Lee Graham Shopping Center, LLC v. Estate of Diane Z. Kirsch

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2348
LEE GRAHAM SHOPPING CENTER, LLC,
Plaintiff – Appellee,
and
LEE GRAHAM SHOPPING CENTER LIMITED PARTNERSHIP; PAUL V.
ZEHFUSS; SITTA M. ZEHFUSS; NICOLE M. ZEHFUSS; PAUL H.
ZEHFUSS; T. EUGENE SMITH,
Third Party Defendants – Appellees,
v.
ESTATE OF DIANE Z. KIRSCH; DIANE Z. KIRSCH FAMILY TRUST;
SEPARATE TRUST FOR THE BENEFIT OF WAYNE CULLEN,
Defendants – Appellants.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Liam O’Grady, District
Judge. (1:13-cv-189-LO-TCB)
Argued: December 9, 2014 Decided: February 2, 2015
Before WILKINSON, SHEDD, and THACKER, Circuit Judges.
Affirmed by published opinion. Judge Shedd wrote the opinion in
which Judge Wilkinson and Judge Thacker joined.
ARGUED: Roger Alexander Hayden, II, PASTERNAK & FIDIS, P.C.,
Bethesda, Maryland, for Appellants. Kerr Stewart Evans, Jr.,

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EVANSSTARETT PLC, Fairfax, Virginia, for Appellees. ON BRIEF:
Nathan S. Brill, PASTERNAK & FIDIS, P.C., for Appellants.

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SHEDD, Circuit Judge:
In May 2011, Diane Z. Kirsch assigned her limited
partnership interest (“Interest”) in the Lee Graham Shopping
Center Limited Partnership (“Partnership”),1 a business closely
held by members of two families, to the Diane Z. Kirsch Family
Trust (“Kirsch Trust”). By the terms of the Kirsch Trust, the
Interest was to pass to another trust, established for the
benefit of her long-term companion Wayne Cullen (“Cullen
Trust”), upon Kirsch’s death. Kirsch died in January 2012, and
at that time, the Interest passed to the Cullen Trust as
provided by the Kirsch Trust. In February 2013, the Partnership
filed suit in the Eastern District of Virginia, seeking a
declaratory judgment that the Partnership Agreement forbids the
transfer of the Interest to the Cullen Trust. Cullen asserted a
number of related counterclaims. The district court granted
summary judgment to the Partnership on all claims, and Cullen
now appeals. For the reasons that follow, we affirm.
I.
1 Following the events underlying this dispute, the Lee Graham
Shopping Center Limited Partnership was converted to an LLC. For
ease of reference and to avoid confusion, we use the term
“Partnership” to refer to this entity in both its past and
present forms.

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The Lee Graham Shopping Center partnership, in Falls
Church, Virginia, was founded as a general partnership between
Dr. Paul E. Zehfuss and T. Eugene Smith in 1969. In 1984,
Zehfuss and Smith converted the general partnership to a limited
partnership and adopted a partnership agreement (“Agreement”)
memorializing the change. Dr. Zehfuss then gifted interests of
four percent in the Partnership to several family members,
including his daughter, Diane Kirsch. He died in May 1985,
leaving additional interests in the Partnership to Kirsch
through his will.
By 2011, Kirsch had been diagnosed with terminal cancer and
began the process of estate planning. In May 2011, she assigned
her limited partnership Interest to the Kirsch Trust, which she
retained the right to alter, amend, or revoke until her death.
When she died on January 22, 2012, the Kirsch Trust held a 21
percent Interest in the Partnership, and it provided for the
transfer of that Interest to the Cullen Trust upon her death.
Acting in his capacity as trustee of the Kirsch Trust, Cullen
transferred the Interest to the Cullen Trust. Kirsch’s will was
subsequently probated in Maryland in June 2012.
In February 2013, the Partnership filed suit in the Eastern
District of Virginia, seeking a declaratory judgment that
Kirsch’s transfer of the Interest to the Kirsch Trust became
void as of the date of her death, because the Agreement forbids

