Penar Family Trust v. Adams

• Court: Supreme Court of Delaware
• Decided: November 16, 2016
• Docket: 250, 2016
• Status: Published

Opinion

IN THE SUPREME COURT OF THE STATE OF DELAWARE

THE JOSEPH PENAR FAMILY § TRUST, by its Trustee Joseph § Penar; THE WALDER FAMILY § TRUST, by its Trustee, Cecile § Donnamarie Newkirk; ALLEN § No. 250, 2016 COOPER, individually; SUE § COOPER, individually; and THE § ALLEN AND SUE COOPER § TRUST, by its Trustees, Allen and § Sue Cooper, § Court Below: Court of Chancery § of the State of Delaware Plaintiffs Below-Appellants, § § C.A. No. 10441 v. § § JASEN ADAMS, DAVID § HARTCORN, and BRIAN § TOLLEFSON, § § Defendants Below-Appellees, § § and § § PREMIUM OF AMERICA, LLC, § and PREMIUM HOLDING, LLC, § § Nominal Defendants Below- § Appellees. §

Submitted: November 2, 2016 Decided: November 16, 2016

Before STRINE, Chief Justice; HOLLAND, VALIHURA, VAUGHN, and SEITZ, Justices. ORDER

This 16th day of November, 2016, upon consideration of the parties’ briefs

and the record in this case, and following oral argument, it appears to the Court

that:

(1) Appellants are members of a Delaware limited liability company

formed by a bankruptcy court order to receive the assets of two affiliated

companies in the viatical life insurance business. They claim on appeal that the

Court of Chancery erred when it dismissed their direct and derivative claims

against the defendants whom they allege misappropriated funds from the company

and thereby shorted them when liquidating the company’s assets.

(2) We affirm on the basis of the court’s April 28, 2016 decision. After

rightly expressing frustration with the appellant’s failure exercise its statutory right

to demand books and records before filing suit,1 the Vice Chancellor carefully

reviewed the pleading deficiencies in the amended complaint. He correctly

determined that the appellants’ failure to allege in a non-conclusory fashion the

circumstances of the alleged misappropriation required dismissal of the amended

complaint.

(3) We note that our decision today does not leave appellants without a

future remedy. Court of Chancery Rule 15(aaa) and other rules of claim or issue

1 6 Del. C. § 18-305.

2 preclusion will not bar appellants and other members from asserting claims for

misappropriation or improper distribution of assets as part of the winding up of the

limited liability company.

NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of

Chancery is hereby AFFIRMED.

BY THE COURT:

/s/ Collins J. Seitz, Jr. Justice