Preview
FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020
NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020
STATE OF NEW YORK
SUPREME COURT : COUNTY OF ERIE
_______________________________________________
TIMOTHY ALLEN, BEVERLEY VERIFIED PETITION
BRITZZALARO, LOUISE MACVIE,
TERRENCE WELSCH, ARTHUR Index No. _____________
WINGERTER, all as Trustees of the Walter
N. Welsch 2006 Irrevocable Trust, and
CHARLES W. CHIAMPOU, as the Trust Protector
of the Walter N. Welsch 2006 Irrevocable Trust,
Petitioners,
vs.
MICHAEL ANNALETT, and
and VIRGINIA WILTBERGER, as Trustee of the
Walter N. Welsch 2006 Irrevocable Trust,
Respondents.
_______________________________________________
Petitioners Timothy Allen, Beverley Britzzalaro, Louise MacVie, and
Terrence Welsch, as Trustees of the Walter N. Welsch 2006 Irrevocable Trust (collectively,
the “Family Trustees”); Arthur Wingerter, as Independent Trustee of the Walter N. Welsch
2006 Irrevocable Trust (“Independent Trustee”); and Charles W. Chiampou, as the Trust
Protector of the Walter N. Welsch 2006 Irrevocable Trust (“Trust Protector”), by and
through their respective attorneys, allege as follows:
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INTRODUCTION
1. On August 17, 2020, Respondent Michael Annalett (“Annalett”) was
removed from his position as Independent Trustee of the Walter N. Welsch 2006
Irrevocable Trust (the “Trust”). The Trust instrument plainly grants the Trust Protector the
power to remove the Independent Trustee. The Trust Protector exercised that authority,
which Respondent Annalett has rejected, erroneously claiming that he may continue to act
and exercise the powers of the Independent Trustee, and is now actively interfering with
administration of the Trust. The Family Trustees, Independent Trustee, and Trust Protector
(collectively, “Petitioners”) bring this action seeking a declaratory judgment and injunctive
relief to prohibit Respondent Annalett, or any agent or representative acting on his behalf,
from further interfering with proper administration of the Trust.
PARTIES AND VENUE
2. Petitioner Timothy Allen is a resident of Erie County, New York, and
has been Trustee of the Trust since March 31, 2016.
3. Petitioner Beverley Britzzalaro is a resident of Erie County, New
York, and has been a Trustee of the Trust since September 12, 2006.
4. Petitioner Louise MacVie is a resident of Erie County, New York, and
has been a Trustee of the Trust since September 12, 2006.
5. Petitioner Terrence Welsch is a resident of Deschutes County, Oregon,
and has been a Trustee of the Trust since September 12, 2006.
6. Petitioner Arthur Wingerter is a resident of Erie County, New York,
and has been the Independent Trustee of the Trust since September 10, 2020.
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7. Petitioner Charles Chiampou is a resident of Erie County, New York,
and has been the Trust Protector of the Trust since September 12, 2006.
8. Respondent Michael Annalett is a resident of Erie County, New York,
and was the Independent Trustee of the Trust from May 1, 2015 through August 17, 2020.
9. Upon information and belief, Respondent Virginia Wiltberger is a
resident of Greer County, Virginia, and has been a Trustee of the Trust since 2006. She is
joined as a nominal Respondent pursuant to CPLR 1001(a).
FACTUAL BACKGROUND
10. On September 12, 2006, Walter N. Welsch (“Walter”) established the
Trust to provide maintenance and support to his family members during his lifetime and
upon his death. A copy of the Trust instrument setting forth the terms of the Trust is
attached as Exhibit A.
11. The Trust is governed by New York law.
12. The Trust estate is comprised of two main assets: (1) liquid assets; and
(2) shares of voting common stock of Dynabrade, Inc. (“Dynabrade”), a company that
Walter founded in 1969.1 -
1
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Dynabrade was converted from a New York to a Delaware corporation in 2006.
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13. Walter appointed his five children (Beverley Britzzalaro, Louise
MacVie, Terrence Welsch, Kathleen Locke, and Virginia Wiltberger) as Trustees of the
Trust.
14. Walter appointed Timothy Allen, his grandson, as a Trustee after Ms.
Locke (Mr. Allen’s mother) resigned as Trustee in 2016.
15. In addition to Walter’s children, the Trust instrument designated Todd
Joseph, a non-family member, as the Independent Trustee of the Trust.
16. Respondent Annalett replaced Todd Joseph as Independent Trustee on
May 1, 2015, after Mr. Joseph resigned.
17. The Trust instrument designates Charles Chiampou as Trust Protector,
and he has acted as the Trust Protector since its inception.
18. Walter passed away on May 16, 2020.2 -
19. Each of the Family Trustees are also beneficiaries of the Trust and
individual shareholders of Dynabrade.
RESPONDENT ANNALETT’S CONDUCT AND CONTROL OF DYNABRADE
20. Dynabrade’s Board of Directors is comprised of five members, who
are selected as follows:3 -
a. Board Member 1: Dynabrade’s Chief Executive Officer, who is elected by the
Board of Directors;
2
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The Trust instrument provides that upon Walter’s death, the Trust splits equally into five
trusts for the benefit of each of Walter’s children and their issue. The Family Trustees,
Virginia Wiltberger, and the Independent Trustee remain the trustees of each of those trusts.
3
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The composition of Dynabrade’s Board of Directors is set forth in a Shareholders Voting
Agreement, dated September 30, 2006, attached hereto as Exhibit B.
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b. Board Member 2: A descendent of Walter, who is chosen by the Trustees of
the Trust, with concurrence of the Independent Trustee;
c. Board Member 3: A Dynabrade Executive, who is chosen by the trustees of
an ESOP;
d. Board Member 4: A non-Dynabrade employee and non-Welsch family
member that has suitable business experience, who is chosen by the voting
trustee of the Voting Trust Agreement (attached as Exhibit C) after consulting
with the Trustees of the Trust; and
e. Board Member 5: A non-Welsch family member that has suitable business
experience, who is chosen by the voting trustee of the Voting Trust
Agreement, after consulting with the Trustees of the Trust.