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gift transfers to non-family members, and the Kirsch Trust
provided for transfer of the Interest to a non-qualifying person
– the Cullen Trust. The suit was filed in federal court on the
basis of diversity jurisdiction, because Cullen is a resident of
Maryland and the Partnership is a Virginia entity. Cullen
asserted a number of defenses and related counterclaims. The
parties filed cross-motions for summary judgment, and the
district court granted summary judgment to the Partnership on
all counts. Cullen appealed that decision to this court.
II.
Cullen first argues that the district court lacked
jurisdiction because this case falls within the probate
exception to federal diversity jurisdiction.2 Determining whether
2 In addition to challenging the district court’s rulings on
jurisdiction and the construction of the Agreement, Cullen
raises a number of other issues on appeal. These are: (1) the
transfer restrictions in the Agreement are unlawful restraints
on alienation in violation of Virginia law; (2) the general
partners either waived their right to challenge the transfer of
the Interest to Cullen or consented to that transfer by failing
to contest it in a timely fashion; (3) a genuine dispute of
material fact exists as to whether Paul V. Zehfuss, a general
partner and Kirsch’s brother, intentionally deceived Kirsch into
believing that the Partnership would accept the transfer to
Cullen as valid; (4) the district court erred in denying Cullen
the opportunity to conduct discovery; (5) the Partnership’s
later conversion to an LLC was unlawful because Cullen did not
vote on the conversion; (6) Cullen was wrongfully denied an
accounting and the right to inspect the Partnership’s books and
records; (7) the Partnership has converted at least $37,800.00,
(Continued)

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subject matter jurisdiction exists is a question of law that we
review de novo. In re Kirkland, 600 F.3d 310, 314 (4th Cir.
2010).
The Supreme Court has recently spoken to the scope of the
probate exception in Marshall v. Marshall, 547 U.S. 293 (2006).
In that case, the Court held that
the probate exception reserves to state probate courts
the probate or annulment of a will and the
administration of a decedent’s estate; it also
precludes federal courts from endeavoring to dispose
of property that is in the custody of a state probate
court. But it does not bar federal courts from
adjudicating matters outside those confines and
otherwise within federal jurisdiction.
Id. at 311-12. Thus, after Marshall, the probate exception is
limited to two categories of cases: (1) those that require the
court to probate or annul a will or to administer a decedent’s
estate, and (2) those that require the court to dispose of
property in the custody of a state probate court.
plus interest, in partnership distributions that rightfully
belong to Cullen as the owner of the Interest; (8) Paul V.
Zehfuss’s misrepresentations regarding Kirsch’s rights with
respect to the Interest constitute negligence, fraud, and
intentional interference with contract; (9) the district court
lacked personal jurisdiction over Cullen; and (10) the district
court should have ordered Paul V. Zehfuss joined as a necessary
party to this lawsuit. We have independently reviewed the record
and we find that each of these contentions has either been
waived or has no merit.

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The parameters of the probate exception cannot be read so
broadly as to include this case. In Marshall, the Supreme Court
clarified that the proper scope of the exception is “narrow.”
Id. at 305, 307. Thus, it applies only if a case actually
requires a federal court to perform one of the acts specifically
enumerated in Marshall: to probate a will, to annul a will, to
administer a decedent’s estate; or to dispose of property in the
custody of a state probate court. A case does not fall under the
probate exception if it merely impacts a state court’s
performance of one of these tasks. See, e.g., Three Keys Ltd. v.
SR Util. Holding Co., 540 F.3d 220, 227 (3d Cir. 2008) (“Insofar
as [prior cases] interpreted the probate exception as a
jurisdictional bar to claims ‘interfering’ with the probate, but
not seeking to probate a will, administer an estate, or assume
in rem jurisdiction over property in the custody of the probate
court, that interpretation was overbroad and has been superseded
by Marshall.”) (internal citation omitted).3
This case requires the court to interpret the terms of the
Agreement and the Kirsch and Cullen Trusts, not the terms of
Kirsch’s will. The declaratory judgment requested in this case
3 Other circuits have also recognized that Marshall sharply
curtailed the scope of the probate exception. See Curtis v.
Brunsting, 704 F.3d 406, 407 (5th Cir. 2013); Jimenez v.
Rodriguez-Pagan, 597 F.3d 18, 24 (1st Cir. 2010); Lefkowitz v.
Bank of New York, 528 F.3d 102, 105 (2d Cir. 2007).

