WELLS LORY HILLBLOM, f/k/a NGUYEN BE LORY, Plaintiff, v. WILMINGTON TRUST COMPANY, Defendant.
C.A. No. 2021-1034-MTZ
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
July 8, 2026
ZURN, Vice Chancellor
Date Submitted: December 8, 2025
Benjamin P. Chapple, John T. Miraglia, REED SMITH LLP, Wilmington, Delaware, John M. McIntyre, PORTER WRIGHT MORRIS & ARTHUR LLP, Attorneys for Defendant.
The dispute between the trustee and the lawyers persisted for over two decades. The trustee did not try to value the asset or resolve the dispute. As years passed, the minor grew up and the lawyers lost patience. In 2016, the lawyers submitted a settlement offer to the trustee; the trustee ignored it, and did not tell its beneficiary about the dispute or the settlement offer. The lawyers initiated legal action against the trustee; the trustee ducked that action and pointed the lawyers towards the beneficiary.
Reluctantly, the lawyers sued the beneficiary, who thought his trustee was assisting in his defense. Even after the beneficiary asked the trustee for information about the dispute, the trustee did not disclose the settlement offer. The beneficiary only learned of the offer when his adversary disclosed it in 2019. In 2020, the beneficiary settled the claim for roughly five times the offer his trustee had ignored.
The beneficiary sued his trustee in 2021 for breaches of trust and fiduciary duty. The action went to trial. This post-trial opinion concludes the beneficiary‘s
I. BACKGROUND1
Plaintiff Wells Lory Hillblom brings breach of fiduciary duty and breach of trust claims against his trustee, defendant Wilmington Trust Company (“WTC“).2 Those claims were tried over three days, offering the Court 129 joint exhibits and live testimony from eleven fact witnesses and two expert witnesses.3 The following facts were stipulated to by the parties or proven by a preponderance of the evidence.4
Hillblom was born Nguyen Be Lory in Vietnam on December 2, 1994.9 Hillblom pressed a claim he should inherit a share of the Estate as Larry‘s biological son.10 In 1997, the probate court appointed J. Steven Grist as Hillblom‘s guardian ad litem.11 Grist retained John Veague and Garrick Gallagher of Sanders & Parks, P.C. (“S&P“) as counsel.12 Grist and S&P proved Hillblom‘s claim to a share of the Estate.13 Three other children proved they too were Larry‘s biological heirs.14
A. The Nguyen Be Lory Trust.
On April 21, 1999, the Nguyen Be Lory Trust (the “Trust“) was formed to hold Hillblom‘s inheritance.20 The Trust is governed by the Nguyen Be Lory Trust Agreement (the “Trust Agreement“).21 The Trust Agreement is governed by Delaware law.22 WTC agreed to serve as trustee and to administer the Trust in
The Trust Agreement includes “dispositive provisions” in Section A and “general provisions” in Section B.25 The dispositive provisions govern Trust administration, including the distribution of Trust income,26 payments to Hillblom,27 and the use of Trust assets.28
Section B, Article II details WTC‘s authority as Trustee and the standard of care governing that authority.29 WTC is “vested with all rights, powers, and privileges which an outright owner of the same property would have.”30 Article II
[t]o pay or contest any claim; to settle a claim by or against the trust by compromise, arbitration, or otherwise; to release in whole or in part any claim belonging to the trust; and to prosecute or defend actions, claims, or proceedings for the protection of trust assets, and of the Trustee in the performance of the Trustee‘s duties.33
And the Trust Agreement specifically grants WTC the authority to pay S&P‘s fee:
[WTC] shall have the power to use income and principal of the [T]rust to pay debts and expenses of [Hillblom] attributable to the proceedings relating to the estate of Larry Lee Hillblom, including without limitation, legal fees based upon the fee agreements [Hillblom] has with John Veague, Garrick Gallagher, and the law firm of [ ] Sanders & Parks, P.C., and fees and costs of other advisors as approved by the Superior Court of the Commonwealth of the Northern Mariana Islands or by the court supervising the trust‘s administration.34
As for WTC‘s standard of conduct, the Trust Agreement provides that WTC is “subject always to the obligations of a fiduciary.”35 WTC must act with the
