In re Jenzabar,Inc. Derivative Litigation ( 2014 )

COURT OF CHANCERY
OF THE
SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
VICE CHANCELLOR 34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: May 1, 2014
Date Decided: July 30, 2014
Gregory E. Stuhlman Catherine G. Dearlove
Greenberg Traurig, LLP Thomas A. Uebler
1007 North Orange Street, Suite 1200 Richards, Layton & Finger, P.A.
Wilmington, DE 19801 920 North King Street
Wilmington, DE 19801
Peter J. Walsh, Jr.
Matthew D. Stachel
Potter Anderson & Corroon LLP
1313 North Market Street
Wilmington, DE 19801
Thad J. Bracegirdle
Wilks, Lukoff & Bracegirdle, LLC
1300 North Grant Avenue, Suite 100
Wilmington, DE 19806
Richard D. Heins
Ashby & Geddes
500 Delaware Avenue
Wilmington, DE 19801
Re: In re Jenzabar, Inc. Derivative Litig.,
Civil Action No. 4521-VCG
Dear Counsel:
This case raises an interesting question of the capacity of a trust as a
juridical person, which trust, by the document that gave it life, has expired, but
where that trust still holds assets on behalf of its beneficiary. The question arises
under Massachusetts law. This Letter Opinion addresses the Defendants’ Motion
to Dismiss, which is granted. For the reasons below, I find that the trust can take
only those actions related to preserving its assets for purposes of distribution and
wind-up, together with those actions for which the trust instrument specifically
provides: the latter include defensive litigation, but not the maintenance of the
derivative litigation contemplated in this action.
The question before me arises in the following context: On April 21, 2009,
MCG Capital Corporation (“MCG”) filed a Complaint in this action, alleging both
direct and derivative claims against the software company Jenzabar, Inc.
(“Jenzabar,” or the “Company”) and various directors and officers of the
Company, including Robert A. Maginn, Jr., Ling Chai, Jamison Barr, Joseph San
Miguel, and Daniel Quinn Mills. In May 2010, then-Chancellor Chandler
dismissed most of MCG’s derivative claims; the surviving derivative claims relate
to a $750,000 bonus payment for Maginn, Jenzabar’s CEO and Chairman, that was
purportedly approved by the board in 2002, never paid, and then reapproved in
December 2008 (the “2002 Bonus”).1 According to the Complaint, reapproval of
this bonus reflected breaches of fiduciary duties by the Defendants. On October
1
See MCG Capital Corp. v. Maginn, 2010 WL 1782271, at *3, *27 (Del. Ch. May 5, 2010).
Then-Chancellor Chandler did, however, dismiss these claims as alleged against Defendant Chai.
2
19, 2010, MCG filed a second complaint against Jenzabar in a separate action,
seeking an order requiring the Company to repurchase its preferred stock.
Those parties subsequently settled both matters, with Jenzabar repurchasing
MCG’s preferred stock.2 On March 1, 2012, they filed a Stipulation of Dismissal
in this action, which dismissed MCG’s direct claims and the Defendants’
counterclaims. On June 27, 2013, the parties filed a Joint Stipulation and Petition
for Dismissal of Derivative Claims with Prejudice as to Named Plaintiff Only.
Jenzabar then mailed a Notice of Stipulation and Petition for Dismissal of
Derivative Claims “to all Jenzabar stockholders of record who held Jenzabar stock
continuously from December 31, 2008, to June 26, 2013.”3 This Notice notified
Jenzabar stockholders of their right to seek to intervene, providing:
Jenzabar’s stockholders may seek leave of the Court to intervene in
this action, subject to Defendants’ right to oppose such motion. Any
Jenzabar stockholders seeking to pursue the Derivative Claims shall,
by no later than 15 days before the Dismissal Hearing . . ., file a
motion to intervene . . . .4
Only the Plaintiff here, trustee of a trust allegedly holding Jenzabar stock, came
forward to continue what remains of this litigation; specifically, the derivative
claims related to the 2002 Bonus. Conversely, all other Jenzabar stockholders—
2
As a result, MCG lost derivative standing to prosecute the remaining derivative claims in this
matter.
3
Aff. of Mailing ¶ 4.
4
Transmittal Aff. of Gregory Stuhlman Ex. 1 at 4.
3
representing approximately 96 percent of the shares outstanding—remained
content to see these claims lapse.
