Wright et al v. Elton Corporation et al

Filing 200

MEMORANDUM ORDER- denying 184 MOTION to appoint successor Trustee. Signed by Judge Sherry R. Fallon on 7/1/2020. (lih)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
HELENA DUPONT WRIGHT, et al.,
Plaintiffs,
v.
ELTON CORPORATION, et al.,
Defendants,
v.
MARY MILLS ABEL-SMITH, et al.,
Third-Party Defendants.

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C.A. No. 17-286-JFB-SRF

MEMORANDUM ORDER
At Wilmington this 1st day of July, 2020, the court having considered (1) defendant and
third-party plaintiff First Republic Trust Company of Delaware, LLC’s (“First Republic”)
motion to appoint a successor trustee for the Mary Chichester duPont Irrevocable Trust dated
September 11, 1947 (“the trust”) (D.I. 184); (2) the answering briefs in opposition to First
Republic’s motion by plaintiffs Joseph Wright and T. Kimberley Williams (collectively,
“plaintiffs”) and by third-party defendants Katharine duPont Gahagan, Mary Mills Abel Smith,
and Christopher T. duPont (collectively, “third-party defendants”) (D.I. 185; D.I. 187 1); and (3)
First Republic’s replies to the opposition filings (D.I. 188; D.I. 189); IT IS HEREBY ORDERED
THAT First Republic’s motion to appoint a successor is DENIED for the reasons set forth below.

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In their responsive filing, third-party defendants make a motion to compel First Republic to
produce documents and to respond to discovery requests. (D.I. 187 at 2) Third-party
defendants’ motion is not properly before the court. The court directs third-party defendants to
the court’s procedures for resolving discovery disputes in the undersigned’s section of the court’s
website, in the “Forms” tab, under the heading “Discovery Matters—Motion to Resolve
Discovery Disputes.”

1.

Background. On February 4, 2016, Helena duPont Wright and James Mills

initiated the present litigation by filing a complaint against Elton Corporation. (“Elton”) and
Gregory Fields (“Fields”) in the District Court for the District of Maryland, seeking equitable
relief in the form of a court order compelling Elton and Fields to bring the trust into compliance
with the Employee Retirement Income Security Act, 29 U.S.C. § 1000, et seq. (“ERISA”). (D.I.
1)
2.

On March 18, 2016, plaintiffs Helena DuPont Wright and James Mills filed an

amended complaint, which added First Republic 2 and the trust as defendants to the case. (D.I. 8)
3.

On December 9, 2019, plaintiffs Helena DuPont Wright and James Mills filed a

second amended complaint, which added Joseph Wright and Kimberley D. Williams as plaintiffs
in the case. (D.I. 35)
4.

On March 3, 2017, the District Court for the District of Maryland transferred the

case to this District. (D.I. 45)
5.

The case was bifurcated for a determination of the threshold issue of whether or

not the trust at issue is an ERISA plan governed by ERISA. (D.I. 132 at 2)
6.

On May 31, 2019, this court granted plaintiffs’ motion for summary judgment on

Count I 3 of the second amended complaint. (Id. at 14) The court held “that the Trust at issue [i]s
an ERISA plan and is covered by ERISA.” 4 (Id.)

2

First Republic succeeded Elton as trustee in 2015. (D.I. 8 at ¶ 30; D.I. 184 at ¶ 6)
Count I of the second amended complaint sought a declaratory judgment that ERISA governs
the trust. (D.I. 35 at ¶¶ 94–99)
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On December 27, 2019, the court denied a motion to enter judgment under Rule 54(b) on the
ERISA trust issue, a motion to sever the claim, and a request for certification of interlocutory
appeal, inter alia, finding material issues of fact intertwined with the ERISA trust issue and
ruling that discovery should be conducted on all related issues. (D.I. 176 at 7–12)
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2

7.

On February 28, 2020, First Republic filed the present motion, arguing that the

court should appoint a new trustee because First Republic is incapable 5 of administering an
ERISA-governed trust. (D.I. 184 at ¶¶ 7–9; D.I. 188 at ¶¶ 1–2, 6–7)
8.

Plaintiffs argue that under Ream v. Frey, 107 F.3d 147, 154 (3d Cir. 1997), First

Republic may not resign as trustee without naming an appropriate successor. (D.I. 185)
9.