B. Grist And The Estate Support Hillblom, And S&P Receives Fees.
After securing Hillblom‘s entitlement to assets of the Estate, Grist helped Hillblom and his extended family create a new life in Virginia.37 Grist ensured the Trust paid for the family‘s home, of course.38 But he went above and beyond to support Hillblom‘s family. Grist helped Hillblom‘s aunt get a driver‘s license, assisted the family with buying a vehicle, hosted the family at his home for dinner “many times,” found an English language tutor for Hillblom‘s mother, caused Hillblom to enroll at the same school as Grist‘s children, secured Hillblom United States citizenship, helped members of his family get student visas, and generally was “very involved in [Hillblom‘s] acclimation to American life[.]”39 Grist treated Hillblom as a member of his family, taking Hillblom on many Grist family vacations,
Grist also interfaced with WTC to make sure it paid S&P‘s fees. On April 30, 1999, the Trust received its first distribution from the Estate, amounting to $7,500,000.42 On June 16, Grist wrote to WTC to ensure S&P received payment.43 Grist explained, “According to the terms of the Fee Agreement, Mr. Veague, Mr. Gallagher and [ ] Sanders & Parks are entitled to 30 percent” of that distribution as Trust Recovery.44 WTC raised no issue, and paid S&P its 30% fee.45 On October 8, the Trust received a distribution of $7,972,507.15.46 Again, Grist wrote to WTC directing it to authorize and remit payment to S&P according to the Fee Agreement.47 WTC did so. By May 2000, the Trust received approximately $44.6 million from the Estate, and WTC again paid S&P its thirty percent, approximately $13.4
In the meantime, in April 2000, Larry‘s heirs and their representatives had reached a court-approved Global Settlement Agreement apportioning the Estate‘s cash and non-cash assets among Larry‘s heirs and a charitable trust, with 60% going to the heirs.50 For non-cash assets, the Global Settlement Agreement called for liquidation and using a liquidating trust to divide the proceeds.51 On April 22, 2000, the Estate assigned its non-cash assets to a liquidating trustee.52 This case centers on one particular non-cash asset: ARW Company, which held interests in two cellular telecommunications companies, Davenport Cellular Telephone Company (“Davenport“) and Madison Cellular Telephone Company (“Madison“).53 The ARW Company‘s interests were transferred to ARW, LLC (“ARW“), formed to distribute those interests to the heirs and charitable trust.54 By April 28, Hillblom‘s Trust
C. The ARW Fee Dispute
On October 3, 2002, ARW sent Gallagher ARW‘s 2001 Schedule K-1 and a check for a $87,615.00 cash distribution to Hillblom‘s Trust.57 That check represented ARW‘s first cash distribution.58 Gallagher promptly sent the check and Schedule K-1 to WTC, and asked that WTC pay S&P thirty percent.59
Thus began eighteen years of disagreement over how to calculate S&P‘s fee on the Trust‘s interest in ARW: specifically, whether S&P was entitled to thirty percent of all ARW cash distributions into the future, or thirty percent of the fair market value of the Trust‘s interest in ARW when the Trust received it in April 2000. WTC solicited Grist‘s opinion on Gallagher‘s fee request.60 On October 15, Grist wrote to Gallagher, copying WTC.61 Grist took the position that the fee should be calculated as “thirty percent of the fair market valuation of ARW on the date it was
WTC took no action at that time. It did not pay S&P anything on the ARW interest or cash distribution.65 The parties sporadically exchanged correspondence on S&P‘s ARW fee over the next decade.66
In 2012, WTC acknowledged the Trust still owed S&P‘s ARW fee.67 That fall, WTC began communicating directly with S&P.68 S&P maintained its fee should be based on ARW‘s cash distributions to the Trust, just like other cash distributions.69 Gallagher noted counsel for the other heirs “were paid fees on the interim distribution received from ARW and then on the sale proceeds when a portion was
Hillblom turned eighteen in December 2012.73 WTC continued as trustee, ensuring the Trust provided for his living expenses.74 WTC intimately supported Hillblom‘s financial and personal affairs, including by filing his taxes, preparing his will, supporting his education, paying legal fees, and providing monthly cash distributions to support a monthly budget WTC reviewed.75 WTC reviewed Hillblom‘s monthly budget and exercised discretion over his living expenses.76 Hillblom often interacted with Allison Patni at WTC, including when he moved to Los Angeles and when he needed a will.77 Patni explained certain Trust Agreement provisions to Hillblom, and ensured Hillblom executed documents necessary for Trust administration.78 WTC‘s role in Hillblom‘s life was not limited to financial
