COURT OF CHANCERY

OF THE

STATE OF DELAWARE

KATHALEEN ST. JUDE MCCORMICK

CHANCELLOR

LEONARD L. WILLIAMS JUSTICE CENTER

500 N. KING STREET, SUITE 11400

WILMINGTON, DELAWARE 19801-3734

April 7, 2022

Neal J. Levitsky, Esquire

Kasey H. DeSantis, Esquire

Fox Rothschild LLP

919 North Market Street, Suite 300

Wilmington, DE 19801

Gary F. Seitz, Esquire 

Gellert Scali Busenkell & Brown, LLC 

1201 N. Orange Street, 3rd Floor 

Wilmington, DE 19801

Michael L. Vild, Esquire

Cross & Simon, LLC

1105 N. Market Street, Suite 901

Wilmington, DE 19801

Re: Grassi Fund Administration Services, Inc. v. Crederian, LLC,

C.A. No. 2020-0748-KSJM

Dear Counsel:

This letter decision resolves the objection of petitioner Grassi Fund Administration 

Services, Inc. (“Petitioner”) to the Liquidating Trustee’s Report and Recommendation for 

Relief (the “Report”).

1

Petitioner and Crederian, LLC (“Respondent”) together formed Crederian Fund 

Services, LLC (the “Company”) “to provide accounting and compliance services to 

investment fund accounts.”2 Due to irreconcilable differences, Petitioner sought 

dissolution of the Company and entered arbitration as provided for in the Company’s 

1 See C.A. No. 2020-0748-KSJM, Docket (“Dkt.”) 49, Report of Liquidating Trustee &

Recommendation for Relief (Report); Dkt. 53, Pet’r’s Obj. to the Report of Liquidating 

Trustee & Recommendation for Relief (“Objection”).

2 Objection ¶ 1. 
C.A. No. 2020-0748-KSJM

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Operating Agreement.3 The arbitration tribunal issued a decision on liability (the “Liability 

Decision”) and a decision and final award (the “Final Award”),

4 which Petitioner sought

to enforce in this court.5 On December 4, 2020, the court confirmed the results of the 

arbitration proceeding and ordered that the Company be wound up and dissolved.6 On 

February 9, 2021, the court appointed Gary Seitz as Liquidating Trustee.7

The Liquidating Trustee recovered $68,136.47 and submitted the Report on 

December 20, 2021.8

The Report recommended that the court order the Liquidating Trustee to pay the 

recovered sum as follows: $26,702.00 in fees and $262.29 for expenses to the Liquidating 

Trustee; $35,514.37 in unpaid salary to Eugene Grace; and the remaining balance of 

$5,657.85 to the Company’s landlord, Rosetree KPG III, LLC (the “Landlord”).

9

 The

Liquidating Trustee further concluded that although he may be able to obtain additional 

recovery, “the meager sums obtained through the liquidation and the lack of interest of any 

contingent fee firms known to the Trustee prevent the ability to mount any liquidation 

3

Id. ¶ 2.

4 Dkt. 1, Ex. A. Exhibit A to the Verified Petition to Confirm Arbitration Award includes 

both the Liability Decision (pages 2 through 33) and Final Award (pages 34 through 96). 

This decision cites to the internal pagination of the individual decisions and not the

pagination of the exhibit. 

5 Objection ¶¶ 2–3.

6 Dkt. 33 ¶ 1.

7 Dkt. 41 ¶ 2.

8 Report at 3.

9

Id. at 8.
C.A. No. 2020-0748-KSJM

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litigation in this case.”10 The Liquidating Trustee concluded that “[d]ue to the lack of 

resources, [he] is unable to further investigate or pursue any liquidation litigation suggested 

by the parties.”11

Petitioner initially asserted three objections to the Report, but Petitioner collapsed 

two of its objections into one during oral argument.12 Petitioner first argues that the 

Liquidating Trustee failed to provide documents supporting the claims of Eugene Grace

(the “Salary Claim”).

13 Petitioner next argues that the Liquidating Trustee improperly 

subordinated Petitioner’s claims in favor of the Landlord’s claim under the lease agreement 

(the “Lease Claim”), and that the Liquidating Trustee failed to consider Respondent’s joint 

and several liability under the lease agreement for the Lease Claim.

14 Petitioner’s first 

objection concerns $35,514.37. Petitioner’s second objection concerns $5,657.85.

The parties dispute what standard of review applies to Petitioner’s objections.

15

 

Petitioner argues that de novo review is appropriate. Respondent argues that a more 

deferential standard is appropriate. 

