Court reverses dismissal of beneficiary claims on laches.
See our prior discussion of the trial court decision.
Mary Campbell individually and as beneficiary of the Mary F.C. Campbell Charitable Remainder Unitrust (the “CRUT”) filed suit against Merrill Lynch Trust Company alleging fraud and misrepresentation in connection with the creation of the CRUT. The Delaware Chancery Court found that the alleged misrepresentations were known in 1996 at the time the CRUT was established and the claims were not asserted until 10 years later in 2006 and were thus time barred by the doctrine of laches.
Mary appealed and the Supreme Court of Delaware remanded the case to the Delaware Court of Chancery for reconsideration of its ruling on laches.
On remand, the Delaware Chancery Court reversed its ruling and found dismissal was premature under the doctrine of laches on the grounds that: (1) importing the applicable statute of limitations for fraud to dismiss the claims under the equitable defense of laches was hasty and the traditional test for laches as an equitable defense should have been considered; (2) the traditional test for laches requires the defendant to demonstrate that the plaintiff waited an unreasonable length of time before bringing suit and the delay unfairly prejudiced the defendant; (3) the investment strategy that ultimately caused losses to the CRUT was the product of the CRUTs unusual payout terms; (4) the earliest possible time for charging Mary with knowledge of the faulty terms and investment strategy was the date on which she received a letter from Merrill Lynch discussing the downsides of the CRUT and the investment strategy, rather then the date on which the CRUT had been established; (5) this letter was received less than three years before Mary first asserted her claim and the court found that it could not properly infer that Mary’s delay in filing suit was unreasonable given Mary’s age, her reasonable reliance on Merrill Lynch as her fiduciary, and the difficulty in linking the CRUT’s annual payout to Merrill Lynch’s investment strategy; (6) Merrill Lynch had not met its burden in demonstrating that it would suffer prejudice where the claims were largely dependent on documents and recorded investment and trust administration practices; and (7) dismissal under the laches doctrine was inappropriate as premature (but the court noted that a further hearing may render dismissal appropriate).