A. Background
In 2000, non-party Gregory Raiff established a grantor-retained annuity trust
(a “GRAT”), governed by Massachusetts law, for which he was grantor and sole
beneficiary. This trust, The Gregory M. Raiff 2000 Trust (the “Raiff Trust”), was
established through a trust agreement dated May 23, 2000 (the “Trust Instrument”).
The Raiff Trust was funded with shares of Jenzabar. As of July 2001, the Raiff
Trust held 1,750,000 shares of Jenzabar common stock.5 The Plaintiff avers that,
“[a]s a result of a stock dividend in 2012 and stock repurchase by Jenzabar in
2005, the [Raiff] Trust presently owns approximately 16,391,000 shares of
Jenzabar common stock.”6 At oral argument, counsel estimated that this
ownership interest represents approximately four percent of the Company’s
holdings.7 Jenzabar stock is the Raiff Trust’s only asset.8
5
Transmittal Aff. of Thomas Uebler Ex. B at 2-3. Although Jenzabar issued over 12,000 shares
of subordinated preferred stock to the Raiff Trust, as reflected in a December 2004 stock
certificate and March 2005 letter to the then-trustee, references to stock in this Letter Opinion
refer to common stock unless otherwise noted. See Transmittal Aff. of Gregory Stuhlman Ex.
15.
6
Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss at 6 (emphasis omitted).
7
Oral Arg. Tr. 45:21-46:2; see also Transmittal Aff. of Gregory Stuhlman Ex. 23 at 1 (noting
that, in June 2012, the Raiff Trust’s ownership percentage in Jenzabar was 4.27 percent on a
non-fully diluted basis).
8
See, e.g., Jonathan Dep. 29:5-7 (responding to the question “do you know what assets are held
by the [Raiff Trust]” with “I believe it’s just the Jenzabar stock”).
4
Massachusetts attorney M. Gordon Ehrlich served as trustee of the Raiff
Trust from its inception until December 18, 2012.9 During this same period,
Ehrlich also served as trustee of the Gregory M. Raiff Family Trust (the “Family
Trust”), the Raiff Trust’s contingent beneficiary.10 Gregory’s brother, Jonathan
Raiff, was appointed successor trustee of both Trusts in December 2012.11
As a GRAT, the Raiff Trust, by the terms of the Trust Instrument, was to
make annuity payments to Gregory “[o]n each of the first two anniversaries of the
date of creation of [the] Trust.”12 Each of these payments was to equal 55.923
percent “of the initial fair market value of the property contributed to this trust.”13
Further, in accordance with the following language, the Raiff Trust was to
terminate on May 23, 2002:
Termination. This Trust will terminate upon the earlier of the death of
the Grantor and the second anniversary of the date the Trust is
created. If the Grantor is living at the termination of the Trust, the
Trustee shall distribute the remaining principal to the Trustees for the
time being of The Gregory M. Raiff Family Trust, heretofore created
by the Grantor by instrument of even date herewith, and to be held
and disposed of by the said Trustees upon the trusts therein set forth.
If the Grantor is not then living, the Trustee shall distribute the
remaining principal to the Grantor’s estate.14
9
Transmittal Aff. of Gregory Stuhlman Ex. 4 at RAIFF-000029.
10
Id. at RAIFF-000030.
11
Id. Ex. 5 at RAIFF-000381-82. I use first names to distinguish between the Raiff brothers; no
disrespect is intended.
12
The Raiff Trust Trust Instrument § 2.
13
Id.
14
Id. at § 3 (emphasis added).
5
The Defendants contend that the two annuity payments called for would have
almost certainly depleted the Raiff Trust, leaving nothing for the remainder
beneficiary, the Family Trust;15 the Plaintiff does not address this contention.
Regardless, it appears from the record that no remainder principal was transferred
from the Raiff Trust to the Family Trust.16 In fact, the parties dispute whether the
Raiff Trust ever made any distributions, including upon its termination in 2002.