WTC retained ownership of the S&P fee dispute after Hillblom turned eighteen. In June 2013, WTC informed Gallagher that Grist was no longer Hillblom‘s guardian and instructed Gallagher to direct any future S&P invoices to WTC.81 In August, WTC Vice President Randi Dlott confirmed Grist “no longer ha[d] a fiduciary role” and that she had reviewed S&P‘s most recent invoices for WTC “as Trustee.”82 Dlott acknowledged “[WTC] ha[s] not yet compensated you for your services on ARW” and noted WTC was “internally discussing a proposed resolution.”83 Correspondence continued into December.84 WTC maintained S&P‘s ARW fee should be based on the fair market value of Hillblom‘s interest in ARW at the time of transfer to the Trust.85 At the same time, WTC acknowledged “[i]t is very difficult to obtain information necessary to retroactively value an asset that was received 13 years [ago], but [we] think that with the help of a valuation expert, you
On October 1, counsel to another heir named David Axelrod wrote to WTC explaining he received his contingency fee on ARW cash distributions to his client‘s trust.88 He explained that ARW had always been difficult to value, and that nobody seriously considered relying on the Form 706 value.89
On December 10, WTC offered S&P $79,086.00 as its entire ARW fee plus interest (the “2013 WTC Offer“).90 It calculated that amount based on ARW‘s fair market value when received by the Trust, informed by the Form 706 value.91 It used the consumer price index for interest.92 The December 2013 Offer concluded:
I understand that your firm will probably not accept the $61,034 amount. As an alternative we could consult with an outside valuation firm to see if they could produce an appraisal as of the year 2000. Your firm and the bank could split the costs of the appraisal. It is possible, of course, that the appraised value could exceed the value of the
distribution, but it would satisfy the bank‘s fiduciary duty to pay your firm in accordance with the Fee Agreement as written.93
Dlott included the invitation to retain a valuation professional “based on a concept of fairness.”94
Gallagher did not respond to the 2013 WTC Offer.95 Neither WTC nor S&P commissioned an appraisal of ARW. By the end of 2013, the Trust had received eleven ARW distributions totaling $991,239.96 The dispute went dormant again.97
In August 2016, Gallagher raised the ARW fees again with WTC.98 Patni resent the 2013 WTC Offer to Gallagher.99 Gallagher noted he had not received it the first time, positing it had gone to spam or been misfiled.100 Gallagher thought the 2013 WTC Offer was unacceptable because it was not based on “a real value for the property” that anyone considered or would have accepted when ARW was
On December 6, S&P offered to settle the ARW dispute—for all ARW fees from 2002 into the future—for $300,000 (the “2016 S&P Offer“).103 S&P explained the offer would expire on December 20.104
The next day, Patni emailed Hillblom seeking his input on certain Trust decisions.105 She did not mention the S&P fee dispute or the 2016 S&P Offer.106
When S&P made the 2016 S&P Offer, Neil Derman was the WTC attorney charged with handling the ARW fee dispute; Dlott had left WTC‘s legal department in 2015.107 Derman did not know the history of the dispute.108 He let the 2016 S&P Offer lapse without acknowledging it.109 Derman understood the 2016 S&P Offer to be a settlement offer and that typically, a trustee would share a settlement offer
On May 3, 2017, Derman sent S&P a repackaged version of the 2013 WTC Offer (the “2017 WTC Offer“).115 Derman explained the 2017 WTC Offer repeated Dlott‘s 2013 use of the Form 706 value because “there was [no] additional evidence presented to come to any different conclusion than what was written back [] in
The 2017 WTC Offer was accompanied by a check for $79,086.00, the exact figure of the 2013 WTC Offer; the check was drawn from the Trust‘s principal, endorsed by two WTC representatives, and marked “FINAL PAYMENT ON ARW, LLC.”119 The 2017 WTC Offer relied on the same reasoning undergirding the 2013 WTC Offer, yet did not include any additional interest.120 Derman explained, “I didn‘t feel like it made sense to accrue interest based on [S&P‘s] delay.121
WTC did not consult Hillblom before cutting that check from his Trust.122 Derman testified the Trust Agreement gave WTC authority to pay S&P “an amount that was equal to what was owed by the [Trust]” without involving Hillblom.123
