Branzan Alternative Investment Fund, LLLP v. Bank of New York Mellon Trust Co., 677 F. App'x 496

Branzan Alternative Investment Fund, LLLP (Branzan) invested in units of the Eastern American Natural Gas Trust (the Trust) and sued The Bank of New York Mellon Trust Company, N.A. (Trustee) after liquidation, alleging breaches of the trust agreement (including selling assets without an appraisal).
The district court dismissed Branzan’s putative class-action claims for failure to satisfy Delaware procedural requirements for derivative suits; Branzan appealed.
The parties agree Delaware law governs; the dispositive question is whether Branzan’s claims are direct (brought to vindicate investor rights) or derivative (brought on behalf of the Trust).
Branzan conceded it did not comply with Delaware derivative-suit procedures (e.g., demand or demand excusal) and therefore argued its claims are direct to avoid those requirements.
Branzan initially argued (1) the Tooley test applies only to fiduciary-duty claims and (2) contract claims can be direct, but after the Delaware Supreme Court’s decision in El Paso Pipeline GP Co. v. Brinckerhoff those arguments were conceded as foreclosed.
Branzan’s remaining argument was that Tooley’s test should yield to equity/policy exceptions; the court rejected that, holding Tooley’s two-question test controls and is not subject to equity-based exceptions. The judgment dismissing Branzan’s action was affirmed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Branzan’s claims are direct or derivative	Claims (including appraisal/contract claim) are direct so derivative procedural rules do not apply	Claims are derivative because harm was to the Trust and recovery would benefit the Trust	Claims are derivative; Tooley test governs and leads to derivative characterization
Whether Tooley test applies only to fiduciary-duty claims	Tooley is limited to fiduciary-duty cases; contract claims fall outside it	Tooley applies generally to determine direct vs. derivative characterization	Tooley applies; prior arguments that it was limited to fiduciary claims are foreclosed by El Paso
Whether equity or policy considerations can override Tooley	Equity/policy can create exceptions making a claim direct despite Tooley	Tooley’s two-question test is dispositive; equity/policy irrelevant to characterization	Equity/policy do not alter Tooley; characterization solely depends on who suffered the harm and who would benefit from recovery
Whether claim survival / terminated-trust rule affects ability to pursue derivative relief	(Argued) terminated trust made derivative claims impossible so should be treated as direct	Delaware law permits derivative suits on behalf of terminated trusts (12 Del. C. § 3810(g)); derivative procedure still required	Court treated derivative procedure as available and required; dismissal affirmed

Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (establishes two-question test for direct vs. derivative action)
Rales v. Blasband, 634 A.2d 927 (Del. 1993) (demand and demand-excusal standards for derivative suits)
In re ZAGG Inc. S’holder Derivative Action, 826 F.3d 1222 (10th Cir. 2016) (discusses procedural protections and Rule 23.1 for derivative claims)