IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

In re:

WACK JILLS, Inc., f/k/a JACK 

WILLS, INC.,

Assignor,

To:

SM FINANCIAL SERVICES 

CORPORATION, 

Assignee.

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C.A. No. 2019-0650-PAF

OPINION

Date Submitted: March 29, 2024

Date Decided: August 29, 2024

Adam Hiller, HILLER LAW, LLC, Wilmington, Delaware; Attorney for Assignee 

SM Financial Services Corporation.

Daniel K. Astin, Ryan M. Ernst, CIARDI CIARDI & ASTIN, Wilmington, 

Delaware; Albert A. Ciardi III, Walter W. Gouldsbury III, CIARDI CIARDI & 

ASTIN, Philadelphia, Pennsylvania; Attorneys for Creditor Home Club Realty 

Trust, Agent for Hall Associates.

Frederick B. Rosner, THE ROSNER LAW GROUP LLC, Wilmington, Delaware; 

Marc J. Kurzman, CARMODY TORRANCE SANDAK & HENNESSEY LLP, 

Stamford, Connecticut, Attorneys for Creditor 252-264 Greenwich Avenue Retail, 

LLC.

FIORAVANTI, Vice Chancellor
In this assignment for the benefit of creditors or “ABC” proceeding, Wack 

Jills USA, Inc., formerly known as Jack Wills, Inc. (“Wack Jills” or the “Assignor”),

assigned all its property and assets to SM Financial Services Corporation (“SM

Financial” or the “Assignee”) in August 2019.

SM Financial, in its capacity as trustee of the JW ABC Trust (the “Trust”), 

seeks approval of a Motion to Approve Final Distributions and Close the Case (the 

“Motion”). Home Club Realty Trust, Agent for Hall Associates (“Home Club” or 

the “Objector”), a general unsecured creditor of the Assignor, objects to the approval 

of the Motion.

In Delaware, ABC proceedings are governed by statute. See 10 Del. C. §§ 

7381–87 (the “ABC Statute”). The ABC Statute has seven sections, which set forth 

several requirements. Specifically, assignees must file an affidavit of inventory

within 30 days of the assignment, give bond as approved by the court, and submit 

annual accountings. These requirements are clear, and they are mandatory.

The Assignee in this case did not come close to satisfying the requirements of 

the ABC Statute—and conceded as much. In addition, the Assignee’s compensation 

structure provided no incentive to minimize Trust expenses because the Assignee 

received a 20% commission on all amounts distributed to creditors and all amounts 

paid in costs and expenses. To that end, the Assignee’s authorized representative 

retained his New Jersey law firm as counsel to the Assignee after having already 
2

retained Delaware counsel. Further, the Assignee never communicated with the 

Assignor or any of its directors or officers and did not request its financial records. 

And it was not until over a year into the process that the Assignee learned that the 

Assignor’s estate included a leasehold in Connecticut.

The court concludes that the Assignee’s failure to comply with the 

requirements of the ABC Statute and to act in the best interest of the Assignor’s 

creditors constitutes sufficient cause to remove the Assignee pursuant to 10 Del. C.

§ 7386. Accordingly, the Motion is denied, and SM Financial is removed as 

Assignee.

I. BACKGROUND1

A. Events Leading to the Assignment

The Assignor,

2 a Delaware corporation, was the U.S. affiliate of an 

international clothing retailer and sold children’s clothing and accessories in three 

1 Citations to the docket in this action are in the form of “Dkt. [#].” In citations, the Petition 

for Assignment for the Benefit of Creditors in this action, Dkt. 1, will be cited as “ABC 

Petition,” and citations to the transcript of the evidentiary hearing, Dkt. 92, will be cited as 

“Evidentiary Hearing.” After being identified initially, individuals are referenced herein 

by their surnames without regard to formal titles such as “Dr.” No disrespect is intended.

2 During these proceedings, the Assignee, with the court’s approval, filed an amendment 

to the Assignor’s certificate of incorporation changing its name from “Jack Wills, Inc.” to 

“Wack Jills, USA, Inc.” Dkts. 8, 19. The Assignee subsequently moved, however, to 

amend the case caption to “Wack Jills, Inc.,” and the parties have employed that caption 

throughout these proceedings. See Dkt. 20.
3

stores in Massachusetts.3

 Prior to the filing of this proceeding, the Assignor’s parent 

company, Jack Wills Retail, Ltd., was placed into an insolvency proceeding in the 

United Kingdom.

4

 In that proceeding, the assets of many of the Assignor’s affiliates 

were sold to a third party, Sports Direct.com Retail Limited (“Sports Direct”).

5 The 

Assignor’s assets were not sold in the insolvency proceeding.

6

Prior to the assignment, the Delaware law firm of Hiller Law, LLC (“Hiller 

Law”) contacted Steven Mitnick, Esquire, a New Jersey attorney and SM Financial’s 

general counsel, about serving as the assignee for Wack Jills in a Delaware ABC

proceeding.

7 SM Financial is a New Jersey corporation that provides liquidation 

services in court-supervised proceedings such as ABCs.8

 Mitnick estimated that he 

or SM Financial have served as an assignee in more than 500 ABC cases in New 

Jersey in the past 43 years and fewer than five ABC proceedings in Delaware.9

 SM 

Financial is a family business, owned entirely by Mitnick’s wife and two adult 

3 ABC Petition ¶¶ 2–3.

4 Id. ¶ 3; Dkt. 8 ¶ 5.

5 ABC Petition ¶ 3; Dkt. 8 ¶ 5; Evidentiary Hearing at 16:20–22 (Mitnick) (explaining that 

Sports Direct purchased the Assignor’s parent company’s assets in the UK insolvency 

proceeding). 

6 ABC Petition ¶ 3.

7 Evidentiary Hearing at 57:5–13, 58:8–11 (Mitnick).

8 ABC Petition ¶ 5; Evidentiary Hearing at 56:20–21 (Mitnick).

9 Evidentiary Hearing at 12:22–13:18 (Mitnick). 
4

children.10 Mitnick owns and operates SM Law, PC (“SM Law”), a New Jersey law 

firm.11

B. The Assignment Agreement

On August 15, 2019, the Assignor and SM Financial entered into the Trust 

Agreement and Assignment for the Benefit of Creditors (the “Assignment 

Agreement”) and created the Trust.

12 Mitnick executed the Assignment Agreement 

on behalf of SM Financial and has served as its authorized representative in these 

proceedings.13 Pursuant to the Assignment Agreement, the Assignor assigned all of 

its property and assets to SM Financial as the Assignee for distribution to the 

Assignor’s creditors (the “Assignment”).

14 The Assignee is the trustee of the 

Trust.15 The beneficiaries of the Trust are the Assignor’s creditors as of the

Assignment.

16

10 Id. at 56:18–57:4 (Mitnick) (“Q: Who are the principals of SM Financial Services? A: 

SM Financial Services is a New Jersey corporation, 60 percent owned by Jane Mitnick, 

who is my wife, and 20 percent owned by each of -- trusts for my two daughters, who are 

now grown. . . . It is a family-owned business.”).

11 Id. at 14:1–5 (Mitnick).

12 ABC Petition Ex. A [hereinafter “Assignment Agreement”].

13 Id. at 14; Evidentiary Hearing at 14:7–15 (Mitnick).

14 Assignment Agreement §§ 1.2–1.3.

15 Id. § 1.5.

16 Id. § 1.6.
5

Section 2 of the Assignment Agreement outlines the rights, powers, and duties 

of the Assignee in administering the Trust. Under the Assignment Agreement, the 

Assignee “shall have full right, power, and discretion to manage the affairs of the 

Trust.”17 Specifically, the Assignee is empowered to, among other things, maintain 

bank accounts,18 cause the Trust to perform or continue performance under any 

contracts or leases that are Trust assets,

19 retain professionals, employees, and 

consultants on behalf of the Trust,20 collect, liquidate, and administer the Trust’s 

assets,21 maintain the Trust’s books and records,22 and pay administrative expenses 

of the Trust.23 Per the Assignment Agreement, the Assignee was permitted “to retain 

Hiller Law [] as counsel and others as necessary and appropriate, in the Assignee’s 

sole discretion.”24 In addition to Hiller Law, the Assignee retained SM Law to 

provide legal services to the Trust.25

17 Id. § 2.1. 

18 Id. § 2.1(b).

19 Id. § 2.1(c).

20 Id. § 2.1(e).

21 Id. § 2.1(k).

22 Id. § 2.1(n).

23 Id. §§ 2.1(o)–(q).

24 Id. § 2.1(e).

25 Dkt. 23 Ex. A; Evidentiary Hearing at 59:16–20 (Mitnick).
6

Section 2.7 of the Assignment Agreement provides that the Assignee’s 

compensation “shall be 20% of the amount of distributions made from the Trust in 

accordance with [Section] 2.3 [of the Assignment Agreement] (including but not 

limited to distributions of cash made to secured creditors on account of their 

collateral).”26 Under Section 2.3, distributions include, but are not limited to, 

administrative expenses of the Trust such as attorneys’ fees and payments to the 

Assignor’s creditors to satisfy claims against the Assignment estate.27 The Assignee 

is required to make distributions in the following sequence:

(A) First, expenses and debts of the Trust shall be paid or reserved for, 

including but not limited to amounts owed to the Assignee, the Trust’s 

professionals, and the Assignor’s professionals (pursuant to [Sections] 

1.6.4 and 2.2 hereof); (B) Second, to the General Trust Beneficiaries, 

pro rata, until their enforceable claims (including but not limited to any 

and all enforceable interest, charges, and fees) against the Assignor are 

satisfied in full; then (C) Finally, to the holders of equity in the 

Assignor, pro rata.

