Background
Wells Lory Hillblom (born as Nguyen Be Lory in Vietnam) successfully pursued a claim to inherit a share of the estate of Larry Hillblom, founder of DHL shipping company, who was declared legally dead in 1995. Hillblom was represented by guardian ad litem J. Steven Grist and attorneys John Veague and Garrick Gallagher of Sanders & Parks, P.C. (S&P) under a 30% contingency fee agreement. In 1999, the Nguyen Be Lory Trust was established to hold Hillblom’s inheritance, with Wilmington Trust Company (WTC) serving as trustee under a Delaware-governed trust agreement.
The Trust received approximately $44.6 million in cash distributions by 2000, on which S&P received roughly $13.4 million in contingency fees. However, the Trust also received a 14.85% interest in ARW, LLC (a vehicle holding cellular telephone company interests) in April 2000 as a non-cash distribution. For the next 18 years, WTC and S&P disputed how to calculate S&P’s fee on the ARW interest: whether it was 30% of ARW’s fair market value when received in 2000, or 30% of all future ARW cash distributions to the Trust. WTC maintained the fee should be based on a retroactive valuation of the difficult-to-value asset, while S&P argued it should be based on distributions like other assets.
In December 2016, S&P made a settlement offer to resolve all ARW fees for $300,000, with a December 20 deadline. WTC did not share this offer with Hillblom and allowed it to expire. WTC instead reoffered $79,086 (based on a Form 706 estate valuation) in May 2017. S&P rejected this and commenced arbitration against WTC in June 2017. WTC refused arbitration, claiming it was not a party to the fee agreement and directing S&P to sue Hillblom directly. Only on January 16, 2018—after S&P initiated arbitration—did WTC inform Hillblom of the potential S&P claim. Notably, WTC did not disclose the December 2016 settlement offer to Hillblom. S&P subsequently filed an arbitration complaint against Hillblom in February 2019, and Hillblom eventually settled for approximately $1.5 million. Hillblom then sued WTC in 2021 for breach of fiduciary duty and breach of trust.
The Court’s Holding
The Court of Chancery, Vice Chancellor Zurn presiding, held that Hillblom’s claims were timely filed and that WTC breached multiple fiduciary duties owed to Hillblom as beneficiary. The court found that WTC’s failure to disclose the December 2016 settlement offer of $300,000—which would have resolved the dispute—constituted a material breach of fiduciary duty. WTC’s conduct over the dispute’s two-decade duration demonstrated a pattern of inaction, lack of good faith, and failure to advocate for the beneficiary’s interests. The court emphasized that WTC bore the burden and had the authority under the Trust Agreement to resolve contested matters, including claims for S&P’s fees, but instead simply ignored the dispute and concealed critical settlement information from Hillblom.
The court rejected WTC’s argument that the Trust Agreement limited its duties to calculating fees strictly according to the fee agreement’s language. WTC was obligated to act as a prudent fiduciary in managing trust property and protecting the beneficiary’s interests, which required at minimum disclosing material settlement offers to the beneficiary. The court found that WTC’s belated and inadequate disclosure of S&P’s claim on the January 2018 call—presenting it as a minor, easily dismissible matter—further breached WTC’s duty of candor and loyalty to Hillblom.
The court awarded Hillblom damages equal to the difference between the settlement amount he ultimately paid (approximately $1.5 million) and the $300,000 settlement offer that WTC had ignored and concealed. Hillblom was also awarded his attorneys’ fees incurred in prosecuting this action against WTC.
Key Takeaways
- A trustee must disclose material settlement offers and claims information to the beneficiary, even if the trustee believes it has authority to resolve such matters independently under the trust agreement.
- The trustee’s failure to act on a settlement offer for two decades, combined with concealment from the beneficiary, constitutes a substantial breach of fiduciary duty, not merely a dispute about fee calculation methodology.
- A trustee cannot rely on narrow textual constructions of the trust agreement to escape fundamental fiduciary obligations of good faith, candor, and loyalty to the beneficiary.
- When a trustee receives a time-limited settlement offer, it must either accept it, counter it promptly, or disclose it to the beneficiary—simply ignoring it and concealing it exposes the trustee to liability for the difference between the offer and any higher amount ultimately paid.
Why It Matters
This decision reinforces that Delaware trustees cannot hide material information from beneficiaries or ignore settlement opportunities for extended periods while claiming administrative authority under the trust instrument. The case demonstrates that trustees owe an affirmative duty to pursue beneficial resolutions of disputed claims and to keep beneficiaries informed of their options, particularly when the beneficiary is, or has been, unsophisticated about trust administration. WTC’s attempt to shift responsibility to S&P and Hillblom—claiming it was not a party to the fee dispute despite having full authority under the Trust Agreement to resolve it—failed because fiduciary duties cannot be delegated away.
For trustees managing contested matters and pending claims, this decision is a cautionary tale: inaction combined with non-disclosure of settlement offers creates substantial liability. The court’s damages framework—measuring loss as the difference between the ignored settlement and the amount ultimately paid—incentivizes trustees to engage good-faith settlement discussions and promptly share offers with beneficiaries. The award of attorneys’ fees further reinforces that a beneficiary forced to litigate against a trustee’s breach of fiduciary duty will recover the costs of proving that breach.