Court Opinion

ID: 7803588
Source: CourtListenerOpinion
Date Created: 2022-08-25 17:03:49.493257+00
Date Added: 2024-06-11T16:29:41.239363
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PAUL CAPITAL ADVISORS, L.L.C., a               )
Delaware limited liability company, PAUL       )
CAPITAL PARTNERS VIII-A, L.P., a               )
Delaware limited partnership, PAUL CAPITAL     )
PARTNERS VIII-B, L.P., a Delaware limited      )
partnership, PAUL CAPITAL PARTNERS             )
VIII-C, a Delaware limited partnership, PAUL   )
CAPITAL PARTNERS VIII HOLDINGS, a              )
California    general    partnership,   PAUL   )
CAPITAL PARTNERS IX, L.P., a Delaware          )
limited partnership, and PAUL CAPITAL          )
TOWN STREET PARTNERS, L.P., a Delaware         )
limited partnership,                           )
                                               )
                 Plaintiffs,                   )
                                               )
     v.                                        ) C.A. No. 2022-0167-SG
                                               )
JOHN A. STAHL, as Trust Advisor of the LT-1    )
to LT-9 Exchange Trusts, MURRAY T.             )
HOLLAND, as former Trust Advisor of the LT-    )
1 to LT-9 Exchange Trusts, JAMES E. Turvey,    )
as former Trust Advisor of the LT-1 to LT-9    )
Exchange Trusts, DELAWARE TRUST                )
COMPANY, as Trustee of the LT-1 to LT-9        )
Exchange Trusts, MHT FINANCIAL L.L.C.,         )
THE BENEFICIENT COMPANY GROUP,                 )
L.P.,     HIGHLAND         CONSOLIDATED        )
BUSINESS       HOLDINGS       GP,    L.L.C.,   )
BENEFICIENT MANAGEMENT, L.L.C.,                )
BENEFICIENT COMPANY HOLDINGS,                  )
L.P., HIGHLAND CONSOLIDATED, L.P.,             )
BENEFICIENT         HOLDINGS,          INC.,   )
HIGHLAND REAL ASSETS, L.L.C., and              )
BENEFICIENT                 MANAGEMENT         )
COUNSELORS, L.L.C.,                            )
                                               )
                 Defendants.                   )
                          MEMORANDUM OPINION

                          Date Submitted: July 6, 2022
                         Date Decided: August 17, 2022
                         Date Corrected: August 25, 2022

David E. Ross, Eric D. Selden, and A. Gage Whirley, of ROSS ARONSTAM &
MORITZ, LLP, Wilmington, Delaware; OF COUNSEL: John F. Hartmann, P.C. and
Ravi Subramanian Shankar, of KIRKLAND & ELLIS LLP, Chicago, Illinois,
Attorneys for Plaintiffs Paul Capital Advisors, L.L.C., Paul Capital Partners VIII-A,
L.P., Paul Capital Partners VIII-B, L.P., Paul Capital Partners VIII-C, L.P., Paul
Capital Partners VIII Holdings, Paul Capital Partners IX, L.P., and Paul Capital
Town Street Partners, L.P.

Stephen C. Norman and Ellis H. Huff, of POTTER ANDERSON & CORROON
LLP, Wilmington, Delaware, Attorneys for Defendants Beneficient Company Group,
L.P. and James Turvey.

Norman M. Powell, Emily V. Burton, Lauren Dunkle Fortunato, Michael E.
Neminski, and Nehama L. Hanoch, of YOUNG CONAWAY STARGATT &
TAYLOR, LLP, Wilmington, Delaware, Attorneys for Defendants Murray T.
Holland and MHT Financial LLC.

Brett M. McCartney, Elizabeth A. Powers, and Sarah T. Andrade, of BAYARD, P.A.,
Wilmington, Delaware; OF COUNSEL: Michael K. Hurst and Sara H. Chelette, of
LYNN PINKER HURST & SCHWEGMANN, Dallas, Texas, Attorneys for
Defendant John A. Stahl.

GLASSCOCK, Vice Chancellor
          This matter involves a contractual scheme that is, in the apt phrase of

Defendants’ counsel, a morass of complicated agreements. Notwithstanding that,

the issue before me is straightforward, if novel. Where a party has a contractual

right to receive payments from a trust, but the integrated trust agreement names

beneficiaries and does not include the party as a beneficiary, is the party nonetheless

a beneficiary, entitled to enforce statutory remedies available only to beneficiaries

against the trust and the trust advisor? Under the facts here, I find the answer is no.

The Defendants seek to dismiss Count I of the Second Amended Complaint (the

“SAC”), in which the Plaintiffs seek to remove a trust advisor, under Section 3327

of Title 12.          Standing to bring a petition under the statute is limited to

“beneficiaries.”1

          The Plaintiffs here are Paul Capital Advisors, L.L.C. (“Paul Capital”) and

certain of its affiliates. They exist as investment fund managers. As of 2017, they

intended to divest illiquid assets. With the assistance of counsel, and presumably

for reasons they found advantageous, the Plaintiffs entered a convoluted transaction

by which they transferred the illiquid assets to MHT Financial, L.L.C. (“MHT”),

which was to monetize them through an auction, and which contracted to pay up to

the first $550 million to the Plaintiffs; the amount realized beyond that amount

belonged to MHT (the “Transaction”). This brief recitation simplifies and omits

1
    As well as the “trustee” or “other officeholder,” categories inapplicable here.
                                                   1
much of the series of transactions, explained in more detail below. To facilitate this

scheme, MHT settled trusts with the assets (the “Exchange Trusts”). The purpose

of the Exchange Trusts was to monetize the assets, pay over the first $550 million to

the Plaintiffs, and distribute the remainder to MHT. As contemplated by the

Transaction documents, the Exchange Trusts exchanged the illiquid assets for

common units in The Beneficient Company Group, L.P. (“BEN”), which had

contracted to pay the Plaintiffs any shortfall if the auction failed to generate $500

million. MHT and BEN then conducted an auction of the BEN common units.

      The winning bidder in the auction was GWG Holdings, Inc. (“GWGH”), who

purchased the BEN common units from the Exchange Trusts in return for cash and

GWGH stock and “L-Bonds.” The Exchange Trusts, as contractually required by

the agreements governing them (the “Trust Agreements”), paid over the cash to the

Plaintiffs, but the amount was not enough to satisfy MHT’s and BEN’s obligation to

the Plaintiffs. The Exchange Trusts proved unable or unwilling to liquidate their

remaining assets, the stock and L-Bonds of GWGH. In the meantime, GWGH

entered voluntary bankruptcy.

