Judge narrows Hibbing stolen inheritance lawsuit

DULUTH — A judge has narrowed the scope of a lawsuit that claims a Colorado couple pressured a Hibbing vulnerable adult to sign over a $250,000 inheritance with cooperation from a negligent local bank.

Judge Jill Eichenwald in late December threw out all but one claim against American Bank of the North in the civil case brought by the estate of Cheryl Shega in 2020.

Eichenwald also dismissed a portion of the case against the couple, Laura and Stephen Craig, who reportedly spent the entire sum within two years of receiving the payout over the objections of Shega’s siblings.

The ruling, in response to summary judgment motions for both defendants, comes amid a nearly three-year legal battle in State District Court in Duluth and limits the avenues that could be contested at an upcoming trial.

Perhaps most significantly, the judge concluded that there was not sufficient evidence to show that the bank knew Cheryl was a vulnerable adult when employees allowed her to transfer beneficiaries on several certificates of deposit to Laura, her purported long-lost cousin.

Eichenwald also said she did not see evidence that the bank had notice that the certificates were to be protected under a family trust established by Cheryl’s parents before they died. She left in place only a negligence claim against the financial institution, which now operates as Park State Bank.

“The alleged primary tort-feasors are the Craigs,” the judge wrote in a 22-page opinion. “The alleged action the bank took in aiding and abetting was releasing assets to the Craigs. However, the action the Craigs took in allegedly exploiting Cheryl, a vulnerable adult, was making Laura the beneficiary of the CDs.

“There is no sufficient evidence to show that the bank was aware that this action by Cheryl was being done because of some undue influence, exploitation or tortious interference by Laura Craig. The only other action the bank took, releasing the assets, was not a part of the alleged tortious conduct of the Craigs.”

Amy Mason, an attorney representing the estate through Cheryl’s brother, Greg Shega, said she believes the court misapplied the law and she intends to appeal.

“This court has been presented with ample evidence to support a finding that the bank did actively assist the Craigs,” Mason wrote. “In summary, this evidence shows the bank ignored multiple requests for them to hold onto the money, and instead actively attempted to locate the Craigs and then rushed to release the funds to the Craigs, the day after the request was made for release, all the while failing/refusing to communicate with Cheryl’s siblings.”

The lawsuit, first reported by the News Tribune in February 2021, states that Cheryl was “very low-functioning” and childlike — never officially diagnosed with mental illness but spending nearly her entire 67 years living at her parents’ rural Hibbing home, without working or maintaining significant relationships outside the immediate family.

Her mother, Charlene, died suddenly in 2015, and the lawsuit says Cheryl was unable to provide satisfactory care to her father, Ed, who would die in 2017, or herself, living out her final days emaciated in a squalid home.

Her siblings, both of whom live in the western United States, said they had no idea that their parents had amassed a small fortune through Ed’s 42 years of work in the Iron Range mines. They said they were shocked to discover Cheryl had been secretly communicating with Laura, who had not been seen by the family since leaving to join a religious sect in 1980, and had signed over the certificates that they believed to be protected by the trust.

The lawsuit claims that, through years of messages and phone calls, Laura pushed alternative health remedies and religious beliefs, while encouraging Cheryl to frugally conserve the money her parents had set aside for her. She was, according to the complaint, encouraged to drift away from her two siblings and nephew, who initially stood to inherit the substantial deposits.

Attorneys for the bank and the Craigs asked the court to dismiss nearly all claims, claiming Cheryl did not meet the legal definition of a “vulnerable adult” and asserting the change in beneficiaries and distribution of funds to Laura were proper and legal.

Eichenwald largely sided with the bank, dismissing claims that included tortious interference and exploitation of a vulnerable adult.

“There is no evidence the bank was aware that Cheryl was a vulnerable adult or if she had any struggles when she changed the beneficiaries on the CDs,” the judge wrote. “Cheryl had limited contact with the bank. There is no evidence that she appeared or was unable to conduct business appropriately.”

She further ruled that there was “not sufficient evidence” to support a claim that the bank was aware the certificates were trust assets. The bank never produced a copy of the document in discovery, but the Shega family maintained there was “significant circumstantial evidence” that the parents had followed through when they established the trust in 2009 to support Cheryl.

An attorney for Cheryl’s sister, Nancy Weiser, sent a letter to the bank 10 days after her May 2019 death expressing concerns about exploitation and asking employees to hold off on payment to Laura — a request that was ignored in July 2019. But Eichenwald was not persuaded by that letter.

