Court Opinion

ID: 4766300
Source: CourtListenerOpinion
Date Created: 2021-08-17 14:03:05.841738+00
Date Added: 2024-06-11T08:09:16.772840
License: Public Domain

COURT OF CHANCERY
                                          OF THE
                                    STATE OF DELAWARE
KATHALEEN ST. JUDE MCCORMICK                                           LEONARD L. WILLIAMS JUSTICE CENTER
        CHANCELLOR                                                         500 N. KING STREET, SUITE 11400
                                                                          WILMINGTON, DELAWARE 19801-3734
                                           August 17, 2021

     Luke M. Mette, Esquire                               Henry E. Gallagher, Jr., Esquire
     Jonathan M. Stemerman, Esquire                       Gregory J. Weinig, Esquire
     Armstrong Teasdale LLP                               Shaun M. Kelly, Esquire
     300 Delaware Avenue, Suite 210                       Jarret W. Horowitz, Esquire
     Wilmington, DE 19801                                 Connolly Gallagher LLP
                                                          1201 North Market Street, 20th Floor
                                                          Wilmington, DE 19801

                    Re:    In the Matter of The Jeremy Paradise Dynasty Trust and The
                           Andrew Paradise Dynasty Trust,
                           Cons. C.A. No. 2021-0354-KSJM

      Dear Counsel:

             This letter decision resolves the motion by Jeremy Paradise (“Petitioner” or

      “Jeremy”)1 for immediate removal of John Pomerance, Casey Chafkin, and Charlotte

      Edelman (the “Fiduciaries”) as fiduciaries and the appointment of a receiver pendente lite

      as to The Jeremy Paradise Dynasty Trust (“Jeremy’s Trust”) and The Andrew Paradise

      Dynasty Trust (“Andrew’s Trust,” and with Jeremy’s Trust, the “Trusts”). For the reasons

      that follow, the motion is denied.

             On April 24, 2021, Jeremy filed a Verified Petition to Reform Trust and Remove

      Invalid Fiduciaries (the “Petition”). The Petition seeks: reformation of the trust agreement

      governing Jeremy’s Trust based on mistake and fraud; an order declaring invalid the

      1
       To avoid confusion, the court will refer to members of the Paradise family by their first
      names. The court intends no disrespect.
C.A. No. 2021-0354-KSJM
August 17, 2021
Page 2 of 5

appointments of Chafkin and Edelman as Trust Protectors and Distribution Advisers of

Andrew’s Trust and as Investment Distribution Advisers of Jeremy’s Trust; the removal of

the Fiduciaries from all fiduciary positions they occupy for the Trusts; and an accounting

for the Trusts.2 On May 20, 2021, Jeremy filed a motion for appointment of receiver

pendente lite.3 The parties fully briefed Petitioner’s motion on June 2, 2021,4 and the court

heard oral argument on July 7, 2021.5

         Removal of a trustee is appropriate where “there exists . . . hostility between the

trustees and the beneficiaries that threatens the efficient administration of the trust.”6

“Mere friction or discord, however, is not sufficient.”7 This is an extreme form of relief

that should be exercised sparingly, as Petitioner concedes.8

         Generally, to justify the appointment of a receiver pendente lite, there must be “an

urgent need for immediate protection against injury either in the course of actual infliction

2
    See C.A. No. 2021-0354-KSJM, Docket (“Dkt.”) 1 (“Pet.”).
3
    Dkt. 37 (“Pet’r’s Mot.”).
4
    See id.; Dkt. 40 (“Resp’ts’ Opp.”); Dkt. 42 (“Pet’r’s Reply”).
5
    Dkt. 64.
6
  Taglialatela v. Galvin, 2013 WL 2122044, at *3 (Del. Ch. May 14, 2013) (ellipses in
original) (quoting 12 Del. C. § 3327(3)(c)).
7
  Gans v. MDR Liquidating Corp., 1991 WL 114514, at *4 (Del. Ch. June 25, 1991)
(citing Smith v. Biggs Boiler Works Co., 91 A.2d 193 (Del. Ch. 1952)).
8
 See Pet’r’s Reply ¶ 10 (citing Tigani v. Tigani, 2021 WL 1197576, at *21 (Del. Ch.
Mar. 30, 2021)).
C.A. No. 2021-0354-KSJM
August 17, 2021
Page 3 of 5

or reasonably to be apprehended.”9 “There must be something more than a possibility of

danger and loss to justify the court in exercising the unusual and extraordinary power of

appointing a receiver.”10

         According to Petitioner, the Fiduciaries’ hostility to Jeremy’s interests included the

following:

         •      The Fiduciaries refused to discuss the removal of Chafkin and Edelman with
                Jeremy.