      The matter before me is the Plaintiffs’ request to remove the “Trust Advisor”

of the Exchange Trusts, under 12 Del. C. § 3327. That part of Plaintiffs’ complaint

is expedited; the bulk of the complaint consists of contract claims arising under the

many documents that control the overall Transaction. The Plaintiffs allege that they

                                          2
are beneficiaries under the Exchange Trusts, and that the Trust Advisor is aligned

with GWGH, BEN, and MHT and will not properly advance the Plaintiffs’ interests

as an alleged beneficiary.

      The Defendants have moved to dismiss for lack of standing. They note that

the statutory relief sought is limited to “beneficiaries,” that the Trust Agreements

here enumerate the beneficiary as solely MHT, and they do not name the Plaintiffs

as beneficiaries. Accordingly, per the Defendants, the Plaintiffs are not owed

fiduciary duties under the Trust Agreements and have no standing to seek to remove

the Trust Advisor.

      The Plaintiffs point out that the statutory term “beneficiaries” is undefined,

and that under our case law, adopting the Restatement of Trusts, any party that the

settlor intended to include as a holder of a beneficial interest in the trust is a

“beneficiary.” The intent of the settlor controls. But in assessing that intent, I must

rely on the words of the Trust Agreements, which do not include the Plaintiffs among

the beneficiaries. The Plaintiffs point to the larger Transaction and its controlling

documents. But even taking those into account, they provide that MHT—the settlor

and sole beneficiary of the Exchange Trusts—and BEN have a contractual obligation

to facilitate the sale of the illiquid assets, that MHT has a contractual obligation to

pay over the initial payment to the Plaintiffs (with certain obligations of BEN to

cover shortfalls), and that the Exchange Trusts have a fiduciary duty to MHT to

                                          3
market and sell the assets, and a ministerial duty to pay up to the initial payment

amount of the proceeds directly to the Plaintiffs.

      In other words, the parties structured the Transaction so that contractual duties

flowed from MHT and BEN to the Plaintiffs regarding the sale of the assets and

payment of the $550 million, that MHT would create and use the Exchange Trusts

to facilitate this payment as well as its own interests in the proceeds, and that

fiduciary duties would flow from the Exchange Trusts to MHT only. Of course, the

parties could have agreed to have the Plaintiffs be beneficiaries of the Exchange

Trusts. This Transaction was among sophisticated parties aided by counsel, and I

must conclude that the structure of the Transaction as provided in the various

contracts was purposeful. Again, the explicit language of the Trust Agreements,

which the parties agree are integrated documents, do not list the Plaintiffs as

beneficiaries or describe an intent that they are due a beneficial interest in the

Exchange Trusts. Accordingly, I find that the Plaintiffs are not beneficiaries of the

Exchange Trusts and do not have standing to seek removal of the Trust Advisor.

Their relief must come in an action based on the contracts.

      My reasoning follows.

                                          4
                                     I. BACKGROUND2

       “The reader is forewarned that this case involves a maze of corporate entities

and an alphabet soup of corporate names.”3 This Memorandum Opinion includes

only those facts necessary to my analysis.

       A. The Relevant Parties and Non-Parties

       Plaintiff Paul Capital is a Delaware limited liability company with its principal

place of business in San Francisco, California, operating as a private equity firm.4

       Plaintiffs Paul Capital Partners VIII-A, L.P.; Paul Capital Partners VIII-B,

L.P.; Paul Capital Partners VIII-C, L.P.; and Paul Capital Partners IX, L.P. are

Delaware limited partnerships with their principal places of business in San

Francisco, California.5 They are private equity funds.6

2
  Unless otherwise noted, the following facts are based on the Plaintiffs’ Verified Second Amended
Complaint, Dkt. No. 66 (the “SAC”) and the documents incorporated by reference therein. Elf
Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 287 n.1 (Del. 1999) (“Since this is an appeal from
a dismissal under Court of Chancery Rule 12(b)(1) for lack of jurisdiction, we must confine
ourselves to the allegations of the complaint and exhibits thereto, which must be accepted as true
for purposes of the motion to dismiss.”); Dover Hist. Soc. v. City of Dover Plan. Comm’n, 838
A.2d 1103, 1110 (Del. 2003) (“In ruling upon a Rule 12(b)(6) motion to dismiss, the relevant
universe of facts are ordinarily confined to the allegations of the petition.”). Citations in the form
of “Neminski Aff. —” refer to the Transmittal Affidavit of Michael E. Neminski in Support of
Corrected Opening Brief of Defendants in Support of their Motions to Dismiss Count I of the
Verified Second Amended Complaint, Dkt. No. 107. Citations in the form of “Neminski Aff., Ex.
—” refer to the exhibits attached to the Neminski Affidavit, Dkt. No. 108.
3
  Veloric v. J.G. Wentworth, Inc., 2014 WL 4639217, at *2 (Del. Ch. Sept. 18, 2014).
4
  SAC ¶ 10.
5
  Id. ¶¶ 11–14.
6
  Id.

                                                  5
        Plaintiff Paul Capital Partners VIII Holdings is an investment holding

company owned by Paul Capital Partners VIII-A, L.P., Paul Capital Partners VIII B,

L.P., and Paul Capital Partners VIII-C, L.P.7 It is a California general partnership

with its principal place of business located in San Francisco, California.8

        Plaintiff Paul Capital Town Street Partners, L.P. is a Delaware limited

partnership with its principal place of business in San Francisco, California,

operating as a private equity fund.9

        Plaintiffs Paul Capital Partners VIII-A, L.P.; Paul Capital Partners VIII-B,

L.P.; Paul Capital Partners VIII-C, L.P.; Paul Capital Partners IX, L.P.; Paul Capital

Partners VIII Holdings; and Paul Capital Town Street Partners, L.P. are referred to

herein as the “Paul Capital Funds.”

        Defendant John Stahl is a Trust Advisor to the Exchange Trusts, and a resident

of North Carolina.10

        Defendant Murray Holland is a former Trust Advisor to the Exchange Trusts

and a resident of Texas.11 Holland is also the Chairman, President, and CEO of

GWGH, and a principal and owner of MHT.12

7
  Id. ¶ 15.
8
  Id.
9
  Id. ¶ 16.
10
   Id. ¶ 17.
11
   Id. ¶ 18.
12
   Id.

                                           6
        Defendant James Turvey is a former Trust Advisor to the Exchange Trusts

and a resident of Texas.13 Turvey is a senior executive of BEN, where he serves as

Senior Vice President of Collateral Valuation.14

        Defendant Delaware Trust Company is a Delaware corporation and serves as

the trustee of the Exchange Trusts.15

        Defendant MHT is a Delaware limited liability company with its principal

place of business located in Dallas, Texas.16

        Defendant BEN is a holding company of capital and financial services

companies.17 It is a Delaware limited partnership with its principal place of business

in Dallas, Texas.18

        Defendant Highland Consolidated Business Holdings GP, L.L.C. (“BEN

GP”) is a Delaware limited liability company.19

        Defendant Beneficient Management, L.L.C. (“Successor BEN GP”) is a

Delaware limited liability company.20

13
   Id. ¶ 19.
14
   Id.
15
   Id. ¶ 20.
16
   Id. ¶ 21.
17
   Id. ¶ 22.
18
   Id.
19
   Id. ¶ 23.
20
   Id. ¶ 24.

                                          7
        Defendant Beneficient Company Holdings, L.P. (“BCH”) is a Delaware

limited partnership.21

        Defendant Highland Consolidated, L.P. (“HCLP”) is a Delaware limited

partnership.22

        Defendant Beneficient Holdings, Inc. (“Holdings”) is a Delaware

corporation.23 Holdings, BEN, BEN GP, Successor BEN GP, BCH, and HCLP are

collectively referred to herein as the “BEN CVR Parties.”

