Vice Chancellor Concludes That Beneficiary Adequately Stated Claims Alleging Trustee’s Failure to Convey Information And To Act
Wells Lory Hillblom v. Wilmington Trust Company, C.A. No. 2021-1034-MTZ (December 6, 2022)
In this case, the plaintiff, a trust beneficiary, sued the corporate trustee alleging that the trustee breached its fiduciary duties by failing to accept a settlement offer from the plaintiff’s former guardian’s counsel regarding fees owed to that counsel, by failing to inform the plaintiff that that offer was made, and by failing to adequately assist the beneficiary in an arbitration between that beneficiary and the plaintiff’s former guardian’s counsel over the fees owed to that counsel. The former counsel was entitled to a contingency fee award for success in obtaining a court declaration years earlier that the beneficiary was the child of a wealthy decedent, resulting in the creation of a trust to hold and manage the beneficiary’s share of the decedent’s estate. The trustee at issue was the trustee of that trust.
The trustee moved to dismiss the complaint and argued that “most” of the claims were barred by laches and, alternatively, that the plaintiff could not state a claim for relief because neither the common law nor the trust instrument placed the alleged duties to communicate or act onto the trustee in the circumstances at issue. The court denied the trustee’s motion and ruled that the trustee owed the plaintiff all duties owed by a common law trustee because the trust agreement does not clearly and unambiguously waive those duties and because it is “reasonably conceivable” that the common law or the trust instrument placed a duty on the trustee to settle the counsel fee dispute, required the trustee to inform the beneficiary of the information at issue, and to defend against the arbitration. Said another way, the court concluded that the plaintiff had adequately stated all claims and may continue to pursue them, including the claims for breach of fiduciary duties against the trustee for its handling of the settlement proposal and its failure to inform plaintiff of that proposal. In so ruling, the court explained that the trustee argued that it was not obligated to inform the beneficiary of the settlement offer because the settlement offer did not relate to the trust and was instead personal to the beneficiary, but that it (the court) expressly disagreed with that contention because at the time the settlement offer was made, the law firm that made that offer was seeking to recover funds held by the trust. Thus, the court wholly denied the motion to dismiss and allowed the claims to proceed into the discovery phase of litigation.