28

26 Assignment Agreement § 2.7(a).

27 See id. § 2.3.

28 Id. Section 2.2 of the Assignment Agreement states that the Trust assets “shall be used 

to pay amounts due to the Assignee pursuant to [Section] 2.7 hereof and the fees and 

expenses of any attorney, consultant, or other professional, vendor, or agent retained by the 

Assignee[.]” Attorney fees and expenses “shall be paid from the Trust Assets as 

administrative expenses as they arise in the ordinary course of business.” Id. § 2.2. Section 

1.6.4 of the Assignment Agreement provides that professionals asserting claims for fees 

and expense reimbursements are not beneficiaries of the Trust, and the Assignee “assumes 

all such claims and shall cause them to be paid from funds of the Trust as administrative 

expenses in the ordinary course of business.”
7

In addition, the Assignee may be reimbursed from the Trust’s assets for all 

“reasonable documented actual out-of-pocket expenses incurred in the performance 

of its duties.”29

Based on this compensation structure, SM Financial was entitled to receive 

20% of all funds distributed to the Assignor’s creditors and an amount equal to 20% 

of all costs and expenses incurred during the Assignment process, including amounts 

paid to SM Law. In sum, the Assignee’s compensation was 20% of all funds it 

received at the time of the Assignment and all amounts collected thereafter—

regardless of how those funds were ultimately used. As structured, the Assignee had 

no incentive to minimize costs and expenses. Indeed, by hiring SM Law as a second 

law firm to the Assignee, the Mitnick family was in a position to increase its share 

of the proceeds from the Assignment estate by billing for SM Law’s legal services 

and then receiving a 20% commission on top of those expenses.

Section 5 of the Assignment Agreement provides that the Trust will terminate 

upon the earlier of (i) the distribution of all the Trust’s assets; (ii) a court order 

terminating the Trust; or (iii) five years after the effective date of the Assignment 

29 Id. § 2.7(a).
8

Agreement.30 If warranted, the term of the Trust may be extended for a finite term, 

subject to approval by the court.31 The court may also retroactively extend the term 

of the Trust if it terminates prior to all the Trust’s assets being administered.32

The Assignee may resign at any time upon at least 30 days’ written notice by 

filing a notice of resignation with this court.33 The Assignor may remove the 

Assignee at any time with or without cause by written agreement.34 The Assignment 

Agreement also specifically provides that the court may remove the Assignee for 

cause.35 The Assignment Agreement purports to exculpate the Assignee from 

30 Id. § 5. The Assignment Agreement is dated August 15, 2019. Id. at 1. The Assignee 

and Assignor executed the Assignment Agreement on August 15, 2019, and August 16, 

2019, respectively. Id. at 14.

31 Id. § 5.

32 Id.

33 Id. § 4.1.

34 Id. § 4.2. In this court’s experience, the prospect of an assignor terminating an assignee 

is remote. Typically, once an assignee is hired, directors and officers of the assignor scatter 

and are not involved in the ABC process. Perhaps one representative stays behind to 

provide information to the assignee, but that is not always the case. Indeed, in this case,

the Assignee represented that the Assignor’s directors and officers had either resigned or 

were in the process of resigning from their positions as of October 2, 2019, “leaving the 

[Assignor] without governance” less than two months after the Assignment occurred. Dkt. 

8 ¶ 6.

35 Assignment Agreement § 4.3. The Assignment Agreement defines “cause” as “the 

willful and continued refusal by the Assignee to perform the duties set forth herein,” “gross 

negligence, gross misconduct, fraud, embezzlement, or theft, regardless of whether such 

acts were directed at assets of the Trust,” or “such other cause as the Court shall determine 

to evidence that the Assignee is unable or unfit to perform the duties set forth herein.” Id.
9

liability for good faith business decisions except in the case of fraud, willful 

misconduct, recklessness, or gross negligence.36 

C. Sports Direct Sale

At or around the time the Assignee and Assignor executed the Assignment 

Agreement, Mitnick contacted Auction Advisors to assist with the Assignment.

37 

Auction Advisors is headquartered in New York and “is primarily in the business of 

liquidating and auctioning hard assets and real estate[.]”38 It also provides appraisal

and receivership services.39 Auction Advisors has previously worked with Mitnick 

on various liquidation proceedings.40 Auction Advisors dispatched a representative 

to Massachusetts to attempt to inspect the three stores that contained the Assignor’s 

inventory.41

36 Id. §§ 2.5(a), (d). Under Section 2.5(g), the Assignee is permitted to enter into 

transactions “with the Assignor and/or its principals” if the Assignee reasonably believes 

such transactions are appropriate in its business judgment. Id. § 2.5(g) (emphasis added).

37 Evidentiary Hearing at 47:10–14 (Mitnick) (“I’m sure the moment I hung up with Mr. 

Hiller, my next call was to Mr. Olshin or to his partner, Mr. Klein, to advise them that I 

had a new ABC that I wanted [Auction Advisors] to get involved in.”).

38 Id. at 64:17–19 (Olshin).

39 Id. at 64:19–21 (Olshin).

40 Id. at 17:22–23 (Mitnick).

41 Id. at 66:7–13, 68:21–69:14 (Olshin).
10

Around the time of the Assignment, negotiations began with Sports Direct to 

purchase the apparel inventory at the Assignor’s three Massachusetts stores.42 It is 

not clear from the record whether these discussions commenced prior to the date of 

the Assignment.43

Attempts to assess the assets of the Assignor and to negotiate with Sports 

Direct appear to have occurred simultaneously and very quickly. On September 3, 

2019, just a few weeks after the date of the Assignment, Sports Direct and the 

Assignee executed a purchase agreement providing for the sale of the Assignor’s 

inventory at the three Massachusetts stores for $20,000.44 The purchase agreement 

states that the Assignee “has not performed an audit of the Inventory [and] that the 

Purchaser is purchasing whatever Inventory exists in these locations sight 

42 See id. at 18:6–19:23, 23:4–11 (Mitnick) (discussing the negotiations with Sports Direct 

to purchase the apparel inventory at the Assignor’s stores in Massachusetts).

43 See id. at 46:22–47:1 (Mitnick) (“Q: When did the negotiations with Sports Direct start? 

A: You know, I don’t actually recall when they began. It was probably pretty quickly after 

we got the deed.”).

44 Dkt. 48 Ex. C. The purchase agreement is drafted on Hiller Law letterhead and is dated 

August 13, 2019, two days before the date of the Assignment Agreement and three days 

before the filing of the ABC petition. Id. at 1. Representatives of the Assignee and Sports 

Direct executed the purchase agreement on September 3, 2019. Id. at 2. The August 13 

date on the purchase agreement is an obvious typographical error because the purchase 

agreement includes the caption of this ABC proceeding, along with the civil action number. 

Civil action numbers are not assigned until a case has been filed and accepted on the court’s 

docket. Thus, the reference to the civil action number in the purchase agreement indicates 

that the final version of the purchase agreement could not have preceded this action. Of 

course, that does not mean that an earlier draft of the purchase agreement pre-dated the 

filing of the ABC petition.
11

unseen[.]”45 In connection with the asset sale, Sports Direct agreed to make 

severance payments to three of the Assignor’s former employees, who were U.K.

nationals residing in the United States and managing the Assignor’s stores.46 None 

of the details concerning the Sports Direct sale were revealed to the court until more 

than two years after the commencement of this proceeding.

47

D. The Greenwich Lease

In addition to the three Massachusetts stores, the Assignor had been leasing

commercial retail space from 252-264 Greenwich Avenue Retail, LLC (the 

45 Id. at 1 n.1.

46 Id. at 1–2. The purchase agreement identifies these three individuals as William Allen, 

Steve Robinson, and Mercedes Shaw, but does not describe their affiliation to the Assignor. 

Id. At the evidentiary hearing, Mitnick testified that these individuals were managers of 

the Assignor’s stores in Massachusetts. Evidentiary Hearing at 24:7–17 (Mitnick) (“Q: 

Did Sports Direct impose any conditions on the sale? A: Yes, [the Assignor] had either 

two or three employees that I think had managed the stores who were from England who 

were just left high and dry when the stores closed. I think there’s very severe labor laws 

in the U.K., and they were afraid that they would be penalized, so they wanted to make 

sure that they dealt with these three employees. So I think they were given $2,000 each as, 

like, a severance payment. And that was paid in addition to the $20,000.”).

47 Information regarding the Sports Direct sale was first revealed to the court in November 

2021 when Home Club filed its objection to the Motion. Dkt. 48. Home Club submitted 

a copy of the purchase agreement into the record as part of its filing. Id. Ex. C. The record 

did not contain any specific information regarding the Sports Direct sale prior to November 

2021. There is a vague reference to an inventory sale in the Assignee’s Motion for 

Authority to Record Name Change for Assignor, filed in October 2019, but no specific 

information about the Sports Direct sale was included in that filing. Dkt. 8 ¶ 4 (representing

that the “Assignee has sold its remaining inventory during this case and is in the process 

of identifying a few additional assets that may have value to the Trust”); Dkt. 14 ¶ 4

(making a similar representation regarding an inventory sale); Dkt. 23 ¶ 4 (same).
12

“Greenwich Landlord”) in Greenwich, Connecticut since September 2011 (the 

“Greenwich Lease”).48 The Assignor and the Greenwich Landlord became parties 

to the lease agreement through a series of assignments dating back to September 

2011.49 In December 2014, the Assignor subleased the entirety of the premises to 

an unrelated third-party, Eileen Fisher, Inc. (“Fisher”).

50 After subleasing the 

premises to Fisher, the Assignor ceased business operations at the Greenwich 

location.51

Pursuant to the terms of the sublease and in the ordinary course of business, 

Fisher would wire the sublease rent payments to the Assignor, which would make 

up the shortfall in the rent and remit the full amount to the Greenwich Landlord.52

48 See Dkt. 48 Ex. A.

49 The original lease agreement was from September 2008, and was between Cole Haan 

Company Store (“Cole Haan”) and Brooks Properties Greenwich LLC (“Brooks 

Properties”). Id. at 6. On September 13, 2011, the Assignor entered into an Assignment 

and Assumption of Lease with Cole Haan, pursuant to which Cole Haan assigned its rights, 

interest, and obligations under the lease to the Assignor, and the Assignor became the 

tenant under the lease. Id. at 50–56. Brooks Properties, the original landlord, assigned its 

rights, interest, and obligations under the lease to the Greenwich Landlord on March 11, 

2014. Id. at 57–61. The Greenwich Landlord has been the landlord of the Greenwich 

property since the March 2014 assignment. 

50 Id. at 62–71; Dkt. 40 ¶ 6 [hereinafter “Supplement to Motion”].

51 Dkt. 58 at 3.

52 Dkt. 40 ¶ 7; Dkt. 58 at 3. According to the Greenwich Landlord, the full monthly rent 

due under the primary lease was $45,505.57, and the full monthly rent due under the 

sublease was $31,353.22, as of the final year of the term of the primary lease. Dkt. 58 at 

3. The Greenwich Landlord received rent due under the primary lease through August 

2019, but then the payments ceased. Id.
13

In September and October 2019, shortly after the Assignment, Fisher wired two 

sublease rent payments, totaling $62,706.44 (the “Sublease Payments”), into one of 

the Assignor’s bank accounts at HSBC Bank USA, N.A.53 Beginning in November 

2019, Fisher paid rent directly to the Greenwich Landlord and continued to do so for 

the remainder of the term of the sublease.