D. S&P Initiates Arbitration Against WTC; WTC Loops In Hillblom.
On June 30, 2017, S&P‘s counsel, including Axelrod, made an arbitration demand on WTC (the Arbitration Demand“) seeking approximately $1.3 million under the Fee Agreement.127 The Arbitration Demand‘s cover letter noted that WTC “repeatedly re-affirmed its obligation” under the Fee Agreement, but its conduct revealed “no good faith effort to comply” with that obligation.128 Gallagher explained he served the arbitration demand on WTC, rather than Hillblom, because he “had no interest in suing [a] client to get money that [he] thought his trust had the obligation to have taken care of.”129 S&P expressed its desire to meet with WTC, hoping the dispute could be resolved without formal arbitration proceedings.130
WTC had never involved Hillblom before, or expressed that it had to involve him. WTC “never [provided] a substantive proposal” following the Arbitration Demand, leaving S&P “to conclude that Wilmington has no intention of settling the dispute and valuation issues.”133
WTC knew it had to pay S&P‘s fee from the Trust: the Trust Agreement said so, and WTC had acknowledged that fact many times over the previous two decades.134 WTC also knew Hillblom had no funds outside his Trust.135 But it continued to play games with S&P, ducked the arbitration, and sent S&P to sue Hillblom.136 On December 27, WTC told the arbitrator WTC is “not a party to the Fee Agreement and it has not consented to submit to the court‘s jurisdiction or to
Two weeks later on January 16, 2018, Derman, Kelly White, and three other WTC employees called Hillblom, informing him for the first time there was a chance S&P might sue him for its fees.140 Hillblom had never before spoken with so many WTC representatives at once.141 WTC explained S&P had demanded WTC pay the
Hillblom was overcome with “disappointment” and “heartbreak” by S&P‘s decision to sue him.149 S&P, as counsel to Hillblom‘s guardian Grist, had been a kind and transformational force in his remarkable childhood. Hillblom was
On January 19, White sent Hillblom “12 key documents” “concerning the ARW LLC asset and the fee dispute” to assist in his defense (the “2018 Production“).151 The 2018 Production included the 2013 WTC Offer and the 2017 WTC Offer, but did not include the 2016 S&P Offer or any documents referencing it.152 Derman‘s team compiled the 2018 Production, but on the stand, Derman deflected responsibility to White‘s team as the “business line.”153 White‘s email also included a list of law firms “in the event [Hillblom] independently wish[ed] to start an evaluation process for an attorney.”154
In February 2019, S&P reluctantly filed its arbitration complaint for its ARW fee (the “Arbitration Complaint“) against Hillblom.155 By July, Hillblom retained David Ribakoff as counsel.156 Hillblom found Ribakoff by searching for an attorney located in Century City, California, based on his view that it is “the nicest area” of Los Angeles with the “best of everything,” including legal professionals.157 Ribakoff asked WTC for “whatever non-privileged documents you have concerning the [S&P] Attorneys’ claims.”158 On August 5, WTC‘s litigation counsel responded with five documents WTC “authorized” him to provide.159 WTC‘s August production failed to disclose the 2016 S&P Offer or any documents discussing that offer.160
On September 7, Hillblom was served with S&P‘s Arbitration Complaint.161 It alleged:
- “[Hillblom], directly and through his agent, [WTC], has breached the Fee Agreement by failing and refusing to pay to [S&P] the Contingent Fee earned on the value of certain assets and
distributions received by [Hillblom], through the Lory Trust, from the Estate.”162 - “[WTC], acting as [Hillblom]‘s agent, repeatedly asked [S&P] to defer its receipt of payment attributable to the ARW asset and distributions between 2010 and 2017 . . . . [WTC‘s] conduct has increased the damages incurred by [S&P] and now owed to [S&P] by [Hillblom].”163
- “[WTC] breached [Hillblom‘s] performance under the Fee Agreement when it asserted in bad faith that [WTC] would pay [S&P] based only upon a 1995 valuation of a former ARW LLC . . . .”164
- “[Hillblom] directly and through his designated agent, [WTC], breached the Fee Agreement.”165
F. WTC Sends Hillblom Documents In September 2019.
On September 5, Hillblom emailed WTC and WTC‘s litigation counsel requesting “a conference call in regards to the Gallagher situation.”166 Hillblom explained he and his attorney “would like to discuss and request some information before [Ribakoff] reaches out to [S&P‘s] legal team.”167 That conference call occurred on September 17.168
The September 2019 Production comprised the following documents:
- Grist‘s October 2002 letter to Gallagher claiming S&P is entitled to “thirty percent of the fair market value of ARW on the date it was distributed to Lory.”172 Grist notes that while he is “certain that a valuation was assigned to the Estate‘s interest in ARW on the 706 Tax Return [] I would not readily concede that that figure is one we should rely on, whatever it is.”173
- The 2013 WTC Offer, which relies on the Form 706 and offers $79,086.174 The 2013 WTC Offer alternatively proposes the possibility S&P and WTC retain a valuation profession to appraise ARW at the time it was distributed to the Trust.175
- WTC‘s May 2017 Offer, which reiterates use of the Form 706 value and includes a $79,086 check for “FINAL PAYMENT ON ARW, LLC“.176
- Axelrod‘s letter dated June 30, 2017, asserting “Wilmington‘s current interpretation of the Fee Agreement is wrong.”177
S&P‘s Arbitration Demand directed to WTC, also dated June 30, 2017.178 The Arbitration Demand notes under the Fee Agreement the “basic fee obligation” is Hillblom‘s “direct responsibility” since he reached the age of majority.179 The demand explains WTC is “authorized to honor and perform” Hillblom‘s obligation under the Trust Agreement and indeed has done so “as [Hillblom‘s] authorized representative in these respects for many years.”180 The demand claims WTC breached the Fee Agreement by failing to satisfy the Trust‘s obligations to S&P. S&P‘s Arbitration Demand seeks approximately $1.3 million in fees related to ARW distributions, prejudgment interest on the ARW distributions, and prejudgment interest on one other non-cash asset.181 - Axelrod‘s December 2017 letter to the arbitrator.182 The letter informs the arbitrator that Hillblom has reached the age of majority, and that WTC has represented Hillblom “in matters pertaining to [the] [F]ee [A]greement” since the probate proceeding closed.183 Axelrod‘s letter states “[t]he principal disputed issue is likely to be the value of Mr. Lory‘s (or his Trust‘s) interest in a minority interest in . . . ARW, LLC.”184