21. The Independent Trustee of the Trust is also automatically appointed
as “voting trustee” under the Voting Trust Agreement.
22. Therefore, upon being appointed Independent Trustee of the Trust,
Respondent Annalett also became the voting trustee under the Voting Trust Agreement.
23. In his various roles, Respondent Annalett was responsible for
appointing three of the five members of Dynabrade’s Board of Directors.
24. Respondent Annalett is also a member of Dynabrade’s Board of
Directors.
25. Respondent Annalett, as Independent Trustee and voting trustee,
controlled almost 70% of the shares of voting stock in Dynabrade.
26. From May 1, 2015 until August 17, 2020, Respondent Annalett: (a)
was a Board Member of Dynabrade; (b) had authority to appoint and remove most of the
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Board Members of Dynabrade; (c) was the Independent Trustee of the Trust; (d) was the
voting trustee of the Voting Trust Agreement; and (e) maintained control over the majority
shares of voting stock in Dynabrade.
27. Since 2006, the Trust has held shares of voting stock in Dynabrade, a
privately held company, and the financial information requested by the Family Trustees
assists them in evaluating the Trust’s investment in Dynabrade.
28. The Trustees had previously been provided with Dynabrade’s financial
statements and valuation reports by the prior Independent Trustee, Todd Joseph. They
were able to use that information to assess and evaluate the Trust’s investments.
29. After Respondent Annalett became the Independent Trustee, the
Family Trustees requested information from Respondent Annalett regarding Dynabrade’s
financial performance as part of their fiduciary duties.
30. Respondent Annalett would frequently dismiss or deny the Family
Trustees’ request for information about Dynabrade.
31. For example, in April 2017, Family Trustee Timothy Allen requested
information from Respondent Annalett related to Dynabrade’s financial performance.
32. Respondent Annalett refused and failed to provide Mr. Allen with full
and complete answers to his questions.
33. Instead, in direct response to Mr. Allen’s requests for information,
Respondent Annalett urged and advised Dynabrade’s Board of Directors to pass a
“communication policy” that limited the disclosure of Dynabrade’s financial information
which might be made to its shareholders.
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34. Dynabrade’s “communication policy” was thereafter used by
Respondent Annalett to deny each of Mr. Allen’s requests for information about
Dynabrade’s finances.
35. For example, in February 2019, Family Trustee Timothy Allen again
requested information about Dynabrade’s cash and investment reserves, investment policies,
and investment performance.
36. Respondent Annalett prepared a response to Mr. Allen, which denied
his request for information, claiming that the request as (1) not for a proper purpose; (2) not
in the company’s best interest, and (3) contains confidential information, the disclosure of
which could cause harm to the company.
37. In May 2019, three Family Members met with the Trust Protector and
requested his assistance in obtaining information about Dynabrade’s finances.
38. In July 2019, the Trust Protector requested that Respondent Annalett
provide the Family Trustees with information about Dynabrade. Respondent Annalett
refused this request.
39. In July 2019, the Trust Protector sent a memo to Respondent Annalett
stating that Respondent Annalett had a fiduciary duty to disclose the requested financial
information.
40. The Trust Protector thereafter met with Respondent Annalett in
August 2019 to discuss this issue. The Trust Protector and Respondent Annalett discussed
the Family Trustees’ request for information in great detail, including the Family Trustees’
reasons for wanting the disclosure of Dynabrade’s financial information. Respondent
Annalett again refused to provide this information.
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41. After this meeting, Respondent Annalett stopped communicating with
the Trust Protector.
42. In August 2019, Family Trustee Timothy Allen requested that
Respondent Annalett and Dynabrade provide the Family Trustees with Dynabrade’s
financial statements, investments, investment growth, cash, asset position, and company
valuation reports for 2016 through 2018, and that this information should be provided to the
Family Trustees on an annual basis.
43. Respondent Annalett refused Mr. Allen’s request for information,
claiming the request was not done for a “proper purpose.”
44. In September 2019, three of the Family Trustees requested that the
Trust Protector and Respondent Annalett all meet to discuss the lack of communication
between the Family Trustees and Respondent Annalett. Respondent Annalett refused to
meet.
45. At a November 2019 Trust meeting, the Family Trustees renewed their
request for Dynabrade’s financial statements and valuations by M&T Bank. Respondent
Annalett failed and refused to provide this information.
46. The Family Trustees requested this information in order to investigate
and fully understand transactions, clarify discrepancies, and evaluate the Trust’s
investments, including ascertaining the value of the stock held by the Trust.
47. The little information that was provided to the Family Trustees (during
Welsch family meetings presented by Dynabrade) did not provide them with complete
financial information they were seeking and they were never permitted to receive copies of
the information presented at the annual meetings.
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48. To date, the Family Trustees have still not been provided with full and
complete information regarding Dynabrade’s finances, including, but not limited to
financial statements and valuation reports since Respondent Annalett became the
Independent Trustee of the Trust.
49. Respondent Annalett derived substantial compensation in his roles as
Independent Trustee and as voting trustee. For example, upon information and belief, in
2019, Respondent Annalett received over $175,000 in compensation as Independent Trustee
and voting trustee. This is in addition to compensation or reimbursements that Respondent
Annalett may have been paid as a Board Member of Dynabrade.
50. The Family Trustees receive no compensation in their roles as Trustees
of the Trust.
REMOVAL OF RESPONDENT ANNALETT AS INDEPENDENT TRUSTEE
51. The Trust instrument grants the Trust Protector the authority to
remove the Independent Trustee without court intervention. Specifically, Section 4.7 of the
Trust instrument provides:
At any time, with respect to any trust hereunder, upon a determination
by the Protector that the Independent Trustee has failed to fulfill his or
her fiduciary obligations hereunder, the Protector shall have the right
to remove such Independent Trustee. Such right of removal shall be
continuing and shall be exercised with a duly acknowledged notice of
removal, setting forth such failure with reasonable specificity, and by
filing such notice with the trust records. The Independent Trustee that
is removed shall not be entitled to any commissions with respect to
any transfer of principal to any successor or remaining Trustee, but
shall be entitled to reimbursement for reasonable expenses incurred in
effecting such transfer.