The Defendants, arguing that the Raiff Trust distributed its assets to
Gregory, emphasize the language of the Trust Instrument itself, as well as record
evidence that such a distribution took place.17 For instance, an email regarding a
“limited tender offer” by the Company, sent in 2005 by Gregory’s then-counsel to
Jenzabar, stated:
My client needs to know immediately whether Jenzabar is requiring
all of the beneficiaries of the Raiff Family Trust, which trust is the
contingent beneficiary of the Raiff Trust that owned the Jenzabar
shares until Raiff Trust terminated and distributed the Jenzabar
shares to Greg, to sign documents . . . .18
15
See, e.g., Defs.’ Reply Br. in Supp. of Mot. to Dismiss at 5 n.5; see also Transmittal Aff. of
Thomas Uebler Ex. E.
16
See, e.g., Ehrlich Aff. ¶ 4 (noting that he “do[es] not recall [the Raiff Trust] making any
distribution to the Raiff Family Trust . . .”); Jonathan Dep. 29:8-10 (stating that he “believe[s]
there are no assets” in the Family Trust).
17
The Defendants make additional arguments relying on federal tax and Massachusetts trust law,
and argue that, “[a]s a matter of law and equity, all that remains of the Trust is an empty,
terminated shell with no assets and nothing left to do but wind up its (nonexistent) affairs.”
Defs.’ Reply Br. in Supp. of Mot. to Dismiss at 1; see also id. at 6-7.
18
Transmittal Aff. of Thomas Uebler Ex. F.
6
Conversely, the Plaintiff contends that “[t]he [Raiff] Trust has made no
distributions to [Gregory] or the Raiff Family Trust or its beneficiaries,”19 and that
neither trustee made any effort to wind-up its assets.20 Thus, it is the Plaintiff’s
position that the Raiff Trust never terminated, and therefore is a proper party here.
The Plaintiff relies on Ehrlich’s Affidavit, which confirms that he does “not recall
[the Raiff Trust] making any distribution to the [Family Trust] or to [Gregory]” or
“taking any actions to terminate the [Raiff Trust] on or following its second
anniversary or to make any actual distribution of that trust’s assets.”21 Further,
“[t]o [his] knowledge, the [Raiff Trust] continued to exist and hold Jenzabar stock
during the period of [his] service as Trustee,” that is, until December 2012.22
Gregory, the Raiff Trust’s vested beneficiary, also testified that the Trust exists,
and continues to hold shares of Jenzabar stock.23
The Plaintiff, further, emphasizes several transactions between the Raiff
Trust and the Company that have transpired since 2002, including a stock buyback
and books and records requests pursued on behalf of the Raiff Trust as record
19
Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss at 7.
20
Id. at 8. Additionally, the Plaintiff avers that, “if the Trust had become a legal nullity,” it
would not have been able to participate in acts with legal significance, such as partaking in the
2005 Jenzabar stock buyback. Id. at 13-14; see also id. at 8 (arguing that “the Trust’s ‘intent’
was to hold Jenzabar stock ‘long term’”) (quoting Jonathan Dep. 23:1-6).
21
Ehrlich Aff. ¶ 4.
22
Id.
23
See, e.g., Gregory Dep. 5:21-22, 16:17-17:6, 24:11-14, 26:20-27:1.
7
owner of Jenzabar stock.24 The Raiff Trust remained the record owner of
approximately 16,391,000 shares on Jenzabar’s stock ledger until at least
December 2013.25
B. Procedural History
Because an address of Gregory’s was listed in Jenzabar records as the
appropriate address for which to correspond with the Raiff Trust,26 the Notice of
Stipulation and Petition for Dismissal of Derivative Claims was sent to the Trust
via Gregory.27 On August 22, 2013, the Raiff Trust moved to intervene. On
September 26, 2013, this Motion was granted with conditions, including that the
Defendants “be permitted to challenge, through motion practice, the capacity,
standing, and adequacy to serve as a derivative plaintiff of the Raiff Trust.”28 As
noted above, counsel represent that the Raiff Trust holds approximately four
percent of the stock of Jenzabar. No other stockholders have sought to intervene.
On September 27, 2013, the Defendants filed a Motion to Dismiss pursuant
to 8 Del. C. § 327 and Court of Chancery Rules 9(a) and 23.1. The Defendants
request that this Court dismiss this action because “(1) the Trust lacks capacity to
24
See, e.g., Transmittal Aff. of Thomas Uebler Exs. I, O; Transmittal Aff. of Gregory Stuhlman
Exs. 14-17.
25
Barr Dep. 45:22-46:4.
