Chancellor Denies Motion To Remove Fiduciaries

Delaware Fiduciary Litigation Blog

Posted September 10, 2021

In the Matter of The Jeremy Paradise Dynast Trust and The Andrew Paradise Dynasty Trust, Cons. C.A. No. 2021-03540 KSJM (August 17, 2021)

       In this case, Chancellor McCormick denied Petitioner’s motion for immediate removal of fiduciaries (the “Fiduciaries”) and appointment of a receiver pendente lite as to two dynasty trusts. The Petitioner alleged, inter alia, that the Fiduciaries were hostile for failing to discuss removing two of the trustees, refusing to increase monthly distributions without reason, refusing to provide copies of fully executed trust agreements, and for allegedly maligning the Petitioner’s reputation. The Chancellor found these arguments unpersuasive in light of the high standard required to remove a trustee and appoint a receiver pendente lite.

       The removal of a trustee is only appropriate in extreme situations and, thus, courts utilize it only sparingly. Removal is only appropriate when there is hostility between the trustees and the beneficiaries that threatens the efficient administration of the trust. To justify the appointment of a receiver pendente lite, there must exist an urgent need for immediate protection against injury. A mere possibility of danger and loss does not warrant the appointment of a receiver pendente lite.

        Although the Petitioner was able to establish friction between the Petitioner and the Fiduciaries, the Petitioner did not meet the high standard required to compel the appointment of a receiver pendente lite. For example, Petitioner did not allege that the Fiduciaries took profit for themselves or impacted the Trust in a way that would permanently affect the Beneficiaries. Petitioner also did not allege any need for immediate protection, instead pointing to the “prospect of further damages.” Thus, the Petitioner could not establish the degree of hostility required to justify the appointment of a receiver pendente lite or removal of the Fiduciares.

Author(s)

Madeline Silverman – Law Clerk