        Defendant Highland Real Assets, L.L.C. (“Highland”) is a Delaware limited

liability company.24

        Defendant Beneficient Management Counselors, L.L.C. (“Counselors”) is a

Delaware limited partnership.25 Highland, Counselors, and the BEN CVR Parties

are collectively referred to as the “BEN Parties.”

        B. Factual Background

        Paul Capital is a private equity firm, founded in 1991, that raises capital from

investors, pools the funds into successive private equity funds, and invests the capital

in those funds.26 Paul Capital’s funds primarily invested in limited partnership

21
   Id. ¶ 25.
22
   Id. ¶ 26.
23
   Id. ¶ 27.
24
   Id. ¶ 28.
25
   Id. ¶ 29.
26
   Id. ¶ 37.

                                            8
interests in other private equity funds, which are commonly referred to as “secondary

market” private equity interests, or “secondaries.”27

       By 2017, Paul Capital wanted to exit the private equity business and sell the

secondaries that its funds were invested in.28 Although Paul Capital’s secondaries

had an alleged net asset value of approximately $500 million, 29 secondaries are

generally illiquid and “cannot easily be monetized into cash.”30 Nevertheless, Paul

Capital found a buyer for its secondaries: Defendant BEN.31 Paul Capital wanted

to sell its secondaries for cash, but BEN did not have $500 million available in

cash.32 Paul Capital also needed to obtain consent from the underlying private equity

funds that had issued the secondaries, which was something it wanted to avoid

upfront.33 To address these issues, Paul Capital and BEN devised the Transaction,

using MHT as a middleman, to facilitate the sale of the secondaries from Paul Capital

to BEN.34

       At a high level, the Transaction proceeded in the following steps, which are

depicted in Figure One.

27
   Id.
28
   Id. ¶ 38.
29
   Id.
30
   Id. ¶ 37.
31
   Id. ¶ 39.
32
   Id. ¶¶ 41–42.
33
   Id. ¶ 62.
34
   Id. ¶ 43.

                                          9
Figure One. Simplified structure of the transaction as contemplated.

                                           10
First, the Paul Capital Funds transferred their economic rights associated with the

secondaries to MHT.35 MHT then formed nine Delaware trusts—the Exchange

Trusts—and contributed its rights in the secondaries to them.36 Next, the Exchange

Trusts transferred those rights associated with the secondaries to BEN in exchange

for common equity units of BEN, which BEN committed to list on a U.S.

exchange.37 MHT and BEN agreed to conduct a “prelisting auction” of the BEN

common units (the “Auction”).38 Under the Transaction documents, MHT was

obligated to pay to the Paul Capital Funds up to $550 million in net cash proceeds

from the Auction.39 If the Auction failed to generate net cash proceeds of at least

$500 million, BEN was obligated to pay additional “contingent consideration” to the

Paul Capital Funds, which the parties referred to as “contingent value rights” or

“CVRs.”40

               1. The Transaction Documents

        The parties memorialized the Transaction pursuant to several related

contracts, described below.

35
   Id. ¶ 45.
36
   Id. ¶ 46.
37
   Id. ¶ 47.
38
   Id. ¶ 48.
39
   Id. ¶ 49.
40
   Id.
                                        11
                      a. The Transaction Agreement

       The parties agreed to and summarized the Transaction in a September 1, 2017

Transaction Agreement between Paul Capital, the Paul Capital Funds, MHT, BEN,

and certain BEN affiliates.41 In the recitals of the Transaction Agreement, the parties

stated that they were entering into “a series of transactions . . . pursuant to which

certain assets owned by the [Paul Capital] Funds would be acquired by MHT in

exchange for the right to the proceeds from the sale of common equity units of BEN

and the exercise of certain contingent rights as described herein.”42

       The Transaction Agreement stated that, “[a]fter the transactions,” “[e]ach

[Paul Capital] Fund will have the rights to the amounts due from MHT to the

applicable [Paul Capital] Fund under the Purchase and Sale Agreement, which rights

would effectively entitle each [Paul Capital] Fund to the proceeds from the sale of

BEN Common Units to be held by the Exchange Trusts as set out below as well as

the proceeds flowing through the CVRs.”43 The Transaction Agreement further

provided that “[t]he Exchange Trusts will (a) have MHT as its beneficiary and

(b) hold (i) the EDA Rights, (ii) the MHT BEN Units and (iii) all rights under the

CVR Contract.”44

41
   Id. ¶ 52.
42
   Id. ¶ 53; see also Neminski Aff., Ex. 3 at 1 [hereinafter the “Transaction Agreement”].
43
   Transaction Agreement, Ex. A at 1.
44
   Id.

                                               12
       In Section 5.5.1 of the Transaction Agreement, MHT and the BEN Parties

agreed to “conduct an auction . . . of the Auction BEN Common Units as

contemplated and consistent with Section 5 of the Purchase and Sale Agreement”

and to “take any reasonable actions reasonably necessary in order to consummate

the Auction on or prior to April 30, 2018.”45 Likewise, in Section 5.2 of the

Transaction Agreement, the parties agreed to “use commercially reasonable best

efforts to . . . make effective the transactions contemplated by this Agreement.”46

                     b. The Purchase and Sale Agreement

       The sale of the secondaries from the Paul Capital Funds to MHT was

memorialized in a September 1, 2017 Purchase and Sale Agreement (the “PSA”).47

In Section 2 of the PSA, Paul Capital and the Paul Capital Funds agreed to sell the

secondaries to MHT in exchange for the right to receive up to $550 million of the

net cash proceeds generated by the Auction of the BEN common units.48

       In Section 5(a) of the PSA, MHT agreed to commence the Auction of BEN

common units within 60 days, and to use “good faith efforts” to complete the

Auction by April 30, 2018.49 In Section 5(d) of the PSA, MHT agreed to use its

“best commercial efforts” to complete the Auction for net cash proceeds of at least

45
   SAC ¶ 55; Transaction Agreement § 5.5.1.
46
   SAC ¶ 56; Transaction Agreement § 5.2.
47
   SAC ¶¶ 57–61; Neminski Aff., Ex. 1 [hereinafter the “PSA”].
48
   SAC ¶ 59; see also PSA § 2.
49
   SAC ¶ 60; see also PSA § 5(a).

