Estate of Martha Barotz v. Wilmington Savings Fund Society, FSB

majority opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ESTATE OF MARTHA BAROTZ, by its

Executor Nathan Barotz,

Plaintiff,

v. C.A. No. 2024-0447-JTL

WILMINGTON SAVINGS FUND

SOCIETY, FSB; WELLS FARGO

DELAWARE TRUST COMPANY, N.A.;

WELLS FARGO BANK, N.A.; APOLLO

GLOBAL MANAGEMENT, INC.;

APOLLO ASSET MANAGEMENT, INC.;

APOLLO CAPITAL MANAGEMENT,

L.P.; and FINANCIAL CREDIT

INVESTMENT I MANAGER, LLC,

Defendants.

OPINION GRANTING MOTIONS TO DISMISS IN PART

Date Submitted: March 20, 2026

Date Decided: June 29, 2026

Kaan Ekiner, Nathan D. Barillo, COZEN O’CONNOR, Wilmington, Delaware; Gregory J. Star, Michael J. Miller, Victoria G. Mazzola, Carlynne A. Wagner, COZEN O’CONNOR, Philadelphia, Pennsylvania; Attorneys for Plaintiff.

Steven L. Caponi, Michael J. Vail, K&L GATES LLP, Wilmington, Delaware; Attorneys for Defendant Wilmington Savings Fund Society, FSB.

Kevin J. Mangan, Stephanie S. Riley, WOMBLE BOND DICKINSON (US) LLP, Wilmington, Delaware; Mahesh Venkatakrishnan Parlikad, Kelly A. Carrero, JONES DAY, New York, New York; Attorneys for Defendants Wells Fargo Delaware Trust Company, N.A. and Wells Fargo Bank, N.A.

Matthew D. Stachel, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP,

Wilmington, Delaware; Gregory F. Laufer, Jacobus J. Schutte, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP, New York, New York; Attorneys for

Defendants Apollo Global Management, Inc., Apollo Asset Management, Inc., Apollo Capital Management, L.P., and Financial Credit Investment I Manager, LLC.

LASTER, V.C.

Nearly twenty years ago, a life settlement company affiliated with a major

financial institution paid a senior citizen to engage in a stranger-originated life

insurance (“STOLI”) transaction. The senior citizen procured a multi-million-dollar

policy on her own life in exchange for a payment equal to three percent of the stated

death benefit. As instructed by the life settlement company, she formed an insurance

trust with a corporate trustee and made the life settlement company the sole owner

of the beneficiary interest (the “Insurance Trust”). The Insurance Trust was a

directed trust, meaning its corporate trustee was entitled to follow the instructions of

the life settlement company as sole owner of the beneficiary interest. The life

settlement company instructed the corporate trustee to apply for and secure the

policy. The life settlement company paid the premiums to maintain the policy.

Five years later, a private equity firm acquired the beneficiary interest in the

Insurance Trust when it bought a portfolio of life insurance investments from the

financial institution affiliated with the life settlement company. The private equity

firm controlled the beneficiary interest in the Insurance Trust through a three entity

stack. At the top was an Irish entity managed by an affiliate of the private equity

firm. That entity held the beneficiary interest in a Delaware statutory trust, which

in turn held the beneficiary interest in another statutory trust, which in turn held

the beneficiary interest in the Insurance Trust. The two Delaware trusts sitting

between the Insurance Trust and the Irish entity were directed trusts, meaning each

trustee followed the instructions of the sole owner of the beneficiary interest. The

private equity firm thus controlled the structure all the way down.

Twelve years after the insurance policy was issued, the senior citizen died. The

private equity firm caused the trustee of the Insurance Trust to apply for the death

benefit, which the insurance company paid to the Insurance Trust. As directed by the

private equity firm, each trustee in the stack distributed the death benefit proceeds

to the next entity in line. The trustee of the third trust transferred the proceeds to a

bank account controlled by the private equity firm. The three intervening entities

between the insurance trust and the private equity firm subsequently dissolved.

STOLI transactions violate Delaware law and are void ab initio. Delaware’s

insurance code gives the estate of the insured a right to recover the death benefit from

a person who received it (the “Disgorgement Statute”). When the senior citizen’s

estate began to investigate the scheme at the center of this case, the Insurance Trust

sued the estate in New York state court to obtain a declaratory judgment of nonownership. The estate sued the Insurance Trust in Delaware Superior Court.

The New York court dismissed its action in favor of the Delaware proceeding.

The Superior Court ultimately granted summary judgment for the estate and against

the Insurance Trust. But when the estate sought to enforce the judgment, the

Insurance Trust claimed to be insolvent. Through discovery in aid of execution, the

estate learned more about the flow of the insurance proceeds.

In 2024, the estate filed this action. The estate has sued the trustee of the

Insurance Trust, the trustees of the first two intervening trusts, and the private

equity firm and three of its affiliates. The estate contends each of the defendants is

liable for the death benefit under the Disgorgement Statute. The estate also asserts

that the defendants engaged in fraudulent transfers, improperly dissolved the first

two intervening entities by failing to make provision for known claims, and

committed fraud.

The defendants moved to dismiss. They argue that the complaint fails to state

any claims on which relief can be granted. They also argue that the estate improperly

split its claims, lacks standing, and sued too late.

This decision grants defendants’ motions to dismiss in part. Three claims fail

on timeliness grounds:

• The estate’s claims under the Disgorgement Statute are subject to a three-year

statute of limitations. The estate was on inquiry notice of its claims by February

2021, but did not sue until April 2024.

• The estate’s claim for constructive fraudulent transfer is untimely because the

challenged transfers occurred in 2019 and the statute of limitations is not subject

to tolling. The estate did not sue until April 2024.

• The estate’s claim for actual fraudulent transfer is untimely because the

challenged transfers were or could reasonably have been discovered by the estate

in 2021. Again, the estate did not sue until April 2024.

The estate’s fraud claim fails because that claim is really an effort to plead fraudulent

concealment to defeat the defendants’ timeliness defenses. On the alleged facts, the

estate cannot transform allegations about fraudulent concealment into a timely fraud

claim.

That leaves the estate’s claim for improper dissolution of the first two

intervening entities. That claim survives. So does a veil-piercing claim that none of

the defendants challenged.

I. FACTUAL BACKGROUND

The facts are drawn from the operative complaint (the “Complaint”),

documents integral to the Complaint or that the Complaint incorporates by reference,

and documents subject to judicial notice.1 At this procedural stage, the court must

credit the Complaint’s well-pled allegations and draw all reasonable inferences in the

plaintiff’s favor.

A. The STOLI Transaction

In 2006, Martha Barotz entered into a STOLI transaction with an entity called

Life Accumulation Trust III (the “Life Settlement Company”). Deutsche Bank, the

multinational financial firm, beneficially owned and controlled the Life Settlement

1 Citations in the form “Compl. ¶ ___” refer to the paragraphs of the operative

complaint. Dkt. 104. Citations in the form “Compl. Ex. ___ at ___” refer to the exhibits to the Complaint. Id. Citations in the form “WSFS OB Ex. ___ at ___” refer to the exhibits to Defendant Wilmington Savings Fund Society, FSB’s Opening Brief in Support of its Motion to Dismiss the Verified Amended Complaint. Dkt. 115. Citations in the form “Wells Fargo OB Ex. ___ at ___” refer to the exhibits submitted by Defendants Wells Fargo Bank, N.A. and Wells Fargo Delaware Trust Company, N.A. in support of their Opening Brief in Support of Their Motion to Dismiss the Verified Amended Complaint. Dkt. 118. Citations in the form “AB at ___” refer to Plaintiff’s Answering Brief in Opposition to Defendants’ Motions to Dismiss Plaintiff’s First Amended Complaint. Dkt. 146. Citations in the form “Wells Fargo RB at ___” refer to Defendants Wells Fargo Bank, N.A.’s and Wells Fargo Delaware Trust Company, N.A.’s Reply Brief in Support of Their Motion to Dismiss the Verified Amended Complaint. Dkt. 151. Citations in the form “Plaintiff’s Supp. OB at ___” refer to Plaintiff’s Supplemental Brief in Opposition to Defendants’ Motions to Dismiss Plaintiff’s First Amended Complaint. Dkt. 168. Citations in the form “Plaintiff’s Supp. RB at ___” refer to Plaintiff’s Reply to Defendants’ Supplemental Brief in Support of Their Motions to Dismiss Plaintiff’s First Amended Complaint. Dkt. 172. Page references cite internal pagination whenever possible.

Company. The transaction employed a well-known template frequently used in the

STOLI industry.

Acting on instructions from the Life Settlement Company, Barotz set up the

Insurance Trust, formally known as the Martha Barotz 2006-1 Insurance Trust,

under a trust agreement dated August 18, 2006. The Life Settlement Company

became the sole owner of the Insurance Trust’s beneficiary interest in exchange for a

nominal capital investment in the Insurance Trust. The Life Settlement Company

thus became the sole beneficiary of the Insurance Trust, but because the beneficiary

interest was transferrable, the Life Settlement Company could transfer the interest

to a new owner.

The Insurance Trust was originally a Delaware statutory trust formed under

the Delaware Statutory Trust Act. Effective March 18, 2021, the Insurance Trust

converted to a common-law trust.

The initial trustee of the Insurance Trust was Christiana Bank & Trust

Company. Wilmington Savings Fund Society, FSB (“WSFS”) took over as the

successor trustee after acquiring the original trustee. The trust agreement for the

Insurance Trust established a directed trustee structure, meaning that the trustee

had to follow the instructions given by the owner of the beneficiary interest.

On August 23, 2006, the Life Settlement Company caused the Insurance Trust

to apply for a $5 million insurance policy on Barotz’s life. On September 3, an

insurance company issued a policy to the Insurance Trust with a stated death benefit

of $5 million (the “Policy”). Except for the nominal investment that the Life

Settlement Company made in the Insurance Trust in return for the beneficiary

interest, the Insurance Trust had no assets other than the Policy.

The Life Settlement Company paid Barotz $150,000 for her role in the STOLI

transaction. That amount represented 3% of the death benefit. Barotz did not pay

any premiums on the Policy. Going forward, the Life Settlement Company funded the

premiums.

B. The First Sale

Deutsche Bank included the beneficiary interest in the Insurance Trust in a

portfolio of life insurance investments that it sold to an affiliate of Apollo Global

Management, Inc. (“Apollo Global”) for $200 million in February 2011. Apollo Global

is a publicly traded Delaware corporation and private equity firm.

Apollo Global owned the beneficiary interest in the Insurance Trust through a

series of subsidiaries. One level down from Apollo Global was Apollo Asset

Management, Inc. (“Apollo Asset”), a Delaware corporation and wholly owned

subsidiary of Apollo Global. One level down from Apollo Asset were three

subsidiaries: (i) Apollo Capital Management, L.P. (“Apollo Capital”), a Delaware

limited partnership, (ii) Financial Credit Investment I, L.P., a Cayman entity (the

“Cayman Fund”), and (iii) Financial Credit Investment I Manager, LLC (the “Fund

Manager”), a Delaware limited liability company. Apollo Capital was the sole member

of the Fund Manager.

One level down from the three subsidiaries was Financial Credit Investment I

Limited, an Irish entity (the “Investment Fund”). Apollo Capital, the Cayman Fund,

and the Fund Manager owned 100% of the equity interest in the Investment Fund.

Through the Fund Manager, Apollo Capital managed the Investment Fund. This

decision refers to Apollo Global, Apollo Asset, Apollo Capital, and the Fund Manager

collectively as the Apollo Defendants.

The Apollo Defendants established three Delaware statutory trusts to hold and

manage the portfolio of life insurance investments they acquired from Deutsche

Bank. They were Financial Credit Investment I Trust C-2 (“Trust C-2”), Financial

Credit Investment I Trust C-3 (“Trust C-3”), and Financial Credit Investment I Trust

C-4 (“Trust C-4”).

The Investment Fund owned the beneficiary interest in Trust C-2. Wells Fargo

Delaware Trust Company, N.A. (“Wells Fargo Delaware”) served as the trustee for

Trust C-2. Trust C-2 owned the beneficiary interest in Trust C-3. Wells Fargo

Delaware served as the trustee for Trust C-3. Wells Fargo Bank, N.A. (“Wells Fargo

Bank”), the parent company of Wells Fargo Delaware, served as a secondary trustee

and securities intermediary for Trust C-3. This decision refers to Wells Fargo

Delaware and Wells Fargo Bank together as the Wells Fargo Defendants.

