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
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 Paul Capital Funds 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.