UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

BRANZAN ALTERNATIVE 

INVESTMENT FUND, LLLP, on behalf 

of itself and all others similarly situated, 

 Plaintiff - Appellant, 

v. 

BANK OF NEW YORK MELLON 

TRUST COMPANY, NA, 

 Defendant - Appellee, 

and 

ENERGY CORPORATION OF 

AMERICA, 

 Defendant. 

No. 16-1068 

(D.C. No. 1:14-CV-02513-REB-MJW) 

(D. Colo.) 

_________________________________ 

ORDER AND JUDGMENT*

_________________________________ 

Before LUCERO, HARTZ, and McHUGH, Circuit Judges. 

_________________________________ 

 Branzan Alternative Investment Fund, LLLP appeals from the dismissal of its 

putative class-action claims against The Bank of New York Mellon Trust Company, N.A. 

(Trustee) for failure to comply with the procedural requirements for derivative claims. 

 

*

 This order and judgment is not binding precedent, except under the doctrines of law of 

the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive 

value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 

FILED 

United States Court of Appeals 

Tenth Circuit 

February 17, 2017

Elisabeth A. Shumaker 

Clerk of Court
2 

Branzan was an investor in units of the Eastern American Natural Gas Trust (the Trust). 

It claims that Trustee breached the terms of the trust agreement that governed liquidation 

of the Trust by, among other things, selling Trust assets without first obtaining an 

appraisal.1

 Exercising jurisdiction under 28 U.S.C. § 1291, we affirm. 

 The parties agree that Delaware law governs the dispute. As framed by Branzan, 

the sole issue on appeal is whether its claims are direct or derivative. A direct claim is 

one brought by an investor for a violation of the investor’s rights. See Tooley v. 

Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1036 (Del. 2004). A derivative 

claim, in contrast, is one brought by an investor (say, a stockholder) on behalf of the 

entity (say, a corporation) in which the investor has invested. See id. (a derivative suit 

“enables a stockholder to bring suit on behalf of the corporation for harm done to the 

corporation”). The investor seeks to increase the value of its investment by obtaining a 

recovery for the entity. To prevent derivative suits from interfering with the proper 

management of the entity, however, they are subject to certain procedural requirements. 

See In re ZAGG Inc. S’holder Derivative Action, 826 F.3d 1222, 1227 (10th Cir. 2016); 

Fed. R. Civ. P. 23.1 (requirements for derivative claims); Del. Ch. Ct. R. 23.1 (same). 

For example, under Delaware law, “the right of a stockholder to prosecute a derivative 

suit is limited to situations where the stockholder has demanded that the directors pursue 

the corporate claim and they have wrongfully refused to do so or where demand is 

 

1

 Branzan also claims that Trustee breached other trust provisions concerning voting and 

informational rights of unitholders. But it has conceded, perhaps ill-advisedly, that this 

claim rises or falls with the appraisal claim. 
3 

excused because the directors are incapable of making an impartial decision regarding 

such litigation.” Rales v. Blasband, 634 A.2d 927, 932 (Del. 1993). Branzan does not 

contend that it has complied with these procedural requirements. Rather, it says that the 

requirements do not apply because its claims are direct ones. 

 Branzan further narrows the issues before us by forgoing other potential 

arguments. It has not contested that Delaware case law regarding derivative actions in 

the corporation and limited-partnership context also applies to investment trusts. In 

addition, it agreed at oral argument that even though the Trust has been liquidated, a 

Delaware statute would permit it to pursue a derivative claim on behalf of the Trust. See

12 Del. C. § 3810(g) (relating to statutory trusts after cancellation of certificate of trust). 

And its original briefing in this court acknowledged the general rule set forth in Tooley

that the test for determining whether an action is a derivative action, rather than a direct 

claim, turns “solely on the following questions: Who suffered the alleged harm . . . and 

who would receive the benefit of the recovery or other remedy?” Tooley, 845 A.2d at 

1035. 

 Against this backdrop, Branzan’s principal arguments on appeal have been that the 

Tooley test does not apply here because Delaware law has established (1) that the test 

applies only to breach-of-fiduciary-duty claims and (2) that breach-of-contract claims 

(such as its appraisal claim) can be pursued as direct actions. After oral argument in this 

appeal, however, the Delaware Supreme Court concluded otherwise in El Paso Pipeline 
4 

GP Co., L.L.C. v. Brinckerhoff, No. 103, 2016, 2016 WL 7380418 (Del. Dec. 20, 2016); 

and Branzan concedes that the above two arguments are now foreclosed.2

 

 Branzan therefore pursues only a third argument, which it touched on in its 

opening brief: It contends that El Paso supports the proposition that the Tooley test is 

subject to exceptions based on equity and policy considerations. We disagree. El Paso

reaffirmed Tooley’s statement that the derivative-action test turns “‘solely’” on the 

answers to the two questions it poses. El Paso, 2016 WL 7380418, at *10 (quoting 

Tooley, 845 A.2d at 1033). And nothing in those two questions relates to equity or policy 

considerations. Although Branzan points to language in El Paso that speaks of policy 

concerns, that language does not relate to whether an action is a direct action or a 

derivative action. Rather, it appears only in the discussion of a distinct issue—whether a 

derivative claim survives a merger. The claim in El Paso was by a limited partner 

against the general partner for breach of a conflict-of-interest provision in the limitedpartnership agreement. See id. at *7. The court’s primary ruling was that this claim was 

exclusively a derivative claim under the Tooley test. See id. at *13. The claim-survival 

issue arose because the limited partnership, as the true owner of the claim, had been 

acquired in a merger and thereby ceded ownership of the claim to the partnership’s 

successor. See id. at *1–2. In holding that the limited partner therefore could no longer 

pursue its derivative claim, the court discussed the contrary decision by the lower court, 

 

2

 At our request the parties submitted supplemental briefs on whether (and if so how) the 

El Paso decision impacts this appeal. 
5 

which had relied on equity and policy. See id. It is this discussion, not the discussion of 

claim characterization, that Branzan has mistakenly invoked. And in any event, that 

discussion culminated in the rejection of the argument that equity and policy 

considerations justified survival of the derivative claim. See id. at *2. In our view, El 

Paso makes clear that equity and policy considerations are irrelevant to the Tooley test.3

We AFFIRM the judgment of the district court. Trustee’s Conditional Motion to 

Certify Questions to the Delaware Supreme Court, and Branzan’s request for similar 

certification are DENIED. 

Entered for the Court 

Harris L Hartz 

Circuit Judge 

 

3

 Further, we question whether equity favors Branzan. For example, although it argues 

that a derivative recovery would unjustly enrich a “wrongdoer” unitholder complicit in 

some of the alleged breaches, Aplt. Br. at 61, that is simply a reason to bring a claim 

against that wrongdoer. (For reasons not apparent in the appellate record, Branzan 

dropped its claims against the alleged miscreant unitholder in this appeal. See id. at 3 

n.1.) And Trustee could not be unjustly enriched, as it was not a unitholder. Branzan’s 

opening brief on appeal also says that equity must provide relief because “[a]t the time 

[it] filed its lawsuit the Trust had terminated and thus no derivative claims were 

possible.” Id. at 57. As previously noted, however, Branzan has now conceded that 

Delaware law permits derivative suits on behalf of terminated trusts.