52. In October 2019, Family Trustee Timothy Allen requested that the
Trust Protector remove Respondent Annalett as Independent Trustee.
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53. As part of the Trust Protector’s due diligence, he sought to discuss the
matter with all parties involved.
54. The Trust Protector, who is a Certified Public Accountant and holds a
Juris Doctor degree, conducted his own independent research and consulted with two
independent and highly regarded trust and estate attorneys familiar with the law of fiduciary
duties.
55. In November 2019, at a Trustee meeting, the Family Trustees again
requested that Respondent Annalett provide Dynabrade’s financial statements and
valuations prepared by M&T Bank. Respondent Annalett refused to provide this
information.
56. In November 2019, Family Trustee Timothy Allen requested that
Respondent Annalett provide him with a list of compensation received by Dynabrade’s
Board Members. Respondent Annalett refused to provide that information.
57. Unbeknownst to the Family Trustees, upon information and belief, in
January 2020, Respondent Annalett began conferring with the Trustees’ then-counsel,
Hodgson Russ LLP, to prepare a strategy to curtail the Family Trustees from continuing to
ask questions about Dynabrade.4 -
58. Respondent Annalett contacted the Trustees’ then-counsel, inquiring
whether he could engage another law firm to prevent that law firm from representing the
Family Trustees “against” Respondent Annalett.
4
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At the time of this meeting, Hodgson Russ LLP represented (a) Dynabrade; (b)
Respondent Annalett; and (c) the Family Trustees as Trustees of the Trust.
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59. In January 2020, Respondent Annalett also requested assistance from
the Trustees’ then-counsel about his “concern” that the Family Trustees wanted to replace
Trustee Virginia Wiltberger on Dynabrade’s Board of Directors with another family
member (as allowable under the Trust instrument), as three of the Family Trustees had
asked Respondent Annalett about this for months.
60. On February 26, 2020, while the Trust Protector was continuing to
review the Family Trustees’ request to remove the Independent Trustee, the Family
Trustees held a vote to appoint a family member (Nicholas MacVie) to Dynabrade’s Board
of Directors. Respondent Annalett voted against this nomination, causing the vote to fail.
61. Also during this February 26, 2020 meeting, Family Trustees Timothy
Allen, Louise MacVie, and Beverley Britzzalaro requested information about Dynabrade’s
financial performance. They were not provided the requested information.
62. Respondent Annalett continued to refuse and deny the Family
Trustees’ requests for information.
63. After Walter passed away in May 2020, Respondent Annalett
contacted Family Trustee Terrence Welsch and expressed his condolences for the loss of
Mr. Welsch’s father. During that phone call, Mr. Welsch expressed his concern to
Respondent Annalett that during the last Trustee meeting, Mr. Allen, Ms. MacVie and Ms.
Britzzalaro had questions that went unanswered and had gone unanswered for a long time.
Respondent Annalett responded simply that everyone was getting “good returns,” and
encouraged Mr. Welsch to align himself with Respondent Annalett and Trustee Virginia
Wiltberger so that the three of them could “block” the other three Family Trustees and put
an “end” to this “whole thing.” Mr. Welsch did not agree to do so.
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64. On June 19, 2020, the Family Trustees submitted a letter, attached as
Exhibit D, to the Trust Protector stating that Respondent Annalett had failed to fulfill his
fiduciary obligations by, among other reasons, withholding information from the Family
Trustees. The Family Trustees requested that the Trust Protector exercise his power under
Section 4.7 of the Trust instrument to remove Respondent Annalett as Independent Trustee.
65. The Trust Protector continued to review the matter.
66. After considering issues with the Independent Trustee for over one
year and making his own independent evaluation of the facts and circumstances, the Trust
Protector decided to remove Respondent Annalett as Independent Trustee of the Trust.
67. By letter dated August 17, 2020, the Trust Protector notified
Respondent Annalett that he was removed as Independent Trustee, effective immediately,
pursuant to Section 4.7 of the Trust instrument. A copy of that letter (the “Removal
Letter”) with attachments is attached as Exhibit E.
68. The Trust Protector’s Removal Letter describes Respondent Annalett’s
repeated failures to fulfill his fiduciary obligations, including, but not limited to:
a. Respondent Annalett’s failure to fulfill his duty of loyalty to the Trustees and
beneficiaries of the Trust, including his procurement and vote on a policy that
allegedly denies both the Family Trustees and Trust beneficiaries from
receiving complete financial information about Dynabrade, thereby
interfering with the Trustees’ duties to manage and evaluate the Trust assets;
b. Respondent Annalett’s lack of transparency about Dynabrade’s finances and
cash position;
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c. Respondent Annalett’s arbitrary use of veto power against the Family
Trustees’ vote;
d. Respondent Annalett’s disregard for the Family Trustees, his disrespectful
treatment of them, his assumption of “total control” of the Trust, and his
failure to permit the Trustees to do their job with regard to the Trust;
e. Respondent Annalett’s failure to disclose information necessary for the other
Trustees to evaluate the Trusts’ investment in Dynabrade, including financial
statements and reports requested by the Family Trustees, along with his
failure to fully account and general refusal to provide information to the
Family Trustees;
f. Respondent Annalett’s several conflicts of interest; and
g. Respondent Annalett’s payment of significant fees from the Trust without
approval by the majority of the Trustees.5 -
69. The Removal Letter provides that Respondent Annalett’s “removal is
effective immediately and [he] cannot take any further action as the Independent Trustee of
the [Trust] and as a consequence of [his] removal you can no longer vote the shares under
the [Voting Trust Agreement].”
70. The Removal Letter requires that Respondent Annalett complete any
and all “administrative duties such as preparing the final accounting” by September 15,
2020.
5
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Pursuant to the Trust instrument, the Trustees may act by majority vote. As noted in the
Trust Protector’s letter, Respondent Annalett paid significant fees from the Trust without
approval by a majority of the Trustees (including the Family Trustees).