Third-party defendants argue the same and highlight the fact that First Republic

has not represented that it tried to find a suitable replacement trustee. (D.I. 187)
10.

In response, First Republic argues that it filed this motion to comply with the

express provisions of the trust and the ERISA requirement that a replacement trustee must be in
place before a trustee may resign, as articulated in Glaziers & Glassworkers Union Local No.
252 Annuity Fund v. Newbridge Sec., Inc., 93 F.3d 1171 (3d Cir. 1996). (D.I. 184 at ¶¶ 12, 15;
D.I. 188 at ¶ 3; D.I. 189 at ¶ 4)
11.

First Republic also argues that third-party defendants lack standing to object to

the present motion. (D.I. 189 at ¶ 3)
12.

Legal standard. The trustee of an ERISA-governed pension plan can resign

“only when adequate provision has been made for the continued prudent management of plan
assets.” Glaziers, 93 F.3d at 1183. ERISA § 404(a) imposes a duty on a resigning trustee to
ensure that its obligations as trustee continue to be met upon resignation. See Sec’y of Labor v.
Doyle, 675 F.3d 187, 202 (3d Cir. 2012) (citing Glaziers, 93 F.3d at 1180); Glaziers, 93 F.3d at
1183.

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First Republic claims to have agreed to serve as successor trustee in reliance on Elton’s legal
opinion that ERISA did not apply to the trust. (D.I. 184 ¶¶ 7–9) First Republic also notes that
plaintiffs, in opposing First Republic’s motion, seek to force First Republic to remain trustee
while simultaneously alleging that First Republic breached fiduciary duties owed to plaintiffs.
(D.I. 188 at ¶ 6)
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13.

“Under traditional trust law, a trustee is permitted to resign in accordance with the

terms of the trust, with the consent of the beneficiaries, or with a court’s permission.” Ream, 107
F.2d at 154 (citing Glaziers, 93 F.3d at 1183–84; Restatement (Second) of Trusts § 106)). A
resigning trustee must “take prudent precautions, such as by providing for a ‘suitable and
trustworthy replacement,’ to ensure that his resignation does not harm the Fund or its
beneficiaries.” Doyle, 675 F.3d at 202 (quoting Ream, 107 F.2d at 154).
14.

Analysis. First Republic’s motion for the appointment of a successor trustee is

denied because First Republic must provide a “suitable and trustworthy replacement” before it
can resign and has failed to do so. See Doyle, 675 F.3d at 202.
15.

First Republic seeks a court order appointing a successor without suggesting a

successor for the court to appoint. Although the trust expressly allows First Republic to resign, 6
neither the trust itself nor any applicable case law suggest that seeking the court’s appointment of
a successor without naming a suitable replacement is proper.
16.

In choosing to rely on the advice of counsel that the trust was not covered by

ERISA, First Republic took a risk that, with the benefit of hindsight, they would not have
chosen. However, their decision does not form a legal basis for the relief requested, and no
authority has been cited for shifting their obligation under the trust to the court.
17.

Conclusion. For the foregoing reasons, IT IS HEREBY ORDERED THAT First

Republic’s motion to appoint a successor trustee is DENIED without prejudice. (D.I. 184)

6

First Republic did not attach a copy of the trust to its submission, nor did it cite to a location in
the record where the court could find a copy of the trust. The court refers to the trust attached as
an exhibit to the briefing submitted previously to Judge Bataillon. In relevant part, the trust
states: “Any Trustee named herein shall have the right to resign at any time and shall have the
further right to name his or her successor.” (D.I. 125-1, Ex. A at ¶ 4)
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18.

This Memorandum Order is filed pursuant to 28 U.S.C. § 636(b)(1)(A), Fed. R.

Civ. P. 72(a), and D. Del. LR 72.1(a)(2). The parties may serve and file specific written
objections within seven (7) days after being served with a copy of this Memorandum
Order. Fed. R. Civ. P. 72(a). The objections and responses to the objections are limited to five
(5) pages each.
19.

The parties are directed to the court’s Standing Order For Objections Filed Under

Fed. R. Civ. P. 72, dated October 9, 2013, a copy of which is available on the court’s website,
www.ded.uscourts.gov.

Sherry R. Fallon
UNITED STATES MAGISTRATE JUDGE

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