In April 2011, as part of the portfolio sale, the Life Settlement Company

transferred the beneficiary interest in the Insurance Trust to Trust C-3. Because the

Insurance Trust continued to own the Policy, that transfer made the Apollo

Defendants the economic beneficiaries of the Policy. After acquiring the beneficiary

interest in the Insurance Trust, Trust C-3 paid the premiums on the Policy until

Barotz’s death.

Both Trust C-2 and Trust C-3 were directed trusts, meaning that their trust

instruments required that the trustee follow the instructions of the owner of the

beneficiary interest. Recall that the Insurance Trust was also a directed trust. The

trustee of the Insurance Trust (WSFS) therefore had to follow the instructions of

Trust C-3, whose trustee (Wells Fargo Delaware) had to follow the instructions of

Trust C-2, whose trustee (Wells Fargo Delaware) had to follow the instructions of the

Investment Fund, which was managed, through the Fund Manager, by Apollo

Capital. Through this structure, the Apollo Defendants controlled all of the entities

in the ownership chain.

C. The Death Benefit Distribution

Barotz died on December 22, 2018. The Apollo Defendants learned of her death

on December 26. As early as January 2, 2019, the Apollo Defendants had started the

process for securing the death benefit, which included authorizing and assisting in

preparing the paperwork necessary to file a claim.

By February 2019, Trust C-3 had directed WSFS in its capacity as trustee of

the Insurance Trust to submit a death benefit claim to the insurer. On April 4, 2019,

the insurer sent a check for $5,042,328.77 to WSFS (the “Death Benefit”). WSFS

deposited the check in an account WSFS maintained in the name of the Insurance

Trust.

On April 12, 2019, Trust C-3 instructed WSFS to transfer the Death Benefit to

a Wells Fargo Bank account titled “Wells Fargo Longevity Clearing Account” for

“further credit” to an account titled “FCI I Trust C-3 Proceeds Account.”2 Apollo

Capital received consolidated statements that included this account. On April 18,

WSFS complied.

On April 22, 2019, representatives of the Apollo Defendants engaged in

internal discussions about obtaining the Death Benefit. On April 24, Wells Fargo

Bank transferred the Death Benefit to a JPMorgan account in the name of the

Investment Fund. The Apollo Defendants intended to use some of the proceeds to pay

expenses.

Soon thereafter, several multi-million dollar withdrawals were made from the

JPMorgan account. The funds were deposited into another JPMorgan account in the

name of the Cayman Fund.

D. The Second Sale

Soon after the distribution of the Death Benefit, the Apollo Defendants caused

the Investment Fund to sell a portfolio of beneficiary interests in around 530 active

life insurance policies—comprising death benefits totaling $1.46 billion—to

Berkshire Hathaway and a different Apollo Global affiliate called Financial Credit

Investment III DAC. As part of that transaction, the Apollo Defendants directed the

trustees of Trust C-2 and Trust C-3 to dissolve those entities.

The Apollo Defendants documented the instruction to dissolve Trust C-2 and

Trust C-3 in an Omnibus Termination Agreement and Direction, dated December 2,

2 Compl. ¶ 77.

2019 (the “Termination Agreement”). As part of that agreement, the Investment

Fund

certifie[d] and agree[d] that (a) all claims and obligations of the Trusts,

if any, have been paid in full as of the date hereof or reasonable provision

has been made by the Beneficial Owner for the payment of such claims

and obligations as required by Section 3808(e) of the Act, and (b) as of

the date hereof and aside from any Tax Filings, the winding up of the

affairs of the Trusts under the Trust Agreements will have been

completed and accordingly all conditions to the dissolution and

termination of the Trusts under the Trust Agreements will have been

satisfied.3

That provision was a contractual stipulation intended to protect the trustees. If it

turned out not to be true, then the trustees could sue. It did not establish the truth

of the stipulation as a real-world fact.

By late January 2020, the dissolutions of Trust C-2 and Trust C-3 were

complete. The Apollo Defendants later dissolved the Investment Fund, and its

liquidation and winding up were complete by June 6, 2021. Those steps left the

Insurance Trust as the only active entity in the chain of ownership linking the

original Policy to the Apollo Defendants that received the Death Benefit.

E. The Estate’s Investigation

Barotz’s spouse was the executor of her estate (the “Estate”). He had been part

of the original STOLI transaction, where he signed documents for the Insurance

Trust as the settlor’s spouse. Their son later succeeded his father as the executor of

the Estate. He notarized the documents for the original STOLI transaction. Nor was

3 Id. ¶ 148; see Compl. Ex. N § 1(b).

the STOLI transaction Barotz’s only venture of that sort. She participated in at least

one other STOLI scheme, which was the subject of a separate litigation in the

Delaware Superior Court.4

Because he had been part of the original STOLI transaction, the executor knew

about the Insurance Trust, but little more. He suspected that the Life Settlement

Company had transferred the beneficiary interest in the Insurance Trust, but did not

know where it ended up. He also did not know the fate of the Policy or the Death

Benefit.

As part of an investigation into whether the Estate had claims under Delaware

law, the Estate’s counsel sent letters in January 2020 to a number of known STOLI

players, including Wells Fargo Bank. The letters asked about the “final recipient of

the death benefit” and suggested that the Estate intended to commence litigation to

recover the Death Benefit, if necessary.5

On January 28, 2020, Wells Fargo Bank forwarded the Estate’s letter to the

Apollo Defendants. Wells Fargo Bank reminded the Apollo Defendants that Trust C3 held the beneficiary interest in the Policy. Wells Fargo Bank did not respond to the

Estate’s letter.

4 See Est. of Martha Barotz v. Vida Longevity Fund, L.P., C.A. No. N20C-05-144 EMD (CCLD) (Del. Super. Ct.).

5 Compl. ¶ 64.

F. The New York Action

On March 10, 2020, the Insurance Trust sued the Estate in New York state

court using a procedural device known as a non-detailed summons (the “New York

Action”). The summons alleged that the Insurance Trust remained the owner of the

Policy at the time of Barotz’s death and that the Insurance Trust “received” the Death

Benefit.6 The Insurance Trust sought a declaration that the Estate could not

“maintain an action to recover … the proceeds of the Policy” from the Insurance

Trust.7 Strikingly, the Insurance Trust also sought damages for harm the Estate

somehow caused the Insurance Trust.

The summons was the first time that the Estate learned that the Insurance

Trust had in fact received the Death Benefit. The summons did not reveal that the

Insurance Trust no longer held the Death Benefit or where the proceeds had gone.

The summons also did not identify the owner of the beneficiary interest in the

Insurance Trust or any of the entities further up the chain.

G. The Superior Court Action

On April 15, 2020, the Estate sued the Insurance Trust in Delaware Superior

Court (the “Superior Court Action”). The Estate invoked the Disgorgement Statute

and sought to recover the Death Benefit from the Insurance Trust on the grounds

that the Policy was an illegal STOLI transaction.

6 Id. ¶ 56.

7 Id.

On June 22, 2020, the Insurance Trust filed a formal complaint against the

Estate in the New York Action. The complaint continued to seek a declaratory

judgment addressing whether the Estate could “recover the Policy proceeds” from the

Insurance Trust.8 The complaint added detail about the original STOLI transaction

but did not identify the owner of the Insurance Trust’s beneficiary interest or explain

what happened to the Death Benefit.

On July 22, 2020, the Insurance Trust moved to dismiss or stay in the Superior

Court Action in deference to the New York Action. The motion explained that the

Insurance Trust paid the premiums on the Policy and received the Death Benefit, but

did not identify the owner of the beneficiary interest in the Insurance Trust or

address whether the Insurance Trust had transferred the Death Benefit.

On the same day, the Estate moved to dismiss the complaint in the New York

Action. The Insurance Trust opposed the motion. Its papers acknowledged that the

Estate had tried to identify the owner of the Insurance Trust’s beneficiary interest

through the Estate’s January 2020 letter.

The New York Court eventually dismissed the New York Action in favor of the

Superior Court Action. Two days later, the Delaware Superior Court denied the

Insurance Trust’s motion to dismiss the Superior Court Action.

8 Id. ¶ 61.

H. Discovery In The Superior Court Action

The Estate served requests for the production of documents, requests for

admission, and interrogatories in the Superior Court Action. When the Insurance

Trust responded to the requests for production of documents in August 2020, the

Insurance Trust objected to the relevance of the Estate’s request for “documents

sufficient to identify any and all of the persons or entities that were, at any time, the

ultimate beneficiary(ies) of the Policy and/or of the [Insurance] Trust.”9 When the

Insurance Trust produced documents in September 2020, the production included a

Beneficial Interest Transfer Agreement dated April 14, 2011. That agreement

evidenced the Life Settlement Company’s sale of the beneficiary interest in the

Insurance Trust to Trust C-3. Through this document, the Estate learned that Trust

C-3 owned the beneficiary interest when the Death Benefit was paid. On October 30,

2020, the Estate issued a subpoena to Trust C-3.

Also in October 2020, the Insurance Trust responded to the Estate’s requests

for admission. The Insurance Trust admitted knowing that the Policy was part of a

STOLI transaction and that the Insurance Trust was created in furtherance of a

STOLI scheme.

In December 2020, the Insurance Trust responded to the Estate’s

interrogatories. One interrogatory asked the Insurance Trust to identify “any person

9 Id. ¶ 66.

or entity who received all or part of the death benefit of the $5 million dollar policy.”10

The response only identified the Insurance Trust.

Despite the limited information that the Estate had obtained, the Estate

“suspected that the [Insurance] Trust had transferred the Policy’s death benefit to

Trust C-3.”11 The Estate also suspected “that Trust C-3, as the beneficiary of the

[Insurance] Trust, was in possession of the proceeds and would be the entity that

would ultimately satisfy any judgment in favor of the Estate.”12 On January 25, 2021,

in a filing in the Superior Court Action, the Estate stated that “[i]f the [Insurance]

Trust ever, in fact, possessed the life insurance proceeds at issue in this action, it was

only fleetingly as the funds flowed through it to the real party in interest.”13

On January 27, 2021, the Estate proposed to add Trust C-3 as a defendant in

the Superior Court Action. Counsel for the Insurance Trust responded that Trust C3 dissolved in late January 2020. On January 29, 2021, the Insurance Trust produced

more documents, including a wire transfer form indicating that the Insurance Trust

transferred the Death Benefit to a bank account associated with Trust C-3 on April

18, 2019.

10 Id. ¶ 70.

11 Id. ¶ 71.

12 Id.

13 WSFS OB Ex. J at 2–3.

On February 2, 2021, the Estate issued subpoenas to the Fund Manager and

Apollo Management, L.P. (“Apollo Management”). The subpoenas sought documents

related to the Death Benefit and the dissolution of Trust C-3. The Fund Manager and

Apollo Management objected to the subpoenas on the basis of relevance and burden,

claiming that the information sought was irrelevant to the Superior Court Action.

The Estate did not move to enforce the subpoenas or engage with the

subpoenaed parties. Instead, the Estate moved to compel the Insurance Trust to

produce discovery identifying the recipients of the Death Benefit after Trust C-3’s

dissolution. The Insurance Trust claimed not to know who received the proceeds.

On April 27, 2021, the Insurance Trust produced a Removal, Appointment and

Succession Agreement between WSFS, the Investment Fund, and an entity called 66

LLC. That agreement recited that the Investment Fund was in the “final stage” of a

“voluntary liquidation” and that the Investment Fund was removing WSFS as trustee

of the Insurance Trust, appointing 66 LLC as the new trustee, and converting the

Insurance Trust to a common-law trust.14 During a deposition two days later, a WSFS

representative could provide no information beyond what was in the agreement.

I. Summary Judgment In The Superior Court Action

On May 4, 2021, the Estate moved for summary judgment against the

Insurance Trust. The Superior Court granted the Estate’s motion on December 18,

2023. On January 8, 2024, the Superior Court entered a final judgment awarding the

14 Compl. ¶ 87.

Estate $6,922,036.86 in damages and prejudgment interest. The Insurance Trust did

not appeal.