10 Id. at 4

11 Id. at 5.

12 Dkt. 62 (“Oral Arg. Tr.”) 14:10–15 (“THE COURT: So this is really about, assuming 

we can find support or I find at that point Mr. Grace’s claim is supported, it’s really about 

the remaining 5,000-plus dollars. ATTORNEY DESANTIS: Yes, that’s correct.”).

13 Objection ¶¶ 21–25.

14 Id. ¶¶ 26–37.

15 Id. ¶ 12; Dkt. 56, Resp’t’s Response to the Pet’r’s Obj. to the Report of Liquidating Tr.

& Recommendation for Relief (“Response”) ¶ 3.
C.A. No. 2020-0748-KSJM

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Vice Chancellor Fioravanti addressed this issue in In re Dissolution of Jeffco 

Management LLC, observing that while a receiver’s decision to disallow a creditor’s claim 

is reviewed de novo, a receiver’s business decisions are subject to a more deferential 

standard.16 This decision does not repeat the Vice Chancellor’s scholarly analysis. 

Applying the holding of Jeffco here and giving Petitioner the benefit of a close call, I review 

the Liquidating Trustee’s determinations de novo because the priority assigned to the 

Salary Claim and the Lease Claim had the effect of depriving Petitioner of any recovery

through the liquidation. 

Under a de novo standard of review, the court “ma[kes] a careful and independent 

review of both the factual findings and the conclusions of law.”17 “Although de novo

review generally means a new trial or hearing on questions of fact, it is equally possible to 

conduct a review de novo on the record.”18

In this case, the parties did not submit to an evidentiary hearing.19 Given the 

extremely narrow scope of Petitioner’s objections and the limited amount in controversy, 

16 See In re Dissolution of Jeffco Mgmt., LLC, 2021 WL 282634, at *2–4 (Del. Ch. Jan. 28, 

2021) (discussing B.E. Cap. Mgmt. Fund LP v. Fund.com Inc., 171 A.3d 140 (Del. Ch. 

2017) and other cases).

17 In re Reardon, 759 A.2d 568, 575 (Del. 2000).

18 B.E. Cap. Mgmt. Fund LP, 171 A.3d at 144 (internal quotation marks and citation 

omitted).

19 Neither party requested an evidentiary hearing. Petitioner asked the court to reject the 

Liquidating Trustee’s Report and “adopt a plan consistent with the findings of the Final 

Award.” Objection ¶ 8; see also id. ¶ 12. Respondent asked the court to accept the 

Report. Response ¶ 23 (stating that “the Respondent respectfully and reluctantly requests 

that the Court accept the Trustee’s Report and overrule the Objections”).
C.A. No. 2020-0748-KSJM

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this was a reasonable decision. The parties rely significantly on the arbitration tribunal’s 

factual findings, which resulted in the Liability Decision and the Final Award confirmed 

by this court.20 The parties dispute whether the Liquidating Trustee acted appropriately in 

implementing aspects of the arbitration tribunal’s findings, and this court will review the 

challenged decisions de novo. The court, however, does not review the factual findings of 

the arbitration tribunal de novo; those findings have been confirmed by this court and are 

binding. 

As to the Salary Claim, Petitioner does not object to the Liquidating Trustee’s 

recommendation to pay Grace’s unpaid salary.21 Rather, Petitioner questions whether the 

amount Grace seeks is unpaid salary for work performed, as opposed to payment from 

some other arrangement with Respondent.22 Petitioner phrases its request strangely by

asking Respondent to prove a negative—that no document exists proving Grace is not 

entitled to his unpaid salary.23 The arbitration tribunal already resolved the issue of Grace’s 

20 Dkt. 33 ¶ 1 (ordering that “[a]ll aspects of the Arbitration Proceeding between the parties 

are hereby CONFIRMED”).

21 Objection ¶ 21.

22 Id. (objecting to the Report “to the extent the Liquidating Trustee recommends payment 

to Eugene Grace for unpaid salary in the amount of $35,514.37 without any supporting 

evidence for the claim” (emphasis added)).

23 Oral Arg. Tr. 9:2–5.
C.A. No. 2020-0748-KSJM

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entitlement.

24 As discussed above, that finding is binding. Petitioner’s objection to the 

Salary Claim is therefore overruled.

As to the Lease Claim, Petitioner first argues that Respondent should be liable for 

the Lease Claim instead of the Company “because Respondent is jointly and severally 

liable under the terms of the lease agreement,”

25 and Petitioner next argues that the 

Liquidating Trustee improperly subordinated its claims to the Lease Claim.