54

The Assignee was not informed of and did not make inquiry into the 

Greenwich Lease at the time of the Assignment. It appears from the record that the 

Assignee did not formally become aware of the Greenwich Lease until December 

2019, when the Greenwich Landlord submitted a proof of claim in this proceeding 

to the Assignee.55 The Assignee became aware of the Sublease Payments in the 

HSBC account around September 2020.56 The court was not provided with any 

specific information about the Greenwich Lease or the Sublease Payments until 

53 Id. at 4.

54 Id. The term of the sublease expired on the date when the term of the primary lease 

expired. Dkt. 48 Ex. A. at 62. The term of the primary lease expired on January 31, 2020. 

Id. at 48; Dkt. 58 at 3.

55 Supplement to Motion ¶¶ 5–6 (explaining that the Assignee was not aware of the 

Greenwich Lease prior to accepting the assignment); Evidentiary Hearing at 43:10–12 

(Mitnick) (“We didn’t even know about the Greenwich location because it wasn’t a Jack 

Wills location when we took over.”); Dkt. 48 Ex. A (Proof of claim dated December 20, 

2019, submitted by the Greenwich Landlord to the Assignee).

56 Dkt. 33 ¶ 7.
14

September 2021, when the Assignee filed a supplemental submission in support of 

the Motion.

57

The Assignee is now in possession of the Sublease Payments.

58 As discussed 

below, the Sublease Payments are the subject of Home Club’s objection to the 

Motion. This opinion does not resolve that objection.

E. Procedural History

1. The ABC Petition and Inventory Opinion

On August 16, 2019, the Assignee filed the ABC petition.59 On September 

12, 2019, the Assignee filed a motion to establish a claims bar date and claims filing 

procedures,

60 which the court granted on October 3, 2019.61 That same day, the 

Assignee filed an “Inventory and Valuation Opinion” (the “Inventory Opinion”).

62

57 Supplement to Motion ¶¶ 5–9.

58 Id. ¶ 9.

59 Dkt. 1.

60 Dkt. 4. Unlike the federal bankruptcy code, the ABC Statute does not provide a process 

for submitting proof of claims. Cf. 11 U.S.C. § 501. However, certain assignees adopt the 

functional equivalent of a bankruptcy proof of claims process in Delaware ABC 

proceedings. See, e.g., In re Cureatr, Inc., C.A. No. 2023-1274-PAF (Del. Ch.), Dkt. 6; In 

re Allbright Gp. US, LLC, C.A. No. 2021-0814-PAF (Del. Ch.), Dkt. 2.

61 Dkt. 11.

62 Dkt. 12 [hereinafter “Inventory Opinion”].
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The Inventory Opinion is a two-page document dated September 12, 2019.63 It was 

prepared by Joshua Olshin, a managing partner of Auction Advisors.

64

The Inventory Opinion categorizes the Assignor’s assets into four groups: “(i) 

Inventory; (ii) General Furniture, Fixtures and Equipment; (iii) Vehicles; and (iv) 

Liquid Assets.”65 The Inventory Opinion provides an estimated liquidation value 

for each asset category, which Auction Advisors calculated as of the date of the ABC 

Petition.

66 Auction Advisors estimated that the liquidation value of the inventory 

was $19,254,

67 which is slightly less than the $20,000 that Sports Direct paid for that 

inventory one week earlier.

68

Auction Advisors estimated that the liquidation value of the fixtures and 

vehicles was $750 and $12,500, respectively.69 For the liquid assets, Auction 

63 Id. at 1.

64 Id. at 2; Evidentiary Hearing at 65:10–12 (Olshin).

65 Inventory Opinion at 1.

66 Id. The Inventory Opinion contains the following disclaimer: “We are experienced 

liquidators, but are not rending [sic] this opinion as appraisers conducting an appraisal 

under the guidelines of the American Society of Appraisers.” Id. At the evidentiary

hearing, however, both Olshin and Mitnick referred to the Inventory Opinion as an 

appraisal. Evidentiary Hearing at 33:14–16 (Mitnick) (identifying the Auction Advisors’ 

report as an “appraisal”), 83:6–9 (Olshin) (explaining that furniture and other fixtures were 

identified “in our appraisal”).

67 Inventory Opinion at 1. Auction Advisors reached this calculation by assigning a 

liquidation value of 10% to the cost of the inventory. Id.

68 The Inventory Opinion does not mention the inventory sale to Sports Direct.

69 Id. at 1–2.
16

Advisors identified the following bank accounts and balances: “(i) Bank of 

America, $86,862; (ii) Rockland Trust, $86,119; and (iii) HSBC, $4,171,” totaling 

$177,152.

70 Auction Advisors opined that the total liquidation value of all of the 

Assignor’s assets was $209,656.71 The Inventory Opinion was not accompanied by 

an affidavit.

In addition to filing the Inventory Opinion, the Assignee notified the court on 

October 3, 2019, that it had unilaterally posted a bond of $209,656, representing the 

total liquidation value of the assets stated in the Inventory Opinion.

72

70 Id. at 2. The HSBC bank account referenced in the Inventory Opinion appears to be 

different from the account that held the Sublease Payments, of which neither the Assignee 

nor its counsel was purportedly aware of until several months after the Assignment. See

Dkt. 33 ¶ 7 (indicating the Assignee did not become aware of a Sublease Payment in the 

HSBC account until “almost a year” after it was made in October 2019); Dkt. 40 ¶ 8 

(representing that the Assignee was “not immediately aware” of the HSBC account where 

Fisher wired the Sublease Payments). When Mitnick was asked about the HSBC account 

at the evidentiary hearing, he provided conflicting testimony. Compare Evidentiary 

Hearing at 41:18–22 (Mitnick) (“Q: Was one of the bank accounts that you initially knew 

about an HSBC account? . . . A: Yes.”), with id. 43:13–43:20 (Mitnick) (“Q: [W]asn’t one 

of the accounts that you initially knew about an HSBC account . . . ? A: No, as memory 

serves me, and it’s been six years, I don’t think we knew about the HSBC account until we 

were advised by the Greenwich landlord, but I could be mistaken.”).

71 Inventory Opinion at 2.

72 Dkt. 13. The Assignee obtained the bond from Hartford Fire Insurance Company. Id.
17

2. The Motion and Home Club’s Objection

The Assignee filed the Motion on June 12, 2020, accompanied by a final 

accounting.

73 Neither the Motion nor the final accounting reflected the HSBC 

account that held the Sublease Payments.74

On September 21, 2021, the Assignee filed a supplemental motion and 

amended final accounting (the “First Revised Accounting”).

75 The supplemental 

motion indicated that there was a mathematical error in the final accounting, which 

was corrected in the First Revised Accounting.

76 In addition, the Assignee explained 

that it had become aware of the Greenwich Lease after the Assignment, and that the 

Assignee was now in possession of the Sublease Payments that were previously held 

in an HSBC account.

77 The Assignee is of the view that the Sublease Payments are 

not part of the Assignment estate, and that the Greenwich Landlord is entitled to 

73 Dkt. 23.

74 See id. Ex. A (containing no reference to either HSBC account in the final accounting).

75 Dkts. 40–41.

76 Supplement to Motion ¶ 4.

77 Id. ¶¶ 5, 7, 9. In October 2020, the Assignee filed a motion to compel HSBC to turn over 

the funds in the account that held the Sublease Payments. Dkt. 33. That motion was 

resolved without court involvement. Dkt. 38.
18

those funds.

78 The First Revised Accounting reflects the proposed payment of the 

Sublease Payments to the Greenwich Landlord.79

On November 30, 2021, Home Club filed an objection to the Motion and First 

Revised Accounting (the “Objection”).80 Home Club is the landlord for one of the 

Assignor’s three Massachusetts stores and is an unsecured creditor.81 Home Club’s 

primary objection is that the Sublease Payments are assets of the Trust and should 

be distributed pro rata to the Assignor’s creditors—not paid to the Greenwich 

Landlord.

82

On December 30, 2021 and January 10, 2022, the Assignee filed motions to 

extend the deadline to respond to the Objection, each of which the court granted.83 

On January 14, 2022, the Assignee and the Greenwich Landlord each responded to 

the Objection, disputing that the Sublease Payments are assets of the Trust.

84 The 

78 Supplement to Motion ¶ 9.

79 Dkt. 41.

80 Dkt. 48.

81 Supplement to Motion ¶ 2.

82 Dkt. 48 at 2–5. Home Club separately objects to the proposed payment of $27,187.33 

in “Liquidator & Appraiser Fees,” as reflected on the First Revised Accounting. Id. at 6–

7. Home Club also argues that there are additional accounting discrepancies in the First 

Revised Accounting, specifically regarding the Greenwich Landlord’s claim against the 

Assignment estate. Id. at 7–8.

83 Dkts. 53–56.

84 Dkts. 57–58.
19

court held a telephonic hearing on the Motion and the Objection on February 4, 2022, 

which was adjourned.

85 At the hearing, the court raised a series of issues regarding 

the Assignee’s lack of compliance with the ABC Statute and the disposition of the 

Trust’s assets, particularly with respect to the Sports Direct sale.

86 The court 

directed the parties to meet and confer and provide the court with a status report on 

or before March 4, 2022.

87

In accordance with the court’s order, the Assignee filed status reports on 

March 4, March 18, and April 15, 2022, requesting additional time to allow for 

settlement discussions between the Assignee and Home Club regarding the 

Objection.88 On August 10, 2022, the Assignee informed the court that the Assignee 

and Home Club were engaged in discovery,89 but the parties were ultimately 

unsuccessful in reaching a settlement.90

85 Dkt. 65.

86 See Dkt. 64.

87 Id.

88 Dkts. 66–68.

89 Dkt. 71.

90 Previous settlement discussions between Home Club and the Assignee were also 

unsuccessful. Supplement to Motion ¶ 2 (explaining that the parties had been in settlement 

discussions since September 2020 but were “unable to reach a resolution,” prompting the 

Assignee to file its supplemental submission in support of the Motion in September 2021).
20

3. The Order to Show Cause

Following an extended period with no substantive activity on the docket, the 

court, on December 4, 2023, issued an order to show cause why the Assignee should 

not be removed pursuant to 10 Del. C. § 7386, or alternatively why the case should 

not be dismissed for the Assignee’s failure to comply with the ABC Statute (the 

“Order”).91 The Assignee, Home Club, and the Greenwich Landlord each filed 

responses to the Order, requesting that the court allow the proceeding to continue, 

and that the court hold a subsequent hearing on the Motion.92

The court entered a scheduling order on February 16, 2024, and scheduled a 

hearing on the Motion and the Order for March 20, 2024.

