Article III standing; Lujan v Defenders of Wildlife; Effect of the absence of a valid cause of action on subject-matter jurisdiction; Steel Co v Citizens for a Better Env’t; Lexmark Int’l, Inc v Static Control Components; The “wholly insubstantial & frivolous” exception

In this action challenging the distributions of a revocable trust, the court held that the district court erred in granting defendant-David Martin’s Rule 60(b)(4) motion for relief from the judgment for plaintiffs based on lack of subject-matter jurisdiction. The alleged absence of a valid cause of action under the applicable state law did not implicate the district court’s statutory or constitutional power to adjudicate the case. The creator of the trust, Lester Martin, gave his son David his power of attorney and made him trustee of his revocable trust. Originally, Martin’s five children would inherit one-fifth of the trust. One died, leaving her two children to split her share. They later sued David and his siblings, claiming David breached his fiduciary duty as trustee by not giving them their one-fifth share to split. The district court initially granted plaintiffs summary judgment and later entered a judgment for them based on a jury verdict as to the amount of their damages. But it then granted David’s Rule 60(b)(4) motion on the basis Ohio law didn’t give “plaintiffs a right to contest David’s distributions of money from Lester’s trust.” On appeal, the court held that whether plaintiffs had a cause of action under Ohio law to sue David for breach of fiduciary duty was “irrelevant to the narrow legal question” here. Even if they “lacked a cause of action to challenge David’s distributions, the district court had subject-matter jurisdiction to decide this case.” The Supreme Court held in Steel Co it “‘is firmly established’ that ‘the absence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction’—that is, ‘the courts’ statutory or constitutional power to adjudicate the case.’” The court held that plaintiffs had constitutional standing under the three-part Lujan test. It also concluded “the ‘wholly insubstantial and frivolous’ principle has no application to this case.” It found that “when a plaintiff satisfies Article III’s justiciability requirements (like standing) and satisfies the requirements for diversity jurisdiction, federal subject-matter jurisdiction is proper—regardless of whether the legal theory of relief is frivolous under state law.” While some courts have extended the “‘wholly frivolous’ principle to the standing context[,]” the court noted that whether a plaintiff’s “legal theory under state law is frivolous is often a different question from whether the plaintiff’s claimed injury is frivolous for Article III purposes.” In this case, even if plaintiffs’ “theory of liability under Ohio law had been frivolous, the concrete injury they claim—the loss of money—isn’t.” Vacated and remanded.