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will not order a distribution of property out of the assets of
Kirsch’s estate, although it may affect future distributions.
Further, the Interest at issue is currently held by the Cullen
Trust, and thus is not property in the custody of the Maryland
probate court. Accordingly, this case falls into neither of the
narrow classes of cases defined in Marshall.4 The probate
exception therefore does not preclude federal court jurisdiction
in this case, and it was properly before the district court
under normal principles of diversity jurisdiction pursuant to 28
U.S.C. § 1332.
III.
Having established that the district court properly
exercised jurisdiction over this case, we turn now to review its
decision on the merits. We review the district court’s grant of
summary judgment in favor of the partnership de novo. Henry v.
Purnell, 652 F.3d 524, 531 (4th Cir. 2011). We view the evidence
4 Indeed, Cullen’s argument for the application of the probate
exception in this case resembles the argument rejected in
Marshall itself. There, the Supreme Court held that a claim of
tortious interference with the expectancy of an inheritance did
not fall within the probate exception. Marshall, 547 U.S. at
314. Like the tortious interference claim in Marshall, the
contract interpretation question involved here may affect the
outcome of the distribution of estate assets, but that question
itself requires neither an interpretation of a will nor a
distribution of estate assets.

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and all reasonable inferences from it in the light most
favorable to Cullen, the non-moving party. Id. The parties agree
that the interpretation of the Agreement is governed by Virginia
contract law. See Agreement Section 9.09 (“[A]ll questions with
respect to the interpretation or construction of this Agreement
and the rights and liabilities of the parties hereto shall be
determined in accordance with the laws of the Commonwealth of
Virginia.”); Donnelly v. Donatelli & Klein, Inc., 519 S.E.2d
133, 138 (Va. 1999) (Virginia partnership agreements are
interpreted as contracts between the parties).
We must decide whether the Agreement permitted Kirsch to
transfer her Interest to Cullen as a gift through the Kirsch
Trust and the Cullen Trust. Cullen argues that the transfer is
permissible because the introductory clause of Section 6.02
creates a default rule that all limited partnership interests
are freely assignable. The Partnership, on the other hand,
argues that the transfer is prohibited because Sections 6.02(a)
and 6.02(e) provide the exclusive mechanisms by which an
interest may be transferred. For the reasons below, we believe
that the Partnership’s reading of the Agreement is correct.
The central interpretive question in this case is whether
the Agreement permits gift transfers to non-family members.
Although far from a model of clarity, the Agreement permits only
one reasonable interpretation on this point. Section 6.02,

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titled “Assignment of Limited Partner’s Interest,” provides at
the outset that “[t]he interest of each Limited Partner in the
Partnership shall be assignable subject to the following terms
and conditions.” J.A. 34. That introductory clause is followed
by Sections 6.02(a)–(e), which then set out those terms and
conditions.
Section 6.02(a), titled “Limitations on Assignment,”
governs the circumstances under which a limited partner may sell
his partnership interest to a person making a “bona fide written
offer” to purchase it. J.A. 34-35. Before a limited partner may
accept such an offer, he must offer to the Partnership itself
the opportunity to repurchase his interest on the same terms as
those contained in the offer. If the Partnership refuses, he
must then offer the same opportunity to all current partners. In
essence, 6.02(a) creates a right of first refusal for the
Partnership and for current partners when there is an offer to
purchase. Sections 6.02(b), (c) and (d) further elaborate on
6.02(a)’s purchase offer framework by describing, respectively,
the circumstances under which an assignee of a limited
partnership interest may become a limited partner, the effect of
the assignment of a limited partnership interest, and the
definition of the term “bona fide offer.”
Section 6.02(e), titled “Family Transfers,” then removes
transfers to family recipients from the framework of 6.02(a).

