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Phillips Exeter Academy v. Howard Phillips Fund, Inc.

United States Court of Appeals for the First Circuit

November 19, 1999, Decided

No. 99-1254


 [*286]  SELYA, Circuit Judge. This appeal presents a jurisdictional tangle. The seeds for the underlying litigation were sown when the late Howard Phillips (Phillips or the testator) bequeathed all the stock in a profitable Florida-based real estate development company, Dr. Phillips, Inc. (the Company), to the Howard Phillips Fund (the Fund), upon the condition that the Fund share the profits with Phillips Exeter Academy (Exeter), a private secondary school located in New Hampshire. Over time, Exeter concluded that the Company and the Fund had short-shrifted it. When a disenchanted Exeter subsequently [**2]  sued in New Hampshire's federal district court, the court determined that it lacked personal jurisdiction over the named defendants and dismissed the action. Exeter appeals. We affirm.


Phillips resided in Florida and executed his will there. When he died in 1979, he held a power of appointment over all the shares in the Company. His will directed that the stock be offered in turn to a series of family-sponsored charitable foundations. After one declined the gift, the Fund accepted it.

The testator was an alumnus of Exeter and a stalwart supporter of his alma mater. His will obligated the Fund, as a condition to its receipt of the Company's stock, to vote the stock for the election of an Exeter representative to the Company's governing board and to pay Exeter "Five (5%) percent of the net income from such stock . . . but not for more than twenty (20) years after [Phillips's] death," along with "Five (5%) percent of the net proceeds of the stock" if and when sold within the 20-year window. Phillips's will further provided that "any right to future income shall cease" upon a sale of the stock. Although these were the only firm conditions attached to the bequest, [**3]  the testator expressed his hope that the recipient of the stock would continue to focus its charitable efforts on the causes and institutions it had favored when he was active in its direction and that it would give Exeter 5% of its own net income annually for 20 years. The Fund, as a matter of practice, apparently fulfilled the first of these velleities, continuing to devote most of its resources to familiar Florida charities (including Florida chapters of national organizations). But for aught that appears, the Fund showed no interest in channeling more money to Exeter.

 [*287]  Soon after the Florida probate proceedings were completed, two things happened. First, the Fund, acting at Exeter's behest, elected John Emery - an Exeter alumnus who lives and works in New York - to the Company's board. Second, H.E. Johnson, who then served as the chief executive officer of both the Fund and the Company - the two entities were under common control, and remained so thereafter - consulted Emery about the possibility of a lump-sum commutation of the Fund's present and future obligations to Exeter. Exeter turned a deaf ear to this entreaty, and the Fund proceeded to send checks annually to Exeter in [**4]  New Hampshire, each equaling 5% of the dividend declared by the Company for the year in question.

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196 F.3d 284 *; 1999 U.S. App. LEXIS 30542 **

PHILLIPS EXETER ACADEMY, Plaintiff, Appellant, v. HOWARD PHILLIPS FUND, INC., ET AL., Defendants, Appellees.


Disposition: Affirmed.


contacts, stock, personal jurisdiction, relatedness, district court, forum state, annual, fiduciary duty, benefits, bequest, courts

Civil Procedure, In Rem & Personal Jurisdiction, In Personam Actions, General Overview, Jurisdiction, Constitutional Limits, Subject Matter Jurisdiction, Jurisdiction Over Actions, Minimum Contacts, Appeals, Standards of Review, De Novo Review, Torts, Procedural Matters, Commencement & Prosecution, In Personam Jurisdiction, Federal & State Interrelationships, Choice of Law, Significant Relationships, Estate, Gift & Trust Law, Private Trusts Characteristics, Trustees, Removal & Resignation, Governments, Fiduciaries, Intentional Torts, Breach of Fiduciary Duty, Foreseeability, Contracts Law, Contract Interpretation, Fiduciary Responsibilities, Breach, Elements