- A December 27, 2017 letter from WTC‘s litigation counsel to the arbitrator explaining WTC is not a party to the Fee Agreement and “has not consented to submit to the court‘s jurisdiction or to arbitrate any issues.”185 The letter also notes “[w]e are not aware of any information which obligates the Lory Trust to defend the claims alleged by the Contingent Fee Attorneys or to participate in any arbitration process.”186 The letter concludes by noting
After Hillblom received the Arbitration Complaint and the September 2019 Production, he expected Ribakoff and WTC would work together to protect his interests.188 He did not anticipate bringing suit against WTC at that time.189 Ribakoff also believed he and WTC “we[re] on the same team” in terms of protecting Hillblom‘s interests.190 Ribakoff explained he was “viewing [WTC] as being a fiduciary to [Hillblom] and . . . equally interested as I was in supporting [Hillblom] . . . in defending himself.”191
Ribakoff launched into action. On October 2, he informed S&P‘s arbitration counsel and the arbitrator that Hillblom did not consent to arbitration.192 He pressed that Hillblom was a minor for most of the dispute, with “no ability to perform under the [F]ee [A]greement.”193 Ribakoff also emphasized the inherent unfairness of forcing Hillblom to participate in a dispute “between competing fiduciaries—his
S&P responded: “While we can agree with you that Mr. [] Hillblom was not well served by his trustee and may well have claims against the trustee for its negligent handling of this matter and potential breaches of its fiduciary duties during the period before the trustee disclaim both responsibility and authority to act, that is not a matter relevant to my clients’ breach of contract claims, and is certainly no defense.”195
In November, Ribakoff met with Gallagher to better understand S&P‘s claim for ARW fees.196 After that meeting, S&P shared its “archive records of communications with Grist or WTC [since] the time of the distribution of ARW LLC” to the Trust.197 That production included the 2016 S&P Offer.198 That is how Hillblom learned S&P had offered to settle the dispute for $300,000.00.199
Gallagher‘s trove of records was magnitudes larger than WTC‘s September 2019 Production and 2018 Production.200 S&P asked Ribakoff to join their efforts
In early 2020, Hillblom moved to dismiss the Arbitration Complaint for failure to join WTC as an indispensable party.202 S&P resisted, and the arbitrator denied that motion.203 S&P and Ribakoff prepared for arbitration and kept working to find an amicable resolution.204 Ribakoff presented WTC with a subpoena and
In November, S&P offered to settle its claim for ARW fees for $1,846,000.207 Ribakoff immediately contacted Derman. Ribakoff proposed that Hillblom pay $300,000 and WTC pay the rest, on the basis WTC could have settled for $300,000 in 2016.208 WTC responded a week later with a punt: “we need to have further discussion with the business [team] and [] that takes time.”209
In the meantime, Ribakoff asked a valuation expert he trusted from earlier work, Stefano Vranca, to review S&P‘s expert report and opine on a reasonable settlement figure.210 Vranca gave Ribakoff his criticism of the methodology deployed and suggested a reasonable settlement would be in the range of $1,500,000 to $1,579,500.211
In December, Ribakoff counteroffered $1,325,000, and pointed out Hillblom could assert a statute of limitations defense given S&P‘s claim arose in 2002.212 On
G. Procedural History
On November 29, 2021, Hillblom filed his Verified Complaint for breach of fiduciary duty and breach of trust against WTC (the “Complaint“).215 When unpacked, the Complaint‘s two counts assert five claims: (i) breach of fiduciary duty and breach of trust for failure to accept the 2016 S&P Offer ( “Failure to Pay Claim“); (ii) breach of fiduciary duty and breach of trust for failure to inform Hillblom of the 2016 S&P Offer (“Failure to Disclose Claim“); (iii) breach of fiduciary duty for claiming WTC was not subject to arbitration under the Fee Agreement (“Avoiding Arbitration Claim“); (iv) breach of fiduciary duty for failing to provide Hillblom meaningful assistance in arbitration (“Failure to Assist Claim“); and (v) breach of trust for failing to pay the fees owed to S&P under the Fee Agreement (“Failure to Pay Claim“).216
WTC answered the Complaint219 and moved for summary judgment.220 That motion was granted as to the Avoiding Arbitration Claim and the Failure to Assist Claim; it was otherwise denied.221 Relevant here, WTC argued many of Hillblom‘s claims were time-barred under
The parties undertook additional fact discovery into a record spanning thirty years and two continents, and largely predating modern electronic storage
Hillblom‘s breach of fiduciary duty and breach of trust claims were tried over three days in July 2025.227 The parties submitted post-trial briefing,228 and presented post-trial argument on December 8, at which point I took the matter under advisement.229
II. ANALYSIS
The preponderance of the evidence shows WTC breached its fiduciary duties to Hillblom. WTC does not dispute that it owed fiduciary duties, the contractual and fiduciary duty to pay S&P a fee on ARW from the Trust, and the duty to tell Hillblom about the 2016 S&P Offer.230 WTC does not dispute that it left S&P‘s fee unpaid for
Against that backdrop, WTC had few defenses. At trial, WTC attempted to discredit and blame its beneficiary by dredging up personal struggles Hillblom has worked to overcome.232 On the merits, WTC leads with a specific timeliness defense: it asserts Section 3585‘s one-year statute of limitations bars Hillblom‘s claims.233 It claims the September 2019 Production put Hillblom on inquiry notice of his claims against WTC.234 WTC more broadly contends Hillblom‘s claims fail because WTC did not act in bad faith.235 WTC contends Hillblom waived his Failure to Pay Claims.236 Finally, WTC argues Hillblom cannot recover the $1.4 million because that amount is “not tethered to any valuation of ARW at the time of the alleged breach of the Fee Agreement in 2000.”237 None of these arguments succeed.