26
See, e.g., Transmittal Aff. of Thomas Uebler Ex. M; Transmittal Aff. of Gregory Stuhlman Ex.
13 at RAIFF-000366.
27
See Oral Arg. Tr. 39:8-13; id. at 53:22-23 (“We don’t deny that they sent the notice to an
address where Greg Raiff was.”).
28
In re Jenzabar Inc. Derivative Litig., C.A. No. 4521-VCG, at 2-3 (Del. Ch. Sept. 26, 2013)
(ORDER).
8
sue, (2) the Trust lacks derivative standing because it has no beneficial or
economic interest in Jenzabar, and (3) the Trust is an inadequate fiduciary of
Jenzabar.”29 I heard oral argument on the Defendants’ Motion on May 1, 2014.
What follows is my analysis of the capacity issue raised by the Defendants. For
the following reasons, I find that the Raiff Trust lacks the capacity to prosecute this
action on behalf of Jenzabar.
C. Analysis
As a preliminary matter, the Plaintiff argues that the status of the Raiff Trust
is outside my purview. The Plaintiff avers that “Massachusetts strictly limits those
who may enforce the terms of a private trust to beneficiaries or persons acting on
their behalf.”30 Citing to Weaver v. Wood, where the Supreme Judicial Court of
Massachusetts—that state’s highest court—opined that, “[i]n the case of a private
trust, only a named beneficiary, or one suing on his or her behalf, can maintain an
action to enforce a trust,”31 the Plaintiff argues that the Defendants do not have
standing to ask this Court to interpret the terms of the Trust Instrument, or to
“force the Trust’s termination against the wishes of its trustees and beneficiaries.”32
However, the action before me is not an action to enforce the terms of the Raiff
Trust, or to force its termination. Instead, the action before me is a derivative
29
Defs.’ Op. Br. in Supp. of Mot. to Dismiss at 2.
30
Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss at 16.
31
Weaver v. Wood, 680 N.E.2d 918, 922 (Mass. 1997) (emphasis added).
32
Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss at 17.
9
action purportedly brought by the Raiff Trust. In response to the Raiff Trust’s
intervention in this litigation, the Defendants here raise the issue of whether the
Raiff Trust has capacity to sue in this Court, without which this matter may not
proceed. Consequently, I am not prohibited from addressing the issues raised
under the rule set out in Weaver v. Wood.
Having determined that I may resolve the matter before me, I first address
whether the Defendants are equitably estopped from raising lack of capacity as a
defense, and then, finding that they are not so estopped, turn to the substance of
that assertion.
1. The Defendants are not Equitably Estopped from Raising Lack of
Capacity as a Defense
The Plaintiff argues that the Defendants should be equitably estopped from
asserting lack of capacity, based on the many transactions that have occurred
involving Jenzabar and the Raiff Trust since its purported termination.33 To
establish equitable estoppel, the Raiff Trust must demonstrate that it “lacked
knowledge or the means of obtaining knowledge of the truth of the facts in
question; relied on the conduct of the party against whom estoppel is claimed; and
suffered a prejudicial change of position as a result of [its] reliance.”34 The
Plaintiff argues that, because of its past interactions with the Company, it lacked
33
See, e.g., Transmittal Aff. of Gregory Stuhlman Exs. 15-17, 26.
34
Kuhns v. Bruce A. Hiler Delaware QPRT, 2014 WL 1292860, at *19 (Del. Ch. Mar. 31, 2014)
(internal quotation marks omitted).
10
knowledge that the Defendants “would disavow the Trust’s ownership” of
Jenzabar stock, and relied on those interactions “in which Defendants repeatedly
recognized the Trust as a Jenzabar stockholder.”35 It is not, however, the
Company’s subjective decision to raise the capacity issue that constitutes “the facts
in question” for determining whether equitable estoppel applies; instead, it is the
juridical status of the Raiff Trust itself. The facts relevant to that inquiry are, and
have been, known to the Raiff Trust; the Plaintiff does not—and cannot—assert
that it lacked knowledge about the terms of the Raiff Trust that the Defendants
possessed. Thus, the Plaintiff’s equitable estoppel claim must fail.36
2. The Raiff Trust Lacks the Capacity to Pursue this Derivative
Action
I now turn to the capacity issue raised by the Defendants, who argue that the
Raiff Trust—as a terminated trust—lacks the capacity to pursue this derivative
action. Generally, “[c]apacity is the ability of a particular individual [or] entity to
use, or to be brought into, the courts of a forum.”37 The issue, therefore, is whether
the trustee, as fiduciary for a trust that terminated in 2002, has the power to
maintain this action. Court of Chancery Rule 9(a) provides, in pertinent part:
When a party desires to raise an issue as to the legal existence of any
party or the capacity of any party to sue or be sued or the authority of
a party to sue or be sued in a representative capacity, the party shall
35
Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss at 25-26.