93 The Assignee 

subsequently moved to amend the scheduling order, which the court granted.

94 Per 

the amended scheduling order, the Assignee was required to submit an updated final 

accounting by March 8, 2024.

95 Interested parties were required to file any 

exceptions to the revised final accounting, the Motion, or the Order by March 14, 

2024.96

91 Dkt. 74 [hereinafter “Order to Show Cause”].

92 Dkts. 75–77.

93 Dkt. 78.

94 Dkts. 79–81.

95 Dkt. 81 ¶ 1.

96 Id. ¶ 2.
21

“[I]n lieu of the yearly accounts required under 10 Del. C. § 7385,” the 

Assignee submitted a “ledger showing all funds into and out of the Trust since the 

Trust first came into possession of the [Assignor]’s assets” by the March 8 

deadline.97 Both the Greenwich Landlord and Home Club filed timely exceptions.

98 

The Greenwich Landlord reiterated its position that the Sublease Payments are not 

assets of the Trust.99 Home Club objected that the ledger did not satisfy the

requirements of the ABC Statute.

100

The Assignee responded to both exceptions on March 18, 2024.

101 The 

Assignee argues that the preparation of yearly accountings at this stage in the 

proceeding “would have been a waste of resources” and “more complicated for 

parties to analyze and digest[.]”102 The Assignee also maintains that the Sublease 

Payments are not assets of the Trust, and as a result, the Assignee is not proposing 

97 Dkt. 83 at 1.

98 Dkts. 84–85.

99 Dkt. 84 ¶ 1. The Greenwich Landlord reserved its right to take exception to Home Club’s 

“highly inflated” claim against the Assignment estate if the court declined to approve the 

distribution of the Sublease Payments. Id. ¶ 3. The Greenwich Landlord did not previously 

take exception with the amount of Home Club’s claim.

100 See Dkt. 85 at 2–3. Home Club also argued that any fees previously paid to the Assignee 

and the Assignee’s professionals should be subject to disgorgement. Id. at 3–4. In addition, 

Home Club, for the first time, requested payment of its attorneys’ fees and interest since 

the filing of the ABC petition. Id. at 4.

101 Dkt. 87.

102 Id. ¶ 9.
22

to give preferences to any of the Assignor’s creditors, contrary to Home Club’s 

assertions.103

The court held a hearing on the Motion and the Order on March 20, 2024.

104

At the March 20 hearing, the Assignee presented live testimony from two witnesses: 

Mitnick and Olshin.105 During the hearing, the court raised a series of concerns 

regarding the Assignee’s compensation under the Assignment Agreement.

106 The 

court requested that the Assignee provide a revised final accounting and a detailed 

description of the Assignee’s compensation within 10 days of the hearing.

107 The 

Assignee submitted supplemental materialsregarding its compensation and a revised 

final accounting on March 29, 2024.

108

II. ANALYSIS

ABCs are “state or common law alternatives to bankruptcy, which trace back 

to English common law.” Robert Richards & Nancy Ross, Practical Issues in 

Assignments for the Benefit of Creditors, 17 Am. Bankr. Inst. L. Rev. 5, 6 (2009); 

see also In re Aceragen, Inc., 2024 WL 2705703, at *2 (Del. Ch. May 24, 2024) 

103 Id. ¶ 10.

104 Dkt. 90.

105 Evidentiary Hearing at 12:4–7, 64:1–2.

106 Id. at 117:6–118:21.

107 Id. at 127:19–22, 128:7–9.

108 Dkt. 91.
23

(ORDER) (“An assignment for the benefit of creditors is not a bankruptcy 

proceeding.”).109 In an ABC, the company, or assignor, assigns all of its assets to an 

assignee, which is charged with liquidating the assets and distributing the proceeds 

to the assignor’s creditors. See Melanie Rovner Cohen & Joanna L. Challacombe, 

Assignment for Benefit of Creditors–A Contemporary Alternative for Corporations, 

2 DePaul Bus. L.J. 269, 270 (1990). The ABC process varies by jurisdiction. 

Elizabeth Pollman, Startup Failure, 73 Duke L.J. 327, 360 (2023); Berman, The 

ABCs of ABCs 3. Certain jurisdictions require court supervision of the assignment 

and the assignee, while other jurisdictions permit assignments to proceed without 

court supervision, “but require[] that the assignee follow state laws applicable to and 

governing the liquidation of a business and its assets.” Berman, The ABCs of ABCs

3. Other jurisdictions convert assignments to receiverships. Id. at 4.

109 Unlike in bankruptcy, an ABC “do[es] not give a debtor a discharge” of its debts. 

Geoffrey L. Berman, General Assignments for the Benefit of Creditors: The ABCs of ABCs

5 (Robert J. Keach & Steven L. Victor eds., 5th ed. 2019) [hereinafter “Berman, The ABCs 

of ABCs”]. There is also no assignment equivalent of the bankruptcy automatic stay. Id.;

see, e.g., In re Kidbox.com, Inc., C.A. No. 2022-0379-PAF (Del. Ch. May 16, 2022) 

(ORDER) (denying ex parte application for the functional equivalent of a bankruptcy 

automatic stay which is not provided for in the ABC Statute). In a chapter 11 bankruptcy, 

a debtor is permitted to seek court approval to sell assets free and clear of all claims and 

encumbrances, an option that may not be available in an ABC. 11 U.S.C. § 363(f); cf. 

Aceragen, 2024 WL 2705703, at *2 (observing that the ABC Statute does not contain a 

provision providing for court approval of free and clear asset sales like the federal 

bankruptcy code).
24

In Delaware, ABCs are governed by statute and involve judicial oversight. In 

re Vernon Hills Serv. Co., 2024 WL 889963, at *4 (Del. Ch. Feb. 29, 2024). Most 

ABC matters in this court proceed ex parte. See Matter of Glob. Safety Labs, Inc., 

275 A.3d 1278, 1280 (Del. Ch. 2022). “Historically, ex parte ABC matters often 

provided little transparency to creditors, limited and incomplete information about 

the initiation of the ABC, and, frequently, failed to comply with the statutory 

requirements.” In re WindMIL Therapeutics, Inc., 2024 WL 1092326, at *2 (Del. 

Ch. Mar. 13, 2024); see, e.g., Glob. Safety Labs, 275 A.3d at 1279–80 (observing 

that “bare-bones four-page documents consisting principally of conclusory 

averments” are “representative of petitions that the court sees regularly” in ABC 

cases). In recent years, the court has focused on increasing the transparency of the

ABC process by “requiring more detailed information from assignees and 

establishing firm deadlines to the extent they are not otherwise contained in the ABC 

[S]tatute.” Id. (citing recent scheduling orders in ABC cases). These orders from 

the court “supplement, not supplant, the statutory requirements for ABCs.” Id.

Regrettably, this 2019 case epitomizes the lawlessness of a period in which 

Delaware ABC proceedings were known as “the Wild West of bankruptcy.” Id.

(quoting Leslie A. Pappas, Del. Chancery Cracks Down on Non-Bankruptcy 

Bankruptcies, Law360 (May 19, 2022)). The statutory violations in this case are 

numerous and striking, particularly given the relatively few mandates of the ABC 
25

Statute. The court begins with a discussion of the statutory framework, followed by 

a recounting of the Assignee’s repeated failures to comply with the ABC Statute, 

which justify the court’s imposition of the extreme sanction of removing the 

Assignee.

A. The Statutory Framework

The ABC Statute contains seven sections. The execution of the assignment

triggers the application of the ABC Statute. Section 7381, the first section of the 

ABC Statute, provides:

In every case in which any person makes a voluntary assignment of his 

or her estate, real or personal, or of any part thereof to any other person 

in trust for his or her creditors or some of them, the assignee, within 30 

days after the execution thereof, shall file in the office of the Register 

in Chancery of the county in which the real and personal estate of the 

assignor is situate, an inventory or schedule of the estate or effects so 

assigned, accompanied with an affidavit by such assignee, that the same

is a full and complete inventory of all such estate and effects, so far as 

the same has come to his or her knowledge.

10 Del. C. § 7381 (emphasis added). The use of the term “shall” with respect to the 

filing of the inventory and the affidavit reflects that this requirement is mandatory. 

See Manti Hldgs., LLC v. Authentix Acq. Co., Inc., 261 A.3d 1199, 1219 (Del. 2021) 

(“[W]hen construing [a] statute, ‘shall’ generally signals [a] mandatory requirement 

while ‘may’ is permissive.” (alterations in original) (internal quotation marks 

omitted)); see also In re Weaver Hldg. Co., 2011 WL 5910707, at *1 (Del. Ch. Nov. 

28, 2011) (concluding that use of the word “shall” in Section 7383 of the ABC statute 
26

indicated that the court could not waive the requirement that the assignee give a 

bond).

The starting point for an ABC proceeding in this court is the filing of a 

petition. The petition typically contains general background information about the 

assignor and the assignee, the assignor’s business prior to the assignment, and the 

events leading up to the assignment.110 In addition, the petition typically includes 

the assignment agreement111 and the corporate resolutions authorizing the 

assignment as exhibits.112

Within 30 days of the assignment, the assignee must file the affidavit of 

inventory with the court. See WindMIL, 2024 WL 1092326, at *3 (explaining that 

the affidavit of inventory, though filed contemporaneously with the petition, was 

untimely because it was filed over nine months after the assignment occurred). In 

110 See, e.g., In re Blue Lantern Health, LLC, Consol. C.A. No. 2024-0427-PAF (Del. Ch.), 

Dkt. 1 [hereinafter “Blue Lantern Petition”]; In re Cureatr, Inc., C.A. No. 2023-1274-PAF 

(Del. Ch.), Dkt. 1 [hereinafter “Cureatr Petition”]; In re Aceragen, Inc., C.A. No. 2023-

0838-PAF (Del. Ch.), Dkt. 1 [hereinafter “Aceragen Petition”]; In re DFO Parent Hldg. 

