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 CORPOR ATION 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 Inve stment Fund, LLLP appeals from the dismissal of its putative class-action claims ag ainst The Bank of New York Mellon Trust Company, N.A. (Trustee) for failure to comply with the procedural requ irements for derivative claims.

* This order and judgment is not binding precedent, except un der the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, howeve r, for its persuasive value consistent with Fed. R. A pp. 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 Court2 Branzan was an investor in un its 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, selli ng Trust assets without first obtaining an appraisal. 1 Exercising jurisdiction under 28 U.S.C. § 12 91, we affirm. The parties agree that Delaware law gove rns the dispute. As framed by Branzan, the sole issue on appeal is wh ether its claims are direct or derivative. A direct claim is one brought by an investor for a viol ation 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 in vestor (say, a stockholder) on behalf of the entity (say, a corporation) in wh ich 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 se eks to increase the value of its investment by obtaining a recovery for the entity. To prevent derivative suits fro m interfering with the proper management of the entity, however, they are s ubject 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 deriva tive claims); Del. Ch. Ct. R. 23.1 (same). For example, under Delaware la w, “the right of a stockhol der to prosecute a derivative suit is limited to situations where the stoc kholder 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 trus t 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 procedur al requirements. Rath er, 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 Delawa re 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 ev en 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 cancellati on of certificate of trust). And its original briefing in this court ac knowledged 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 fo llowing 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 principa l 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-fiduc iary-duty claims and (2) that breach-of-contract claims (such as its appraisal claim) ca n be pursued as direct actions. After oral argument in this appeal, however, the Delaware Supr eme Court concluded otherwise in El Paso Pipeline4 GP Co., L.L.C. v. Brinckerhoff , No. 103, 2016, 20 16 WL 7380418 (Del. Dec. 20, 2016); and Branzan concedes that the abov e 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 deri vative-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 Bran zan 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 ru ling 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 ther eby ceded ownership of the claim to the partnership’s

successor. See id. at *1–2. In holding that the limit ed partner therefore could no longer pursue its derivative claim, the court discusse d 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 rej ection of the argument that equity and policy considerations justified surviv al of the derivative claim. See id. at *2. In our view, El
Paso makes clear that equity and policy c onsiderations are irrelevant to the Tooley test. 3
We AFFIRM the judgment of the district cour t. 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 whethe r 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 en riched, as it was not a unitholder. Branzan’s opening brief on appeal also sa ys that equity must provide relief because “[a]t the time [it] filed its lawsuit the Tr ust had terminated and thus no derivative claims were possible.” Id. at 57. As previously noted, howe ver, Branzan has now conceded that Delaware law permits derivative suits on behalf of terminated trusts.