         •      The Fiduciaries have refused to increase the monthly distributions above
                $10,000 and have refused to provide a justification for that figure.

         •      The Fiduciaries committed Jeremy’s Trust to purchase certain real estate
                assets and subsequently halted the transaction. Upon Jeremy’s objections,
                Pomerance suggested that Jeremy either walk away from the $70,000 deposit
                or complete the purchase using his own funds.

         •      The Fiduciaries produced an account document on April 3, 2021, that was
                dated March 23, 2021—one day before the contested March 24 Skillz stock
                sale. Jeremy views that act as misleading.

         •      Pomerance refused to provide Jeremy with copies of the fully executed Trust
                Agreements or accounting of the Trusts, forcing Jeremy to retain counsel to
                obtain copies of those documents.

         •      The Fiduciaries made allegations, which Jeremy views as unfounded,
                concerning Jeremy’s reputation in the Opposition to Petitioner’s Motion to
                Expedite.11

9
 Ross Hldg. & Mgmt. Co. v. Advance Realty Gp., LLC, 2010 WL 3448227, at *6 (Del. Ch.
Sept. 2, 2010) (quoting Salnita Corp. v. Walter Hldg. Corp., 168 A. 74, 76 (Del. Ch. 1933)).
10
 Beal Bank, SSB v. Lucks, 1998 WL 778362, at *3 (Del. Ch. Oct. 23, 1998) (quoting
Moore v. Associated Producing & Refin. Corp., 121 A. 655, 656 (Del. Ch. 1923)).
11
     Pet’r’s Mot. ¶ 16.
C.A. No. 2021-0354-KSJM
August 17, 2021
Page 4 of 5

          Based on these collective actions, Jeremy argues that “neither [he] nor the

Beneficiaries will ever be safe from [the Fiduciaries’] further hostility and deception[].”12

          While it is apparent that there is some friction between Jeremy and the Fiduciaries,

it does not reach the high bar required to necessitate the appointment of a receiver. In fact,

most of Jeremy’s allegations of hostility stem from the Fiduciaries’ request that

communications with Jeremy occur in writing or through counsel or from the Fiduciaries’

conduct in this lawsuit.13 Jeremy does not allege that the Fiduciaries have taken any profit

for themselves, let alone impacted the Trust in such a way that Jeremy or the Beneficiaries

are permanently affected. These actions do not rise to the high degree of hostility necessary

for appointment of a receiver.14

          Nor does Jeremy allege any urgent need for immediate protection. He merely points

to the “the prospect of further damages” that the Fiduciaries could cause in the future.15 At

the time the Petition was filed, Jeremy speculated that damages would result from a failure

“to appropriately sell” Skillz stock in June 2021.16 Petitioner does not, however assert what

12
     Id. ¶ 7.
13
     Id. ¶ 16.
14
  See du Pont v. Wilm. Trust Co., 2017 WL 4461132, at *8 (Del. Ch. Oct. 6, 2017) (“To
warrant removal, the friction or hostility [between trustee and beneficiaries] must be of
such a nature as to make it impossible for the trustee to properly perform his duties.”
(quoting Vredenburgh v. Jones, 1980 WL 6786, at *2 (Del. Ch. June 13, 1980))).
15
     Pet’r’s Mot. ¶¶ 21–22.
16
     Id. ¶ 22.
C.A. No. 2021-0354-KSJM
August 17, 2021
Page 5 of 5

an appropriate amount of Skillz stock should be sold from the Trusts, nor does he allege

the Fiduciaries will fail to sell an appropriate amount of the Trusts’ Skillz stock.

Regardless, this argument seems moot now that the June 2021 trading window has passed.

         Additionally, appointment of a receiver is unwarranted here because several of the

Fiduciaries Jeremy seeks to remove no longer control the Trusts. Edelman and Chafkin

resigned as Investment Direction Advisers of the Jeremy Trust and Trust Protectors and

Distribution Advisers of the Andrew Trust, effective May 19, 2021.17 Petitioners are thus

arguing for the removal of two fiduciaries who no longer hold the relevant positions. “The

function of this Court . . . is to decide actual, live controversies. Thus, we do not answer

questions that have become moot.”18 Because Edelman and Chafkin no longer serve as

fiduciaries, this aspect of the controversy is also moot.

         For the foregoing reasons, Petitioners’ motion for appointment of a receiver

pendente lite as to the Trusts is DENIED.

         IT IS SO ORDERED.

                                            Sincerely,

                                            /s/ Kathaleen St. Jude McCormick

                                            Kathaleen St. Jude McCormick
                                            Chancellor

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

17
     Resp’ts’ Opp. Ex. 3.
18
     State Farm Mut. Auto. Ins. Co. v. Davis, 80 A.3d 628, 632 (Del. 2013).