The preponderance of the evidence shows WTC breached its duties to administer the Trust in accordance with common law fiduciary duties and the Trust Agreement.
“The elements of a claim for breach of fiduciary duty are: (i) that a fiduciary duty exists; and (ii) that a fiduciary breached that duty.”238 “Under default principles of Delaware law, a trustee owes fiduciary duties to a beneficiary.”239 “At common law, the duties of a trustee to trust beneficiaries include loyalty, good faith, and due care.”240
A trustee‘s fiduciary duties include the overarching duty to preserve trust property.241 At common law, a trustee has the duty to take reasonable steps to
A trustee also has the duty to inform the beneficiary of certain matters relating to the trust.245 That duty creates “an affirmative obligation” and duty that a trustee
“A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust.”250 A breach of trust by a trustee violates “a correlative right of the beneficiary, and gives rise to liability on the part of the trustee and a correlative cause of action on the part of the beneficiary for any loss to the trust estate. Th[at] rule is
“A trust agreement may ‘expand, restrict, eliminate, or otherwise vary’ a fiduciary‘s duties.”252 A trust agreement may differentiate between discretionary and mandatory powers.253 A mandatory power is generally indicated by the use of terms “shall,” or “must.”254 Where a power is mandatory, “the trust has a positive duty to exercise power by performing the act in question, although the exact time and manner of performance is [] left to the judgement of the trustee.”255
The trust agreement‘s terms also delineate the trustee‘s affirmative duty to administer the trust in accordance with those terms.256 A trustee breaches the duty of trust where it “improperly fail[s] to act” consistent with the terms of the trust
Here, Hillblom‘s Trust Agreement does not disclaim any duties; rather, it reinforces that WTC as trustee is “subject always to the obligations of a fiduciary.”259 It enumerates several specific mandatory powers WTC must exercise in its faithful and informed discretion. It enumerates the mandatory power to use Trust assets to pay debts related to the Estate‘s probate proceedings, specifically including S&P‘s fee.260 And it grants the mandatory power to “pay or contest any claim,” to settle a claim against the Trust, and to “defend actions, claims, or proceedings for the protection of [T]rust assets.”261
WTC did not satisfy those obligations at all, much less with the care and fidelity expected of a fiduciary. WTC did not pay S&P‘s ARW fee. WTC did not pay S&P‘s claim.262 WTC did not contest or defend against S&P‘s claim: it let the
And WTC failed to give Hillblom the information to which he was entitled at every opportunity: when the dispute was unfolding, when WTC received and rejected the 2016 S&P Offer, when WTC left Hillblom to manage his own defense, and when Hillblom and Ribakoff asked WTC for information.264 WTC chose to speak when it offered Hillblom the 2018 Production, which it described as the “12 key documents and correspondence that you and your attorney will need“—but WTC omitted the 2016 S&P Offer.265 WTC omitted it again when Ribakoff asked for “whatever non-privileged documents you have” after Hillblom was sued, and yet again in the September 2019 Production when WTC chose to speak “as a courtesy” to its beneficiary.266
A trustee acts in bad faith when it “consciously and intentionally disregard[s] [its] responsibilities” in the face of a known obligation.269 Put differently, a trustee acts in bad faith where “a known obligation” arises and it willfully abdicates “that well-understood duty.”270
WTC persistently acknowledged its obligation to pay S&P‘s fee.271 WTC knew it should have disclosed the 2016 S&P Offer when it was received.272 WTC knew that ARW was difficult to value when it was distributed to the Trust, that
Put simply, WTC knew it could, and should, pay S&P a fee based on a different valuation of the ARW asset, and that it should have informed Hillblom of the 2016 S&P Offer. But WTC did the opposite: it left the S&P fee unresolved without any valuation work; did not accept or act on the 2016 S&P Offer; did not defend S&P‘s claim, leaving S&P to sue Hillblom; and did not tell Hillblom about the 2016 S&P