“The bank had no legal obligation to abide by the request not to release funds, and while releasing the funds did allow the (Craigs) to use the funds making any possible judgment more difficult, it is the acts of the (Craigs) that created any damages, not the act of the bank releasing the funds to the designated beneficiary,” she wrote.

The judge did allow the negligence claim to proceed, heavily citing the report of a banking expert retained by the plaintiff.

The expert, R. Donald Keysser, opined that the bank failed to follow the “Prudent Person Rule” used by financial institutions. He concluded that the bank could have been aware of the trust, allowed Cheryl to force her father’s signature and authorized the transfer to Laura in the face of “serious doubts” about the handling of the situation.

Keysser additionally wrote that the bank would have been protected by the Minnesota Multi-Party Accounts Act had it held onto the funds, but instead lost its legal shield by quickly releasing the money to Laura.

“There is sufficient evidence to create a genuine issue of material fact that the bank failed to exercise such care … as persons of ordinary prudence usually exercise under such circumstances, and that failure caused damages to plaintiff,” Eichenwald wrote.

As for the Craigs, the judge said there was sufficient cause for a jury to determine whether the couple preyed on a vulnerable adult and unjustly enriched themselves by causing her to switch beneficiaries.

“The Craigs were family to Cheryl and had ongoing contact with Cheryl during the relevant time periods,” Eichenwald wrote. “Given that other people involved in Cheryl’s life at that same time noticed Cheryl struggled with daily life, there is a material issue of fact as to whether Cheryl was a vulnerable adult and if the Craigs knew that.”

The judge said it’s clear the Craigs “received and kept the monetary funds of the CDs (but) it remains to be determined if keeping those funds was illegally, unlawfully or morally wrong” as a jury needs to determine whether Cheryl had the necessary capacity to make the beneficiary changes.

Mason, the Shega siblings’ attorney, indicated at an October hearing that financial records showed the Craigs “frivolously” blew through most of the funds on items and services including groceries, gas, tires, medical and veterinary bills, new furniture, tattoo removal, dog training and family counseling.

Chuck Shreffler, the Craigs’ attorney, argued his clients’ handling of money “bears absolutely no relevance to the case” and maintained that most of the inheritance has been eaten up by the protracted legal battle.

Eichenwald did dismiss counts alleging deception/fraud and intentional misrepresentation that were based on allegations that Laura caused a rift between Cheryl and her siblings, attempted to interfere with medical care to preserve the funds and significantly increased communications around the dates when Cheryl made the beneficiary changes.

“Plaintiff has only provided conjecture and inferences, which even if drawn in a light most favorable to the plaintiff, do not create an issue of material fact as to deception, fraud or misrepresentation,” the judge wrote. “Plaintiff has not provided sufficient evidence to show a link between Laura and Cheryl’s communications and the beneficiary designations of the CDs.”

Eichenwald also tossed a count of undue influence against Stephen Craig, writing that he had never met Cheryl, had no communication with the bank and his contact with Cheryl was limited to sharing two videos and sending two Facebook friend requests that went unanswered.

Claims remaining in the suit are undue influence against Laura Craig, exploitation of a vulnerable adult against the Craigs, unjust enrichment against the Craigs, tortious interference against the Craigs and negligence against the bank.

The case is scheduled to go before a Duluth jury starting March 21. But that could be delayed if Eichenwald grants a request from the plaintiff to allow for an immediate challenge to her findings.

Mason contended the judge misapplied the vulnerable adult law, writing that the standard is “whether or not the individual qualifies as a vulnerable adult, not the knowledge of a defendant.” The bank, nonetheless, did have knowledge when it was warned by Nancy and her attorney in advance of releasing the funds, she wrote.

The attorney also pointed to an “inaccurate finding” regarding the false statement claims, citing evidence that Cheryl and Laura did discuss the beneficiary change and arguing that a jury could determine whether “Laura’s statements related to her power to heal, her love of Cheryl and/or her siblings being out to get her were fraudulent.”

“Through this ruling, this court incorrectly weighted the evidence, rather than limiting the ruling to a determination of whether disputed facts exist,” Mason wrote.

As the order is not currently appealable, Mason requested that Eichenwald enter final judgment on the dismissed counts so the decision could be reviewed before the parties go through the time and expense of a trial on the remaining claims.

Eichenwald had not addressed the request as of Friday morning, nor had attorneys for the defendants.