In re: 14 Realty Corp., No. 20129-VCS (Del. Ch., August 5, 2009), read opinion here.
This 30-page letter decision reviews de novo the determinations of a Trustee who was appointed to oversee the winding-up of a corporation.
This litigation began as a dissolution proceeding pursuant to DGCL Section 273 due to the sibling owners being deadlocked. The court granted dissolution and appointed a trustee to windup the affairs of the dissolving company and pursuant to that appointment signed an Order that set forth the powers and duties of the trustee in connection with winding up the affairs of the dissolving company.
Summary of Decision
The court reviewed the objections to the determinations of the trustee based on a de novo standard. However, in footnote 3, the court described that choice of a standard of review as follows: “This was a regrettable choice of review standard and not one I will sanction in my future orders. As this case amply demonstrates, de novo review of the determinations of a skilled and experienced trustee is duplicative and wasteful of judicial resources and parties’ time and money. Were the standard of review closer to a business judgment standard – – as it should have been – – this motion could have been decided far more expeditiously and efficiently on the basis of the trustee’s well reasoned determinations.” The trustee appointed in this matter was a retired Delaware Supreme Court Justice.
The court reviews the extensive factual background as part of its decision, but those detailed and extensive facts are beyond the scope of this short blog summary.
The point of this case, in which the court affirmed the determinations of a trustee appointed to oversee the winding up of a dissolved corporation, is that one should be careful to provide for a standard of review for a trustee’s determination in a dissolution matter that is "closer to a business judgment standard" in order to avoid what the court described in this opinion as a duplicative and wasteful review process by the court.