In the Matter of The Jeremy Paradise Dynasty Trust and the Andrew Paradise Dynasty Trust
C.A. No. 2021-0354-KSJM
| Del. Ch. | Mar 22, 2022Background
- This dispute arises from a motion by the fiduciaries (Edelman, Chafkin, Pomerance) to issue a commission compelling non‑party contractor Vigomar Realty LLC to produce documents and a corporate representative for deposition about renovations at a property indirectly owned by the Jeremy Paradise Dynasty Trust.
- Fiduciaries contend Vigomar received about $118,000 approved by petitioner Jeremy Paradise for renovations that appear limited, and that this may show Petitioner misused trust assets and justify an unclean‑hands defense.
- Petitioner objected, arguing the requests are overly broad, unduly burdensome, and irrelevant to his petition to reform Article 12(h) of the trust agreement (reformation based on mistake/fraud), because the requested records postdate the trust’s execution.
- Fiduciaries relied on precedent suggesting parties generally lack standing to challenge third‑party subpoenas unless a privilege is implicated; Petitioner argued he still has standing when third‑party discovery would impose a burden on him.
- The Chancellor considered Court of Chancery Rule 26 proportionality and the requirement that unclean hands have an "immediate and necessary" relation to the claim; concluded the requested discovery—dating from June 2019 after the trust was executed—was not sufficiently related to the reformation claim.
- Ruling: the motion for a commission was denied without prejudice; the court left open ordering the discovery later if trial evidence shows it is relevant.
Issues
| Issue | Plaintiff's Argument (Fiduciaries) | Defendant's Argument (Paradise) | Held |
|---|---|---|---|
| Standing to object to third‑party discovery | Petitioner lacks standing to object to a non‑party subpoena unless a privilege is implicated | Petitioner may object because third‑party discovery can impose burdens on parties | Court: Petitioner has standing to assert objections that rest on burdens the discovery would impose on him; Fiduciaries’ broad reading of Cede was rejected |
| Relevance of Vigomar records to reformation claim | Records may show misuse of trust funds by Petitioner and support unclean‑hands defense | Records are irrelevant to reformation because they postdate the trust’s formation and do not bear on the formation‑time mistakes/fraud | Court: Requested records are not sufficiently relevant to the reformation claim and lack an immediate and necessary relationship to it |
| Proportionality / Burden of the requested commission | Discovery is proportional and necessary to probe alleged misconduct as to trust assets | Requests are overly broad and unduly burdensome relative to the needs of the reformation proceeding | Court: Under Rule 26, discovery must be proportional; here requests are not proportional to the reformation issue and impose unjustified burden |
| Availability of unclean‑hands defense based on post‑formation conduct | Post‑formation misconduct (misuse of trust assets) can bar equitable relief | Unclean‑hands must be immediately and necessarily related to the claim (formation of the trust) | Court: Unclean‑hands defense requires an immediate/necessary relation to the claim; post‑formation conduct alleged here is not sufficiently connected to reformation now |
Key Cases Cited
- Nakahara v. NS 1991 Am. Tr., 718 A.2d 518 (Del. Ch. 1998) (articulates that an unclean‑hands defense requires an immediate and necessary relationship between the inequitable conduct and the claim)