The Insurance Trust failed to satisfy the judgment, prompting the Estate to

seek discovery in aid of execution. The Estate issued subpoenas to at least seventeen

non-parties, including the Fund Manager, Trust C-4, other Apollo Global-affiliated

entities, Wells Fargo Delaware, Wells Fargo Bank, WSFS, 66 LLC, and counsel for

the Insurance Trust. The Estate also served requests for production and

interrogatories on the Insurance Trust. The Estate subsequently moved to compel

production and enforce the subpoenas.

On March 22, 2024, the Estate received a small production of documents from

a few of the subpoenaed parties. According to the Estate, the discovery showed that

the Investment Fund and the various trusts “were, in reality, a conglomerate of shell

entities and empty statutory trusts that served as puppets for the ultimate director

and financial beneficiary who sits behind the curtain pulling the strings: Apollo.” 15

The production included a Management Agreement showing that as of January

5, 2011, the Fund Manager managed the Investment Fund “to the fullest extent

permitted by law.”16 The Management Agreement identified Apollo Capital as the

sole member of the Fund Manager and a Co-President of Apollo Asset as the “Control

15 Id. ¶ 114.

16 Id. ¶ 116.

Person” of the Fund Manager.17 The production also included an Amended

Management Agreement, dated February 15, 2011, that expanded the Fund

Manager’s control over the Investment Fund. That Amended Management

Agreement described the Fund Manager as an affiliate of Apollo Capital.

On March 25, 2024, counsel for the Insurance Trust moved to withdraw,

representing that there had been no communication “with the Trustee or any

authorized representative” of the Insurance Trust “concerning the Trust’s response

to any document or motion, any potential appeal in this Action, or any other legal

services on behalf of the Trust.”18 The Estate opposed the motion.

On April 15, 2024, the Superior Court ordered the Insurance Trust to serve

meaningful responses to the Estate’s post-judgment discovery. The Superior Court

also ordered counsel for the Insurance Trust to identify the addressee of their legal

bills.

The Superior Court also granted the motions to enforce the subpoenas that the

Estate had served, ordering the respondents to produce “any documents” relating to

the formation and dissolution of the trusts involved with the Policy and the

disposition of the Death Benefit.19 In response, the Estate received a single document.

17 Id. ¶ 117.

18 Id. ¶ 101.

19 Id. ¶ 103.

According to the Estate, “it was so heavily redacted that the Estate could not

comprehend it.”20

J. This Action

The Estate filed this action on April 26, 2024. The operative complaint contains

seven counts:

• Count I asserts a claim against WSFS under the Disgorgement Statute.

• Count II asserts a claim against the Wells Fargo Defendants under the

Disgorgement Statute.

• Count III asserts a claim against the Apollo Defendants under the

Disgorgement Statute.

• Count IV asserts a claim against the Wells Fargo Defendants for improperly

dissolving Trust C-2 and Trust C-3.

• Count V asserts a claim to enforce the Superior Court judgment against the

Apollo Defendants under an alter ego or veil piercing theory.

• Count VI asserts a claim against all defendants for fraudulent transfer.

• Count VII asserts a claim against all defendants for fraud.

WSFS and the Wells Fargo Defendants (the “Trustees”) moved to dismiss all claims

against them. The Apollo Defendants moved to dismiss Counts III, VI, and VII. The

Apollo Defendants did not move to dismiss Count V.

II. LEGAL ANALYSIS

When considering a motion to dismiss under Rule 12(b)(6), “a trial court should

accept all well-pleaded factual allegations in the Complaint as true, accept even

vague allegations in the Complaint as ‘well-pleaded’ if they provide the defendant

20 Id. ¶ 104.

notice of the claim, [and] draw all reasonable inferences in favor of the plaintiff.”21

The court should “deny the motion unless the plaintiff could not recover under any

reasonably conceivable set of circumstances susceptible of proof.”22 Delaware’s

“governing ‘conceivability’ standard is more akin to ‘possibility,’ while the federal

‘plausibility’ standard falls somewhere beyond mere ‘possibility’ but short of

‘probability.’”23

“For a court to grant a Rule 12(b)(6) motion on timeliness grounds, the

complaint’s allegations must show that the claim was filed too late.”24 When

evaluating whether the factual allegations in a complaint support a timeliness

defense, a court “must draw the same plaintiff-friendly inferences required in a

12(b)(6) analysis.”25 When reviewing a timeliness defense, the “court effectively

assumes the validity of the claims, then applies timeliness principles.”26

A. Counts I, II, and III: The Disgorgement Statute Claims

Counts I, II, and III of the Complaint assert claims under the Disgorgement

Statute. The Trustees seek dismissal for lack of standing. All the defendants seek

21 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531,

536 (Del. 2011).

22 Id.

23 Id. at 537 n.13.

24 Lebanon Cty. Emps.’ Ret. Fund v. Collis, 287 A.3d 1160, 1193 (Del. Ch. 2022)

(citing Kahn v. Seaboard Corp., 625 A.2d 269, 277 (Del. Ch. 1993)).

25 State ex rel. Brady v. Pettinaro Enters., 870 A.2d 513, 524–25 (Del. Ch. 2005).

26 Collis, 287 A.3d at 1193.

dismissal on the theory that the claims are untimely. Assessing the defendants’

arguments for dismissal requires a baseline understanding of the law on those claims.

Wagering on human life has long been illegal, regardless of the means. “Since

the initial creation of life insurance during the sixteenth century, speculators have

sought to use insurance to wager on the lives of strangers.” 27 In 1881, the Supreme

Court of the United States recognized the insurable interest doctrine, under which

the person procuring a life insurance policy must have a sufficient interest in the

ongoing life of the insured to prevent the policy from operating as a death wager.28

As the Court acknowledged, it is hard to define an insurable interest “with precision,”

but explained that the doctrine required an interest “founded upon the relations of

the parties to each other, either pecuniary or of blood or affinity,” that made it

reasonable for the person procuring the policy “to expect some benefit or advantage

from the continuance of the life of the assured.”29 In other words, the person securing

the policy had to have some connection to the insured that would give the person

securing the policy a reason to want the insured to continue living. In that setting,

the person securing the policy can legitimately secure a death benefit as

compensation for the loss—emotional, pecuniary, or otherwise—that the insured’s

death will cause.

27 PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Tr., 28 A.3d 1059, 1069 (Del.

2011).

28 See Warnock v. Davis, 104 U.S. 775, 779 (1881).

29 Id.

The Delaware Supreme Court adopted the insurable interest doctrine in

1915.30 In 1968, the Delaware General Assembly codified the doctrine in Section

2704(a) of the Insurance Code (the “Insurable Interest Statute”).”31 The pertinent

language states:

Any individual of competent legal capacity may procure or effect an

insurance contract upon that individual’s own life or body for the benefit

of any person, but no person shall procure or cause to be procured any

insurance contract upon the life or body of another individual unless the

benefits under such contract are payable to the individual insured or

that individual’s personal representatives or to a person having, at the

time when such contract was made, an insurable interest in the

individual insured.32

The provision has two parts. By its terms, a person may procure insurance on his own

life for anyone’s benefit. But a person procuring insurance on the life of another must

have an insurable interest in the life of the insured.33

One common structure in the life insurance industry involves the creation of a

life insurance trust to own a policy, receive the proceeds, and then distribute them in

accordance with the trust agreement. A trust is a separate jural entity, so questions

could arise as to whether the trust was procuring a policy on the life of another.

Delaware law first addressed this issue by statute in 1994 (the “Trust Exception”).

Today, the pertinent language states:

30 See Baltimore Life Ins. Co. v. Floyd, 94 A. 515, 520 (Del. 1915).

31 18 Del. C. § 2704(a).

32 Id.

33 See Price Dawe, 28 A.3d at 1073–74.

The trustee of a trust created and initially funded by an individual has

an insurable interest in the life of that individual and the same

insurable interest in the life of any other individual as does any person

who is treated as the owner of such trust for federal income tax purposes

without regard to:

a. The identity of the trust beneficiaries;

b. Whether the identity of the trust beneficiaries changes from time to

time; and

c. The means by which any trust beneficiary acquires a beneficial

interest in the trust.34

Under the Trust Exception, if a person with an insurable interest validly creates and

initially funds a trust to own the policy, then the trustee has an insurable interest in

the life of the insured sufficient to support the policy

Today, the Disgorgement Statute appears in Section 2704(b) of the Insurance

Code. It states:

If the beneficiary, assignee or other payee under any contract made in

violation of this section receives from the insurer any benefits

thereunder accruing upon the death, disablement or injury of the

individual insured, the individual insured or the individual’s executor

or administrator, as the case may be, may maintain an action to recover

such benefits from the person so receiving them.35

The Disgorgement Statute thus provides that if the person procuring a policy lacks

an insurable interest in the life of the insured, then the insured or their personal

representative can recover the death benefit from a person who received it.

34 18 Del. C. § 2704(c)(5).

35 18 Del. C. § 2704(b).

A STOLI transaction violates the Insurable Interest Statute. By definition, a

stranger to the insured lacks an insurable interest in the insured’s life and cannot

procure a life insurance policy.

But what about more subtle fact patterns? In Price Dawe, the Delaware

Supreme Court addressed a situation where—as here—a person procured an

insurance policy on his own life. As here, the insured designated a family trust as the

policy beneficiary, and he owned the beneficiary interest in the trust. Shortly after

procuring the policy, the insured sold it to an investor. When his estate sought to

recover the policy, the party who received the death benefit argued that the structure

complied with the Insurance Code. The justices disagreed, explaining the statute

“requires more than just technical compliance.”36 As they explained, “a third party

cannot use the insured as a means or instrumentality to procure a policy that, when

issued, would otherwise lack an insurable interest.”37

The justices further explained that when a person with an insurable interest

nominally procures a policy, but another person pays the premium, then the validity

of the transaction turns on whether the person paying the premium had an insurable

interest in the life of the insured.38 “If the funding is provided by a third party as part

36 Price Dawe, 28 A.3d at 1074.

37 Id.

38 See id. at 1076 (“[T]he insured’s subjective intent for procuring a life insurance policy is not the relevant inquiry. The relevant inquiry is who procured the policy and whether or not that person meets the insurable interest requirements.”).

of a pre-negotiated agreement—then the substantive requirements of [the Insurable

Interest Statute] are not met.”39 That analysis flows through to the Trust Exception.

If a third party provides the funding for an insurance trust as part of a pre-negotiated

agreement, then the transaction violates the Insurable Interest Statute.

This case maps onto Price Dawe. As the Superior Court already held, the Policy

violated the Insurable Interest Statute, and the Estate is entitled to the Death

Benefit under the Disgorgement Statute. The problem is the Insurance Trust

distributed the proceeds long ago. The Estate therefore now asserts a claim under the

Disgorgement Statute against the Trustees and the Apollo Defendants.

1. Constitutional Standing

The Trustees argue that the Estate lacks constitutional standing to sue

because the Estate falls outside the zone of interests that the Insurable Interest

Statute and Disgorgement Statute seek to protect. The court must address standing

first, because “standing is a threshold question” that ensures the case presents an

appropriate dispute for the exercise of the court’s judicial power.40 Contrary to the

Trustees’ assertions, the Estate is precisely the type of party that the Insurable

Interest Statute and Disgorgement Statute seek to protect and grant standing to sue.

39 Id. at 1078.

40 Dover Hist. Soc’y v. City of Dover Plan. Comm’n, 838 A.2d 1103, 1110 (Del.

2003).

