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Sichenzia Ross Ference Carmel LLP’s Litigation Partner Owen Kloter Obtains Victory In Federal Court Under Doctrine Of Abstention In $2.1 Million Estate Litigation Claim

New York, NY – March 27, 2024 – Sichenzia Ross Ference Carmel LLP Litigation Partner Owen Kloter obtained a victory for the Firm’s clients in the Southern District of New York under the rarely-invoked Federal Court doctrine of abstention in Conrad v. Fisher et al., a dispute concerning $2.1 million in real estate proceeds relating to an ongoing will and trust contest in the New York County Surrogate’s Court, In re. Will of McDearmon.

The Firm’s clients, a married couple, were the primary beneficiaries under a decedent’s will. They had filed objections to the probate of decedent’s alleged subsequent will in the New York County Surrogate’s Court in June 2021, and later, a petition to invalidate a trust allegedly created by the decedent, both of which would disinherit them if validated. While these disputes and others were proceeding in the Surrogate’s Court, the decedent’s estate sold his Manhattan cooperative apartment to a purchaser for approximately $2.1 million. In July 2021, the parties to the Surrogate’s Court litigation stipulated that the co-op sale proceeds would be held in escrow pending resolution of the various disputes before the Surrogate’s Court, with 50% being held by each party’s attorney.

Despite the existence of the stipulation, the trustee of the alleged trust filed a separate lawsuit in the Southern District of New York in December 2022, alleging claims of conversion and unjust enrichment against the Firm’s clients and seeking a declaratory judgment that the Trust was entitled to possession of all of the co-op sale proceeds; in essence seeking to outmaneuver the pending determinations, and the protections afforded to the defendants, by the Surrogate’s Court with respect to the alleged will and trust.

Although the Southern District determined that it had subject matter jurisdiction to consider the Trustee’s claims, in deciding the defendants’ motion to dismiss, the Court agreed with the defendants’ arguments and refused to exercise that jurisdiction, invoking the rarely-applied Supreme Court doctrine of abstention set forth in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976). The Southern District’s opinion found that “[t]he questions of state law, the Surrogate’s Court’s ability to protect the parties’ rights, and the risk of piecemeal litigation with inconsistent outcomes, all weigh in favor of this Court abstaining in favor of the Surrogate’s Court proceedings”, and stayed the federal case pending the Surrogate’s determination of the various disputed issues in the ongoing will and trust contest.

Owen Kloter is a partner in Sichenzia Ross Ference Carmel’s Business Litigation & Arbitration Group. He litigates general commercial litigation matters, broker-dealer and insurance broker claims, trust and estate disputes, and real estate disputes, principally in New York, New Jersey, and Connecticut.

Sichenzia Ross Ference Carmel LLP is a full-service law firm with a nationally-recognized corporate, securities and litigation practice that provides experienced representation in all matters involving the securities industry. In addition to handling routine to complex commercial matters, SRFC’s litigation practice specializes in representing public and private companies, private funds, investment banks, broker-dealers, investment advisers, placement agents, directors and officers, special committees, and corporate and individual investors in securities and commercial litigation, arbitration, regulatory actions and enforcement defense, including class action lawsuits, shareholder derivative actions, and matters involving allegations of fraud, misrepresentation or other securities violations. The firm complements its core practice areas with an established tax, commercial real estate and trusts and estates practice.