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Rogers v. Wilmington Trust Co.

United States District Court, D. Delaware

August 9, 2019

FRIEDA MAE ROGERS f/k/a FRIEDA ROGERS ROEN; and PREMIER TRUST, INC., a Nevada corporation, as Trustee of the FRIEDA M. ROEN RESULTING TRUST u/a/d July 19, 1934, Plaintiffs,
v.
WILMINGTON TRUST COMPANY, a Delaware corporation; and WILMINGTON TRUST INVESTMENT ADVISORS, INC., a Maryland corporation, Defendants.

          REPORT AND RECOMMENDATION

          SHERRY R. FALLON UNITED STATES MAGISTRATE JUDGE.

         I. INTRODUCTION

         Presently before the court in this action alleging defendants' mismanagement of plaintiffs' financial resources and breach of fiduciary duties is a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6) filed by defendants Wilmington Trust Company ("WTC") and Wilmington Trust Investment Advisors, Inc. ("WTIA") (collectively, "defendants"). (D.I. 123) For the following reasons, the court recommends DENYING defendants' motion to dismiss.[1]

         II. BACKGROUND

         a. The Parties

         Frieda Mae Rogers ("Ms. Rogers")[2] is a citizen and resident of the state of California. (D.I. 115 at ¶ 1) Premier Trust, Inc. ("Premier") is a corporation formed under the laws of Nevada. (Id. at ¶ 2) WTC is a corporation formed under the laws of Delaware with its principal place of business in Wilmington, Delaware. (Id. at ¶ 4; D.I. 124, Ex. 1 at 1) WTIA is a corporation formed under the laws of Maryland. (D.I. 115 at ¶ 5)

         b. Procedural History

         On March 16, 2017, Ms. Rogers and Premier (collectively, "plaintiffs") originally filed this action in the U.S. District Court for the Eastern District of California. (D.I. 1) On June 16, 2017, WTIA filed a motion to dismiss for lack of personal jurisdiction, or, in the alternative, to dismiss Counts I and V of the complaint for failure to state a claim.[3] (D.I. 10) On the same day, WTC filed a motion to transfer venue to this District and a motion to dismiss Counts I and V of the complaint for failure to state a claim. (D.I. 12; D.I. 13) On January 19, 2018, the District Court for the Eastern District of California transferred the case to this District and denied defendants' motions to dismiss without prejudice. (D.I. 40)

         On February 9, 2018, defendants filed a motion to dismiss pursuant to Rule 12(b)(6). (D.I. 51) On June 5, 2018, District Judge Sleet denied defendants' motion to dismiss. (D.I. 67) On July 26, 2018, plaintiffs filed a motion for leave to amend the complaint.[4] (D.I. 78) On December 6, 2018, District Judge Connolly granted plaintiffs' motion for leave to amend the complaint. (D.I. 114) On December 7, 2018, plaintiffs filed their amended complaint (the "First Amended Complaint"). (D.I. 115) On December 21, 2018, defendants filed the present motion to dismiss. (D.I. 123)

         c. Facts

         On July 19, 1934, Katherine Stuart Stibbs created a trust (the "Original Trust"). (D.I. 115 at ¶ 3) On November 10, 2008, the trust document entitled "Reformed and Restated Trust Agreement of the Trust Created by Katherine Stuart Stibbs Under Trust Agreement Dated July 19, 1934, as Divided for the Benefit of the Descendants of Mary Stuart Rogers" (the "Roen Trust Agreement") was created and confirmed by Court Order.[5] (Id.) Pursuant to the Roen Trust Agreement, the Frieda M. Roen Resulting Trust (the "Roen Trust") was created. (Id.) Ms. Rogers is the sole beneficiary of the Roen Trust and is an elderly adult female over the age of 65 years old. (Id. at ¶¶ 13-14)

         From December 3, 2008 to January 13, 2015, WTC was the sole Trustee of the Roen Trust and WTIA acted as an adviser to WTC as the Trustee over the Roen Trust. (Id. at ¶ 15) As Trustee, WTC managed approximately $62 million of Roen Trust's corpus and related assets. (Id. at ¶ 23) During their tenure as Trustee and adviser, WTC and WTIA invested Roen Trust corpus and principal assets in proprietary investments that were owned and managed by WTC and WTIA. (Id. at ¶ 17) Ms. Rogers was not cognizant of these WTC and WTIA investments. (Id.) WTC and WTIA were not given written consent for discretionary management of the Roen Trust's assets. (Id. at¶ 16)

         On January 13, 2015, Ms. Rogers replaced WTC with Premier as Trustee over the Roen Trust. (Id. at ¶ 20) In March 2016, WTC provided Premier with several Form K-ls regarding investments and tax information in 2015 for the Roen Trust (the "2015 Form K-ls"), but did not provide any Form K-ls related to 2014 (the "2014 Form K-ls"). (Id. at ¶ 21) WTC indicated that while the 2014 Form K-ls were not immediately available, they would be delivered to Premier by September 2015. (Id.) Premier made financial plans for the Roen Trust's tax obligations based upon the 2015 Form K-ls WTC had provided. (Id.)

         In September 2016, WTC delivered the 2014 Form K-ls to Premier, which differed from the 2015 Form K-ls. (Id. at ¶ 22) The 2014 Form K-ls reflected a "significantly higher long-term capital gain in one or more of the 'proprietary funds' of [WTC]," which resulted in a tax liability of approximately $1.8 million. (Id.) Furthermore, the forced liquidation of WTC proprietary funds upon transfer to Premier triggered the recognition of capital gains, resulting in taxes, penalties, and interest totaling approximately $1, 749, 335.00. (Id.) Ms. Rogers recently discovered that the Roen Trust held a 19.8% interest in a Rogers Family Limited Partnership with a value of ...


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