                                             13
$500 million, and to invoke and enforce the Paul Capital Funds’ “contingent value

rights” if the Auction failed to generate net cash proceeds of at least $500 million.50

However, under Section 5(b) of the PSA, Paul Capital and the Paul Capital Funds

agreed that “there is no guarantee of what the final terms of the Auction will be or if

any Auction will be successful or will occur at all.”51

       Section 2(d) of the PSA required MHT to establish and deposit the secondaries

into the Exchange Trusts.52 Section 2(d) then contemplated that the Exchange Trusts

would distribute up to $550 million of any cash proceeds to Paul Capital.53

                     c. The Economic Direction Agreement

       As discussed above, the Paul Capital Funds could not transfer the secondaries

to MHT until they received approval from the underlying private equity funds that

issued the secondaries.54 Thus, the Transaction involved an “Economic Direction

Agreement,” which provided that MHT, and in turn, BEN, had the right to the

dividends, distributions, or other payments or proceeds generated by the secondaries,

pending the actual transfer of the secondaries.55 Paul Capital, the Paul Capital

50
   SAC ¶ 61; see also PSA § 5(d).
51
   PSA § 5(b).
52
   See id. § 2(d).
53
   See id.
54
   See supra note 33 and accompanying text.
55
   SAC ¶ 62.

                                              14
Funds, the Exchange Trusts, MHT, and BEN were among the parties to the

Economic Direction Agreement.56

                     d. The Trust Agreements

       The PSA required MHT to establish the Exchange Trusts and to contribute its

rights associated with the secondaries to the Exchange Trusts. 57 MHT established

the Exchange Trusts pursuant to nine identical Trust Agreements, dated

September 1, 2017.58 Under the Trust Agreements, MHT was the settlor of the

Exchange Trusts, and the Delaware Trust Company acted as an administrative

trustee.59 The Trust Agreements also named two “Trust Advisors”: (i) Defendant

Holland and (ii) a BEN executive who was then replaced with Defendant Turvey,

another BEN executive.60

       The Trust Agreements granted the Trust Advisors the authority to manage and

direct the activities of the Exchange Trusts.61 The Trust Agreements also required

the Trust Advisors to “take all steps necessary and advisable to commence and

consummate the Auction [of the BEN common units] as contemplated by the

Transaction Agreement, including, without limitation fully exercising the Protection

56
   Id.
57
   See PSA § 2(d).
58
   SAC ¶ 64.
59
   Id.
60
   Id. ¶¶ 46, 64.
61
   Id. ¶ 65.

                                        15
Rights.”62 Further, the Trust Advisors were required under the Exchange Trust

Agreements “to take all steps necessary to distribute the Auction Consideration

(including all proceeds received in connection with the Protection Rights)” to the

Paul Capital Funds.63

       The Exchange Trust Agreements define the “Beneficiary” of the Exchange

Trusts to be “the persons or organizations who are beneficiaries of the [Exchange]

Trusts and designated as such in Exhibit A.”64 Exhibit A designates MHT as the

only beneficiary of the Exchange Trusts.65

                     e. The MHT-BEN Letter Agreement

       As discussed above, once MHT deposited the secondaries in the Exchange

Trusts, the Exchange Trusts exchanged them for common units in BEN, which BEN

committed to list on a U.S. exchange.66 The Exchange Trusts accomplished this

exchange via a September 1, 2017 letter agreement among the Exchange Trusts,

MHT, and BEN.67 As a result of the exchange, BEN held the economic rights

associated with the secondaries, and the Exchange Trusts held common units in

62
   Id. ¶ 68.
63
   Id. ¶ 69.
64
   E.g., Neminski Aff., Ex. 2 [hereinafter “LT-1 Exchange Trust Agreement”] § VII.D.
65
   E.g., id., Ex. A.
66
   SAC ¶ 70.
67
   Id. ¶ 71.

                                             16
BEN—which BEN had agreed to list on a U.S. exchange, and which MHT and BEN

had agreed to sell in the Auction.68

                         f. The CVR Contract

        As explained above, if the Auction failed to generate at least $500 million in

net cash proceeds, BEN was required to pay the Paul Capital Funds additional

“contingent value rights,” or “CVRs.”69 This obligation was memorialized in a

September 1, 2017 “CVR Contract” executed by MHT and the BEN CVR Parties.70

Under the CVR Contract, if the Auction failed to generate at least $500 million in

net cash proceeds, BEN and certain subsidiaries were required to make up that

shortfall by contributing additional BEN common units “and/or” cash to the

Exchange Trusts.71 The CVR Contract states that the Exchange Trusts are “an

intended third party beneficiary of this [CVR Contract] Agreement.”72 Defendant

Holland signed the CVR Contract on behalf of MHT.73

                   2. The Parties Conduct the Auction

        In late 2017, BEN and MHT conducted the Auction.74 On December 23,

2017, Holland, on behalf of MHT, informed Paul Capital that the Auction had

68
   Id. ¶ 72.
69
   Id. ¶ 73.
70
   Id. ¶ 75.
71
   Id. ¶ 76.
72
   Id. ¶ 75.
73
   Id. ¶ 77.
74
   See id. ¶ 78.

                                               17
generated a winning bid.75 The winning bid, from GWGH, was not an all-cash

proposal.76     Instead, it was a combination of cash and GWGH stock and

“L-Bonds.”77 Specifically, the winning bid was composed of (i) $150 million in

cash, (ii) GWGH L-Bonds, which were GWGH-issued bonds secured by GWGH’s

assets, with a principal amount of $250 million, and (iii) GWGH common stock

worth $150 million.78 Thus, GWGH’s winning bid was worth $550 million in

aggregate consideration.79

       Because Paul Capital and the Paul Capital Funds were entitled to the first $550

million in net cash proceeds from the Auction, they wanted the Auction

consideration to be all cash, not a combination of cash, common stock and bonds. 80

But the parties contemplated that the L-Bonds and the common stock could be

liquidated quickly; indeed, GWGH represented that it intended to use “commercially

reasonable efforts to effect expeditiously” “the refinancing in full of the aggregate

principal amount outstanding of the GWG[H] L-Bonds issues to each of the Seller

Trusts.”81

75
   Id.
76
   Id. ¶ 79.
77
   Id. ¶ 86.
78
   Id.
79
   Id. ¶¶ 86–87.
80
   E.g., id. ¶ 94, 112.
81
   See id. ¶ 106; see also id. ¶¶ 88–90, 92, 96–97, 100.