LLC, C.A. No. 2021-0877-KSJM (Del. Ch.), Dkt. 1 [hereinafter “DFO Petition”]; In re 

Complexa, Inc., C.A. No. 2020-0700-KSJM (Del. Ch.), Dkt. 1 [hereinafter “Complexa 

Petition”]; In re EndoStim, Inc., C.A. No. 2019-0924-MTZ (Del. Ch.), Dkt. 1 [hereinafter 

“EndoStim Petition”].

111 See, e.g., Blue Lantern Petition Exs. C-1–C-3; Cureatr Petition Exs. B–C; Aceragen 

Petition Ex. A; DFO Petition Ex. A; Complexa Petition Exs. A–B; EndoStim Petition Ex. 

A.

112 See, e.g., Blue Lantern Petition Ex. G; Cureatr Petition Ex. F; In re Stackpath Mgmt., 

Inc., C.A. No. 2024-0647-PAF (Del. Ch.), Dkt. 1 Ex. 3. 
27

practice, the inventory list is attached as an exhibit to the affidavit. The inventory 

list is typically in a balance-sheet format, which identifies the property by general 

category (i.e., cash, cash equivalents, accounts receivable, real property, fixtures and 

equipment, and intellectual property) and provides the book value of the property at 

or near the date of the assignment, if available.113 The assignee typically conducts a

UCC search and confirms in the affidavit whether there are any liens on the property 

of the assignment estate.114

The filing of the affidavit of inventory triggers the next section of the ABC 

Statute, which pertains to appraising the assets of the assignment estate. Section 

7382 states:

Upon the filing of the inventory and affidavit required by § 7381 of this 

title, the Court of Chancery shall appoint 2 disinterested and competent 

persons to appraise the estate assigned, who shall, after being duly 

sworn or affirmed by some person having authority to administer oaths, 

to perform their duties with fidelity, forthwith proceed to make an 

appraisement of the estates and effects assigned, according to the best 

of their judgment, and having completed the same, shall return the 

inventory and appraisement to the office of the Register in Chancery of 

the county in which the inventory of the assignee and the affidavit 

accompanying the same were filed. The appraisers shall receive the 

113 See, e.g., In re Cureatr, Inc., C.A. No. 2023-1274-PAF (Del. Ch.), Dkt. 8 [hereinafter 

“Cureatr Inventory Aff.”]; In re EndoStim, Inc., C.A. No. 2019-0924-MTZ (Del. Ch.), 

Dkts. 4–5 [hereinafter “EndoStim Inventory Aff.”]; In re Gearbox, LLC, C.A. No. 2021-

0005-KSJM (Del. Ch.), Dkt. 2 [hereinafter “Gearbox Inventory Aff.”]; In re Coskata, Inc., 

C.A. No. 11644-VCS (Del. Ch.), Dkt. 2 [hereinafter “Coskata Inventory Aff.”].

114 See, e.g., Cureatr Inventory Aff. ¶ 22; EndoStim Inventory Aff. ¶ 5; Gearbox Inventory 

Aff. ¶ 12; Coskata Inventory Aff. ¶ 6.
28

same compensation as is now allowed by law to appraisers of the estate 

of a decedent.

10 Del. C. § 7382 (emphasis added). In practice, the assignee files a motion with 

the court seeking appointment of appraisers, which recommends at least two 

appraisers for the court’s consideration and includes information about the 

qualifications of the proposed appraisers.

115 The motion typically is accompanied 

by affidavits of disinterestedness from each appraiser, so as to satisfy the oath 

requirement of Section 7382.

116 Once appointed by the court, the two appraisers are 

required to appraise the assignor’s assets as of the date of the assignment and file 

those appraisals with the court.117

The appraisals are the necessary antecedent to the bond requirement of 

Section 7383, which provides that the assignee “shall . . . give bond with sufficient 

115 See, e.g., In re Kidbox.com, Inc., C.A. No. 2022-0379-PAF (Del. Ch.), Dkt. 6 ¶¶ 11–13 

[hereinafter “Kidbox Motion to Appoint Appraisers”]; In re gen-E, LLC, Consol. C.A. No. 

2020-0635-PAF (Del. Ch.), Dkt. 8 ¶¶ 11–13 [hereinafter “gen-E Motion to Appoint 

Appraisers”]; In re Velicept Therapeutics, Inc., C.A. No. 2020-1068-KSJM (Del. Ch.),

Dkt. 3 ¶¶ 5–7 [hereinafter “Velicept Motion to Appoint Appraisers”]; In re Fathom Water 

Mgmt. Hldgs., LLP, C.A. No. 2020-0058-JTL (Del. Ch.), Dkt. 4 ¶¶ 3–5 [hereinafter 

“Fathom Motion to Appoint Appraisers”].

116 See, e.g., Kidbox Motion to Appoint Appraisers Exs. C–D; gen-E Motion to Appoint 

Appraisers Exs. B–C; Velicept Motion to Appoint Appraisers Exs. B–C; Fathom Motion 

to Appoint Appraisers Exs. B–C.

117 See, e.g., In re Mobex Fourth and 1, LLC, C.A. No. 2024-0163-PAF (Del. Ch.), Dkts. 

11–12; In re Cureatr, Inc., C.A. No. 2023-1274-PAF (Del. Ch.), Dkt. 15; In re DFO Parent 

Hldg. LLC, C.A. No. 2021-0877-KSJM (Del. Ch.), Dkts. 13–14; In re Xtuit Pharms., Inc., 

C.A. No. 2018-0179-TMR (Del. Ch.), Dkt. 5.
29

surety, to be approved by the Court of Chancery in an amount fixed by the Court, 

being not less than the total amount of inventory and appraisement of the estate so 

assigned.” 10 Del. C. § 7383(a) (emphasis added). “[T]he inventory, appraisals, 

and bond are all focused on the same snapshot in time: the moment of assignment.” 

In re Summit Nats., Inc., 2024 WL 2833515, at *2 (Del. Ch. June 3, 2024) (ORDER).

Standard practice in this court is for the assignee to file a motion seeking an 

order from the court to set the bond in an amount tied to the appraisals.

118

Sometimes, an assignee will request that the amount of the bond be the average of 

the two appraisals; sometimes, it will be at the higher of the two appraisals.119 After 

reviewing the appraisals, the court sets the amount of the bond;

120 the assignee then 

obtains the bond and provides notice to the court.121 Upon the application of any

118 See, e.g., In re LM Indus. Gp., Inc., C.A. No. 2022-0148-PAF (Del. Ch.), Dkt. 5; In re 

Sequel Youth and Fam. Servs., LLC, C.A. No. 2022-0198-PAF (Del. Ch.), Dkt. 10; In re 

Illumitex, Inc., C.A. No. 2020-1102-KSJM (Del. Ch.), Dkt. 9.

119 Where the appraisals contain computational errors or flawed analysis, the court has set 

the bond higher than the amount of the appraisals. See, e.g., In re Custom Furniture Techs., 

Inc., 2022 WL 1553551, at *2 (Del. Ch. May 17, 2022); In re LM Indus. Gp., Inc., C.A. 

No. 2022-0148-PAF (Del. Ch. May 17, 2022) (ORDER).

120 See, e.g., In re Aceragen, Inc., C.A. No. 2023-0838-PAF (Del. Ch. June 6, 2024) 

(ORDER); In re Sequel Youth and Fam. Servs., LLC, C.A. No. 2022-0198-PAF (Del. Ch. 

Sept. 13, 2022) (ORDER); In re Illumitex, Inc., C.A. No. 2020-1102-KSJM (Del. Ch. May 

12, 2021) (ORDER).

121 See, e.g., In re DDP DMO Hldgs., LLC, C.A. No. 2023-0989-PAF (Del. Ch.), Dkt. 23; 

In re Revelar Biotherapeutics, Inc., C.A. No. 2022-0921-PAF (Del. Ch.), Dkt. 10; In re 

Teatime Games, Inc., C.A. No. 2021-0307-KSJM (Del. Ch.), Dkt. 10. In 2021, Court of 
30

interested party, the court may “direct the bond provided under § 7383 of this title 

to be proceeded on if it deems it necessary and proper for the protection of such 

interested party.” 10 Del. C. § 7384.

Section 7385 requires the assignee to “render an account of the assignee’s 

trusteeship every year from the date of the assignee’s bond” until the case is closed.

Id. § 7385(a).122 When filing the annual accountings, the assignee must provide 

notice to “all persons in interest” and give such persons an opportunity to file 

exceptions to the accountings with the court. 10 Del. C. § 7385(b). In practice, once

a final accounting has been rendered, the assignee files a motion with the court to 

approve the final distributions, release the bond, and close the case.123

Chancery Rule 89 was amended to repeal the requirement that bonds filed in the Court of 

Chancery take a specific form. The amended rule provides: “Each bond filed in the Court 

of Chancery after December 1, 1969, shall be in the form and manner prescribed by the 

Court and submitted to the Register in Chancery or filed electronically.” Ct. Ch. R. 89. 

The court has determined that “a bond in a commercially reasonable form is appropriate in 

light of this amendment.” In re Velicept Therapeutics, Inc., 2021 WL 11715230, at *2 n.11 

(Del. Ch. Apr. 7, 2021) (ORDER).

122 See, e.g., In re LM Indus. Gp., Inc., C.A. No. 2022-0148-PAF (Del. Ch.), Dkts. 13–14; 

In re gen-E, LLC, Consol. C.A. No. 2020-0635-PAF (Del. Ch.), Dkt. 22; In re EndoStim, 

Inc., C.A. No. 2019-0924-MTZ (Del. Ch.), Dkts. 14, 21, 28.

123 See, e.g., In re Kidbox.com, Inc., C.A. No. 2022-0379-PAF (Del. Ch.), Dkt. 13; In re 

gen-E, LLC, Consol. C.A. No. 2020-0635-PAF (Del. Ch.), Dkt. 24; In re EndoStim, Inc., 

C.A. No. 2019-0924-MTZ (Del. Ch.), Dkt. 42. Once the assignee files a motion to approve 

the final accounting, the court will typically schedule a hearing on that motion. See, e.g., 

In re Kidbox.com, Inc., C.A. No. 2022-0379-PAF (Del. Ch. Feb. 27, 2024) (ORDER); In 

re Complexa, Inc., C.A. No. 2020-0700-KJSM (Del. Ch. Apr. 26, 2024) (ORDER); In re 
31

Section 7386 provides that the court, “upon cause being shown, may remove 

the assignee or trustee . . . and compel an assignment of the trust estate to others 

appointed in their stead.” 10 Del. C § 7386. The final section of the ABC Statute, 

Section 7387, permits the court under certain circumstances to void preferences and 

assignments. Id. § 7387.