Petitioner’s first argument is unpersuasive. The Landlord is owed $347,713.96 by 

the Company, far more than the Liquidating Trustee recommends paying the Landlord;26

Petitioner does not dispute this fact.27 Instead, Petitioner argues that the Landlord should 

have to chase Respondents for amounts owed jointly and severally by the Company. 

24 Final Award at 17 (ordering that “[t]he LLC shall pay Mr. Grace any unpaid amounts of 

his regular base salary through the date of the termination of his employements [sic] with 

the LLC (but no later than April 30, 2020), at the salary rate he was earning as of the last 

pay period in which he was paid, provided that the rate of pay shall not exceed his rate of 

pay for the 12 preceding months”); Id. at 29 (awarding “[u]npaid salary of $35,514.37 to 

Eugene Grace, which shall be paid only in the final distribution of the assets of the LLC, 

but before any distribution to either Member, provided, however, that such salary shall be 

paid sooner to the extent required by law”). Petitioner’s objection to the Salary Claim is a 

repeat of the objection it made during the arbitration. Id. at 17 (“[Petitioner] opposes these 

applications on the basis that Crederian has failed to supply sufficient information 

regarding Mr. Grace’s salary and the employee flexible spending account.”). The 

arbitration tribunal rejected Petitioner’s objections, finding that “there is sufficient 

information in the record to dispose of these matters.” Id. 

25 Objection ¶ 27.

26 Report at 6–7, 9.

27 See Objection ¶ 27 (arguing that “[t]he Company should not be liable for the Landlord’s 

claims” and that “Respondent alone should be liable for the Landlord’s claims because 

Respondent is jointly and severally liable under the terms of the lease agreement”).
C.A. No. 2020-0748-KSJM

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Petitioner provides no support for this supposition.28 Petitioner points to no factual or legal 

basis for me to deny the Lease Claim outright, which would be the practical effect of the 

court accepting Petitioner’s argument.

29

 

Petitioner’s next argument also misses the mark. Petitioner asserts that the 

Liquidating Trustee improperly subordinated its claims based upon an unsupported

assertion by Respondent.

30

 Petitioner notes that the Final Award (i) found that Petitioner 

was entitled to a credit of half of $297,000 for payments it made to subcontractors31 and to

$275,000 in fees paid to the Company,

32 and (ii) awarded Petitioner $30,000, which was 

the administrative fee stated in the operating agreement.33

Petitioner selects too carefully from the Liability Decision and Final Award, 

omitting adverse facts and findings that cut against Petitioner’s position. For example, the 

arbitration tribunal stated in the Liability Decision that the parties are to “make best efforts 

to minimize fees and expenses resulting from the wind-down of the LLC” including with 

28 See id.

29 See Report at 6–7 (stating that the Landlord is seeking $347,713.96 in the lease claim 

against the Company). 

30 Oral Arg. Tr. 13:4–7.

31 Final Award at 10.

32 Id. at 29.

33 Id. at 8 (finding Petitioner is “entitled to the administrative fees provided in Schedule B 

to the LLC Agreement for each month from the inception of the LLC through April 30, 

2020, including any such administrative fees that were unpaid as of the December 2018 

drawdown”).
C.A. No. 2020-0748-KSJM

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respect to the lease.34 After the Liability Decision, however, the parties failed to use best 

efforts to minimize fees in connection with the Lease. 

After the Liability Decision, the parties corresponded on how to terminate the lease, 

arriving at a draft email to send to the Landlord.35 The next day, Petitioner’s counsel 

scuttled the negotiations, stating that after “consult[ing] with [his] client, [they] do not 

believe that any communication with the landlord is appropriate, at this time” and that 

Respondent should “recall that neither Member is authorized to speak to the landlord about 

the lease independently.”36 Respondent raised the dispute with the arbitration tribunal. In 

response, Petitioner explained that “Members of the Joint Venture have no liability for the 

Joint Venture” and that “[t]he Landlord would also have an obligation to mitigate any 

damages for lost rent if the lease were terminated immediately, which may result in no 

claim against the Joint Venture for lost rent.”37 

The arbitration tribunal held a conference call to address the parties’ dispute 

concerning the lease and other issues.

38

 After that call, Respondent drafted a new email to 

34 Liability Decision at 58–59; see also id. at 57 (directing that, “[i]f any contract or other 

commitment cannot be terminated effective April 30, 2020, the Members shall make 

commercially reasonable efforts to effectuate a termination at the earliest possible date”).