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71. By the terms of the Voting Trust Agreement, when Respondent
Annalett was removed as Independent Trustee of the Trust, he was also removed as voting
trustee of the Voting Trust.6 -
RESPONDENT ANNALETT SEEKS TO INTERFERE WITH THE APPOINTMENT
OF A NEW INDEPENDENT TRUSTEE AND ADMINISTRATION OF THE TRUST
72. On August 21, 2020, Respondent Annalett informed the Trust
Protector that he would not recognize the Trust Protector’s removal and would “continue as
Independent Trustee.”
73. On September 10, 2020, the Trust Protector exercised his authority
under Section 4.2(C) of the Trust instrument to appoint Arthur Wingerter as Independent
Trustee and Arthur Wingerter accepted his appointment on the same date. A copy of that
appointment and acceptance is attached as Exhibit F.
74. Following Mr. Wingerter’s assumption of Independent Trustee duties,
Respondent Annalett has interfered with administration of the Trust by continuing to insist
that he is the Independent Trustee.
75. By letter dated October 8, 2020, Respondent Annalett sent a letter
through counsel to Mr. Wingerter asserting that the Trust Protector’s removal of
Respondent Annalett as Independent Trustee was, for unidentified reasons, invalid, and that
Mr. Wingerter should “cease and desist any further actions or communications to establish
6
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Section 2.1(b) of the Voting Trust Agreement states “The Trustee (or any successor
Trustee) will serve as voting trustee under this Agreement for so long as the Trustee (or any
successor Trustee) is serving as the Independent Trustee under the 2006 Trust.” The “2006
Trust” referenced in the Voting Trust Agreement is the Walter N. Welsch 2006 Irrevocable
Trust.
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[his] alleged role, duties and/or authority as Independent Trustee of the Trust” and
threatens “immediate legal action.” A copy of that letter is attached as Exhibit G.
76. Respondent Annalett also sent through counsel a letter dated
October 8, 2020, to the Trust Protector threatening legal action, stating that the Trust
Protector must “cease and desist any further actions to remove [Respondent] Annalett as
Independent Trustee, or to replace [Respondent] Annalett as Independent Trustee.” A copy
of that letter is attached as Exhibit H.
77. Both letters falsely assert that Respondent Annalett was not removed
as Independent Trustee.
78. Both letters falsely state that even if Respondent Annalett was
removed (which he denies) that he is allowed to appoint the successor Independent Trustee.
79. The Trust instrument does not state that an Independent Trustee who
was removed for failure to fulfill fiduciary duties (e.g. “for cause” removal) has authority to
appoint his own successor.
80. Respondent Annalett’s counsel’s letter to the Trust Protector attempts
to enjoin the Trust Protector from exercising any authority or power vested in him under the
Trust instrument.
81. Prior to receiving these letters, on October 6, 2020, the Independent
Trustee (Arthur Wingerter), as part of his duties and responsibilities, contacted Dynabrade
to set up a meeting, so he can become more informed about the company and its finances.
82. On October 9, 2020, Hardy Hamann, President and CEO of
Dynabrade, sent an email to the Independent Trustee (Arthur Wingerter) stating that he was
“notified by the current Independent Trustee,” an apparent reference to Respondent
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Annalett, “that he and his legal counsel are challenging his removal and your appointment
as the new Independent Trustee.” Mr. Hamann states that he would not communicate with
or provide any information about Dynabrade to the Independent Trustee, or take any action
that did not recognize Respondent Annalett as Independent Trustee of the Trust.
83. Upon information and belief, Respondent Annalett has advised
Dynabrade not to communicate with Independent Trustee (Arthur Wingerter) and that
Respondent Annalett is the “true” Independent Trustee of the Trust.
84. Dynabrade’s CEO is elected, and may be removed, by Dynabrade’s
Board of Directors, which includes Respondent Annalett and two other members which
were appointed by Respondent Annalett.
85. The Independent Trustee (Arthur Wingerter) again attempted to
contact Dynabrade to obtain background and financial information necessary for the
Independent Trustee to meet his fiduciary obligations to the Trust and his co-Trustees.
86. Dynabrade again refused to meet with, or acknowledge, the
Independent Trustee (Arthur Wingerter), including refusing to provide the Independent
Trustee with any information about the company.
87. Upon information and belief, Respondent Annalett continues to hold
himself out as Independent Trustee of the Trust, continues to stonewall the Family Trustees
regarding Dynabrade’s financial information, and continues to prevent the Family Trustees
and Independent Trustee from fulfilling their fiduciary obligations.
88. Respondent Annalett has failed and refused to turn over Trust records
to the Independent Trustee (Arthur Wingerter) and has cut off all communication with the
Family Trustees.
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89. Respondent Annalett has failed to notify M&T Bank of his removal
and has failed to take his name off of the Trust’s accounts.
90. The Family Trustees cannot access the Trust’s accounts with M&T
Bank because Respondent Annalett continues to dispute his removal as Independent
Trustee.
91. Dynabrade has scheduled a Welsch family informational meeting for
November 13, 2020. Upon information and belief, Respondent Annalett intends to
continue to act as Independent Trustee and voting trustee at that meeting. This would be
done in direct conflict to Mr. Wingerter’s rights and responsibilities as Independent Trustee
(and as voting trustee of the Voting Trust Agreement).
92. One of the roles of the Independent Trustee and voting trustee is to
vote for Board Members of Dynabrade (in conjunction with a vote and/or consultation with
the Trustees).
93. Upon information and belief, Dynabrade will not recognize the vote of
the Independent Trustee (Arthur Wingerter) for Board Members of Dynabrade because
Respondent Annalett has informed Dynabrade not to recognize anyone else but himself as
Independent Trustee or voting trustee.
94. Upon information and belief, the Independent Trustee’s and voting
trustee’s commissions are paid out of Dynabrade’s shareholders’ dividends in November of
each year. Upon information and belief, in November 2020, Respondent Annalett will
attempt to collect commissions in the amount of almost $200,000 even though he has been
removed as Independent Trustee and voting trustee.
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95. Respondent Annalett has now actively interfered with the
administration of the Trust, and the responsibilities and duties of the Family Trustees, the
Independent Trustee, and the Trust Protector.
