaintiff Scott Seldin seeks an accounting pursuant to Neb. Rev. Stat. § 30-3890(b)(4) related to a trust in which he was the beneficiary and Theodore Seldin and Stanley Silverman served as the trustees.[2] Scott Seldin contends that this matter arises from the unauthorized and undisclosed self-dealing by these two trustees of the family trust. Scott Seldin requests an accounting from 1992 through 2002 of the MSCM trust, discussed hereinafter. Filing No. 1 and Filing No. 2. Plaintiff asks this Court to exercise its power in this case and order the trustees to account for the properties by allowing access to the records by an independent third-party auditor. Defendant Theodore Seldin contends that this Court lacks subject matter jurisdiction, as there is an agreement to arbitrate that binds the parties. Filing No. 17.

         BACKGROUND

         Ted, Stan and Mark Seldin served as trustees for a trust, Millard Seldin Children's Master Trust (“MSCM Trust”), created by Scott Seldin's father, Millard R. Seldin. Scott Seldin is named in the MSCM Trust as a beneficiary along with his two siblings, Traci Seldin Moser and Derry Seldin. Scott's father, Millard, established a trust for Scott and his siblings. Scott's uncles, Ted and Stan Seldin, now estranged from Millard and Scott, were designated as two of the trustees (Ted and Stan Seldin will be collectively referred to as “Trustees”). Among other things, the Trustees allegedly overcharged on lease commissions paid to them under management agreements related to the trust in breach of their fiduciary duties. Also, according to Scott Seldin, the Trustees never submitted a trust report to Scott Seldin or any other beneficiary as required by Nebraska law. Filing No. 1, Complaint, ¶ 8. The MSCM trust required an accounting at least annually.[3]

         On February 18, 2010, the parties entered into a Separation Agreement, designed to split the assets in the many trusts with the help of a mediator. Filing No. 18-2, Ex. 1. The purpose of the agreement was to (1) help separate out the interests between the Omaha Seldins and the Arizona Seldins, [4] and (2) establish arbitration as the exclusive remedy.

         Millard Seldin, Ted and Stan Seldin, Scott Seldin and others entered into a Separation Agreement. With regard to the MSCM Trust, the arbitrator determined that “there is little meaningful evidence . . . to explain how the Trustees handled their annual reports” to Scott. (Filing No. 18-44, Award 1 ¶¶ 15, 16 at 5). The arbitrator found it “was not until October 2008 that [the Trustees] provided [Scott] with sufficient detailed financial information for [him] to reasonably recognize on a per property basis that the management fee provisions in the Management Agreements may have been erroneously applied by Seldin Company over an extended period of time” (Filing No. 18-47, Award 8 ¶ 1 at 1-2; Filing No. 18-45, Award 2 ¶ 20 at 5). The arbitrator further found, on January 27, 2016, that:

“On several occasions, the authorized representatives of the Seldin Company, including Stan, unilaterally and erroneously charged the Owners [including Scott or entities holding his interests] lease fees . . . . The Seldin Company has breached the Management Agreements by overcharging [Scott and others] lease commissions . . . Thus, the overcharged lease commissions paid by [Scott and others] total $257, 392. “[T]here is no factual, legal or equitable basis to support findings that . . . the commissions paid to the Seldin Company . . . for the lease transactions . . . were the result of a mutual mistake . . .”

Filing No. 18-47, Award 8 ¶ ¶ 11, 13 at 4-5).

         The arbitrator further determined that there existed over fifteen hundred boxes of paper records and an electronic Timberline financial accounting system used by the Trustees since 1998. (Filing No. 18-47, Award 8 ¶ 1 at 1-2; Filing No. 18-44, Award 1 ¶ 29 at 11).

         On July 4, 2015, the arbitrator also found that Scott Seldin “breached . . . fiduciary duties of care and loyalty, which [he allegedly] owed to SD&M, MTS, Ted and Stan, and that [Scott allegedly] violated applicable securities statutes when Millard [allegedly] orchestrated the Sky Financial Transactions” (Filing No. 18-50, Award 13 ¶ 73 at 21). The arbitrator found “[Scott has] failed to meet [his] burden of proving that Millard properly disclosed the Sky Financial Transactions and . . . MSCM Trust's investment in SVP Restaurant to SD&M and MTS . . . (Filing No. 18-50, Award 13 ¶ 46 at 14). The arbitrator further found, despite that “SD&M and MTS . . . received a 100.043% total return on . . . the Sky Financial Transactions[, ] . . . [t]he breach of fiduciary duties and securities law violations committed by . . . [Scott allegedly has] damaged . . . [the Trustees]” (Filing No. 18-50, Award 13 ¶¶ 65, 74 at 19, 21). The arbitrator stated: “On or before August 1, 2016, [Scott] shall provide to [the Trustees] a reasonably detailed written accounting of all distributions received directly or indirectly by . . . the MSCM Trust . . . from or through SVP Restaurant . . . since November 2000 arising out of or related to the management of Sky Financial” (Filing No. 18-50, Award 13 at ¶ 75 at 22).

         Scott Seldin filed a motion on November 17, 2015, asking the arbitrator to clarify whether the arbitrator believed he had no jurisdiction to require an accounting under Nebraska trust law or whether the trustees were somehow exempt from such an accounting. The arbitrator replied on November 29, 2015. He denied the motion, giving no explanation for his decision.

         Three previous lawsuits were filed in this case. First, on April 17, 2012, the Arizona Seldins filed an action in Douglas County Nebraska District Court. It was dismissed on August 8, 2012. The Arizona Seldins filed a second lawsuit in Douglas County Nebraska District Court. Following a motion to dismiss by the Omaha Seldins, the court dismissed this case likewise. The Arizona Seldins then filed a demand for arbitration. On December 27, 2012, the Arizona Seldins filed a third lawsuit in Douglas County Nebraska District Court. On April 1, 2013, the court again dismissed the lawsuit. The Arizona Seldins filed 4 appeals. On February 14, 2014, the Arizona Seldins sued Mr. Tucker and Venable, LLP, (the previous arbitrators) alleging negligence, breach of contract, tortious interference. The Douglas County Nebraska District Court granted summary judgment against the plaintiffs on all claims. The Omaha Seldins then filed a suggestion of mootness and motion for summary dismissal with the Nebraska Supreme Court. The Nebraska Supreme Court granted the motion and dismissed the appeals on August 13, 2013.

         Thereafter, the American Arbitration Association appointed Eugene R. Commander as the new arbitrator and the arbitration proceedings recommenced in October 2013. Multiple claims were bifurcated and hearings held and some decisions entered by the arbitrator. Some of the claims were still under advisement as of ...


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