March 2022
In the Matter of The Jeremy Paradise Dynasty Trust and The Andrew Paradise Dynasty Trust, C.A. No. 2021-0354-KSJM (March 22, 2022)
In this decision, Chancellor McCormick denied a motion filed by trust fiduciaries (the “Fiduciaries”) for issuance of a commission for documents and testimony (the “Motion”) directed to Vigomar Realty LLC (“Vigomar”) on February 14, 2022. The Motion seeks to compel non-party Vigamor to produce four categories of documents and designate a corporate representative to attend a deposition on Wednesday, March 23, 2022.
According to the Motion, Vigamor performed work as a contractor at a property indirectly owned by the Jeremy Paradise Dynasty Trust (the “Trust”) and that Petitioner Jeremy Paradise (“Petitioner”), while serving as the property manager, may have improperly or dishonestly managed the funds of the Trust paid to Vigamor, as evidenced by the limited renovations observed by the Fiduciaries in comparison to the amount of money paid to Vigamor by the Trust to complete such renovations. In support of the Motion, the Fiduciaries assert that Vigamor may have received funds from the Trust at Petitioner’s direction for unauthorized purposes, which the Fiduciaries claim is relevant to their unclean hands defense. In reply, Petitioner objects to the Motion, arguing that it is overly broad, unduly burdensome, and wholly irrelevant to the claim for reformation of the Jeremy Paradise Dynasty Trust Agreement (the “Trust Agreement”). The Fiduciaries argue that the Petitioner does not have standing to object to third-party discovery requests and that the discovery requested is neither overly broad nor unduly burdensome.
Pertaining to the issue of whether the Petitioner has standing to object to third-party discovery requests, the Fiduciaries relied on the Court of Chancery’s 2005 decision in Cede & Co. v. Joule Inc. explaining “that when a subpoena is issued to a non-party, a party does not have standing to object to the subpoena unless production of documents pursuant to the subpoena would violate a privilege held by the objecting party.” Finding that decision not to be fully on point as to the issue at hand, Chancellor McCormick found that a party does have standing to object to third-party discovery that imposes a burden on the party. Therefore, because the Petitioner framed Petitioner’s objection based on the burden that the commission will impose on him, Chancellor McCormick rejected the Fiduciaries’ argument that Petitioner lacks standing to assert the objection.
Chancellor McCormick cited Court of Chancery Rule 26, which states that parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case. The court is to limit discovery requests if the discovery sought is not proportional to the needs of the case. The Fiduciaries claim their requests are relevant based on their argument that those requests pertain to the Fiduciaries’ unclean hands defense. The defense of unclean hands is unavailable unless the opposing party’s inequitable conduct has an immediate and necessary relationship to its claims. If a plaintiff’s claim grows out of, depends upon, or is inseparably connected with his own prior fraud, a court of equity will deny any relief.
The commission at issued sought information and documents from after the time period that the Trust Agreement was executed, which caused a problem for the Fiduciaries’ theory of unclean hands because the Motion’s requests are seemingly irrelevant to the question of reformation. Further, the Chancellor concluded that the requests do not have an “immediate and necessary relationship to the claim at issue.”
Consequently, Chancellor McCormick concluded that the Petitioner’s objections had merit and denied the Motion. Chancellor McCormick qualified her decision and stated that if she later concludes—after evaluating the evidence presented at trial—that the discovery sought by the commission is relevant, she will seemingly allow it to proceed at that time.