                                                18
        In connection with the winning bid, the Trust Advisors sent Paul Capital and

the Paul Capital Funds an undertakings letter that was “acknowledged and agreed

to” by MHT (the “Undertakings Letter”).82 The Undertakings Letter was signed by

Defendant Holland, both in his capacity as a Trust Advisor to the Exchange Trusts,

and in his capacity as the Managing Member of MHT.83 The Undertakings Letter

acknowledged that GWGH had committed to use “commercially reasonable efforts

to refinance outstanding debt with a more favorable credit facility and/or

institutional note within 12 months following the Closing,” and that the GWGH

contemplated an “orderly resale” of the GWGH common stock.”84 The Trust

Advisors also agreed in the Undertakings letter to “cooperate with MHT to the full

extent of the authority granted to us” to liquidate the L-Bonds and GWGH common

stock by “the earliest practicable date during 2018.”85 Further, the Trust Advisors

acknowledged in the Undertakings Letter that the Paul Capital Funds were each “a

designated third party beneficiary of the agreements, covenants, and undertakings

set forth herein and, accordingly, entitled to rely upon and enforce such agreements,

covenants, and undertakings.”86

82
   Id. ¶ 107.
83
   Id.
84
   Id. ¶ 108.
85
   Id. ¶ 109.
86
   Id. ¶ 111.

                                         19
       On January 11, 2018, Paul Capital and the Paul Capital Funds agreed to go

forward with the GWGH winning bid.87 The next day, on January 12, 2018, the

Exchange Trusts, MHT, BEN, and GWGH entered into a Master Exchange

Agreement to memorialize the terms of the GWGH winning bid.88

       The Auction ultimately closed in two stages. In the initial closing, which

occurred on August 10, 2018, the Exchange Trusts transferred 70% of the BEN

common units to GWGH in exchange for $250 million in GWGH L-Bonds and $100

million in cash, with an additional $50 million in cash to be paid by BEN by

December 14, 2018.89 In a second closing, on December 31, 2018, the Exchange

Trusts received the $150 million in GWGH common stock in exchange for the

remaining BEN common units.90 Ultimately, the Exchange Trusts “directly wired

almost all of the $150 million to the [Paul Capital] Funds, and BEN directly wired

the remaining amount directly to the [Paul Capital] Funds.”91 As a result, as of the

end of 2018, the Exchange Trusts no longer held any BEN common units.92 Instead,

they held GWGH L-Bonds with an aggregate face amount of $250 million, and

GWGH common stock valued at $150 million.93

87
   Id. ¶ 112.
88
   Id. ¶ 114.
89
   Id. ¶¶ 131, 137–138. The SAC alleges that BEN failed to pay that $50 million by December 14,
2018. Id. ¶¶ 150–56.
90
   Id. ¶¶ 131, 157.
91
   Id. ¶ 173.
92
   Id. ¶ 158.
93
   Id.

                                              20
        Although the GWGH winning bid contemplated that the L-Bonds and GWGH

common stock would be liquidated quickly, they remain unliquidated. In the years

since the winning bid closed, GWGH’s financial condition has deteriorated. In

October 2020, GWGH learned that it was the subject of an SEC investigation.94

Months later, GWGH missed the March 31, 2021 deadline for filing its Annual

Report on Form 10-K for the year ended December 31, 2020 as a result of certain

accounting issues.95 Because of its failure to timely file its 2020 10-K, GWGH

suspended sales of its L-Bonds and resorted to its liquidity reserves for funding.96

When GWGH ultimately filed its 2020 10-K on November 5, 2021, it disclosed a

“going concern” qualification and material weaknesses in its internal controls over

financial reporting and its disclosure controls.97 GWGH resumed sales of L-Bonds

on December 1, 2021, but only briefly.98

        On January 6, 2022, GWGH announced that its independent auditing firm

would not stand for reappointment.99 A week later, on January 15, 2022, GWGH

announced that it had failed to pay approximately $13.6 million in L-Bond payments

that were due that day.100 It also announced that it would likely miss its March 31,

94
   Id. ¶ 218.
95
   Id. ¶ 219.
96
   Id. ¶ 220.
97
   Id. ¶ 221.
98
   Id. ¶ 226.
99
   Id. ¶ 227.
100
    Id. ¶ 228.

                                        21
2022 deadline for filing its Annual Report on Form 10-K for the year ended

December 2021, and that it had resuspended its sale of L-Bonds on January 10,

2022.101 And, it announced that its board of directors authorized management to hire

financial and legal restructuring advisors to help evaluate liquidity and capital

structure alternatives.102 On January 27, 2022, the Wall Street Journal reported that

GWGH was seeking “rescue financing” to avoid bankruptcy.103 The value of the

GWGH common stock held in the Exchange Trusts, initially $150 million,

plummeted to $60 million.104

       C. The Plaintiffs File This Action

       The Plaintiffs filed this action on February 18, 2022, bringing one count to

remove Holland and Turvey as the Trust Advisors of the Exchange Trusts. 105 The

initial complaint alleged that Holland and Turvey should be removed because of

purported conflicts of interest arising from the interwoven relationships between

GWGH, BEN, MHT, Holland, and Turvey, and because of Holland’s and Turvey’s

alleged failure to monetize the L-Bonds and GWGH common stock.106

101
    Id.
102
    Id.
103
    Id. ¶ 230.
104
    Id. ¶ 232.
105
    See Verified Compl., Dkt. No. 1 ¶¶ 215–32.
106
    See id.

                                                 22
       The Plaintiffs also filed a motion to expedite, seeking an expedited trial in

May 2022.107 On March 9, 2022, I held a hearing regarding the Plaintiffs’ motion

to expedite, during which I ordered expedited motion to dismiss briefing, but

reserved judgment regarding an expedited trial pending resolution of the

Defendants’ motions to dismiss.108

       On March 29, 2022, the Defendants filed an opening brief in support of their

motion to dismiss.109 Instead of opposing the motion to dismiss, the Plaintiffs filed

an amended complaint on April 19, 2022.110 The amended complaint reasserted

Count I, seeking to remove Holland and Turvey as Trust Advisors, and added several

additional counts based on the various contracts related to the Transaction.111 The

same day, Holland and Turvey resigned as Trust Advisors, and MHT and BEN

countersigned the resignations in order to waive a 30-day notice requirement.112 In

their place, MHT appointed Stahl as the new Trust Advisor to the Exchange

Trusts.113 Stahl immediately began taking actions as the new Trust Advisor.114 The

Plaintiffs were not informed of Holland’s and Turvey’s resignations until the

107
    See generally Pls.’ Mot. Expedited Proceedings, Dkt. No. 1.
108
    Tr. Telephonic Oral Arg. and Rulings Ct. Pls.’ Mot. Expedited Proceedings, Dkt. No. 33 at
19:20–21:20.
109
    Opening Br. Defs. Supp. Their Mots. Dismiss Verified Compl., Dkt. No. 43.
110
    Verified Am. Compl., Dkt. No. 55.
111
    Id. ¶¶ 232–337.
112
    SAC ¶ 240.
113
    Id. ¶ 242.
114
    E.g., id. ¶¶ 244–48.