35 Dkt. 56, Ex. F at 6.

36 Id.

37 Id. at 13. 

38 Final Award at 3; see Dkt. 56, Ex. F at 8 (stating that “[t]here is an urgent matter that we 

would like to bring to the Panel’s attention. The Joint Venture’s landlord has emailed Mr. 

Ciavardini about the unpaid June rent and asked him to respond”). 
C.A. No. 2020-0748-KSJM

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the Landlord for Petitioner’s review, and Petitioner responded through counsel stating that 

a call with the Landlord would not be productive.39 

The arbitration tribunal later issued its Final Award, requiring the parties to “take 

such steps as are necessary to terminate ongoing services contracts and other commitments, 

including . . . lease commitments, effective to the extent feasible April 30, 2020, except as 

may be required in the Members’ joint interest.”40

During the time period when Petitioner failed to cooperate in communications

concerning terminating the lease, the Company remained a tenant but was unable to pay 

rent.41 The Company’s failure to pay rent caused the Landlord to levy interest and penalty 

charges against the Company and file a breach of contract claim against the Company and 

Respondent.

42

 

39 Dkt. 56, Ex. F at 18. 

40 Final Award at 25; Liability Decision at 58–59 (requiring the parties to “make best efforts 

to minimize fees and expenses resulting from the wind-down of the LLC” including with 

respect to the lease).

41 Withdrawing funds from the LLC’s bank accounts required both Members’ consent. See

Final Award at 17 (“Except as specifically provided in this paragraph, no other funds shall 

be taken from the accounts of the LLC, except by agreement of the Members or order of a 

court, liquidating trustee, or other referee.”). Petitioner refused to provide its consent, 

instead asking Respondent to tell the Landlord “that the company is in the midst of winding 

down and . . . will be evaluating all claims of potential creditors as part of that process.” 

Dkt. 56, Ex. F at 18; see also Final Award at 6 (finding that Petitioner “may have violated 

orders of the Pennsylvania court providing for the deposit of collected client accounts 

receivable into the LLC’s bank account”).

42 See Dkt. 56, Ex. C at 2; Dkt. 56, Ex. D at 1, 5.
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Summing it up, Petitioner was obligated to help terminate the existing lease.

Petitioner’s failure to cooperate contributed to additional liability. These facts support a 

finding that Petitioner is at least partially responsible for the Lease Claim.

Accordingly, it is appropriate to subordinate Petitioner’s claims under one of two 

equitable doctrines—equitable subordination43 or unclean hands.44 Petitioner’s actions 

contributed to additional rent, penalty, and interest payments owed to the Landlord. 

Although the effect of Petitioner’s actions on the Lease Claim is not easily 

quantifiable, Petitioner’s actions caused an increase in the amount of the claim of at least 

more than half of the remaining balance of the recovered sum, $5,657.85, which is the most 

that Petitioner would otherwise be entitled to.

45

 

43 “Equitable subordination is a doctrine that, based on a creditor’s inequitable conduct and 

its effect on other creditors, allows that creditor’s debt to be subordinated to other claims 

in bankruptcy or allows the creditor’s liens to be transferred to the bankruptcy estate.” 

Nelson v. Emerson, 2008 WL 1961150, at *4 n.13 (Del. Ch. May 6, 2008) (citations 

omitted).

44 “The doctrine of unclean hands is [e]quity’s maxim that a suitor who engaged in his own 

reprehensible conduct in the course of [a] transaction at issue must be denied equitable 

relief . . . .” RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816, 875–76 (Del. 2015) (internal 

quotation marks and citation omitted). “Ultimately, the doctrine is about public policy, and 

the Court has the broad discretion to refuse relief if [a party] can establish that [the other 

party] does not meet a very basic though inexact standard: ‘where the litigant’s own acts 

offend the very sense of equity to which he appeals.’” Universal Enter. Gp., L.P. v. Duncan 

Petro. Corp., 2014 WL 1760023, at *7 (Del. Ch. Apr. 29, 2014) (quoting Merck & Co., 

Inc. v. SmithKline Beecham Pharm. Co., 1999 WL 669354, at *45 (Del. Ch. Aug. 5, 1999)).

45 The Landlord stated in its Pennsylvania Court of Common Pleas Complaint that it is 

owed $30,937.33 in outstanding rent through August 2020, and $316,776.63 in accelerated 

rent. Dkt. 56, Ex. D ¶ 34.
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Accordingly, Petitioner’s objections are overruled. The court adopts the Report in 

full. 

Sincerely,

/s/ Kathaleen St. Jude McCormick

Kathaleen St. Jude McCormick

Chancellor

cc: All counsel of record (by File & ServeXpress)