36
In briefing the pending Motion, the Plaintiff did not raise any other affirmative defenses.
37
Johnson v. Helicopter & Airplane Servs. Corp., 404 F. Supp. 726, 729 (D. Md. 1975).
11
do so by specific negative averment, which negative averment shall
include such supporting particulars as are peculiarly within the
pleader’s knowledge.38
Thus, on a motion to dismiss pursuant to Rule 9(a), this Court may consider
supporting evidence of such capacity, or lack thereof.
The Plaintiff argues that the Raiff Trust has the capacity, through its trustee,
to maintain this derivative action because “the Trust continues to exist and hold
Jenzabar stock as a legal entity.”39 To support this contention, the Plaintiff
highlights testimony of the principal parties involved in the Raiff Trust’s
establishment—namely Ehrlich, the initial trustee, and Gregory, the settlor and life
beneficiary—that indicates that the Raiff Trust did not distribute its assets.40 The
Plaintiff also points out that the trustee is permitted by the terms of the Trust
Instrument to retain investments “for such period of time as he shall deem
advisable . . .,” and to hold securities “until actual distribution of the trust property
following termination of such trust.”41
In determining whether the Raiff Trust lacks juridical capacity, however, I
need not resolve here the question of whether the Raiff Trust distributed Jenzabar
stock in 2002, or whether the Raiff Trust continues to hold this stock. Rather, I
assume for purposes of this Letter Opinion that the stock has not been distributed.
38
Ct. Ch. R. 9(a).
39
Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss at 11.
40
See, e.g., Gregory Dep. 5:21-22, 16:17-17:3, 24:11-14; Ehrlich Aff. ¶ 4; see also Oral Arg. Tr.
52:20-53:2, 57:3-12.
41
The Raiff Trust Trust Instrument §§ 12(A), (F).
12
The powers of a trustee are established by the intent of the settlor as provided in
the trust instrument, and constrained by the law of the state of settlement. The
Raiff Trust terminated, as specifically provided by the Trust Instrument, on its
second anniversary in 2002. Consequently, the trustee may only maintain this
action if he retains the authority to do so, post-termination. Under Massachusetts
law, upon termination of the Raiff Trust in 2002, the powers of the trustee were
confined to those necessary to preserve Trust assets pending distribution, as well as
any other powers explicitly provided in the pertinent Trust Instrument. The Trust
Instrument here, however, does not authorize the trustee to bring the type of
litigation now pending.
In T.W. Nickerson, Inc. v. Fleet National Bank, the Massachusetts Supreme
Judicial Court explained that, “[o]nce a trust is terminated, and absent a specific
grant of authority in the trust, the trustee has the power and obligation only to
preserve the trust property while winding up the trust and delivering any trust
property to the beneficiary.”42 Thus, the trustee of the Raiff Trust at issue here has
42
T.W. Nickerson, Inc. v. Fleet Nat’l Bank, 924 N.E.2d 696, 706 (Mass. 2010); see also 203E
Mass. Gen. Laws § 815(a) (“A trustee, without authorization by the court, may exercise:
(1) powers conferred by the terms of the trust . . . .”); id. § 816 (“Without limiting the authority
conferred by section 815, a trustee may: . . . (27) on termination of the trust, exercise the powers
appropriate to wind up the administration of the trust and distribute the trust property to the
persons entitled to it.”); id. § 105(b) (providing, with certain exceptions not applicable here, that
“[t]he terms of a trust shall prevail over any provision” of the Massachusetts Uniform Trust
Code). Although the Massachusetts Uniform Trust Code went into effect in 2012, it generally
applies retroactively. See 140 Mass. Acts § 66(a) (2012) (“Except as otherwise provided in this
13
the authority to first, wind-up and distribute the corpus, taking those actions
necessary to preserve the Jenzabar stock in light of that process, and second, to
exercise those powers specifically authorized by the Trust Instrument.