                                             23
afternoon of April 20, 2022,115 and they were not informed of Stahl’s appointment

until April 25, 2022.116

       Also on April 20, 2022, GWGH filed for bankruptcy.117                       I held a

teleconference on April 28, 2022, during which I held that the resignations of

Holland and Turvey mooted Count I of the amended complaint, which sought to

remove them.118 I also granted the Plaintiffs leave to file a second amended

complaint seeking to remove the new Trust Advisor, Stahl.119

       The Plaintiffs filed the SAC on May 6, 2022.120 The SAC reasserts Count I,

this time seeking to remove Stahl as the Trust Advisor to the Exchange Trusts, and

brings several non-expedited counts.121 The Defendants moved to dismiss the SAC

on May 20, 2022122 and June 6, 2022.123 The parties briefed the motions to dismiss

as they relate to Count I,124 and I held oral argument on July 6, 2022. I consider the

matter fully submitted as of that date.

115
    Id. ¶ 254.
116
    Id. ¶ 263.
117
    Id. ¶ 234.
118
    Tr. Telephonic Status Conference, Dkt. No. 67 at 12:5–13:3.
119
    Id.
120
    See generally SAC.
121
    Id. ¶¶ 271–392.
122
    Mot. Dismiss, Dkt. No. 74; Mot. Dismiss Verified Second Am. Compl., Dkt. No. 75.
123
    Def. John A. Stahl’s Mot. Dismiss Pls.’ Verified Second Am. Compl., Dkt. No. 98.
124
    Corrected Opening Br. Defs. Supp. Their Mots. Dismiss Count I Verified Second Am. Compl.,
Dkt. No. 106; Joinder Def. John A. Stahl Corrected Opening Br. Defs. Supp. Their Mots. Dismiss
Count I Verified Second Am. Compl., Dkt. No. 109; Pls.’ Answering Br. Opp. Defs.’ Mot.
Dismiss, Dkt. No. 117 [hereinafter “Pls.’ AB”]; Defs.’ Reply Br. Supp. Mot. Dismiss, Dkt.
No. 129.

                                             24
                                       II. ANALYSIS

       A. The Motion to Dismiss Standards

       The Defendants have moved to dismiss the SAC for lack of subject matter

jurisdiction under Rule 12(b)(1) and for failure to state a claim under Rule 12(b)(6).

Under Rule 12(b)(1), the Court must “dismiss an action for lack of subject matter

jurisdiction if it appears from the record that the Court does not have jurisdiction

over the claim.”125 In considering a motion to dismiss under Rule 12(b)(1), “[t]he

burden of establishing the court’s subject matter jurisdiction rests ‘with the party

seeking the Court’s intervention.’”126 In reviewing a motion to dismiss under Rule

12(b)(1), the Court “may consider documents outside the complaint,”127 although

“[w]hen a challenge to subject matter jurisdiction is directed to the face of a

complaint, the court accepts the plaintiff’s allegations of fact.”128

       Under Rule 12(b)(6), I may only dismiss a complaint if I conclude that “the

plaintiff[s] would not be entitled to recover under any reasonably conceivable set of

circumstances.”129 In making this determination, I must “accept all well pleaded

factual allegations as true,” including “vague allegations” that “give the opposing

125
    Ropp v. King, 2007 WL 2198771, at *2 (Del. Ch. July 25, 2007).
126
    Maloney-Refaie v. Bridge at Sch., Inc., 958 A.2d 871, 882 (Del. Ch. 2008) (quoting Ropp, 2007
WL 2198771, at *2).
127
    Id.
128
    Zebroski v. Progressive Direct Ins. Co., 2014 WL 2156984, at *3 (Del. Ch. Apr. 30, 2014)
(quoting Diebold Computer Leasing, Inc. v. Com. Credit Corp., 267 A.2d 586, 588 (Del. 1970)).
129
    Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 535 (Del. 2011).

                                               25
party notice of the claim,” and “draw all reasonable inferences in favor of the

non-moving party.”130

       The Defendants contend that the Plaintiffs lack standing to remove Stahl as

the Trust Advisor, and even if they had standing, they have failed to state a claim for

Stahl’s removal. “The term ‘standing’ refers to the right of a party to invoke the

jurisdiction of a court to enforce a claim or redress a grievance.”131 Standing “is

concerned only with the question of who is entitled to mount a legal challenge and

not with the merits of the subject matter of the controversy.”132 When “the issue of

standing is related to the merits, a motion to dismiss is properly considered under

Rule 12(b)(6) rather than 12(b)(1).”133 But where “a party is arguing that the court

lacks the authority to grant the relief requested by the plaintiff, standing is a

jurisdictional question” evaluated under Rule 12(b)(1).134 As explained below, I find

that the Plaintiffs lack standing to bring this action, regardless of which provision of

Rule 12 applies.

130
    Id.
131
    Spiro v. Vions Tech. Inc., 2014 WL 1245032, at *8 (Del. Ch. Mar. 24, 2014) (quoting Stuart
Kingston, Inc. v. Robinson, 596 A.2d 1378, 1382 (Del. 1991)).
132
    Id. (quoting Stuart Kingston, 596 A.2d at 1382) (emphasis omitted).
133
    Id. (quoting Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1285–86 (Del.
2007).
134
    Id.

                                             26
          B. The Plaintiffs Lack Standing to Remove Stahl

          The Plaintiffs seek to remove Stahl as the Trust Advisor of the Exchange

Trusts under the removal provisions in Delaware’s statute governing trusts, 12 Del.

C. § 3327. Section 3327 provides as follows:

                 If a governing instrument expressly permits an
                 officeholder . . . to be removed, the officeholder may be
                 removed in accordance with the terms of the governing
                 instrument. In addition, the Court of Chancery may
                 remove an officeholder on the Court’s own initiative or on
                 petition of a trustor, another officeholder, or beneficiary if:
                 (1) The officeholder has committed a breach of trust; or
                 (2) The continued service of the officeholder substantially
                 impairs the administration of the trust; or
                 (3) The court, having due regard for the expressed
                 intention of the trustor and the best interests of the
                 beneficiaries, determines that notwithstanding the absence
                 of a breach of trust, there exists:
                           a. A substantial change in circumstances;
                           b. Unfitness, unwillingness or inability of the
                           officeholder to administer the trust or perform its
                           duties properly; or
                           c. Hostility between the officeholder and
                           beneficiaries or other officeholders that threatens
                           the efficient administration of the trust.135

          Accordingly, Section 3327 provides that an officeholder may be removed “in

accordance with the terms of the governing instrument,” “on the Court’s own

initiative,” or “on petition of a trustor, another officeholder, or beneficiary.”136 The

135
      12 Del. C. § 3327.
136
      Id.

