Updated 1/31/12 at 3:25 p.m.
The widow of a Taiwanese billionaire has lost her attempt in a Washington federal court to reclaim billions of dollars in assets she claims were diverted to one of several trusts controlled by rival family members.
In a ruling (PDF) published Friday, U.S. District Judge James Boasberg found that because the widow had failed to prove the citizenship of the trust's beneficiaries - as opposed to just the trustee - the court didn't have jurisdiction to hear the case. Boasberg did order the defendants to turn over information on the beneficiaries within two weeks, however, leaving the door open for Wang to try again.
Yueh-Lan Wang was legally married to Yung-Ching Wang, known as Y.C. Wang, for 72 years. Y.C. Wang, who died in 2008, founded the Formosa Plastics Group in the 1954 and was named the 178th wealthiest person in the world the year before he died by Forbes magazine.
But, as Boasberg wrote in Friday’s opinion, “if Y.C. was a businessman first, he was a family man second.” Wang had no children with Yueh-Lan Wang, but had nine children with two other women who were not his wife.
Y.C. Wang didn't leave a will. According to the complaint (PDF) first filed in October 2010, Yueh-Lan Wang accused one of these women and her children, known as the “Third Family,” of manipulating Y.C. Wang as he grew older and sicker to gain control of his assets, and then diverting money to separate trusts in the U.S. and overseas to reduce Yueh-Lan Wang’s share of the marital estate.
Yueh-Lan Wang had a good relationship with her husband’s children from his “Second Family,” according to the complaint, including Winston Wen-Young Wong, Y.C. Wang’s oldest son. The complaint also accused the Third Family of using the trusts to keep power out of the hands of the Second Family.
Under Taiwanese law, Yueh-Lan Wang is entitled to 50% of the marital estate. She sued for her share of whatever funds the Third Family had allegedly moved to the trusts between 2003 and 2008.
Although much of the litigation surrounding Y.C. Wang’s estate is still being fought out in New Jersey and Hong Kong, Yueh-Lan Wang filed suit in Washington because one of the trusts at issue, New Mighty U.S. Trust, and its trustee are both located in the District. The defendants moved to dismiss (PDF) the case last March, arguing, among other things, that Yueh-Lan Wang had failed to establish diversity jurisdiction.
Yueh-Lan Wang, who lives in Taiwan, had argued that she only needed to show that the trust and its trustee are located in a different location from her own to establish diversity jurisdiction. Boasberg wrote that while the U.S. Court of Appeals for the D.C. Circuit hasn’t set out guidelines for deciding the citizenship of a trust, the U.S. Supreme Court and other circuits have held that the citizenship of the trust’s beneficiaries is a key factor.
In Carden v. Arkoma Associates, the Supreme Court ruled in 1990 that citizenship is determined based on the “members” of an entity – in this case, the trust. The beneficiaries of the trust are its “members,” Boasberg found, although he didn’t address whether the citizenships of the trustees should also matter.
“Regardless of whether a trustee’s citizenship is also relevant, a determination that beneficiaries’ citizenships are necessary is sufficient to decide the matter at hand,” he wrote. “In order to survive the Motion to Dismiss, therefore, Plaintiff must have made sufficient allegations to establish the citizenship of the trust’s beneficiaries. She has not done so.”
Still, Boasberg ordered the defendants to turn over a list of all the trust’s beneficiaries within fourteen days. “To simply dismiss the case without prejudice, however, may well work an injustice upon Plaintiff if she remains in the dark about the identities and citizenship of the beneficiaries of the NM-US Trust,” he wrote.
“Armed with this data,” Boasberg concluded, “plaintiff may decide whether she is entitled to another foray in this Court.”
Mark Stoutenberg of Gibbons in New York, lead counsel for Yueh-Lan Wang, declined to comment. New Mighty U.S. Trust is being represented by David Leland, John Gardiner and Andrew Muscato from Skadden, Arps, Slate, Meagher & Flom; they declined to comment.