“The term ‘standing’ refers to the right of a party to invoke the jurisdiction of

a court to enforce a claim or to redress a grievance.”41 Standing “is concerned only

with the question of who is entitled to mount a legal challenge and not with the merits

of the subject matter of the controversy.”42

Federal courts have developed an extensive body of standing jurisprudence

that interprets Article III of the United States Constitution as a constraint on the

scope of federal judicial power. “Delaware courts are not bound by the federal rules

of justiciability.”43 Unlike the federal courts, “state courts apply the concept of

standing as a matter of self-restraint to avoid the rendering of advisory opinions at

the behest of parties who are ‘mere intermeddlers.’”44 State courts nevertheless often

look to federal precedent as persuasive authority.45

“To establish standing, a plaintiff or petitioner must demonstrate first, that he

or she sustained an ‘injury-in-fact’; and second, that the interests he or she seeks to

41 Id. (citing Stuart Kingston, Inc. v. Robinson, 596 A.2d 1378, 1382 (Del. 1991)).

42 Stuart Kingston, 596 A.2d at 1382 (emphasis in original).

43 Albence v. Higgin, 295 A.3d 1065, 1086 (Del. 2022) (citing ASARCO Inc. v.

Kadish, 490 U.S. 605, 617 (1989) (“We have recognized often that the constraints of Article III do not apply to state courts, and accordingly the state courts are not bound by the limitations of a case or controversy or other federal rules of justiciability[.]”)).

44 Dover Hist. Soc’y, 838 A.2d at 1111 (quoting Stuart Kingston, 596 A.2d at

1382).

45 Id. (noting that the standards for evaluating standing under federal law “are

generally the same as the standards for determining standing to bring a case or controversy within the courts of Delaware.”).

be protected are within the zone of interests to be protected.”46 The injury

requirement is multifaceted:

(1) the plaintiff must have suffered an injury in fact—an invasion of a

legally protected interest which is (a) concrete and particularized and

(b) actual or imminent, not conjectural or hypothetical;

(2) there must be a causal connection between the injury and the conduct

complained of—the injury has to be fairly traceable to the challenged

action of the defendant and not the result of the independent action of

some third party not before the court; and

(3) it must be likely, as opposed to merely speculative, that the injury

will be redressed by a favorable decision.47

The Estate has met those requirements.

First, the Estate suffered an injury. The Disgorgement Statute gives the

insured’s estate a right to recover a death benefit from a STOLI policy.48 Barotz died,

yet the Estate did not receive the Death Benefit.

Second, a direct causal connection exists between the conduct the Estate

attacks and the injury. Rather than the Estate receiving the Death Benefit, the

defendants routed the Death Benefit through a series of entities to end up in the

Apollo Defendants’ accounts. That result is fairly traceable to the defendants’ conduct

and is not the result of independent action by some third party.

46 Id. at 1110.

47 Id. (quoting Soc’y Hill Towers Owners’ Ass’n v. Rendell, 210 F.3d 168, 175–

76 (3d Cir. 2000)).

48 18 Del. C. § 2704(b).

Third, a favorable decision in this action will redress the injury. If the Estate

recovers an amount equal to the Death Benefit plus interest, it will be made whole.

Last, the Estate falls within the zone of interests that the Disgorgement

Statute protects. “When endorsed by the Delaware Supreme Court, the federal zoneof-interests test was a prudential and plaintiff-friendly aspect of standing doctrine.”49

The test did not require any “indication of [a legislative] purpose to benefit the wouldbe plaintiff.”50 “The test foreclose[d] suit only when a plaintiff’s ‘interests are so

marginally related to or inconsistent with the purposes implicit in the statute that it

cannot reasonably be assumed that Congress intended to permit the suit.’”51 As long

as the plaintiff’s interest had “a plausible relationship to the policies underlying” the

statute, then the plaintiff could sue.52

The Supreme Court of the United States has since changed the zone of

interests inquiry for purposes of federal standing doctrine, but the Delaware Supreme

Court has not followed suit. The framework that the Delaware Supreme Court

endorsed continues to govern.53

49 In re Del. Pub. Schs. Litig., 239 A.3d 451, 517 (Del. Ch. 2020).

50 Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 567

U.S. 209, 225 (2012) (quoting Clarke v. Sec. Indus. Ass’n, 479 U.S. 388, 399–400 (1987)).

51 Patchak, 567 U.S. at 225 (quoting Clarke, 479 U.S. at 399).

52 Clarke, 479 U.S. at 403.

53 See generally Del. Pub. Schs. Litig., 239 A.3d at 517–19.

The Estate has asserted a claim against the Trustees under the Disgorgement

Statute. The Estate is precisely the type of plaintiff that the provision seeks to

protect. The Estate therefore has constitutional standing to sue.

2. Entity Law Standing

The Trustees next contend that the Estate lacks standing to sue them under

the Delaware Statutory Trust Act because the Estate does not own—directly or

indirectly—a beneficiary interest in the trust. That argument amounts to a

contention that a trust’s status as a jural person protects the trustee from suit. That

argument fails when invoked to defend the Trustees’ involvement with a STOLI

transaction that is inferably illegal.

A Delaware statutory trust is a jural entity that has a separate legal

existence.54 Like other jural entities, “a statutory trust may be sued for debts and

other obligations or liabilities contracted or incurred by the trustees or other

authorized persons.”55 By default, a trustee is not liable for the trust’s obligations

simply by virtue of acting as a trustee. The statute provides:

Except to the extent otherwise provided in the governing instrument of

a statutory trust, a trustee, when acting in such capacity, shall not be

personally liable to any person other than the statutory trust or a

beneficial owner for any act, omission or obligation of the statutory trust

or any trustee thereof.56

54 See 12 Del. C. § 3801(i).

55 12 Del. C. § 3804(a).

56 12 Del. C. § 3803(b).

None of the pertinent trust instruments “otherwise provided.”

At the pleadings stage, however, it is reasonably conceivable that the Trustees

cannot invoke the trusts’ separate jural existence for protection. Like other Delaware

entities, Delaware statutory trusts are only authorized “to carry on any lawful

business or activity.”57 “A trust is invalid if it is created for a consideration which is

illegal. The concept has been extended to instances where a violation of public policy

is found.”58 A statutory trust therefore must have a lawful purpose and operate in

accordance with Delaware law.59 The same is true for a common-law trust created

under Delaware law.60 As a matter of blackletter law, “[a]n intended trust or trust

provision is invalid if: (a) its purpose is unlawful or its performance calls for the

commission of a criminal or tortious act; (b) it violates rules relating to perpetuities;

or (c) it is contrary to public policy.”61

57 12 Del. C. § 3801(i)(1).

58 Fixman v. Diversified Indus., Inc., 1975 WL 1947, at *10 (Del. Ch. May 5,

1975) (citation omitted).

59 See In re Massey Energy Co., 2011 WL 2176479, at *20 (Del. Ch. May 31,

2011) (“Delaware law does not charter law breakers.”); accord Lebanon Cty. Emps.’ Ret. Fund v. Collis, 311 A.3d 773, 795 (Del. 2023).

60See Fixman, 1975 WL 1947, at *7 (emphasizing the importance of “the express statutory phrase ‘which is not otherwise illegal’ and its suggestion of overriding public policies in the case of an illegal purpose” which serve to prohibit the formation of trusts founded upon an unlawful purpose).

61 Restatement (Third) of Trusts § 29 (2003); accord Restatement (Second) of

Trusts § 59 (1959) (explaining that trusts may only “be created for any purpose which is not illegal.”); id. § 60 (“An intended trust or a provision in the terms of a trust is invalid if illegal.”); id. § 62 (“A trust or a provision in the terms of a trust is invalid if the enforcement of the trust or provision would be against public policy, even though

The Trustees also cannot rely on the trusts’ separate jural existence because

they participated directly in the trusts’ corporate act.62 “[I]t is generally held that a

trustee is personally liable for all torts committed by him or by agents and servants

employed by him in the execution of the trust.”63 Here, the Complaint contains wellpled allegations that the defendants used the Insurance Trust and Trust C-3 to carry

out a STOLI scheme. WSFS, as trustee of the Insurance Trust, and the Wells Fargo

Defendants, as the trustees of Trust C-2 and Trust C-3, cannot invoke the protections

of the Delaware Statutory Trust Act at this stage.

The Trustees argue that ignoring their separate entity status would be

equivalent to cancelling the trusts. As they point out, the Delaware Statutory Trust

Act authorizes the Court of Chancery to cancel the certificate of trust of any statutory

trust for abuse or misuse of its statutory trust powers, privileges, or existence only

“[u]pon motion by the Attorney General.”64

its performance does not involve the commission of a criminal or tortious act by the trustee.”).

62 See Carney v. B & B Serv. Co., 2021 WL 1250474, at *4 (Del. Super. Ct. Apr.

5, 2021); accord Prairie Cap. III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 60 (Del. Ch. 2015); Sens Mech., Inc. v. Dewey Beach Enters., Inc., 2015 WL 4498900, at *4–5 (Del. Super. Ct. June 23, 2015); Ayers v. Quillen, 2004 WL 1965866, at *2 (Del. Super. Ct. June 30, 2004) (“[C]orporate officers and directors in Delaware may be liable for their active participation in tortious conduct even if they are officially acting for the corporation.”).

63 Franks v. Del-Mar-Va Council, Inc., 352 A.2d 768, 770 (Del. Super. Ct. 1976).

64 12 Del. C. § 3824(a).

The Estate’s argument is inaccurate. Even if the court eventually disregards

the trusts’ separate jural existence for the limited purpose of allowing the Estate to

recover under the Disgorgement Statute, that is not the same as cancellation. The

court’s judgment would not terminate or disregard the trusts’ existence for all

purposes. The judgment only would permit the Estate to recover under the

Disgorgement Statute. In any event, any judgment would only be entered at the end

of the case. Siding with the Estate at this stage only means that the Estate can

proceed with its claim under the Disgorgement Statute. That is a far cry from

cancellation.

3. The Statute Of Limitations Defense

All the defendants argue that Counts I, II, and III cannot proceed because the

claims are untimely. Those counts are dismissed on that basis.

The Court of Chancery uses two conceptual frameworks to analyze timeliness:

the statute of limitations and the doctrine of laches.65 Before the Delaware Supreme

Court’s decision in Estate of Frank, reasonable minds could disagree over whether

any timeliness bar applied to a claim under the Disgorgement Statute, as well as

what the governing (or analogous) statute of limitations could be. In Estate of Frank,

the Delaware Supreme Court held that a claim under the Disgorgement Statute is an

65 See Whittington v. Dragon Gp., L.L.C., 991 A.2d 1, 7 (Del. 2009) (“Both the

doctrine of laches and statutes of limitations function as time bars to lawsuits.”).

“action based on a statute” and thus subject to a three-year limitations period under

10 Del. C. § 8106(a).66

The next question is when the claim accrued. The limitations period runs from

that date. “[F]or contract claims, the wrongful act occurs at the time a contract is

breached.”67 “For tort claims, … the wrongful act occurs at the time of injury.”68 For

purposes of accrual, the plaintiff need not have suffered quantifiable harm, even if

pleading damages is an element of the cause of action.69

The defendants hint that the Estate’s claims may have accrued in 2006 when

the Policy was issued, but they focus on two dates in April 2019. WSFS argues for

April 4, the date that the Insurance Trust received the Death Benefit. The Wells

Fargo Defendants and the Apollo Defendants argue for April 12, the date when Trust

66 GWG DLP Master Tr. Dated 03/01/06 v. Est. of Frank, 2026 WL 439377, at

*3 (Del. Feb. 11, 2026). s not dispute that under Estate of Frank a claim under the Disgorgement Statute is subject to a three-year statute of limitations. The Estate instead contends that “because of the sui generis nature of human-life wagering and Delaware’s public policy against STOLI, this Court may hold that, under the particular facts of this case, Defendants cannot invoke Section 8106(a).” Plaintiff’s Supp. RB at 4. According to the Estate, the court has discretion to hold that the threeyear statute of limitations does not apply. The Estate’s argument amounts to asking this court to ignore the Delaware Supreme Court’s decision in Estate of Frank. This court must follow binding Delaware Supreme Court precedent.

67 ISN Software Corp. v. Richards, Layton & Finger, P.A., 226 A.3d 727, 732

(Del. 2020).

68 Id.

69 See id. at 735 (“Under the Delaware occurrence rule, injury is distinct from

damages. The statute of limitations can start to run before any ‘actual or substantial damages’ occur.”) (citation omitted).

C-3 received the Death Benefit. The difference is insignificant. The Estate did not file

this action until April 26, 2024, so either date would render the claims untimely.