Delaware courts emphasized more than a century ago the importance of the 

statutory mandates in the ABC Statute. See Elliott v. Montell, 30 A. 854, 855 (Del. 

1885) (“[W]hen a voluntary assignment is made, certain things must be done 

as . . . specified [in the ABC Statute].”). The ABC Statute “is not complicated. It 

has few mandates, but they must be followed.” WindMIL, 2024 WL 1092326, at *3. 

Indeed, the court has dismissed cases for an assignee’s failure to comply with the 

ABC Statute. See, e.g., In re Aeolus Pharms., Inc., C.A. No. 2018-0212-PAF, at

3:20–22, 5:10–6:7 (Del. Ch. Oct. 20, 2023) (TRANSCRIPT) (dismissing ABC 

proceeding due to assignee’s violations of Sections 7381, 7382, and 7383 of the 

Revelar Biotherapeutics, Inc., C.A. No. 2022-0921-PAF (Del. Ch. Dec. 28, 2023)

(ORDER); In re gen-E, LLC, Consol. C.A. No. 2020-0635-PAF (Del. Ch. Dec. 27, 2023) 

(ORDER). If the court is satisfied with the assignee’s disclosures and the proposed 

distributions, the court will approve the final accounting, release the bond, and close the 

case. See, e.g., In re Kidbox, Inc., C.A. No. 2022-0379-PAF (Del. Ch. June 7, 2024) 

(ORDER); In re Complexa, Inc., C.A. No. 2020-0700-KJSM (Del. Ch. June 7, 2024) 

(ORDER); but see In re gen-E, LLC, Consol. C.A. No. 2020-0635-PAF (Del. Ch. Feb. 12, 

2024) (ORDER) (requesting additional information from the assignee regarding the final 

accounting); In re Revelar Biotherapeutics, Inc., C.A. No. 2022-0921-PAF (Del. Ch. Feb. 

12, 2024) (ORDER) (same).
32

ABC Statute); WindMIL, 2024 WL 1092326, at *3 (same); see also Vernon Hills, 

2024 WL 889963, at *7 (dismissing ABC proceeding involving a non-Delaware 

assignor for lack of subject matter jurisdiction under the ABC Statute).

Because ABC actions in this court are predominantly ex parte, the court must 

be particularly careful to enforce the statutory mandates. The ABC Statute “must be 

read in the light of the purpose for which it was enacted, to wit, the security afforded 

both to the cestui que trust and the assignor by the bond of the trustees, the inventory 

and appraisement, and the supervisory control of the chancellor.” Elliott, 30 A. at 

855–56. Vice Chancellor Glasscock’s opinion in Weaver underscores this approach. 

2011 WL 591070. In that case, the court agreed to waive the appraisal requirement 

under Section 7382(a) of the ABC Statute because “the only assets of value in the 

estate assigned [were] cash or cash receivables” and the only known creditor 

“agree[d] with the face valuation of those assets.” Id. at *1. The court reasoned that 

appointing appraisers in that circumstance would “serve no useful purpose and 

would simply reduce the amount available to the creditor[.]” Id.; accord In re 

Prenexus Health, Inc., 2023 WL 2159180, at *2 (Del. Ch. Feb. 22, 2023) (observing 

that the court has occasionally waived the appraisal requirement but only “upon a 

showing of good cause where the assigned assets consist of cash, accounts 

receivable, and assets of nominal value” (emphasis added)).
33

On the other hand, the court in Weaver held that the use of the word “shall”

in Section 7383 indicated that the bond requirement could not be waived. 2011 WL 

5910707, at *1 (“The direction of the Legislature could not be clearer that the bond 

requirement here, despite the proffered waiver of the creditor, be set at not less than 

the total amount of the inventory and appraisement.”); see, e.g., In re Summit Nats.,

Inc., C.A. No. 2024-0199-PAF, at 7 (Del. Ch. Mar. 6, 2024) (ORDER) (“The court 

will not entertain any motion to waive the bond requirement.”).

124 In short, the cases 

reflect the court’s expectation that parties to ABC proceedings follow the statutory 

requirements. See WindMIL, 2024 WL 1092326, at *3.

B. The Assignee Ignored and Repeatedly Violated the ABC Statute

In this proceeding, the Assignee failed to comply with the ABC Statute and

has not justified its pervasive non-compliance, even after the court identified the 

shortcomings in the initial hearing on the Motion in February 2022 and in the 

Order.

125 In fact, Mitnick, who was both the Assignee’s representative and its 

124 The court in In re McBride America, Inc., 2010 WL 3025572 (Del. Ch. July 29, 2010), 

chose not to require a bond where the value of the assignment estate’s assets had “been 

established to be zero dollars,” but in doing was admittedly “skeptical that the Court has 

the power to waive the statutory requirement that a bond be posted.” Id. at *1.

125 See Dkt. 64 (“[T]he court raised a series of issues concerning the Assignee’s compliance 

with the statutory scheme governing assignments for the benefit of creditors articulated in 

[the ABC Statute] and the process of the disposition of the Trust assets.”); Order to Show 

Cause ¶¶ C–H. Some violations of the ABC Statute are potentially curable. See, e.g.,
34

attorney, testified that he was not aware of most of the statutory requirements when 

this case was initiated, despite having been “involved in a handful of Delaware 

ABCs” beforehand.126 Although the Assignee initially acknowledged that this ABC 

proceeding under Delaware law was subject to the ABC Statute,

127 the Assignee

chose not to inquire into it.128 That willful blindness resulted in an inexcusable series 

of failures to comply with the mandates of the ABC Statute.

First, the Assignee did not file an affidavit of inventory within 30 days of the 

Assignment in accordance with Section 7381. The Assignment occurred on August 

Summit Nats., 2024 WL 2833515, at *2–3 (identifying statutory deficiencies with 

appraisals and denying assignee’s motion to set the bond); In re Summit Nats., Inc., C.A. 

No. 2024-0199-PAF (Del. Ch.), Dkt. 15 (submitting new appraisals and a second motion 

to set the bond in response to the court’s order); In re Summit Nats., Inc., 2024 WL 3555871 

(Del. Ch. July 8, 2024) (ORDER) (granting assignee’s motion to set the bond after 

submission of new appraisals).

126 Evidentiary Hearing at 30:10–18, 30:21–31:5, 33:22–24 (Mitnick).

127 See ABC Petition at 3 (“[T]he Assignee requests that this Honorable Court take 

jurisdiction over this matter pursuant to 10 Del. C. § 7381 . . . .”); Assignment Agreement

at 1 (“[I]t is contemplated that the Assignee’s disposition of the assets of the Assignor and 

the proceeds therefrom will occur in the context of an assignment for the benefit of 

creditors . . . under Delaware law[.]”); id. § 1.4 (“Promptly after the Effective Date, the 

Assignee shall commence a proceeding by petition in the Delaware Court of Chancery . . . 

to administer this Trust under Title 10, Chapter 73 of the Delaware Code . . . .”); id. § 6 

(“This Trust is intended to be administered in accordance with the provisions of Delaware 

law governing assignments for the benefit of creditors, under subchapter VI of title 10, 

Chapter 73 of the Delaware Code . . . .”).

128 See Evidentiary Hearing at 30:10–17 (Mitnick) (“Q: Are you aware that the statutes 

governing ABCs in Delaware impose certain requirements on the assignee? A: I am now, 

and I also want to add my apology for not knowing about them on the first day. . . . I should 

have known about all the requirements and followed them[.]”); id. at 57:14–19 (Mitnick) 

(testifying that he did not review the ABC Statute in connection with this proceeding).
35

15, 2019, meaning that Assignee was required to file the affidavit of inventory on or 

before September 14, 2019. The ABC petition, filed the day after the Assignment, 

did not include an affidavit of inventory. Nor did the Assignee ever file one 

thereafter. Rather, on October 3, 2019, the Assignee filed the Inventory Opinion. 

The Inventory Opinion did not satisfy the statutory mandate. It was not filed “within 

30 days after the execution” of the Assignment and did not include “an affidavit by 

[the] assignee.” 10 Del. C. § 7381.

The Assignee acknowledges its omission of the affidavit of inventory,129 but 

proffers no justifiable explanation for its non-compliance, aside from indicating that 

the preparation of an inventory report was costly given the location of the assets.130 

The Assignee asserts that these costs made up a “significant portion of the total value 

of the inventory,”131 but fails to explain why it would be more costly to file an 

129 See, e.g., Dkt. 75 ¶ 6 (“Regarding the Assignee’s omission of an affidavit of inventory 

accompanying the petition and a motion to appoint appraisers, the Assignee realizes that 

those steps were not taken but does not believe that they would have materially changed 

this case.”); Evidentiary Hearing at 5:7–15 (Assignee’s Counsel) (“The assignee 

overlooked certain duties at the beginning of this case. [The ABC Statute] says that the 

assignee should have filed an inventory and affidavit at the beginning, should have filed 

two appraisals instead of one, and should have sought court approval of those appraisers 

before filing the appraisals, and should have been filing yearly reports. I’m not going to 

try to persuade the Court that those obligations weren’t overlooked.”); 6:20–21 (Assignee’s 

Counsel) (acknowledging that the Assignee “did not comply with the early case 

requirements”).

130 Dkt. 75 ¶ 6.

131 Id.
36

affidavit of inventory in the present action as compared to other ABC proceedings, 

or why the costs of preparing the affidavit of inventory excuse compliance with the 

statutory requirement. This post hoc rationalization does not excuse the Assignee’s 

failures. If the Assignee truly believed that dispensing with the requirement to file 

an affidavit of inventory was warranted, the appropriate course of action would have 

been to seek leave from the court to excuse the requirement and to justify the basis 

for the request. The Assignee’s strategy of choosing to seek forgiveness, rather than 

permission, has not served it well.

Second, the Assignee violated Section 7382 by failing to seek the court’s 

appointment of two appraisers to appraise the assets of the Assignment estate. To 

be sure, the Inventory Opinion was not an appraisal. It contains an express 

disclaimer that Auction Advisors was “not rending [sic] this opinion as appraisers 

conducting an appraisal under the guidelines of the American Society of 

Appraisers.”132 See In re Collaborative Cmty. Servs., Inc., 2023 WL 8809863, at *2 

(Del. Ch. Dec. 19, 2023) (ORDER) (explaining that a purported appraisal which 

stated that it “‘should not be construed as a full appraisal’ and is only ‘an expert’s 

opinion as to a possible value that a full appraisal report might fall within’” “does 

not satisfy the requirements of Section 7382” (emphasis omitted)). The Assignee 

132 Inventory Opinion at 1. 
37

also failed to file a motion with the court to set the amount of the bond pursuant to 

Section 7383(a). Instead, on October 3, 2019, the Assignee simply notified the court 

that it had unilaterally posted a bond in the amount of $209,656, tethered entirely to 

the non-conforming Inventory Opinion.133 Again, the Assignee offers no justifiable 

explanation for its non-compliance with these requirements.