FIRST CAUSE OF ACTION
(Declaratory Judgment)
96. Petitioners repeat and reallege the above-referenced paragraphs as if
fully set forth in this cause of action.
97. An actual, justiciable controversy has arisen and now exists between
Petitioners and Respondent Annalett over Respondent Annalett’s removal as Independent
Trustee of the Trust.
98. Uncertainty regarding the identity of the Independent Trustee of the
Trust will harm Petitioners as Trustees and the Trust Protector, including but not limited to,
inability to access the Trust’s accounts at M&T Bank and failure to recognize votes by the
Independent Trustee (Arthur Wingerter) for Board Members of Dynabrade.
99. The Trust Instrument empowers the Trust Protector to remove an
Independent Trustee if the Trust Protector concludes the Independent Trustee failed to
fulfill his or her fiduciary obligations.
100. The Trust Protector made an independent determination that
Respondent Annalett failed to fulfill his fiduciary obligations and exercised his power to
remove Respondent Annalett as Independent Trustee of the Trust.
101. Respondent Annalett is no longer Independent Trustee of the Trust.
102. The Trust Protector has appointed Arthur Wingerter as Independent
Trustee of the Trust.
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103. Petitioners are entitled to a declaration that: (a) Respondent Annalett
has been removed as Independent Trustee: (b) Arthur Wingerter is the Independent Trustee
of the Trust; (c) Respondent Annalett must turn over any and all Trust shares, records, and
information to Mr. Wingerter; and (d) Respondent Annalett is barred from attempting to
take any action on behalf of the Trust.
SECOND CAUSE OF ACTION
(Injunction)
104. Petitioners repeat and reallege the above-referenced paragraphs as if
fully set forth in this cause of action.
105. By reason of Respondent Annalett’s conduct, Petitioners have suffered
and will continue to suffer irreparable injury for which they have no adequate remedy at
law.
106. As to each item of relief requested herein, greater injury will be
inflicted upon Petitioners if relief is denied than will be inflicted upon Respondent Annalett
by the granting thereof.
107. Petitioners are entitled to an injunction barring Respondent Annalett
from holding himself out or exercising the authority of the Independent Trustee, or
otherwise interfering with administration of the Trust, including attempting to vote as
Independent Trustee or voting trustee and from accepting any commissions as Inde
Preview
FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 STATE OF NEW YORK SUPREME COURT : COUNTY OF ERIE _______________________________________________ TIMOTHY ALLEN, BEVERLEY VERIFIED PETITION BRITZZALARO, LOUISE MACVIE, TERRENCE WELSCH, ARTHUR Index No. _____________ WINGERTER, all as Trustees of the Walter N. Welsch 2006 Irrevocable Trust, and CHARLES W. CHIAMPOU, as the Trust Protector of the Walter N. Welsch 2006 Irrevocable Trust, Petitioners, vs. MICHAEL ANNALETT, and and VIRGINIA WILTBERGER, as Trustee of the Walter N. Welsch 2006 Irrevocable Trust, Respondents. _______________________________________________ Petitioners Timothy Allen, Beverley Britzzalaro, Louise MacVie, and Terrence Welsch, as Trustees of the Walter N. Welsch 2006 Irrevocable Trust (collectively, the “Family Trustees”); Arthur Wingerter, as Independent Trustee of the Walter N. Welsch 2006 Irrevocable Trust (“Independent Trustee”); and Charles W. Chiampou, as the Trust Protector of the Walter N. Welsch 2006 Irrevocable Trust (“Trust Protector”), by and through their respective attorneys, allege as follows: 1 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 INTRODUCTION 1. On August 17, 2020, Respondent Michael Annalett (“Annalett”) was removed from his position as Independent Trustee of the Walter N. Welsch 2006 Irrevocable Trust (the “Trust”). The Trust instrument plainly grants the Trust Protector the power to remove the Independent Trustee. The Trust Protector exercised that authority, which Respondent Annalett has rejected, erroneously claiming that he may continue to act and exercise the powers of the Independent Trustee, and is now actively interfering with administration of the Trust. The Family Trustees, Independent Trustee, and Trust Protector (collectively, “Petitioners”) bring this action seeking a declaratory judgment and injunctive relief to prohibit Respondent Annalett, or any agent or representative acting on his behalf, from further interfering with proper administration of the Trust. PARTIES AND VENUE 2. Petitioner Timothy Allen is a resident of Erie County, New York, and has been Trustee of the Trust since March 31, 2016. 3. Petitioner Beverley Britzzalaro is a resident of Erie County, New York, and has been a Trustee of the Trust since September 12, 2006. 4. Petitioner Louise MacVie is a resident of Erie County, New York, and has been a Trustee of the Trust since September 12, 2006. 5. Petitioner Terrence Welsch is a resident of Deschutes County, Oregon, and has been a Trustee of the Trust since September 12, 2006. 6. Petitioner Arthur Wingerter is a resident of Erie County, New York, and has been the Independent Trustee of the Trust since September 10, 2020. -2- 2 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 7. Petitioner Charles Chiampou is a resident of Erie County, New York, and has been the Trust Protector of the Trust since September 12, 2006. 8. Respondent Michael Annalett is a resident of Erie County, New York, and was the Independent Trustee of the Trust from May 1, 2015 through August 17, 2020. 9. Upon information and belief, Respondent Virginia Wiltberger is a resident of Greer County, Virginia, and has been a Trustee of the Trust since 2006. She is joined as a nominal Respondent pursuant to CPLR 1001(a). FACTUAL BACKGROUND 10. On September 12, 2006, Walter N. Welsch (“Walter”) established the Trust to provide maintenance and support to his family members during his lifetime and upon his death. A copy of the Trust instrument setting forth the terms of the Trust is attached as Exhibit A. 11. The Trust is governed by New York law. 12. The Trust estate is comprised of two main assets: (1) liquid assets; and (2) shares of voting common stock of Dynabrade, Inc. (“Dynabrade”), a company that Walter founded in 1969.1 - 1 - Dynabrade was converted from a New York to a Delaware corporation in 2006. -3- 3 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 13. Walter appointed his five children (Beverley Britzzalaro, Louise MacVie, Terrence Welsch, Kathleen Locke, and Virginia Wiltberger) as Trustees of the Trust. 14. Walter appointed Timothy Allen, his grandson, as a Trustee after Ms. Locke (Mr. Allen’s mother) resigned as Trustee in 2016. 15. In addition to Walter’s children, the Trust instrument designated Todd Joseph, a non-family member, as the Independent Trustee of the Trust. 16. Respondent Annalett replaced Todd Joseph as Independent Trustee on May 1, 2015, after Mr. Joseph resigned. 