The Estate argues that its claims under the Disgorgement Statute “did not

accrue until at least January 2024 as a result of Defendants’ fraudulent

concealment.”70 That is not an argument for a latter accrual date, but that tolling

should apply because the defendants engaged in acts of fraudulent concealment. The

Estate also argues that the statute of limitations should be suspended under the

doctrine of equitable tolling. And the Estate claims extraordinary circumstances

under IAC.71 None of those doctrines applies.

a. Fraudulent Concealment

To defeat the statute of limitations defense, the Estate argues for fraudulent

concealment. That doctrine cannot help the Estate because the Estate waited too long

to sue after receiving inquiry notice.

“Under the doctrine of fraudulent concealment, a statute of limitations … can

be ‘disregarded when a defendant has fraudulently concealed from a plaintiff the facts

necessary to put [the plaintiff] on notice of the truth.’” 72 For tolling to apply, “a

plaintiff must allege an affirmative act of ‘actual artifice’ by the defendant that either

prevented the plaintiff from gaining knowledge of material facts or led the plaintiff

70 AB at 67.

71 See IAC/InterActiveCorp v. O’Brien, 26 A.3d 174, 177–78 (Del. 2011).

72 LGM Hldgs., LLC v. Schurder, 340 A.3d 1134, 1146 (Del. 2025) (quoting In

re Tyson Foods, Inc., 919 A.2d 563, 585 (Del. Ch. 2007)) (alteration in original).

away from the truth.”73 “The rationale for this doctrine is to disallow a defendant

from taking advantage of his own wrong in preventing a plaintiff from [filing] a timely

suit in the courts.”74

Under Delaware law, inquiry notice universally limits tolling doctrines.75 A

plaintiff cannot invoke tolling doctrines to push the timeliness period beyond the

point when the plaintiff “was objectively aware, or should have been aware, of facts

giving rise to the wrong.”76 “Even where a defendant uses every fraudulent device at

its disposal to mislead a victim or obfuscate the truth, no sanctuary from the statute

will be offered to the dilatory plaintiff who was not or should not have been fooled.”77

“Inquiry notice does not require full knowledge of the material facts; rather, plaintiffs

are on inquiry notice when they have sufficient knowledge to raise their suspicions to

the point where persons of ordinary intelligence and prudence would commence an

investigation that, if pursued would lead to the discovery of the injury.”78 Put

differently, “[i]nquiry notice does not require a plaintiff to have actual knowledge of

73 Tyson Foods, 919 A.2d at 585 (citing Ewing v. Beck, 520 A.2d 653, 667 (Del.

1987)).

74 Allen v. Layton, 235 A.2d 261, 265 (Del. Super. Ct. 1967), aff’d, 246 A.2d 794

(Del. 1968).

75 See Collis, 287 A.3d at 1212.

76 Tyson Foods, 919 A.2d at 585.

77 Id.

78 Ontario Provincial Council of Carpenters’ Pension Tr. Fund v. Walton, 294

A.3d 65, 96 (Del. Ch. 2023) (quoting Pomeranz v. Museum P’rs, L.P., 2005 WL 217039, at *3 (Del. Ch. Jan. 24, 2005)).

a wrong, but simply an objective awareness of the facts giving rise to the wrong—that

is, a plaintiff is put on inquiry notice when he gains possession of facts sufficient to

make him suspicious, or that ought to make him suspicious.”79 “Once the plaintiff is

aware of the injury, or should have discovered it in the exercise of reasonable

diligence, then the period for bringing a claim starts to run.”80

The Complaint acknowledges that in September 2020, the Insurance Trust

produced a Beneficial Interest Transfer Agreement revealing that the Life Settlement

Company assigned the beneficiary interest in the Insurance Trust to Trust C-3. The

Complaint further acknowledges that “the Estate suspected that the [Insurance]

Trust had transferred the Policy’s death benefit to Trust C-3, and that Trust C-3, as

the beneficiary of the [Insurance] Trust, was in possession of the proceeds and would

be the entity that would ultimately satisfy any judgment in favor of the Estate.”81 In

October 2020, the Estate issued a subpoena to Trust C-3. The Estate sought to add

Trust C-3 as a defendant in the Superior Court Action in January 2021, at which

point the Estate learned that “Trust C-3 was no longer in existence and had actually

dissolved in late January 2020.”82 Also in January 2020, counsel for the Estate

informed Wells Fargo Bank that the Estate intended to sue.

79 Id. (citing Sunrise Ventures, LLC v. Rehoboth Canal Ventures, LLC, 2010

WL 363845, at *7 (Del. Ch. Jan. 27, 2010)).

80 Collis, 287 A.3d at 1212.

81 Compl. ¶ 71.

82 Id. ¶ 72.

After learning that Trust C-3 had dissolved, the Estate served non-party

subpoenas on the Fund Manager and Apollo Management in February 2021. The

Estate thus knew enough at that point to pursue Apollo Global and its affiliates, but

after the Fund Manager and Apollo Management objected to the subpoenas, the

Estate did not move to enforce them.

The Estate contends that the doctrine of fraudulent concealment should toll

the statute of limitations “until at least April 27, 2021, because prior to that date the

Estate did not (and could not) identify potential recipients of the death benefit after

Trust C-3.”83 The Estate’s decision to serve subpoenas on the Fund Manager and

Apollo Management shows that the Estate had the ability to seek the necessary

information. Regardless, “a plaintiff is put on inquiry notice when he gains possession

of facts sufficient to make him suspicious.”84

The Estate was on inquiry notice by February 2021. After a party is on inquiry

notice, the party must sue within a reasonable time or the claim will be barred. Put

differently, “[o]nce a plaintiff is on notice of facts that ought to make her suspect

wrongdoing, she is obliged to diligently investigate and to file within the limitations

period as measured from that time.”85 “Even where the alleged wrongdoer is a

fiduciary to the plaintiff, the plaintiff is ‘not entitled to sit idly by, blindly relying on

83 Plaintiff’s Supp. OB at 4.

84 Walton, 294 A.3d at 96.

85 Pomeranz, 2005 WL 217039, at *13.

defendants’ assurances, when the documents and disclosures plaintiffs received []

were so suggestive of mismanagement.’”86 Even “the trusting plaintiff still must be

reasonably attentive to his interests.’”87

Despite being on inquiry notice, the Estate did not file this action until April

2024, more than three years later. That is not a reasonable time to wait before filing

suit, rendering the Estate’s reliance on fraudulent concealment ineffective.

b. Equitable Tolling

The Estate next invokes equitable tolling. That doctrine “stops the statute from

running while a plaintiff has reasonably relied upon the competence and good faith

of a fiduciary.”88 The complaint does not allege facts that would support a fiduciary

relationship between the defendants and the Estate, so the doctrine does not apply.

c. Extraordinary Circumstances

The Estate last contends that “unusual conditions and extraordinary

circumstances” exist that support tolling of the statute of limitations, invoking the

Delaware Supreme Court’s opinion in IAC. None exists here.

86 Murray v. Rolquin, 2023 WL 2421687, at *12 (Del. Ch. Mar. 9, 2023) (quoting

In re Dean Witter P’ship Litig., 1998 WL 442456, at *9 (Del. Ch. July 17, 1998), aff’d, 725 A.2d 441 (Del. 1999) (TABLE)).

87 Dean Witter, 1998 WL 442456, at *9.

88 Tyson Foods, 919 A.2d at 585.

“There is no precise definition of what constitutes unusual conditions or

extraordinary circumstances. The Court of Chancery must exercise its discretion,

after considering all relevant facts.”89 IAC identified five factors for consideration:

(1) Whether the plaintiff had been pursuing his claim, through

litigation or otherwise, before the statute of limitations expired;

(2) Whether the delay in filing suit was attributable to a material

and unforeseeable change in the parties’ personal or financial

circumstances;

(3) Whether the delay in filing suit was attributable to a legal

determination in another jurisdiction;

(4) The extent to which the defendant was aware of, or participated

in, any prior proceedings; and

(5) Whether, at the time this litigation was filed, there was a bona

fide dispute over the validity of the claim.90

Those factors are not exclusive.

More recently, the Delaware Supreme Court has explained that

[t]he “unusual conditions and extraordinary circumstances” discussed in

our cases tend to focus on whether the plaintiff had been pursuing the

claim during the relevant limitations period and whether there were

extraneous factors such as a material change in the plaintiff’s personal

or financial circumstances or ongoing legal proceedings in other

jurisdictions that prevented the plaintiff from bringing suit within the

limitations period.91

89 IAC, 26 A.3d at 178.

90 Id.

91 Moelis & Co. v. W. Palm Beach Firefighters’ Pension Fund, 2026 WL 184868,

at *16 (Del. Jan. 20, 2026) (citing IAC, 26 A.3d at 178).

That summary accurately describes the events in IAC and in Levey, a later case in

which the Delaware Supreme Court held that the plaintiff met the IAC test.92

The Estate contends that “extraordinary circumstances” exist because “the

Estate was ‘actively misled’ into litigating solely against the [Insurance] Trust in the

Superior Court Action.”93 According to the Estate, it “reasonably believed—and had

no reason to question—that the [Insurance] Trust either still had the liquidity to pay

its legal fees between March 2020 and January 2024, or was indemnified in

connection with the Estate’s 2704(b) claim.”94 The Estate also relies on the Insurance

Trust’s conduct during the New York Action and Superior Court Action, as well as

how long it took the Superior Court to rule on the Estate’s summary judgment motion.

None of those arguments excuses the Estate’s delay. Unlike in IAC and Levey,

the Estate does not contend that it experienced a “material change” to its “personal

or financial circumstances.” There also were no “ongoing legal proceedings in other

jurisdictions that prevented the plaintiff from bringing suit within the limitations

period.” The New York Action was quickly dismissed, and the Estate could have

amended the Superior Court Action to add the defendants. The Estate points to how

long the Delaware Superior Court took to adjudicate the Estate’s motion for summary

92 Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764, 770 (Del. 2013).

93 Plaintiff’s Supp. OB at 6.

94 Id. at 6–7.

judgment, but that pending motion against the Insurance Trust did not prevent the

Estate from adding other defendants and asserting claims against them.

The Estate also argues that only more recently did it obtain information

indicating that suing other parties would become necessary and who those

defendants might be. The Estate contrasts the information it possesses now with

what it previously lacked. For purposes of the statute of limitations inquiry, the

dispositive consideration is not what the Estate knows now, but when the Estate was

on inquiry notice.

First, the Estate observes in January 2024, “following entry of final judgment

in the Estate’s favor by the Superior Court, that the Insurance Trust revealed for the

first time that it was judgment proof.”95 But the Estate was on inquiry notice that the

Insurance Trust transferred the Death Benefit long before January 2024. The

Complaint acknowledges that “the Estate suspected that the [Insurance] Trust had

transferred the Policy’s death benefit to Trust C-3, and that Trust C-3, as the

beneficiary of the [Insurance] Trust, was in possession of the proceeds and would be

the entity that would ultimately satisfy any judgment in favor of the Estate.” 96 In

January 2021, the Insurance Trust produced a wire transfer form evidencing the

transfer of the Death Benefit from the Insurance Trust to Trust C-3. At that point,

95 Id. at 4.

96 Compl. ¶ 71.

the Estate should have at least suspected that the Insurance Trust no longer

possessed the funds to satisfy a judgment.

Second, the Estate argues that “it was not until March 22, 2024, that Apollo

made a limited production of documents that had been fraudulently withheld in

response to the Estate’s February 2021 subpoenas to Apollo and which revealed

Defendants’ relations to the [Insurance] Trust, the Policy, and the fraudulent

transfers of the death benefit.”97 But the Estate knew enough to serve non-party

subpoenas on the Fund Manager and Apollo Management in February 2021. The

Fund Manager and Apollo Management objected to the subpoenas, but the Estate did

not move to enforce them. Had the Estate done so, it could have discovered that the

defendants were involved in the underlying STOLI scheme. Indeed, when the Estate

eventually moved to enforce the subpoenas in aid of execution, the Apollo Defendants

produced the Termination Agreement.

The actual cause of the Estate’s current predicament is its tactical decision not

to enforce the non-party subpoenas served on the Fund Manager and Apollo

Management in February 2021. At that point, the Estate was on inquiry notice of its

claims under the Disgorgement Statute and was seeking information to pursue them.