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Under 6.02(e), “[t]he sale or other transfer by a Partner,
whether inter vivos or by will, of his Partnership interest ...
shall not be subject to the restrictions or limitations of
Section 6.02(a)” if the sale or transfer is made to a member of
a certain group of family recipients, defined as the partner’s
“spouse, parent, descendant, or spouse of a descendant, or to a
trust of which any of said persons are beneficiaries.” J.A. 37.5
Thus, 6.02(e) extends favorable treatment to family members in
two ways: a purchase offer transfer to a family recipient of the
type authorized in 6.02(a) is not subject to 6.02(a)’s right of
first refusal provisions, and a non-purchase offer transfer to a
family recipient is permitted.
The clear reading of Section 6.02 as a whole is that
interests may only be assigned pursuant to the terms of either
6.02(a) or 6.02(e). Any broader right of assignability renders
6.02’s introductory stipulation that interests are assignable
“subject to the following terms and conditions” superfluous. See
TM Delmarva Power, L.L.C. v. NCP of Virginia, L.L.C., 557 S.E.2d
199, 200 (Va. 2002) (“[N]o word or clause in a contract will be
treated as meaningless if a reasonable meaning can be given to
it, and parties are presumed not to have included needless words
5 Although Cullen had been Kirsch’s companion for many years
prior to her death, she and Cullen had never married. Therefore
Cullen is not a family recipient as defined in 6.02(e).

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in the contract.”) This statement is immediately followed by
6.02(a)’s purchase process and the limitations and explanations
of that process in 6.02(b)–(d). 6.02(e) is the only Section in
6.02 that contemplates any transfer outside of the 6.02(a)
process, and it does so by explicitly removing itself from the
terms of 6.02(a). The resulting inference, therefore, is that a
transfer may take place only under the purchase offer process
outlined in 6.02(a) or as a family transfer pursuant to 6.02(e).
Cullen, however, argues that the operative clause of
Section 6.02 is the introductory clause, which reads “[t]he
interest of each Limited Partner in the Partnership shall be
assignable” (emphasis added). The subsequent phrase “subject to
the following terms and conditions,” he argues, exists only to
denote that in certain special cases involving offers to
purchase, additional strictures apply. Finally, he argues that
6.02(e) governs only the special case of purchase offer
transfers among family members because the only change it
effects is to exempt those transfers from the 6.02(a) framework.
In the absence of a purchase offer, he concludes, no
restrictions are applicable and interests are freely assignable
to anyone under the introductory clause of 6.02.
A close examination of Section 6.02(e) reveals that
Cullen’s reading is not correct. 6.02(e) covers both purchase
offers and other types of transfers between family members. If

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these other transfers were allowed under Cullen’s reading of
6.02, there would be no need for 6.02(e) to exempt them from the
provisions of 6.02(a). Such a reading would render these words
in 6.02(e) superfluous, and thus we must reject it. See TM
Delmarva Power, 557 S.E.2d at 200; Roanoke Marble & Granite Co.
v. Standard Gas & Oil Supply Co., 154 S.E. 518, 520 (Va. 1930)
(it is a “settled rule of construction ... that contracts must
be construed so as to give effect to every part thereof”).
This favored treatment of family is further evidenced by
who benefits from the right of first refusal contained in
6.02(a). At the time the Agreement went into effect, all
interests in the Partnership were held by its three partners:
Smith and Dr. Zehfuss, the founders of the Partnership, and Paul
V. Zehfuss, the founding partner’s son. Section 6.02(a) protects
this family ownership by providing that before an outsider can
purchase a Partnership interest, a right of first refusal must
be given first to the Partnership and then to existing partners.
The effect of this provision is thus to enable the families who
own the Partnership to retain ownership if they so desire. The
only exception to this right of first refusal for family members
appears in 6.02(e), where a family right of first refusal is not

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needed because only family members are eligible to obtain
partnership interests under 6.02(e).6
Finally, because we find that the Agreement unambiguously
prohibits gift transfers of interests to non-family members,
there is no need to remand for discovery on the meaning of the
Agreement. See Pocahontas Mining Ltd. Liab. Co. v. CNX Gas Co.,
LLC, 666 S.E.2d 527, 531 (Va. 2008) (“When the writing,
considered as a whole, is clear, unambiguous, and explicit, a
court asked to interpret such a document should look no further
than the four corners of the instrument.”). As a result, we
conclude that the Agreement prohibits the transfer of the
Interest to the Cullen Trust, which benefits a non-family
member.
IV.
For the foregoing reasons, the judgment of the district
court is
AFFIRMED.
6 Not only does Cullen’s reading ignore the favorable treatment
the Agreement provides for family members, it in fact favors
non-family members. Under his view, family members receiving
gift transfers would, under 6.02(e), be explicitly required to
obtain the written permission of the general partners to become
full limited partners, while there would be no such explicit
requirement for non-family members.

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