134 To the contrary, 

Mitnick testified that he was in fact aware of the appraisal requirement and did not 

attempt to comply135—another admission of, at best, the Assignee’s willful blindness 

to the statutory mandates.

133 Dkt. 13 (“[T]he bond amount of $209,656.00 is equal to the amount of the liquidation 

value as outlined in the Appraisal Report dated September 12, 2019.”); Evidentiary 

Hearing at 33:14–21 (Mitnick).

134 The Assignee argues that the court has “some flexibility” in applying the mandates of 

the ABC Statute, citing to the court’s decisions in Prenexus Health and Weaver. Dkt. 87 

¶ 2; see also Evidentiary Hearing at 6:14–18 (Assignee’s Counsel) (“[T]here are a couple 

of cases suggesting that the Court has some flexibility in treating the deadlines in the [ABC 

Statute] . . . under special circumstances.”). This argument is flawed for many reasons. 

First, the court has only waived the appraisal requirement upon a showing of good cause 

where the assignment estate consisted of cash and receivables. Prenexus Health, 2023 WL 

2159180, at *2 (denying motion to waive the appraisal requirement for failure to show 

good cause). Second, the Assignee did not, at any point, request a waiver of the appraisal 

requirement. Third, even if the Assignee is now requesting a waiver of the appraisal 

requirement, the Assignee has not made a sufficient showing of good cause to warrant a 

deviation from the mandates of the ABC Statute. Based on the record, the assignment 

estate does not consist solely of cash and receivables. See In re Ohana Biosciences, Inc., 

2021 WL 5329950 (Del. Ch. Nov. 15, 2021) (ORDER) (denying a motion to waive the 

appraisal requirement where the inventory consisted of more than just cash and 

receivables).

135 Evidentiary Hearing at 32:6–11 (Mitnick) (“Q: Are you aware that there must be two 

appraisers? A: That, actually, I am aware of, and I knew that, and I’m sorry it wasn’t filed. 

I had a previous case in Delaware where we did file two appraisals.”).
38

Next, the Assignee did not file annual accountings as required by Section 

7385. If, as the Assignee appears to have assumed, the bond was properly set on 

October 3, 2019, the Assignee was required to file an annual accounting on October 

3, 2020, and each year thereafter until the close of the case. The Assignee did not 

satisfy this obligation. Aside from the incomplete and inaccurate final accounting 

submitted with the Motion in June 2020, and the First Revised Accounting submitted 

in September 2021, the Assignee did not file annual accountings with the court. The 

Assignee does not proffer any justification for its failure to submit annual accounting 

reports.

On March 8, 2024, the Assignee, “in lieu of the yearly accounts required under 

10 Del. C. § 7385,” submitted a “ledger showing all funds into and out of the 

Trust[.]” 136 The ledger does not satisfy Section 7385, nor does it remedy the 

Assignee’s past statutory violations. The Assignee argues that “there were so few 

transactions during the life of the case,” and “it would have been a waste of 

resources—not to mention more complicated for parties to analyze and digest—if 

the Ledger had been broken into separate yearly reports and submitted 

136 Dkt. 83 at 1. 
39

simultaneously.”137 This explanation, like the others, does not justify the Assignee’s 

non-compliance with Section 7385. To the contrary, it shows that the Assignee had 

access to the information necessary to prepare the accountings but did not do so.

C. There is More Than Sufficient Cause to Remove the Assignee 

Given SM Financial’s multiple unexplained and unjustified failures to follow 

the requirements of the ABC Statute, the court finds that cause exists to remove SM

Financial as the Assignee pursuant to 10 Del. C. § 7386.

Section 7386 of the ABC Statute provides that the court may remove and 

replace an assignee “upon cause being shown.” 10 Del. C. § 7386. Section 7386 

does not define “cause.” The court was unable to identify a case where an assignee 

has been removed for cause under Section 7386. In other jurisdictions, courts have 

removed an assignee or a trustee in an ABC proceeding where the assignee engaged 

in self-dealing or bad faith conduct, where the assignee failed to properly manage 

the estate, where the assignee had a conflict of interest with an interested party, or 

where the assignee failed to comply with the statutory requirements for ABC 

proceedings. See Farmers & Merchs. Nat’l Bank of L.A. v. Peterson, 55 P.2d 867, 

137 Dkt. 87 ¶ 9; Evidentiary Hearing at 34:6–15 (Mitnick) (“Q: On March 8, the assignee 

filed a ledger instead of multiple reports. Why did it do that? A: We -- we had discussed 

it, and it seemed like it made more sense. It would be more easy to follow. It brought the 

numbers current to, you know, a couple weeks ago, and rather than having five reports 

where the last one would have the number that was in the compilation, we decided to file 

it in a compilation.”).
40

869 (Cal. 1936) (affirming judgment and removal of assignees where assignees 

engaged in self-dealing, concealment, and bad faith conduct and “were unfit to 

continue as trustees”); Havens v. Sibbald, 41 A. 371, 371–72, 374 (N.J. Ch. 1898) 

(removing assignee where assignee caused assets of the assignment estate “to be 

appraised at a very low rate” and did not obtain title to certain real property of the 

assignment estate); In re Sheldon, 76 N.Y.S. 278, 283 (N.Y. App. Div. 1902) 

(affirming removal of assignee where sale of assets was made in bad faith), aff’d, 65 

N.E. 1096 (N.Y. 1902); In re Durfee, 4 R.I. 401, 412–13 (1856) (removing assignee 

where assignee procured the assignment by fraud); King v. McClurg, 63 N.W. 219, 

219–20, 222 (S.D. 1895) (affirming removal of assignee where lower court found 

“gross irregularities in the management of the estate” and “there was good and 

sufficient cause for his removal”); In re Assignment of the Com. Bank, 6 Ohio Dec. 

105, 105 (Ohio Insolv. 1895) (removing trustee where trustee was unable “to 

consider and act upon every question that shall arise in the course of the 

administration of the trust [] without any bias or personal embarrassment”); Hall v. 

Saunders, 15 S.W.2d 717, 718–19 (Tex. Civ. App. 1929) (explaining that 

appointment of replacement assignee by lower court was proper where the original

assignee failed to file a bond “within five days after the delivery of the assignment”

as required by statute and affirming lower court’s decision on other grounds); but

see Case v. Mason, 23 A. 48, 48 (R.I. 1885) (opining that the removal of an assignee 
41

for violating the assignment statute is not mandatory, but instead in the discretion of 

the court “if [the] default was unintentional, or there was good excuse for it” and 

declining to remove assignees for “neglect[ing] to render an inventory and schedule”

on the condition that assignees cure their violation within 10 days).

Since the Assignee is serving as trustee of the Assignment estate, the court 

also looks to trust law for guidance on when the removal of a trustee may be 

appropriate. In the trust context, this court has “the discretion to remove a trustee 

who fails to perform his duties through more than mere negligence.” McNeil v. 

McNeil, 798 A.2d 503, 513 (Del. 2002); accord Sweeney v. Sweeney, 2024 WL 

3040424, at *13 (Del. Ch. June 24, 2024). The court may remove a trustee where 

there is a “breach of trust” or “the continued service of the [trustee] substantially 

impairs the administration of the trust.” 12 Del. C. §§ 3327(1)–(2); see also

Sweeney, 2024 WL 3040424, at *13; In re Heizer Corp., 1988 WL 58272, at *21 

(Del. Ch. June 18, 1998) (explaining that trustee removal is an appropriate remedy 

where the trustee “fails to obey a court order concerning the administration of the 

trust,” the trustee’s duties are in conflict with his personal interests, the trustee 

commingles trust and personal property, or the trustee commits “other similar

serious breaches of trust”). “Generally speaking, removal of a trustee is an extreme 

form of equitable relief that should be exercised sparingly.” Tigani v. Tigani, 2021 

WL 1197576, at *21 (Del. Ch. Mar. 30, 2021) (internal quotation marks omitted), 
42

aff’d, 271 A.3d 741 (Del. 2022). Trustee removal is warranted where “trust property 

is ‘endangered by a lack of capacity, honesty or fidelity,’ and is not appropriate for 

‘some mere negligent breach of duty, arising largely from an honest mistake.’” 

Sweeney, 2024 WL 3040424, at *13 (quoting In re Catell’s Est., 38 A.2d 466, 469–

70 (Del. Ch. 1944)).

138

In applying these principles, the court concludes that SM Financial’s 

pervasive non-compliance with the ABC Statute is sufficient cause to warrant its 

removal as Assignee. SM Financial was tasked as Assignee with administering the 

assets of the Assignment estate for the benefit of the Assignor’s creditors. A 

fundamental part of that process, at least in Delaware, where ABC proceedings are 

governed by statute, is ensuring that the ABC is statutorily compliant. SM Financial

fell entirely short of the mark in this proceeding. SM Financial is not a newcomer 

138 In federal bankruptcy proceedings, bankruptcy courts may remove a trustee, other than 

the United States trustee, for cause after notice and a hearing. 11 U.S.C. § 324(a). “Cause” 

for removal of a trustee is not defined by the bankruptcy code and must be determined “on 

a case-by-case basis.” In re Syntax-Brillian Corp., 554 B.R. 723, 726 (Bankr. D. Del. 