Yet the Estate decided not to enforce the subpoenas and did not re-evaluate that

decision until after the Insurance Trust failed to pay the judgment. The Estate waited

too long after it was on inquiry notice—more than three years—before filing this

97 Plaintiff’s Supp. OB at 5.

action. This case is not one in which unusual conditions or extraordinary

circumstances merit granting relief from the statute of limitations.

4. The Conclusion Regarding The Statute Of Limitations

Taken as a whole, the Complaint’s allegations and documents incorporated by

reference demonstrate that the Estate was on inquiry notice of its claims under the

Disgorgement Statute against the defendants by February 2021. The Estate failed to

sue within a reasonable time. Counts I, II, and III of the Complaint are dismissed on

that basis.

B. Count VI: The Fraudulent Transfer Claim

The Estate next asserts a fraudulent transfer claim against the defendants.

That claim is also untimely.

The Estate asserts claims for both constructive and actual fraudulent

transfers. A claim for a constructive fraudulent transfer must be brought “within 4

years after the transfer was made.”98 A claim for an actual fraudulent transfer must

be brought “within 4 years after the transfer was made … or, if later, within 1 year

after the transfer … was or could reasonably have been discovered by the claimant.”99

“The plain language of section 1309 does not allow this Court to permit ‘equitable

tolling’ over and above the tolling period explicitly contained in the statute.”100

98 6 Del. C. § 1309(2).

99 6 Del. C. § 1309(1).

100 Pereyron v. Leon Constantin Consulting, Inc., 2004 WL 1043724, at *2 (Del.

Ch. Apr. 29, 2004).

The Estate challenges transfers in April 2019. On April 12, 2019, Trust C-3

instructed WSFS to deposit the Death Benefit into a Wells Fargo Bank account. On

April 18, WSFS wired the Death Benefit to that account. On April 24, Wells Fargo

Bank wired the Death Benefit to a JPMorgan bank account in the name of the

Investment Fund.

The Estate did not file this action until April 2024, more than four years later.

The Estate’s claim for a constructive fraudulent transfer is therefore untimely.

The Estate’s claim for an actual fraudulent transfer is untimely under the

same four-year statute, but timely if brought “within 1 year after the transfer … was

or could reasonably have been discovered by the claimant.”101 Here, the Estate was

on inquiry notice of the challenged transfer from the Insurance Trust to Trust C-3 no

later than the Insurance Trust’s document production in January 2021, which

included a wire transfer form evidencing the transfer. Any claim based on the

transfer from the Insurance Trust to Trust C-3 is therefore untimely and barred.

The Estate was also on inquiry notice about a subsequent transfer from Trust

C-3 in January 2021, when counsel for the Insurance Trust informed the Estate that

Trust C-3 dissolved in January 2020. As of that point, the subsequent transfer “could

reasonably have been discovered by the” Estate.102 Demonstrating that it was on

notice, the Estate served subpoenas on the Fund Manager and Apollo Management

101 6 Del. C. § 1309(1).

102 Id.

in February 2021. The Estate did not discover the subsequent transfer at the time

because it chose not to enforce the subpoenas.

Accordingly, Count VI is dismissed.

C. Count VII: The Fraud Claim

Count VII asserts a fraud claim against all defendants. The Estate contends

that the defendants “collectively acted to fraudulently conceal and mislead the Estate

from discovering that the [Insurance] Trust was insolvent during the pendency of the

Superior Court Action and, thus judgment proof.”103 According to the Estate, if it “had

known that it could not recover the proceeds of the Policy’s death benefit from the

[Insurance] Trust,” then the Estate “would have pursued claims against additional

parties in the Superior Court Action,” including the Investment Fund, the Trustees,

the Apollo Defendants, and “other downstream beneficiaries of the death benefit that

are still unknown and actively concealed from the Estate.”104

The fraud claim is thus a fallback claim. If the Estate cannot recover on its

other theories, then it should be able to recover in fraud because the defendants

defrauded the Estate into not pursuing its other theories. Through this logic, the

Estate seeks to turn allegations that might support fraudulent concealment and toll

the statute of limitations into an affirmative claim.

103 Compl. ¶ 275.

104 Id.

On the pled facts, the Estate cannot achieve that feat. “[F]alse representations

that cover up” an underlying wrong “might have relevance for the vitality of the

underlying claim—such as by defeating an argument that a stockholder vote cleansed

any breach of fiduciary duty or by tolling a statute of limitations—but it would not

give rise to a separate claim for fraud.”105

The Estate contends that “Defendants collectively acted to fraudulently

conceal and mislead the Estate from discovering that the [Insurance] Trust was

insolvent during the pendency of the Superior Court Action and, thus judgment

proof.”106 The Estate further contends that “Defendants’ actions were orchestrated …

to allow Defendants to argue (as they do now) that the Estate’s claims against them

have expired.”107 The Estate relies on the same underlying actions to establish its

fraud claim and start a new limitations period. The Estate can argue that its

allegations of fraudulent concealment should toll the limitations period, as it has

done, but it cannot assert those same allegations as a separate fraud claim.

Accordingly, Count VII is dismissed.

105 Trenwick Am. Litig. Tr. v. Ernst & Young, L.L.P., 906 A.2d 168, 212 (Del.

Ch. 2006), aff’d sub nom. Trenwick Am. Litig. Tr. v. Billett, 931 A.2d 438 (Del. 2007) (TABLE).

106 Compl. ¶ 275.

107 Id. ¶ 277.

D. Count IV: The Improper Dissolution Claim

Count IV of the Complaint asserts a claim against the Wells Fargo Defendants

for improper dissolution under 12 Del. C. § 3808(e). That claim is not untimely and

can proceed.

The Delaware Statutory Trust Act contains the following language addressing

a statutory trust’s obligations in dissolution:

A statutory trust which has dissolved shall pay or make reasonable

provision to pay all claims and obligations, including all contingent,

conditional or unmatured claims and obligations, known to the statutory

trust and all claims and obligations which are known to the statutory

trust but for which the identity of the claimant is unknown and claims

and obligations that have not been made known to the statutory trust

or that have not arisen but that, based on the facts known to the

statutory trust, are likely to arise or to become known to the statutory

trust within 10 years after the date of dissolution. If there are sufficient

assets, such claims and obligations shall be paid in full and any such

provision for payment shall be made in full. If there are insufficient

assets, such claims and obligations shall be paid or provided for

according to their priority and, among claims and obligations of equal

priority, ratably to the extent of assets available therefor. Unless

otherwise provided in the governing instrument of a statutory trust, any

remaining assets shall be distributed to the beneficial owners.108

In short, the trust must pay or make provision for claims and obligations before

making distributions to its beneficiary interest holders.

Section 3808(e) of the Delaware Statutory Trust Act addresses a trustee’s

liability for failing to cause a trust to “pay or make reasonable provision to pay all

claims and obligations.” The pertinent language provides:

Any person, including any trustee, who under the governing instrument

of the statutory trust is responsible for winding up a statutory trust’s

108 12 Del. C. § 3808(e).

affairs who has complied with this subsection shall not be personally

liable to the claimants of the dissolved statutory trust by reason of such

person’s actions in winding up the statutory trust.109

The statute thus expressly addresses when a trustee is not liable but is silent about

when a trustee is liable.

That does not mean a trustee is not liable for an improper distribution. The

maxim expressio unius est exclusio alterius is “[a] cannon of construction holding that

to express or include one thing implies the exclusion of the other, or of the

alternative.”110 The Delaware Supreme Court has relied on the doctrine when

interpreting statutes.111 “As the maxim is applied to statutory interpretation, where

a form of conduct, the manner of its performance and operation, and the persons and

things to which it refers are affirmatively or negatively designated, there is an

inference that all omissions were intended by the legislature.”112

Under that canon, Section 3808(e) contemplates that a trustee is generally

personally liable for failing to comply with the statutory dissolution requirements. If

a trustee fails to pay or make reasonable provision to pay all claims and obligations

as required by Section 3808(e), then the trustee can be personally liable to claimants

against the trust. That interpretation comports with corporate law, where authorities

109 Id.

110 Expressio Unius Est Exclusio Alterius, Black’s Law Dictionary (12th ed. 2024).

111 See, e.g., Salzberg v. Sciabacucchi, 227 A.3d 102, 120 (Del. 2020).

112 Leatherby v. Greenspun, 939 A.2d 1284, 1291 (Del. 2007) (citation omitted).

held (albeit not universally) that the directors of a corporation who conducted a

liquidation could be liable for distributing amounts to equity holders without making

adequate provision for claims.113

The Complaint alleges that Trust C-2 and Trust C-3 were dissolved without

making provision for the Estate’s claim under the Disgorgement Statute. The

Complaint alleges that the Wells Fargo Defendants knew of the Estate’s claim under

the Disgorgement Statute to the Death Benefit, yet failed to provide for it before

distributing the entire Death Benefit. Those allegations state a claim for relief under

Section 3808(e).

1. The Timeliness Defense

The Wells Fargo Defendants argue in response that a three-year statute of

limitations bars the Estate’s claim. The dissolutions took place in January 2020, so

according to the Wells Fargo Defendants, the Estate had to sue by January 2023.

Tolling doctrine and inquiry notice again come into play. Ultimately, neither a statute

of limitations nor laches bars the Estate’s claim.

113 E.g., In re Altaba, Inc., 241 A.3d 768, 774 (Del. Ch. 2020) (describing traditional corporate law risk that corporate claimants might be able to recover from directors personally if the claimants could prove that the directors made distributions in violation of a duty owed to the corporation’s creditors); In re Transamerica Airlines, Inc., 2006 WL 587846, at *7 (Del. Ch. Feb. 28, 2006) (same); In re RegO Co., 623 A.2d 92, 95–96 (Del. Ch. 1992) (same); 15A William M. Fletcher, Cyclopedia of the Law of Corporations § 7369 (2006) (explaining the trust fund doctrine has been applied to hold directors of a dissolved corporation liable for the debts of the corporation when the directors made improper distributions to equity holders without paying or making provision for corporate claims).

a. No Statute Of Limitations

No court has ruled on the statute of limitations that applies to a claim under

Section 3808. The Delaware Supreme Court has addressed analogous corporate

claims.114 This court “often looks to analogies in the corporate law for guidance on

similar issues involving alternative business entities.”115

Subchapter X of the Delaware General Corporation Law (“DGCL”) governs the

dissolution and winding up of a Delaware corporation. Section 281(b) establishes the

steps involved in winding up a dissolved corporation that has not elected to follow the

special court-supervised procedure contemplated by Section 280.116 Section 281(b)

requires that the dissolved corporation or successor entity

adopt a plan of distribution pursuant to which the dissolved corporation

or successor entity (i) shall pay or make reasonable provision to pay all

claims and obligations, including all contingent, conditional or

unmatured contractual claims known to the corporation or such

successor entity, (ii) shall make such provision as will be reasonably

likely to be sufficient to provide compensation for any claim against the

corporation which is the subject of a pending action, suit or proceeding

to which the corporation is a party and (iii) shall make such provision as

will be reasonably likely to be sufficient to provide compensation for

claims that have not been made known to the corporation or that have

not arisen but that, based on facts known to the corporation or successor

entity, are likely to arise or to become known to the corporation or

successor entity within 10 years after the date of dissolution. The plan

of distribution shall provide that such claims shall be paid in full and

any such provision for payment made shall be made in full if there are

sufficient assets. If there are insufficient assets, such plan shall provide

114 See In re Krafft-Murphy Co., Inc., 82 A.3d 696, 705–07 (Del. 2013).

115 Cantor Fitzgerald v. Chandler, 1999 WL 1022065, at *4 (Del. Ch. Oct. 14,

1999).

116 8 Del. C. § 281(b).

that such claims and obligations shall be paid or provided for according

to their priority and, among claims of equal priority, ratably to the

extent of assets legally available therefor. Any remaining assets shall be

distributed to the stockholders of the dissolved corporation.117

Section 281(c) of the DGCL provides that “[d]irectors of a dissolved corporation or

governing persons of a successor entity which has complied with subsection (a) or (b)

of this section shall not be personally liable to the claimants of the dissolved

corporation.”118

Sections 281(b) and (c) thus establish the same basic winding up procedure for

corporations that Section 3808 establishes for a Delaware statutory trust. In KrafftMurphy, the Delaware Supreme Court held that “no statutory provision governing

corporate dissolution operates to extinguish the Corporation’s potential liability to

third parties by time-barring those parties’ claims.”119 The court reasoned Section

281(b) to “require a dissolved corporation to set aside assets for the payment of claims

against the corporation that may arise or become known five to ten years after

dissolution,” which demonstrated that the “‘legislature intended to recognize the

potential for corporate liability based on claims asserted … five to ten years after

dissolution.’”120 At the same time, “the five and ten year claims planning periods were

117 Id.

118 8 Del. C. § 281(c).