The Plaintiff does not argue that this litigation is necessary to preserve Trust
assets during the wind-up period; instead, it argues that the trustee is authorized by
the Trust Instrument to maintain this derivative action on behalf of Jenzabar. The
Plaintiff argues that the Trust Instrument specifically authorizes the pursuit of
derivative litigation, post-termination, in the following language:
Trustee’s Powers. Subject to the restrictions set forth in the preceding
sections, the Trustee shall have full power to take any steps and do
any acts which he may deem necessary or proper in connection with
the due care, management and disposition of the property and income
of the Trust and, in particular, without limiting the powers given by
law or other provision of this trust, may, in his discretion, and until
actual distribution of the trust property following termination of such
trust, without order or license of court:
...
L. Settle, compromise or refer to arbitration any matter in any
way affecting the trust and pay, compromise or contest any claim or
dispute directly or indirectly affecting the property thereof; . . . .43
The Plaintiff argues that the trustee is, pursuant to this language, entitled to pursue
this derivative action, which ostensibly would affect its purported holding of
act: (1) this act shall apply to all trusts created before, on or after the effective date of this
act . . . .”).
43
The Raiff Trust Trust Instrument § 12 (emphasis added).
14
Jenzabar stock, and which the Plaintiff characterizes as a decision by the trustee to
“contest [a] claim . . . affecting [the Trust’s] property.”44
During briefing, the Plaintiff uses the word “contest” interchangeably with
the word “litigate;” in other words, the Plaintiff takes the position that “contest” is
a neutral term that can include offensive as well as defensive legal actions.
Conversely, the term “contest any claim” could be viewed as limited to resisting a
claim, that is, limited to defensive litigation only. I find that any ambiguity in the
word “contest” in isolation is resolved by examining its use in context.45 In
Section 12(L), the term “contest” is used in a list of words all denoting defensive
actions or the termination of litigation, namely “settle,” “compromise,” “refer to
arbitration,” or “contest.” It is clear in light of this list, and in light of the trustee’s
limited duty to preserve the Trust’s assets while winding-up the Raiff Trust, that
the trustee’s authority to “contest any claim” does not permit the trustee to initiate
litigation, including derivative actions on behalf of Jenzabar. Instead, this
language authorizes the trustee to engage in defensive actions, following
termination but before distribution. Nothing in clause (L) gives the trustee the
power to “bring,” “initiate,” “pursue,” or “prosecute” litigation, post-termination.
44
Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss at 15; see also Oral Arg. Tr. 53:11-15.
45
In my analysis, I employ the canon of ejusdem generis, which provides that “where general
language follows an enumeration of persons or things, by words of a particular and specific
meaning, such general words are not to be construed in their widest extent, but are to be held as
applying only to persons or things of the same general kind or class as those specifically
mentioned.” Aspen Advisors LLC v. United Artists Theatre Co., 861 A.2d 1251, 1265 (Del.
2004) (internal quotation marks omitted).
15
Under the language of the Trust Instrument and Massachusetts law, therefore, the
trustee of this terminated Trust lacks the authority to bring such a suit. As the
trustee lacks the capacity to bring this derivative action on behalf of Jenzabar, the
intervention by the Raiff Trust is a nullity.
As Massachusetts trust law generally, and the Trust Instrument specifically,
dictate that the trustee is not able to maintain this litigation, I find—regardless of
whether the Raiff Trust retains Jenzabar stock—that the Raiff Trust lacks capacity
to pursue this derivative action. Accordingly, I need not reach the second and third
issues raised by the Defendants in their Motion to Dismiss. I do note, however,
that even if the Trust Instrument authorized the trustee to maintain this action, it is
doubtful that pursuing this litigation is consistent with the trustee’s primary duty
under Massachusetts law, post-termination, of winding-up the Raiff Trust’s assets;
nor does it appear, in light of the trustee’s primary duty to wind-up the Raiff Trust,
that the Trust, acting through the trustee, would be a suitable stockholder
representative in pursuing a claim for damages on behalf of Jenzabar, which, in
light of the claims at issue, would be of only nominal value to the Trust itself.
16
D. Conclusion
For the reasons explained above, the Defendants’ Motion to Dismiss is
granted. To the extent the foregoing requires an Order to take effect, IT IS SO
ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
17