B. Hillblom‘s Claims Are Not Time Barred.
WTC argues Hillblom‘s claims are time-barred because the September 2019 Production is a “report” under
Section 3585 provides that if a “report” provides a beneficiary either actual or reasonable inquiry notice of a claim against a trustee, the action must be filed within one year.278 It reads, in relevant part:
(a) A person may initiate a judicial proceeding against a trustee for breach of trust or other claim until the first to occur of:
(1) One year after the date the person was sent a report that adequately disclosed the facts constituting a claim . . . .
(b) For the purpose of subsection (a) of this section, a report adequately discloses the facts constituting a claim if it provides sufficient information so that the person knows of the claim or reasonably should have inquired into its existence.279
And as I held on summary judgment, “a plaintiff may establish a lack of inquiry notice by showing justifiable reliance on a professional or expert whom they have no ostensible reason to suspect of deception.”289 The parties agree the “appropriate standard” for assessing whether a “report” put a beneficiary on inquiry notice takes into account whether the beneficiary had reason to distrust or otherwise be suspicious of the trustee.290 Delaware law recognizes a beneficiary is entitled, and in fact encouraged, to rely on her trustee.291 “The trust relationship has utility only if beneficiaries feel at ease confiding in and relying upon the trustee.”292 “Since trust and good faith are the essence of this relationship, it would be corrosive and contradictory for the law to punish reasonable reliance on that good faith by applying the statute of limitations woodenly or automatically to alleged self-interested
In my view, the considerations informing whether a beneficiary reasonably should inquire into a claim against his trustee also appear in precedent applying the discovery rule in the client-professional context.295 Under the discovery rule, the applicable statute of limitations is tolled where “the injury is inherently unknowable and the claimant is blamelessly ignorant of the wrongful act.”296 A court determining whether a lay client has cause to distrust its own trusted professional must consider “[t]he professional nature of the relationship,” “the plaintiffs’ inability to acquire by other means [the] information” giving rise to claims against the professional, and “the need for persons in the plaintiff‘s position to rely upon” the professional‘s
In Coleman v. PricewaterhouseCoopers, LLC, the Delaware Supreme Court found an email “by itself” to be insufficient “to impose upon the plaintiffs a duty to conduct a further investigation” where the email contained “no ‘red flag’ that clearly and unmistakably would have led a prudent person of ordinary intelligence to inquire” whether her accountant violated certain accounting principles.299 Likewise, in Isaacson v. Artisan‘s Savings Bank, the Supreme Court applied the discovery rule where an accountant changed the plaintiff‘s accounting practices, but failed to obtain the governmental consent required by statute.300 The statute of limitations was tolled until the plaintiff received actual notice of the deficiency because “the relationship was one of confidence and reliance by plaintiff on the expertise of defendant[.]”301 The Isaacson Court further explained that application of the discovery rule “is limited and each case must stand or fall on its own facts.”302
But the September 2019 Production gave Hillblom no reason to suspect WTC‘s breaches. The September 2019 Production contained seven documents, none of which discussed or disclosed S&P‘s 2016 S&P Offer.305 The September 2019 Production informed Hillblom that WTC twice offered to settle S&P‘s demand for payment, and WTC resisted paying on the distributions based on its interpretation of the Fee Agreement.306 It painted a picture that WTC was dutifully protecting the Trust from requests that exceeded what the Fee Agreement allowed.307 It includes WTC‘s acknowledgement that S&P was owed a fee and that WTC had a fiduciary duty to pay its fee.308 And it includes a check for “final payment on ARW” from the
And when Hillblom received the September 2019 Production, he had no reason to be suspicious of WTC. Throughout Hillblom‘s life, WTC had intimately handled all his financial obligations and ensured he received personal support.310 With respect to S&P‘s request for fees, WTC conveyed to Hillblom, in a serious and deeply staffed conversation, that S&P‘s claim against Hillblom was “easily dismissible.”311 The September 2019 Production‘s disclosures of WTC resisting overpayment and giving lowball offers dovetailed with its explanation that S&P‘s claims were not serious. Hillblom and Ribakoff both reasonably believed WTC, as Hillblom‘s fiduciary, was their partner in resolving this issue—not a potential adversary in litigation.312
In a remarkable litigation position, WTC contends Hillblom should have been suspicious of WTC by September 2019. Specifically, WTC contends Hillblom should have viewed the September 2019 Production with skepticism given the
WTC also argues the September 2019 Production should have raised Hillblom‘s suspicions because the production omitted “any communications from [S&P].”321 That argument is foreclosed by In re Dean Witter Partnership Litigation, which concluded “where defendant is a fiduciary, a plaintiff is on inquiry notice when the information underlying plaintiff‘s claim is readily available.”322 Hillblom‘s claims are based on communications from S&P that WTC failed to make available to him. The missing communications did not give rise to inquiry notice about those same communications.