119 Krafft-Murphy, 82 A.3d at 705.

120 Id.

not intended to operate as general statutes of limitation.” 121 As the court concluded,

if the General Assembly intended those periods or a shorter period to bar claims

against a dissolved corporation, then the legislature would have said so. 122

Krafft-Murphy serves as persuasive authority for interpreting Section 3808(e).

No statute of limitations applies to claims under that provision.

b. No Laches Problem

Laches also does not bar the Estate’s Section 3808(e) claim. Section 3808(e)

contemplates that claims may arise up to ten years after dissolution, and as discussed

in the prior section, even that time period does not operate as a hard cutoff. Here, the

Wells Fargo Defendants failed to make provision for a claim that was likely to be

asserted within that statutory period. The Estate can pursue the Wells Fargo

Defendants for dissolving Trust C-2 and Trust C-3 without making provision for a

claim under the Disgorgement Statute.

“Where no analogous limitations period exists, the legal statute of limitations

cannot apply by analogy, and instead the Court relies entirely on the traditional

principles of laches.”123 “Laches is an affirmative defense that the plaintiff

unreasonably delayed in bringing suit after learning of an infringement of his or her

121 Id. at 707.

122 See id.

123 Kraft v. WisdomTree Invs., Inc., 145 A.3d 969, 979 (Del. Ch. 2016) (citation

modified).

rights.”124 The doctrine is “rooted in the maxim that equity aids the vigilant, not those

who slumber on their rights.”125 “Laches consists of two elements: (i) unreasonable

delay in bringing a claim by a plaintiff with knowledge thereof, and (ii) resulting

prejudice to the defendant.”126 When applying the doctrine of laches, “[w]hat

constitutes unreasonable delay and prejudice are questions of fact that depend upon

the totality of the circumstances.”127

What counts as unreasonable delay depends on the nature of the claim. Section

3808(e) seeks to ensure that a party responsible for dissolving and winding up a trust

makes provision for “all contingent, conditional or unmatured claims and obligations,

known to the statutory trust,” as well as for “claims and obligations that have not

been made known to the statutory trust … but that, based on the facts known to the

statutory trust, are likely to … become known to the statutory trust within 10 years

after the date of dissolution.”128

The Complaint supports a reasonably conceivable inference that when the

Wells Fargo Defendants dissolved Trust C-2 and Trust C-3 in January 2020, they

knew or should have known that the Estate did not receive the Death Benefit and

124 Levey, 76 A.3d at 769.

125 Adams v. Jankouskas, 452 A.2d 148, 157 (Del. 1982).

126 Levey, 76 A.3d at 769.

127 Hudak v. Procek, 806 A.2d 140, 153 (Del. 2002).

128 12 Del. C. § 3808(e).

therefore had a claim under the Disgorgement Statute. That claim arose when the

insurer paid the Death Benefit to the Insurance Trust rather than to the Estate.

Although the Estate had not made its claim known to the statutory trusts, a claim

was likely to become known within ten years after dissolution.

The Wells Fargo Defendants argue that they started the dissolution process in

late December 2019, at which point there was no reason for them to know about the

claim under the Disgorgement Statute. At the pleadings stage, the Wells Fargo

Defendants are not entitled to that defense-friendly inference. As repeat players in

the STOLI game, they inferably knew that the Estate had a claim under the

Disgorgement Statute as soon as the Insurance Trust received the Death Benefit and

distributed it up to Trust C-3. At that point, the Wells Fargo Defendants knew that

the Estate did not receive the Death Benefit, giving rise to a claim under the

Disgorgement Statute.

The Wells Fargo Defendants therefore had to make provision for the claim.

Under Section 3808(e), “[i]f there are sufficient assets, … any such provision for

payment shall be made in full.”129 The statute required that the Wells Fargo

Defendants retain the entire Death Benefit as a provision for the claim under the

Disgorgement Statute. Instead, they distributed the Death Benefit up the line to the

Apollo Defendants, leaving the trusts insolvent.

129 Id.

Trust C-2 and Trust C-3 dissolved in January 2020. The Estate did not sue

until April 2024. That delay is sufficient to bar other claims in the case as untimely,

but not a claim under a statute that expressly contemplates the possibility that the

claim may become known to the trust within ten years after dissolution. The Estate

asserted its claim and made it known to Trust C-2 and Trust C-3 four years after

dissolution. Through the letter that the Estate’s counsel sent to Wells Fargo Bank in

January 2020, the Estate made its claims known to the Wells Fargo Defendants at

that time, making it all the more clear that they had an obligation to make provision

for the claim under the Disgorgement Statute.

Because the claim is not untimely, the analysis need not reach the issue of

prejudice. Even so, the Wells Fargo Defendants cannot establish prejudice at the

pleadings stage. The January 2020 letter from the Estate’s counsel put the Wells

Fargo Defendants on notice of the claim and allowed them to preserve documents and

defend themselves. At this stage of the case, it is reasonable to infer that the facts

surrounding the Wells Fargo Defendants’ statutory non-compliance are likely to be

undisputed. The reasons why the Wells Fargo Defendants failed to make provision

for the known claim are also likely to be undisputed: The Apollo Defendants told the

Wells Fargo Defendants to distribute the Death Benefit and wind up the trusts, and

the Wells Fargo Defendants complied. Finding sufficient prejudice to warrant

dismissal would require the court to draw defense-friendly inferences.

The Wells Fargo Defendants claim prejudice because they were not afforded

the opportunity to participate in the Superior Court Action as defendants, but that

was not prejudicial. The “claim” that the Wells Fargo Defendants did not pay or make

reasonable provision to pay during the winding up process arose from the

Disgorgement Statute, not the Superior Court Action. Contrary to the Wells Fargo

Defendants’ arguments, they had ample opportunity “to mount a defense” to the

Estate’s improper dissolution claim after receiving the Estate’s January 2020 letter.

The claim for improper dissolution of Trust C-2 and Trust C-3 is not untimely.

It can proceed.

2. The Not-Our-Job Defense

The Wells Fargo Defendants also argue that they cannot be liable under

Section 3808(e) because they were not in charge of the dissolution process. According

to them, they “cannot face Section 3808(e) liability because the ‘responsib[ility]’ under

the Trusts’ governing agreements for winding up the Trusts lay solely with

beneficiary and Directing Person [the Investment Fund].”130 At this stage of the

proceeding, that argument fails.

Section 3808(e) requires that the statutory trust comply with the requirements

for winding up. Section 3806(a) provides that “[e]xcept to the extent otherwise

provided in the governing instrument of a statutory trust, the business and affairs of

a statutory trust shall be managed by or under the direction of its trustees.” 131 By

130 Wells Fargo RB at 19–20.

131 12 Del. C. § 3806(a).

default, therefore, the trustee is responsible for winding up the trust in compliance

with Section 3808(e).

The Delaware Statutory Trust Act authorizes directed trusts:

To the extent provided in the governing instrument of a statutory trust,

any person (including a beneficial owner) shall be entitled to direct the

trustees or other persons in the management of the statutory trust.

Except to the extent otherwise provided in the governing instrument of

a statutory trust, neither the power to give direction to a trustee or other

persons nor the exercise thereof by any person (including a beneficial

owner) shall cause such person to be a trustee. To the extent provided

in the governing instrument of a statutory trust, neither the power to

give direction to a trustee or other persons nor the exercise thereof by

any person (including a beneficial owner) shall cause such person to

have duties (including fiduciary duties) or liabilities relating thereto to

the statutory trust or to a beneficial owner thereof.132

This provision makes clear that although the governing instrument may authorize

any person to give direction to the trustee, the trustee remains responsible for

managing the business and affairs of the trust. Good faith reliance on the provision

of a trust agreement, including a directed-trustee provision, may provide the trustee

with a defense against liability for some types of claims, 133 but the trustee remains

responsible for managing the business and affairs of the trust.

132 Id.

133 See 12 Del. C. § 3806(d) (“Unless otherwise provided in a governing instrument, a trustee or beneficial owner or other person shall not be liable to a statutory trust or to another trustee or beneficial owner or to another person that is a party to or is otherwise bound by a governing instrument for breach of fiduciary duty for the trustee’s or beneficial owner’s or other person’s good faith reliance on the provisions of the governing instrument.”). This defense notably applies to a claim “for breach of fiduciary duty.” That is not the claim that the Estate asserts.

The Delaware Statutory Trust Act authorizes a trustee “to delegate to 1 or

more persons any or all of the trustee’s rights, powers and duties to manage and

control the business and affairs of the statutory trust.”134 But the same provision

makes clear that “[e]xcept to the extent otherwise provided in the governing

instrument of a statutory trust, such delegation by a trustee of a statutory trust shall

not cause the trustee to cease to be a trustee of the statutory trust or cause the person

to whom any such rights, powers or duties have been delegated to be a trustee of the

statutory trust.”135 Good faith reliance on the agent’s actions may provide the trustee

with a defense against liability,136 but the trustee remains responsible for managing

the business and affairs of the trust.

Consequently, unless the agreements governing Trust C-2 and Trust C-3

provide otherwise, the Wells Fargo Defendants remained responsible for winding up

the trusts. The governing agreements each contain a section titled “Dissolution of the

Trust.” The language is substantively identical, providing

(a) The Trust shall be dissolved upon written notice thereof provided

by the Beneficial Owner to [the] Trustee.

(b) Upon the dissolution of the Trust pursuant to Section 11(a) hereof

and after satisfaction of all liabilities to creditors of the Trust as

provided in the Act (as directed by a Directing Person pursuant

to a Direction), the [Trustee] shall:

134 12 Del. C. § 3806(i).

135 Id.

136 See 12 Del. C. § 3806(k).

(i) at the Direction of a Directing Person, either liquidate the

Trust Assets and distribute the proceeds thereof, or distribute

the Trust Assets in kind, to the Beneficial Owner or a designee

thereof; and

(ii) take such other action as may be directed by a Directing

Person pursuant to a Direction in connection with the transfer

of the Trust Assets or the proceeds thereof to the Beneficial

Owner or its designee.

completion of the winding up of the Trust’s affairs as set forth in

a Direction from a Directing Person, a certificate of cancellation

canceling the Certificate of Trust of the Trust shall be filed with

the Delaware State Office, which certificate of cancellation shall

be executed by [the] Trustee.137

This language makes clear that the Wells Fargo Defendants, as trustees, remained

responsible for winding up the trusts.

To be sure, the governing agreements entitled a “Directing Person,” such as

the Investment Fund, to instruct the Wells Fargo Defendants how to act. For

example, the agreements provide that the trustees may take certain actions only

“after satisfaction of all liabilities to creditors of the Trust as provided in the Act (as

directed by a Directing Person pursuant to a Direction).”138 The agreements also state

that the trustees shall not

incur any liability to anyone in acting upon any … Direction … believed

by it in good faith to be genuine and believed by it in good faith to be

signed by the proper party or parties, and such reliance shall not

137 Wells Fargo OB Exs. 1 § 11, 2 § 11.

138 Id.

constitute negligence or misconduct in connection with the Trustee’s

handling of funds or otherwise.139

For purposes of lawsuits by parties bound by the trust agreement, such as a claim by

a beneficiary for breach of fiduciary duty or breach of the trust agreement, that

provision offers a powerful defense. But it does not obviously bind a non-party to the

trust agreement, such as the Estate.