2016). “Cause to remove a trustee includes ‘trustee incompetence, violation of the trustee’s 

fiduciary duties, misconduct or failure to perform the trustee’s duties, or lack of 

disinterestedness or holding an interest adverse to the estate.’” In re United Tax Gp., LLC, 

622 B.R. 148, 156 (Bankr. D. Del. 2020) (quoting In re AFI Hldg., Inc., 530 F.3d 832, 845 

(9th Cir. 2008)). “A trustee removed for ‘cause’ in one case will be removed from all other 

cases in which the trustee is then serving, ‘unless the court orders otherwise.’” Id. at 157 

(quoting 11 U.S.C. § 324(b)). As such, “the removal of a trustee is an extreme remedy,”

but “the decision to remove a trustee is within the sound discretion of the bankruptcy 

court.” Id.
43

to the ABC process generally or in Delaware specifically. It chose not to review the 

ABC Statute and violated it repeatedly in this proceeding. Even after the court 

pointed out the statutory violations, SM Financial made no attempt to try and correct 

its missteps. The Assignee’s failure to adhere to the ABC Statute is not mere

negligence or an “honest mistake,” but instead the product of its willful blindness to 

the statutory requirements. Catell’s Est., 38 A.2d at 470; see, e.g., In re Walt Disney 

Co. Deriv. Litig., 906 A.2d 27, 62 (Del. 2006) (“[T]he concept of intentional 

dereliction of duty, a conscious disregard for one’s responsibilities, is an appropriate 

(although not the only) standard for determining whether fiduciaries have acted in 

good faith.” (emphasis in original) (quoting In re Walt Disney Co. Deriv. Litig., 907 

A.2d 693, 755 (Del. Ch. 2005)); Heron Bay Prop. Owners Ass’n, Inc. v. 

CooterSunrise, LLC, 2013 WL 3871432, at *4–6, *9 (Del. Ch. June 27, 2013) 

(finding that homeowners’ willful blindness to restrictive covenants was an 

insufficient justification for violation where homeowners “were given several 

opportunities to investigate” the restrictive covenants but did not do so and 

concluding that the covenants were enforceable), adopted sub nom. Heron Bay Prop. 

Owners Ass’n, Inc. v. Cooter Sunrise, LLC, 2013 WL 3734745 (Del. Ch. July 16, 

2013) (ORDER); Homan v. Turoczy, 2005 WL 2000756, at *15 (Del. Ch. Aug. 12, 

2005) (rejecting claim of equitable fraud where buyer was willfully blind to the 
44

existence of financial records and did not request to review them prior to entering 

into transaction).

139

Removal for cause is also warranted under Section 4.3 of the Assignment 

Agreement. That section defines cause, in pertinent part, as “gross negligence, gross 

misconduct, fraud, embezzlement, or theft,” or “such other cause as the Court shall 

determine to evidence that the Assignee is unable or unfit to perform the duties set 

forth herein.”140 The court similarly concludes that SM Financial’s pervasive non139 The Assignee’s pervasive non-compliance with the ABC Statute and failure to review 

the statutory requirements amount, at the very least, to gross negligence. “In the corporate 

context, gross negligence has its own special meaning that is akin to recklessness.” In re 

McDonald’s Corp. S’holder Deriv. Litig., 291 A.3d 652, 689 (Del. Ch. 2023). By contrast, 

“[i]n civil cases not involving business entities, the Delaware Supreme Court has defined 

gross negligence as ‘a higher level of negligence representing an extreme departure from 

the ordinary standard of care.’” New Enter. Assocs. 14, L.P. v. Rich, 295 A.3d 520, 550–

51 (Del. Ch. 2023) (quoting Browne v. Robb, 583 A.2d 949, 953 (Del. 1990)). Under this 

framework, “gross negligence ‘signifies more than ordinary inadvertence or inattention,’ 

but it is ‘nevertheless a degree of negligence, while recklessness connotes a different type

of conduct akin to the intentional infliction of harm.’” Id. at 551 (quoting Jardel Co., Inc. 

v. Hughes, 523 A.2d 518, 530 (Del. 1987)). The Assignee did not make a genuine effort 

to comply with any of the mandates of the ABC Statute, despite having previously 

participated in Delaware ABC proceedings and acknowledging at the outset of this 

proceeding that the Trust would be administered in accordance with the ABC Statute. 

Evidentiary Hearing at 12:22–13:7 (Mitnick); Assignment Agreement §§ 1.4, 6. Instead, 

the Assignee repeatedly failed to adhere to the statutory requirements. See Venhill Ltd.

P’ship ex rel. Stallkamp, 2008 WL 2270488, at *30 (Del. Ch. June 3, 2008) (concluding 

that former general partner of a trust acted in a grossly negligent manner where his 

“decisions did not involve any rational consideration of relevant factors” and there was no 

“genuine effort to comply with the expected duty of care”).

140 Assignment Agreement § 4.3.
45

compliance with the ABC Statute is sufficient cause to warrant its removal as 

Assignee under the Assignment Agreement.

The Assignee’s repeated violations of the ABC Statute alone are enough to 

warrant its removal. But the Assignee’s conduct in this case further supports this 

decision. The Assignee had no direct contact with any of the directors or officers of 

the Assignor at any point.

141 Nor did the Assignee request financials statements or 

other ledgers from the Assignor prior to executing the Assignment Agreement.142

The Assignee’s lack of knowledge of the Greenwich Lease and the Sublease 

Payments, which increased the costs and extended the length of this proceeding, is 

reasonably attributable to these failures. See Berman, The ABCs of ABCs 22 (“Part 

of the early administration of any estate involves taking control of the assignor’s 

assets and books and records, and interviewing the assignor to ascertain the existence 

and value of all assets, including those assets that the assignee might not have 

considered at the time of the assignment.”).

141 Evidentiary Hearing at 57:20–58:4 (Mitnick) (“Q: Did you have any communication 

with anyone from the assignor? A: Ever? Q: Ever. A: I don’t believe so. Q: So you 

had no direct contact with any of the officers or directors of the assignor? A: I don’t think 

so . . . .”).

142 Id. at 58:17–59:2 (Mitnick) (“Q: Did you receive ledgers or financial statements of the 

assignor prior to the time that you executed the assignment agreement? A: I don’t think 

so. Q: At what time did you receive the financial statements or any ledgers of the assignor, 

vis-à-vis when you became the assignee? A: I -- I don’t recall, and I don’t recall actually 

how much documentation that we got from this assignor.”).
46

The Assignee also hired SM Law, its affiliated law firm, as its counsel, even 

though it is not apparent that retention of a second law firm was necessary or 

appropriate in this case, particularly given the limited assets of the Assignor.143 The 

Assignee’s compensation structure magnifies the court’s concern over the 

Assignee’s unilateral retention of SM Law. The Assignment Agreement provided 

for a 20% commission to the Assignee for all distributions made pursuant to Section 

2.3, which includes “expenses and debts of the Trust . . . including but not limited to 

amounts owed to the Assignee, the Trust’s professionals, and the Assignor’s 

professionals[.]”144 As a general matter, this structure does nothing to incentivize 

the Assignee to minimize expenses. And in the specific circumstances of this case, 

the compensation structure enabled SM Financial to collect its 20% commission 

based upon the fees billed by SM Law.145 Thus, the retention of SM Law effectively 

143 SM Law has no offices in Delaware. Neither the Assignor nor its assets have any 

connection to New Jersey. None of the issues in this proceeding appear to involve New 

Jersey law, and there is nothing in the record identifying the legal services that SM Law 

provided to the Assignee that Mitnick, as the General Counsel and representative of the 

Assignee, could not have undertaken in that capacity or that Hiller Law could not have 

provided. According to the First Revised Accounting, the Trust paid $15,900 to SM Law 

through April 30, 2020, and an additional $16,392.60 after April 30, 2020, totaling 

$32,292.60. Dkt. 41. The First Revised Accounting also lists another $8,580 to be paid to 

SM Law at the conclusion of the case. Id.

144 Assignment Agreement §§ 2.3, 2.7(a).

145 The Assignee represents that the fee structure in this case is similar to the compensation 

paid to assignees in ABC proceedings in New Jersey, which is governed by statute. See 
47

increased the total amount of fees payable to Mitnick’s family businesses and 

decreased the amounts to be distributed to the Assignor’s creditors.

146

This conduct and SM Financial’s unexplained and unjustified failures to 

adhere to the ABC Statute constitute sufficient cause to remove SM Financial as 

Assignee. The court does not make this decision lightly. Removal of an assignee is 

an extreme form of equitable relief, but the court, in its discretion, concludes that it 

is warranted here.

Evidentiary Hearing at 115:16–116:3 (Assignee’s Counsel). Under the New Jersey ABC 

statute, an assignee’s commission is subject to the court’s discretion and may not exceed 

“20% on all sums received by the said assignee, except that this limitation shall be 

inapplicable where the amount of the estate is less than $500.00.” N.J. Stat. § 2A:19-43. 

The 20% limitation is “‘confined to sums awarded directly to the assignee and does not 

include items of expense paid out of the estate for which court approval is sought, that is, 

attorney fees, auctioneer fees and the like.’” In re Vill. Sundries & Tobacco, Inc., 2017 

WL 1418384, at *3 (N.J. Super. Ct. App. Div. Apr. 21, 2017) (quoting In re Francilli 

Carriers, Inc., 187 A.2d 45, 47 (N.J. Super. Ct. Ch. Div. 1962)). In other words, under 

New Jersey law, certain expenses that are subject to court approval appear to be excluded 

from the calculation of an assignee’s commission. That is not the case here. The plain 

language of the Assignment Agreement provides that the Assignee is entitled to 20% of all 

distributions from the Trust, which expressly includes “expenses and debts of the Trust[.]” 

Assignment Agreement §§ 2.3; 2.7(a). It is also notable that assignees in New Jersey ABCs 

must obtain court approval to retain counsel on behalf of the assignment estate, and “[c]ourt 

approval of the retention is a condition to any award of counsel fees for services performed 

on behalf of the assignee.” Sundries & Tobacco, 2017 WL 1418384, at *3.

146 Mitnick testified that SM Law provided “all the legal services that were required to 

move this case from Point A to its conclusion,” but did not provide any specific information 

about these services or explain why SM Law’s services were necessary or appropriate 

given the retention of Hiller Law as Delaware counsel for the Assignee. Evidentiary 

Hearing at 59:18–20 (Mitnick); but see Dkt. 41 (indicating that $53,134.28 in legal fees

have been paid to Hiller Law and $15,000 of additional fees will be paid to Hiller Law at 

the close of the case). Neither of the Assignee’s counsel has justified the amount of their 

fees in light of the multiple violations of the ABC Statute.
48

D. Next Steps

The removal of the Assignee will require further proceedings before this 

matter can be closed. Appointment of a new assignee is one possible path forward, 

but there may be others. In the interim, pursuant to Section 5 of the Assignment 

Agreement, the court is extending the term of the Trust until further order of the 

court. In addition, no funds shall be distributed from the Trust without court 

approval. The bond shall remain in place and may be subject to further proceedings. 

III. CONCLUSION

For the foregoing reasons, the Motion is denied, and SM Financial is removed 

as Assignee pursuant to 10 Del. C. § 7386.