More generally, WTC‘s theory relies on inapposite authority: Dean Witter323 and Pomeranz v. Museum Partners.324 Neither case dealt with the special beneficiary-trustee relationship, but instead addressed whether sophisticated
The September 2019 Production did not put Hillblom on inquiry notice that his trustee had mishandled S&P‘s fee request, much less that his trustee had received, ignored, and not shared a favorable settlement offer for the very claim S&P was bringing against him. WTC has failed to start the clock as of September 2019. Its untimeliness defense fails.330
C. Hillblom‘s Failure to Pay Claims Are Not Waived.
Next, WTC argues Hillblom‘s Failure to Pay Claims are waived.331 WTC claims Hillblom‘s post-trial opening brief failed to brief his Failure to Pay Claims.332 Not so.
D. Damages
“[O]nce a right to relief in Chancery has been determined to exist, the powers of the Court are broad and the means flexible to shape and adjust the precise relief to be granted so as to enforce particular rights and liabilities legitimately connected
Delaware does not “require certainty in the award of damages where a wrong has been proven and injury established.”343 “Responsible estimates of damages that lack mathematical certainty are permissible so long as the court has a basis to make such a responsible estimate.”344 At the same time, the Court may not award damages based on “speculation or conjecture“; a plaintiff must demonstrate the defendant caused the harm and its basis for damages must be factually supported.345
“Here has been a continued series of bad faith, and it is requisite to the character of public justice, and for example‘s sake, that the injured party should be completely indemnified.”346 The equitable remedy here is a monetary judgment to restore Hillblom to the situation he would have been in if WTC had fulfilled its
Hillblom learned of the 2016 S&P Offer when S&P shared its archive of WTC communications with Ribakoff in fall of 2019.348 By the time Hillblom and Ribakoff learned S&P had offered to resolve its claim for $300,000, that offer was of no value due to WTC‘s dilatory conduct. After WTC failed to even acknowledge the 2016 S&P Offer, S&P served the Arbitration Demand on WTC, then the Arbitration Complaint against Hillblom; S&P had already incurred over $400,000 in fees in prosecuting its claim against Hillblom.349
I believe the remedy here must cover Hillblom‘s costs in paying S&P‘s ARW fee over and above the 2016 S&P Offer.350 Hillblom‘s costs amount to the $1.4 million the Trust paid S&P minus the $300,000 2016 S&P Offer, and the value the Trust lost from missing the excess $1.1 million.351
Where a breach of trust has been established, a beneficiary is entitled to interest sufficient “to give them the net amount that they would otherwise have received as income and to restore to the trust estate any amounts expended from corpus.”359 This amount should approximate what the Trust could have earned on
The record is thin on the Trust‘s rate of return. One financial statement reveals the Trust received 10% in interest on cash in 2001.363 According to Axelrod, Hillblom‘s portfolio had a large stake in general market funds during a period in which such funds enjoyed an average 11.3% return.364 And Duncan testified as to
The Trust paid the $1.4 million on December 18, 2020.368 The CAGR for the S&P 500 total return index from that date to now is 15.2%. WTC shall pay an additional $167,200.
E. WTC Shall Bear Hillblom‘s Attorneys’ Fees In This Action.
Under the American rule, litigants are generally responsible to bear the cost of their attorneys’ fees.369 “In judicial proceedings involving breaches of trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorneys’ fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.”370 Feeshifting is warranted when the trustee‘s conduct was “grossly negligent or inexcusable.”371 The decision to depart from the American rule rests within the trial court‘s discretion.372
Here, justice and equity require that WTC pay Hillblom‘s attorneys’ fees. WTC dragged its feet on its explicit and known obligation to pay S&P‘s fees for decades. It could not have done less to resolve the issue; it resorted to a Form 706 valuation everyone knew was useless, then recycled that valuation rather than dig in to solve the problem. When S&P understandably ran out of patience after decades, rather than resolve the issue, WTC threw its beneficiary to the wolves. Worse, WTC told its beneficiary the claims were easily dismissable, while knowing S&P was owed the fee; left its beneficiary to find his own counsel; and repeatedly omitted the fact that S&P had offered to settle the matter, once and for all, for $300,000. It did
III. CONCLUSION
Hillblom is entitled to judgment in his favor on all claims tried. Within twenty days, Hillblom shall submit an affidavit under Court of Chancery Rule 88 for the attorneys’ fees incurred in this action. Once those fees are resolved, the parties shall submit an implementing final order and judgment.