Nor is it clear at the pleadings stage that the Wells Fargo Defendants have a

reliance defense. Reliance requires good faith. For purposes of legal compliance, that

means a good-faith belief that the action is legally compliant. “Delaware law does not

charter law breakers.”140 As with the corporations that Delaware charters, Delaware

only authorizes statutory trusts to pursue “lawful business.”141 The obligation of legal

compliance encompasses not only laws external to the entity, but also the laws

governing the entity.142

139 Wells Fargo OB Exs. 1 § 7(a)(iv), 2 § 7(a)(iv).

140 Massey, 2011 WL 2176479, at *20; accord Desimone v. Barrows, 924 A.2d

908, 934–35 (Del. Ch. 2007) (“Delaware corporate law has long been clear on this rather obvious notion; namely, that it is utterly inconsistent with one’s duty of fidelity to the corporation to consciously cause the corporation to act unlawfully. The knowing use of illegal means to pursue profit for the corporation is director misconduct.”) (citation modified); Metro Commc’n Corp. BVI v. Advanced Mobilecomm Techs. Inc., 854 A.2d 121, 131 (Del. Ch. 2004) (“Under Delaware law, a fiduciary may not choose to manage an entity in an illegal fashion, even if the fiduciary believes that the illegal activity will result in profits for the entity.”).

141 12 Del. C. § 3801(i).

142 Firefighters’ Pension Sys. of City of Kansas City v. Found. Bldg. Mat’ls, Inc.,

318 A.3d 1105, 1182 (Del. Ch. 2024) (“Just as directors could be personally liable for knowingly causing the corporation to violate mine safety regulations, directors could be personally liable for knowingly causing the corporation to violate a section of the

At the pleadings stage, it is reasonable to infer that the Wells Fargo

Defendants failed to comply with the laws governing Trust C-2 and Trust C-3 by

dissolving the trusts without making any provision for claims under the

Disgorgement Statute. It is also reasonably conceivable that the Wells Fargo

Defendants could not have believed in good faith that distributing all of the trusts’

assets without making any provision for a claim under the Disgorgement Statute was

statutorily compliant. The claim for improper dissolution survives pleadings-stage

review.

3. The No-Recourse Defense

Last, the Wells Fargo Defendants invoke no-recourse provisions in the trust

agreements. Those provisions do not limit the Estate’s ability to sue because the

Estate is not a party to either trust agreement. They also only apply to liabilities of

the trusts, and the Section 3808(e) claim is a liability of the trustees, not the trusts.

Finally, they cannot insulate the trustees from bad-faith conduct, and at the

pleadings stage, it is reasonably conceivable that the Wells Fargo Defendants

intentionally violated Section 3808(e) by rendering the trusts insolvent through a

statutorily non-compliant winding-up process.

DGCL. The source of the statutory mandate is different, but the operative legal framework is the same.”) (footnote omitted).

A no-recourse provision limits whom a party to a contract can sue.143 A

standard no-recourse provision states that a party cannot sue or recover from the

persons identified in the clause, usually under the contract but often—and more

importantly—on extra-contractual theories.144 The latter dimension is more

important because if the designated persons are not parties to the contract, then they

already cannot be sued for breach of the contract.145 For breach of contract claims,

the no-recourse provision adds a belt to the common law suspenders.146

A no-recourse provision functions as a specific type of covenant not to sue.

Because covenants not to sue are contractual, their effects cannot extend beyond their

terms. Thus, where a no-recourse provision only addressed “payment of the principal

of or premium, if any, or interest on any Debenture or for any claim based thereon,”

the provision by its own terms did not encompass claims that were “not contractual,”

143See AmeriMark Interactive, LLC v. AmeriMark Hldgs., LLC, 2022 WL

16642020, at *4 (Del. Ch. Nov. 3, 2022).

144 See Simons v. Cogan, 542 A.2d 785, 792 (Del. Ch. 1987), aff’d, 549 A.2d 300

(Del. 1988).

145 See Gotham P’rs, L.P. v. Hallwood Realty P’rs, L.P., 817 A.2d 160, 172 (Del.

2002) (“It is a general principle of contract law that only a party to a contract may be sued for breach of that contract.”); HOMF II Inv. Corp. v. Altenberg, 2020 WL 2529806, at *53 (Del. Ch. May 19, 2020) (same); Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 178 (Del. Ch. 2014) (same).

146 See Simons, 542 A.2d at 792 (explaining that a “standard” no-recourse provision in a bond indenture “provid[es] broadly that liability for breach of any obligation created by the indenture shall not attach to any stockholder, officer or director of the issuer, but such liability shall be limited to the corporation itself”).

such as claims for fraud, breach of fiduciary duty under an agency theory, or an

attempt to pierce the corporate veil.147

But because a no-recourse provision functions as a specific type of covenant not

to sue, public policy limits its effects to the same degree.148 As with covenants not to

sue generally, “Delaware public policy will not permit parties to use a no-recourse

provision to insulate themselves from fraud.”149 Delaware public policy also does not

permit the corporate directors to use a non-recourse provision in a contract governing

147 Mabon, Nugent & Co. v. Tex. Am. Energy Corp., 1988 WL 5492, at *3 (Del.

Ch. 1988). The court dismissed the agency claim on its merits. Id. at *4. Other Delaware decisions reach similar results. See Geyer v. Ingersoll Publ’ns Co., 621 A.2d 784, 793 (Del. Ch. 1992) (following Mabon and denying to apply a no-recourse provision to an alter-ego claim because “an alter ego claim is distinct from a contract claim and is equitable in nature” and “the no recourse provision does not bar equitable claims.”); Cont’l Ill. Nat’l. Bank and Tr. Co. of Chi. v. Hunt Int’l Res. Corp., 1987 WL 55826, at *4-5 (Del. Ch. Feb. 27, 1987) (summarizing case law and concluding that a no-recourse clause does not bar claims for common law fraud).

148 See generally New Enter. Assocs. 14, L.P. v. Rich, 295 A.3d 520 (Del. Ch.

2023) (discussing covenants not to sue and associated public policy limitations).

149 In re P3 Health Gp. Hldgs., LLC, 2022 WL 15035833, at *8 (Del. Ch. Oct.

26, 2022). Delaware law distinguishes between contractual fraud and extracontractual fraud. “Commentators and courts have generally understood Delaware law to disregard non-recourse clauses where the parties purportedly insulated by those clauses were complicit in contractual fraud.” Online HealthNow, Inc. v. CIP OCL Invs., LLC, 2021 WL 3557857, at *19 (Del. Ch. Aug. 12, 2021). Parties can insulate themselves from extra-contractual fraud, but only through a non-reliance clause. See Abry P'rs V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1058–59 (Del. Ch. 2006). Delaware law does not countenance other contractual methods of limiting extra-contractual fraud. See P3 Health, 2022 WL 15035833, at *7 (rejecting reliance on scope-of-representation clause combined with an integration clause limited extracontractual fraud); Online HealthNow, 2021 WL 3557857, at *14 (rejecting reliance on no-recourse clause); see also New Enter., 295 A.3d at 532 (discussing non-reliance alternative in Abry and noting that “[s]ubsequent decisions have refused to authorize other types of provisions that could restrict tort liability for intentional harm.”).

securities, such as a trust indenture, “to immunize themselves from a future breach

of fiduciary duties or fraudulent conduct through a provision in the trust

indenture.”150

Those public policy limitations apply even when the no-recourse provision

attempts to sweep in all possible claims. In Continental Illinois, then-Vice Chancellor

(later Justice) Jacobs addressed an expansive no-recourse provision in a bond

indenture that stated:

No recourse whatsoever, either directly or through the Company or any

trustee, receiver or assignee, shall be had in any event or in any manner

against any past, present or future stockholder, director or officer of the

Company by virtue of any past, present or future constitution, statute

or rule of law or equity or by the enforcement of any assessment or

penalty or by any legal or equitable proceeding or otherwise for the

payment of the principal of or premium or interest on the Debentures or

any of them or for any claim based thereon or otherwise in respect to the

Debentures or of the Indenture; the Indenture and each of the

Debentures being each a corporate obligation only, all individual

liability of whatsoever kind or nature of, and all rights and claims

against, such stockholders, directors and officers founded in any way

directly or indirectly upon the Indenture or the Debentures or growing

out of the issue thereof or out of the indebtedness evidenced thereby are

expressly waived and released by the acceptance of the Debentures by

each of the holders thereof and as a condition of a part of the

consideration for the issue thereof and the execution and delivery of the

Indenture.151

150 U.S. Bank Nat’l Ass’n v. U.S. Timberlands Klamath Fall, L.L.C., 864 A.2d

930, 950–51 (Del. Ch. 2004), vacated on other grounds, U.S. Timberlands Klamath Fall, L.L.C. v. U.S. Bank Nat’l Ass’n, 875 A.2d 632 (Del. 2005) (TABLE).

151 Cont’l Ill., 1987 WL 55826, at *4.

After surveying Delaware precedent, Vice Chancellor Jacobs concluded that the

provision “does not bar a tort claim against the individual defendants based on

fraudulent conduct.”152

The Wells Fargo Defendants rely on substantively identical no-recourse

provisions (jointly, the “No-Recourse Provisions”). The No-Recourse Provision

contained in the Trust C-2 trust agreement states:

No recourse shall ever be had, directly or indirectly, against the Trustee,

whether by legal, equitable or other proceeding, in respect of any

indebtedness or other liability of the Trust, it being expressly

understood and agreed that all indebtedness and other liabilities of the

Trust shall be enforceable only against, and be satisfied only out of, the

Trust Assets or shall be evidence only of a right to payment out of the

Trust Assets, as the case may be.153

The Wells Fargo Defendants’ reliance on the No-Recourse Provisions fails for two

reasons.

152 Id.; accord id. at *6 (“Based upon the foregoing authorities, I conclude that

the ‘no recourse’ clause involved here … does not operate to bar Continental from maintaining an action for common law fraud.”); Surf’s Up Legacy P’rs, LLC v. Virgin Fest, LLC, 2021 WL 117036, at *9, 11 (Del. Super. Ct. Jan. 13, 2021) (holding that a no-recourse provision that purported to encompass “[a]ll claims or causes of action (whether in contract or in tort, or in law or in equity)” could not defeat a claim for fraud). See generally Restatement (Second) of Contracts § 195 (1981), Westlaw (database updated Oct. 2024) (“A term exempting a party from tort liability for harm caused intentionally or recklessly is unenforceable on grounds of public policy.”).

153 Wells Fargo OB Ex. 2 § 8. The No-Recourse Provision contained in the Trust

C-3 trust agreement is substantively identical although it does account for the fact that Trust C-3 had a primary and secondary trustee. Wells Fargo OB Ex. 1 § 8.

First, the Estate is not a party to the trust agreements. The parties to the Trust

C-2 trust agreement are Wells Fargo Delaware and the Investment Fund.154 The

parties to the Trust C-3 trust agreement are Wells Fargo Bank, Wells Fargo

Delaware, the Investment Fund, and Trust C-2.155 Nor is the Estate’s claim for

improper dissolution a contract claim that a no-recourse provision could readily

defeat. It is a statutory claim for on an alleged violation of Section 3808(e).

Second, even if the No-Recourse Provisions could encompass the Estate’s

statutory claim, the provisions only extend to “any indebtedness or other liability of

the Trust.” A failure to comply with Section 3808(e) when winding up and dissolving

a trust results in liability for the trustee, not the trust.

Third, even if the No-Recourse Provisions could encompass the Estate’s

statutory claim, and even it was a liability of the trust, the Complaint alleges facts

supporting an inference that it cannot apply. As a matter of Delaware public policy,

contract provisions cannot insulate persons from liability for intentional or bad faith

acts.156 The complaint alleges that the Wells Fargo Defendants acted in bad faith by

intentionally making no provision for a claim under the Disgorgement Statute,

154 Wells Fargo OB Ex. 2.

155 Wells Fargo OB Ex. 1.

156See New Enter., 295 A.3d at 591–92 (collecting authorities). The lone exception remains that an anti-reliance clause can eliminate a party’s ability to sue for fraud based on extra-contractual representations. See Abry P'rs, 891 A.2d at 1058–59.

despite knowing of its existence. As a matter of Delaware public policy, the NoRecourse Provisions cannot bar liability for bad faith acts.

The No-Recourse Provisions do not defeat Count IV.

III. CONCLUSION

The defendants’ motions to dismiss are granted in part. No one sought

dismissal of Count V. Both Count IV and Count V can proceed past the pleadings

stage.

Estate of Martha Barotz v. Wilmington Savings Fund Society, FSB

Authorities cited

Opinion · public domain