17. The Trust instrument designates Charles Chiampou as Trust Protector, and he has acted as the Trust Protector since its inception. 18. Walter passed away on May 16, 2020.2 - 19. Each of the Family Trustees are also beneficiaries of the Trust and individual shareholders of Dynabrade. RESPONDENT ANNALETT’S CONDUCT AND CONTROL OF DYNABRADE 20. Dynabrade’s Board of Directors is comprised of five members, who are selected as follows:3 - a. Board Member 1: Dynabrade’s Chief Executive Officer, who is elected by the Board of Directors; 2 - The Trust instrument provides that upon Walter’s death, the Trust splits equally into five trusts for the benefit of each of Walter’s children and their issue. The Family Trustees, Virginia Wiltberger, and the Independent Trustee remain the trustees of each of those trusts. 3 - The composition of Dynabrade’s Board of Directors is set forth in a Shareholders Voting Agreement, dated September 30, 2006, attached hereto as Exhibit B. -4- 4 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 b. Board Member 2: A descendent of Walter, who is chosen by the Trustees of the Trust, with concurrence of the Independent Trustee; c. Board Member 3: A Dynabrade Executive, who is chosen by the trustees of an ESOP; d. Board Member 4: A non-Dynabrade employee and non-Welsch family member that has suitable business experience, who is chosen by the voting trustee of the Voting Trust Agreement (attached as Exhibit C) after consulting with the Trustees of the Trust; and e. Board Member 5: A non-Welsch family member that has suitable business experience, who is chosen by the voting trustee of the Voting Trust Agreement, after consulting with the Trustees of the Trust. 21. The Independent Trustee of the Trust is also automatically appointed as “voting trustee” under the Voting Trust Agreement. 22. Therefore, upon being appointed Independent Trustee of the Trust, Respondent Annalett also became the voting trustee under the Voting Trust Agreement. 23. In his various roles, Respondent Annalett was responsible for appointing three of the five members of Dynabrade’s Board of Directors. 24. Respondent Annalett is also a member of Dynabrade’s Board of Directors. 25. Respondent Annalett, as Independent Trustee and voting trustee, controlled almost 70% of the shares of voting stock in Dynabrade. 26. From May 1, 2015 until August 17, 2020, Respondent Annalett: (a) was a Board Member of Dynabrade; (b) had authority to appoint and remove most of the -5- 5 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 Board Members of Dynabrade; (c) was the Independent Trustee of the Trust; (d) was the voting trustee of the Voting Trust Agreement; and (e) maintained control over the majority shares of voting stock in Dynabrade. 27. Since 2006, the Trust has held shares of voting stock in Dynabrade, a privately held company, and the financial information requested by the Family Trustees assists them in evaluating the Trust’s investment in Dynabrade. 28. The Trustees had previously been provided with Dynabrade’s financial statements and valuation reports by the prior Independent Trustee, Todd Joseph. They were able to use that information to assess and evaluate the Trust’s investments. 29. After Respondent Annalett became the Independent Trustee, the Family Trustees requested information from Respondent Annalett regarding Dynabrade’s financial performance as part of their fiduciary duties. 30. Respondent Annalett would frequently dismiss or deny the Family Trustees’ request for information about Dynabrade. 31. For example, in April 2017, Family Trustee Timothy Allen requested information from Respondent Annalett related to Dynabrade’s financial performance. 32. Respondent Annalett refused and failed to provide Mr. Allen with full and complete answers to his questions. 33. Instead, in direct response to Mr. Allen’s requests for information, Respondent Annalett urged and advised Dynabrade’s Board of Directors to pass a “communication policy” that limited the disclosure of Dynabrade’s financial information which might be made to its shareholders. -6- 6 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 34. Dynabrade’s “communication policy” was thereafter used by Respondent Annalett to deny each of Mr. Allen’s requests for information about Dynabrade’s finances. 35. For example, in February 2019, Family Trustee Timothy Allen again requested information about Dynabrade’s cash and investment reserves, investment policies, and investment performance. 36. Respondent Annalett prepared a response to Mr. Allen, which denied his request for information, claiming that the request as (1) not for a proper purpose; (2) not in the company’s best interest, and (3) contains confidential information, the disclosure of which could cause harm to the company. 37. In May 2019, three Family Members met with the Trust Protector and requested his assistance in obtaining information about Dynabrade’s finances. 38. In July 2019, the Trust Protector requested that Respondent Annalett provide the Family Trustees with information about Dynabrade. Respondent Annalett refused this request. 39. In July 2019, the Trust Protector sent a memo to Respondent Annalett stating that Respondent Annalett had a fiduciary duty to disclose the requested financial information. 40. The Trust Protector thereafter met with Respondent Annalett in August 2019 to discuss this issue. The Trust Protector and Respondent Annalett discussed the Family Trustees’ request for information in great detail, including the Family Trustees’ reasons for wanting the disclosure of Dynabrade’s financial information. Respondent Annalett again refused to provide this information. -7- 7 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 41. After this meeting, Respondent Annalett stopped communicating with the Trust Protector. 42. In August 2019, Family Trustee Timothy Allen requested that Respondent Annalett and Dynabrade provide the Family Trustees with Dynabrade’s financial statements, investments, investment growth, cash, asset position, and company valuation reports for 2016 through 2018, and that this information should be provided to the Family Trustees on an annual basis. 43. Respondent Annalett refused Mr. Allen’s request for information, claiming the request was not done for a “proper purpose.” 44. In September 2019, three of the Family Trustees requested that the Trust Protector and Respondent Annalett all meet to discuss the lack of communication between the Family Trustees and Respondent Annalett. Respondent Annalett refused to meet. 45. At a November 2019 Trust meeting, the Family Trustees renewed their request for Dynabrade’s financial statements and valuations by M&T Bank. Respondent Annalett failed and refused to provide this information. 46. The Family Trustees requested this information in order to investigate and fully understand transactions, clarify discrepancies, and evaluate the Trust’s investments, including ascertaining the value of the stock held by the Trust. 