                                                27
Plaintiffs do not seek to remove Stahl under “the terms of the governing instrument”

or as trustors or officeholders.137 Rather, they contend that they are entitled to seek

Stahl’s removal under Section 3327 by virtue of their alleged status as

“beneficiaries” of the Exchange Trusts.138

       The Defendants contend that the Plaintiffs lack standing to seek Stahl’s

removal because they are not “beneficiaries” of the Exchange Trusts. Section 3327

does not define the term “beneficiary.”139 But the Restatement (Third) of Trusts,

which Delaware courts look to as persuasive authority when resolving trust

disputes,140 instructs that “[a] person is a beneficiary of a trust if the settlor manifests

an intention to give the person a beneficial interest; a person who merely benefits

incidentally from the performance of the trust is not a beneficiary.”141 A trust

beneficiary is in a fiduciary relationship with a trustee and any trust advisor.142 It is

the intent of the settlor to create such fiduciary relationships that is the sine qua non

of the trust.

       Accordingly, I must ascertain the settlor’s intent when determining the

identity of the Exchange Trusts’ beneficiaries. “To determine a settlor’s intent, this

137
    See Pls.’ AB at 29 n.6 (“[T]he PCA Seller Funds do not claim a contractual right to seek Stahl’s
removal. Rather, they have a right to do so as beneficiaries under 12 Del. C. § 3327.”).
138
    Id.
139
    See 12 Del. C. § 3327.
140
    See Otto v. Gore, 45 A.3d 120, 130 (Del. 2012) (relying on Restatement (Third) of Trusts);
Taylor v. Jones, 2006 WL 1566467, at *4 (Del. Ch. May 25, 2006) (same).
141
    Restatement (Third) of Trusts § 48. See also id. cmt. a.
142
    See 12 Del. C. § 3301(d).

                                                28
Court looks to the language in the trust.”143                The Trust Agreements define

“Beneficiary” as “the persons or organizations who are beneficiaries of the

[Exchange] Trust and designated as such in Exhibit A, as amended or updated from

time to time.”144 Exhibit A to the Trust Agreements identifies MHT as the lone

beneficiary.145

       According to the Defendants, that ends the inquiry—the Plaintiffs are not

beneficiaries.    I agree.     If the language of a trust’s governing document “is

unambiguous, the Court looks no further and does not consider extrinsic evidence of

intent.”146 The Court cannot “look to extrinsic evidence to read ambiguity into an

unambiguous contract.”147         This is particularly true where, as here, the Trust

Agreements at issue are fully integrated.148

       The Trust Agreements identify only one beneficiary: MHT.149 “If the drafters

of the Trust Agreement[s] . . . had intended the [Trust Advisor] to administer the

[Exchange] Trusts in the interests of another deal party, the Trust Agreements would

have said so.”150 They do not. It is thus manifest from the language of the Trust

Agreements that the settlor, MHT, intended itself to be the only beneficiary.

143
    Est. of Tigani, 2016 WL 593169, at *18 (Del. Ch. Feb. 12, 2016).
144
    See supra note 64 and accompanying text.
145
    See supra note 65 and accompanying text.
146
    Tigani, 2016 WL 593169, at *18.
147
    Id.
148
    E.g., LT-1 Exchange Trust Agreement § IX.B.
149
    See supra note 65 and accompanying text.
150
    In re Nat’l Collegiate Student Loan Trs. Litig., 251 A.3d 116, 188 (Del. Ch. 2020).

                                               29
       The Plaintiffs do not dispute that the Trust Agreements name only MHT as a

beneficiary. Rather, they contend that I must look beyond the language of the Trust

Agreements and consider the broader context of the Transaction as a whole, the

ostensible purpose of which was to allow the Plaintiffs to sell the secondaries to BEN

in exchange for cash.151 According to the Plaintiffs, the overall scheme of the

Transaction shows that the parties intended the Plaintiffs to benefit from the

Exchange Trusts.152

       The Plaintiffs emphasize that under the terms of the various Transaction

documents, they are entitled to the first $550 million of proceeds from the assets

held in the Exchange Trusts.153 For example, the Plaintiffs note that under the

Transaction Agreement, the parties agreed that they were entering into “a series of

transactions . . . pursuant to which certain assets owned by the [Paul Capital] Funds

would be acquired by MHT in exchange for the right to the proceeds from the sale

of common equity units of BEN and the exercise of certain contingent rights as

described herein.”154 The Plaintiffs further note that the Transaction Agreement

provided that overall Transaction would “effectively entitle each [Paul Capital] Fund

to the proceeds from the sale of the BEN Common Units to be held by the Exchange

151
    Pls.’ AB § I.
152
    Id.
153
    Id.
154
    See supra note 42 and accompanying text.

                                               30
Trusts.”155 Likewise, the Plaintiffs point out that the parties to the PSA agreed that

“each applicable Exchange Trust shall distribute to Sellers with respect to the

Interests all undistributed Realized Consideration.”156 Finally, the Plaintiffs note

that MHT, the Trust Advisors, and the Exchange Trusts acknowledged in the

Undertakings Letter that under the PSA, “‘the Exchange Trusts shall only distribute

cash’ to the Sellers, subject to certain limited exceptions in the event of a request

from a Seller.”157 These, I note, are contractual provisions bestowing on the

Plaintiffs contractual rights.

       Beyond the language of the Transaction documents, the Plaintiffs also point

to the Exchange Trusts’ post-signing conduct to support their argument that they are

beneficiaries. In particular, the Plaintiffs note that when the Exchange Trusts

distributed the cash component of the GWGH winning bid, they distributed the cash

directly to the Paul Capital Funds.158 According to the Plaintiffs, this is consistent

with the Paul Capital Funds being beneficiaries of the Exchange Trusts.159

       Because the terms of the Exchange Trust Agreements are fully integrated and

unambiguously name MHT as the sole beneficiary, I may not consider the terms of

other contracts executed in connection with the Transaction, or the post-signing

155
    See supra note 43 and accompanying text.
156
    Transaction Agreement § 2(d).
157
    Neminski Aff., Ex. 9 at 1.
158
    Pls.’ AB at 32–33.
159
    Id.