47. The little information that was provided to the Family Trustees (during Welsch family meetings presented by Dynabrade) did not provide them with complete financial information they were seeking and they were never permitted to receive copies of the information presented at the annual meetings. -8- 8 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 48. To date, the Family Trustees have still not been provided with full and complete information regarding Dynabrade’s finances, including, but not limited to financial statements and valuation reports since Respondent Annalett became the Independent Trustee of the Trust. 49. Respondent Annalett derived substantial compensation in his roles as Independent Trustee and as voting trustee. For example, upon information and belief, in 2019, Respondent Annalett received over $175,000 in compensation as Independent Trustee and voting trustee. This is in addition to compensation or reimbursements that Respondent Annalett may have been paid as a Board Member of Dynabrade. 50. The Family Trustees receive no compensation in their roles as Trustees of the Trust. REMOVAL OF RESPONDENT ANNALETT AS INDEPENDENT TRUSTEE 51. The Trust instrument grants the Trust Protector the authority to remove the Independent Trustee without court intervention. Specifically, Section 4.7 of the Trust instrument provides: At any time, with respect to any trust hereunder, upon a determination by the Protector that the Independent Trustee has failed to fulfill his or her fiduciary obligations hereunder, the Protector shall have the right to remove such Independent Trustee. Such right of removal shall be continuing and shall be exercised with a duly acknowledged notice of removal, setting forth such failure with reasonable specificity, and by filing such notice with the trust records. The Independent Trustee that is removed shall not be entitled to any commissions with respect to any transfer of principal to any successor or remaining Trustee, but shall be entitled to reimbursement for reasonable expenses incurred in effecting such transfer. 52. In October 2019, Family Trustee Timothy Allen requested that the Trust Protector remove Respondent Annalett as Independent Trustee. -9- 9 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 53. As part of the Trust Protector’s due diligence, he sought to discuss the matter with all parties involved. 54. The Trust Protector, who is a Certified Public Accountant and holds a Juris Doctor degree, conducted his own independent research and consulted with two independent and highly regarded trust and estate attorneys familiar with the law of fiduciary duties. 55. In November 2019, at a Trustee meeting, the Family Trustees again requested that Respondent Annalett provide Dynabrade’s financial statements and valuations prepared by M&T Bank. Respondent Annalett refused to provide this information. 56. In November 2019, Family Trustee Timothy Allen requested that Respondent Annalett provide him with a list of compensation received by Dynabrade’s Board Members. Respondent Annalett refused to provide that information. 57. Unbeknownst to the Family Trustees, upon information and belief, in January 2020, Respondent Annalett began conferring with the Trustees’ then-counsel, Hodgson Russ LLP, to prepare a strategy to curtail the Family Trustees from continuing to ask questions about Dynabrade.4 - 58. Respondent Annalett contacted the Trustees’ then-counsel, inquiring whether he could engage another law firm to prevent that law firm from representing the Family Trustees “against” Respondent Annalett. 4 - At the time of this meeting, Hodgson Russ LLP represented (a) Dynabrade; (b) Respondent Annalett; and (c) the Family Trustees as Trustees of the Trust. - 10 - 10 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 59. In January 2020, Respondent Annalett also requested assistance from the Trustees’ then-counsel about his “concern” that the Family Trustees wanted to replace Trustee Virginia Wiltberger on Dynabrade’s Board of Directors with another family member (as allowable under the Trust instrument), as three of the Family Trustees had asked Respondent Annalett about this for months. 60. On February 26, 2020, while the Trust Protector was continuing to review the Family Trustees’ request to remove the Independent Trustee, the Family Trustees held a vote to appoint a family member (Nicholas MacVie) to Dynabrade’s Board of Directors. Respondent Annalett voted against this nomination, causing the vote to fail. 61. Also during this February 26, 2020 meeting, Family Trustees Timothy Allen, Louise MacVie, and Beverley Britzzalaro requested information about Dynabrade’s financial performance. They were not provided the requested information. 62. Respondent Annalett continued to refuse and deny the Family Trustees’ requests for information. 63. After Walter passed away in May 2020, Respondent Annalett contacted Family Trustee Terrence Welsch and expressed his condolences for the loss of Mr. Welsch’s father. During that phone call, Mr. Welsch expressed his concern to Respondent Annalett that during the last Trustee meeting, Mr. Allen, Ms. MacVie and Ms. Britzzalaro had questions that went unanswered and had gone unanswered for a long time. Respondent Annalett responded simply that everyone was getting “good returns,” and encouraged Mr. Welsch to align himself with Respondent Annalett and Trustee Virginia Wiltberger so that the three of them could “block” the other three Family Trustees and put an “end” to this “whole thing.” Mr. Welsch did not agree to do so. - 11 - 11 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 64. On June 19, 2020, the Family Trustees submitted a letter, attached as Exhibit D, to the Trust Protector stating that Respondent Annalett had failed to fulfill his fiduciary obligations by, among other reasons, withholding information from the Family Trustees. The Family Trustees requested that the Trust Protector exercise his power under Section 4.7 of the Trust instrument to remove Respondent Annalett as Independent Trustee. 65. The Trust Protector continued to review the matter. 66. After considering issues with the Independent Trustee for over one year and making his own independent evaluation of the facts and circumstances, the Trust Protector decided to remove Respondent Annalett as Independent Trustee of the Trust. 