                                               31
conduct of the Exchange Trusts in distributing the cash.160 But in any event, the

other Transaction documents do not indicate that the parties intended the Plaintiffs

to be beneficiaries of the Exchange Trusts. Notably, the Transaction Agreement on

which the Plaintiffs rely states that “[t]he Exchange Trusts will . . . have MHT as its

beneficiary.”161 The Transaction Agreement therefore does not manifest an intent to

make the Plaintiffs beneficiaries of the Exchange Trusts. To the contrary, all the

Transaction Agreement, PSA, and Undertakings Letter establish is that the Plaintiffs

have a contractual right, enforceable against MHT, to be paid up to the first $550

million in net cash proceeds from the assets in the Exchange Trusts. That is, they

establish that the Plaintiffs have a contractual, not a beneficial, interest in those

proceeds. Neither the Trust Agreements themselves, then, nor the other agreements

160
    City Investing Co. Liquidating Tr. v. Cont’l Cas. Co., 624 A.2d 1191, 1198 (Del. 1993) (“If a
writing is plain and clear on its face, i.e., its language conveys an unmistakable meaning, the
writing itself is the sole source for gaining an understanding of intent.”). The Plaintiffs’ reliance
on Jo Ann Howard and Associates, P.C. v. Cassity is misplaced. 868 F.3d 637 (8th Cir. 2017). In
Jo Ann, a federal appeals court interpreting a repealed Missouri statute governing contracts and
trusts for “preneed funeral” services held that the beneficiaries of those trusts included funeral
providers, id. at 643, 646–48, despite a contractual definition of “beneficiary” that identified only
the decedents and the purchasers of the contracts, Jo Ann Howard & Assocs., P.C. v. Cassity, 2015
WL 13675548, at *4 (E.D. Mo. Jan. 9, 2015). The Plaintiffs are correct that, in looking beyond
the contractual definition to find that the funeral homes were beneficiaries, the Jo Ann court noted
that “[t]he central purpose of the preneed trusts was to ensure the availability of funds to pay
funeral homes.” Jo Ann, 868 F.3d at 647. But in doing so, it relied heavily on the “statutory
scheme” governing the funeral service contracts and corresponding trusts, which provided that the
funeral homes “were entitled to a distribution directly from the trust” “if [the seller] failed” to pay
them. See id. at 646–47; see also Jo Ann, 2015 WL 13675548, at *5. No equivalent “statutory
scheme” exists here from which this Court could divine an intent regarding the beneficiaries of the
Exchange Trusts that differs from what is memorialized in the Transaction documents. Regardless,
Jo Ann is a federal decision interpreting the trust law of a different state. It is not binding on this
Court, and I decline to follow the Plaintiffs’ reading of it.
161
    See supra note 44 and accompanying text.

                                                 32
involved, manifest an intent to create a fiduciary relationship between the trust

fiduciaries and the Plaintiffs.

       Nor does the fact that the Exchange Trusts “directly wired” cash proceeds to

the Plaintiffs establish that they held a beneficial interest in the Exchange Trusts.

The PSA makes clear that the payment obligation is owed by MHT: “The Net

Purchase Consideration (and, as applicable, any Net Purchase Consideration

Premium) shall be payable by [MHT] promptly . . . .”162 But the PSA does not

require MHT to make that payment directly. Instead, it merely requires MHT to

“pay (or cause to be paid) to each Seller . . . the economic rights . . . to which such

Seller is entitled.”163 Consistent with PSA’s requirement that MHT “pay” or “cause

to be paid” the proceeds, the Trust Agreements provide that “[a]ll distributions . . . of

trust funds, either income or principal, may be . . . expended for the benefit of

[MHT].”164 Thus, the Transaction documents establish that although MHT was

obligated to ensure that the payments were made to the Plaintiffs, the Exchange

Trusts could make those payments directly on MHT’s behalf. That is exactly what

happened with the cash component of GWGH’s winning bid.

       At bottom, the Plaintiffs have established an incidental interest, as contractual

counterparties, in the proceeds of the assets held in the Exchange Trusts. “[A] person

162
    PSA § 2(c).
163
    Id. § 2(b).
164
    LT-1 Exchange Trust Agreement § III.G.

                                             33
who merely benefits incidentally from the performance of the trust is not a

beneficiary.”165 The Plaintiffs are not beneficiaries.

       Section 3327 confers a trust’s “trustor, another officeholder, or beneficiary”

with standing to seek the removal of an officeholder.166 The Plaintiffs only claim to

standing here is their alleged status as beneficiaries. Accordingly, because they are

not beneficiaries of the Exchange Trusts, they lack standing to seek Stahl’s removal

as the Trust Advisor of the Exchange Trusts.167 “The absence of a party with

standing will require dismissal.”168 Count I is therefore dismissed.

                                     III. CONCLUSION

       For the foregoing reasons, the Defendants’ Motion is GRANTED with respect

to Count I. The parties should confer and submit a form of order consistent with this

Memorandum Opinion. The parties should also inform me whether they believe

165
    Restatement (Third) of Trusts § 48.
166
    12 Del. C. § 3327.
167
    The Plaintiffs also pointed out in a preliminary conference that, even if they do not have
standing, Section 3327 authorizes this Court to remove a trustee “on the Court’s own initiative.”
Tr. Telephonic Scheduling Conference, Dkt. No. 95 at 8:10–22; see also SAC ¶¶ 274–75. The
Plaintiffs did not raise this argument in their motion to dismiss briefing, and I therefore consider
it waived. See Hill v. LW Buyer, LLC, 2019 WL 3492165, at *6 n.65 (Del. Ch. July 31, 2019)
(“Issues not briefed are deemed waived.” (quoting Emerald Partners v. Berlin, 726 A.2d 1215,
1224 (Del. 1999)). But in any event, “one who lacks a beneficial interest in a trust has no standing
to enforce it,” Sergeson v. Del. Tr. Co., 413 A.2d 880, 882 (Del. 1980), and “[t]he absence of a
party with standing will require dismissal,” Ropp, 2007 WL 2198771, at *2. The Court’s
“initiative” in removing a trust fiduciary is limited to acting on behalf of those in a fiduciary
relationship to this trust. The Plaintiffs cannot escape this Court’s standing requirement by asking
this Court to remove Stahl “on [its] own initiative.” Equity does not support such action, in any
event, because the Plaintiffs may enforce the rights they bargained for, in contract.
168
    Ropp, 2007 WL 2198771, at *2.

                                                34
Count II, which asserts breach of fiduciary duty claims against Holland and

Turvey,169 should also be dismissed for lack of standing, and if so, whether this Court

has subject matter jurisdiction over the remaining counts.

169
      SAC ¶¶ 289–305.

                                          35