67. By letter dated August 17, 2020, the Trust Protector notified Respondent Annalett that he was removed as Independent Trustee, effective immediately, pursuant to Section 4.7 of the Trust instrument. A copy of that letter (the “Removal Letter”) with attachments is attached as Exhibit E. 68. The Trust Protector’s Removal Letter describes Respondent Annalett’s repeated failures to fulfill his fiduciary obligations, including, but not limited to: a. Respondent Annalett’s failure to fulfill his duty of loyalty to the Trustees and beneficiaries of the Trust, including his procurement and vote on a policy that allegedly denies both the Family Trustees and Trust beneficiaries from receiving complete financial information about Dynabrade, thereby interfering with the Trustees’ duties to manage and evaluate the Trust assets; b. Respondent Annalett’s lack of transparency about Dynabrade’s finances and cash position; - 12 - 12 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 c. Respondent Annalett’s arbitrary use of veto power against the Family Trustees’ vote; d. Respondent Annalett’s disregard for the Family Trustees, his disrespectful treatment of them, his assumption of “total control” of the Trust, and his failure to permit the Trustees to do their job with regard to the Trust; e. Respondent Annalett’s failure to disclose information necessary for the other Trustees to evaluate the Trusts’ investment in Dynabrade, including financial statements and reports requested by the Family Trustees, along with his failure to fully account and general refusal to provide information to the Family Trustees; f. Respondent Annalett’s several conflicts of interest; and g. Respondent Annalett’s payment of significant fees from the Trust without approval by the majority of the Trustees.5 - 69. The Removal Letter provides that Respondent Annalett’s “removal is effective immediately and [he] cannot take any further action as the Independent Trustee of the [Trust] and as a consequence of [his] removal you can no longer vote the shares under the [Voting Trust Agreement].” 70. The Removal Letter requires that Respondent Annalett complete any and all “administrative duties such as preparing the final accounting” by September 15, 2020. 5 - Pursuant to the Trust instrument, the Trustees may act by majority vote. As noted in the Trust Protector’s letter, Respondent Annalett paid significant fees from the Trust without approval by a majority of the Trustees (including the Family Trustees). - 13 - 13 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 71. By the terms of the Voting Trust Agreement, when Respondent Annalett was removed as Independent Trustee of the Trust, he was also removed as voting trustee of the Voting Trust.6 - RESPONDENT ANNALETT SEEKS TO INTERFERE WITH THE APPOINTMENT OF A NEW INDEPENDENT TRUSTEE AND ADMINISTRATION OF THE TRUST 72. On August 21, 2020, Respondent Annalett informed the Trust Protector that he would not recognize the Trust Protector’s removal and would “continue as Independent Trustee.” 73. On September 10, 2020, the Trust Protector exercised his authority under Section 4.2(C) of the Trust instrument to appoint Arthur Wingerter as Independent Trustee and Arthur Wingerter accepted his appointment on the same date. A copy of that appointment and acceptance is attached as Exhibit F. 74. Following Mr. Wingerter’s assumption of Independent Trustee duties, Respondent Annalett has interfered with administration of the Trust by continuing to insist that he is the Independent Trustee. 75. By letter dated October 8, 2020, Respondent Annalett sent a letter through counsel to Mr. Wingerter asserting that the Trust Protector’s removal of Respondent Annalett as Independent Trustee was, for unidentified reasons, invalid, and that Mr. Wingerter should “cease and desist any further actions or communications to establish 6 - Section 2.1(b) of the Voting Trust Agreement states “The Trustee (or any successor Trustee) will serve as voting trustee under this Agreement for so long as the Trustee (or any successor Trustee) is serving as the Independent Trustee under the 2006 Trust.” The “2006 Trust” referenced in the Voting Trust Agreement is the Walter N. Welsch 2006 Irrevocable Trust. - 14 - 14 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 [his] alleged role, duties and/or authority as Independent Trustee of the Trust” and threatens “immediate legal action.” A copy of that letter is attached as Exhibit G. 76. Respondent Annalett also sent through counsel a letter dated October 8, 2020, to the Trust Protector threatening legal action, stating that the Trust Protector must “cease and desist any further actions to remove [Respondent] Annalett as Independent Trustee, or to replace [Respondent] Annalett as Independent Trustee.” A copy of that letter is attached as Exhibit H. 77. Both letters falsely assert that Respondent Annalett was not removed as Independent Trustee. 78. Both letters falsely state that even if Respondent Annalett was removed (which he denies) that he is allowed to appoint the successor Independent Trustee. 79. The Trust instrument does not state that an Independent Trustee who was removed for failure to fulfill fiduciary duties (e.g. “for cause” removal) has authority to appoint his own successor. 80. Respondent Annalett’s counsel’s letter to the Trust Protector attempts to enjoin the Trust Protector from exercising any authority or power vested in him under the Trust instrument. 81. Prior to receiving these letters, on October 6, 2020, the Independent Trustee (Arthur Wingerter), as part of his duties and responsibilities, contacted Dynabrade to set up a meeting, so he can become more informed about the company and its finances. 82. On October 9, 2020, Hardy Hamann, President and CEO of Dynabrade, sent an email to the Independent Trustee (Arthur Wingerter) stating that he was “notified by the current Independent Trustee,” an apparent reference to Respondent - 15 - 15 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 Annalett, “that he and his legal counsel are challenging his removal and your appointment as the new Independent Trustee.” Mr. Hamann states that he would not communicate with or provide any information about Dynabrade to the Independent Trustee, or take any action that did not recognize Respondent Annalett as Independent Trustee of the Trust. 83. Upon information and belief, Respondent Annalett has advised Dynabrade not to communicate with Independent Trustee (Arthur Wingerter) and that Respondent Annalett is the “true” Independent Trustee of the Trust. 84. Dynabrade’s CEO is elected, and may be removed, by Dynabrade’s Board of Directors, which includes Respondent Annalett and two other members which were appointed by Respondent Annalett. 85. The Independent Trustee (Arthur Wingerter) again attempted to contact Dynabrade to obtain background and financial information necessary for the Independent Trustee to meet his fiduciary obligations to the Trust and his co-Trustees. 86. Dynabrade again refused to meet with, or acknowledge, the Independent Trustee (Arthur Wingerter), including refusing to provide the Independent Trustee with any information about the company. 87. Upon information and belief, Respondent Annalett continues to hold himself out as Independent Trustee of the Trust, continues to stonewall the Family Trustees regarding Dynabrade’s financial information, and continues to prevent the Family Trustees and Independent Trustee from fulfilling their fiduciary obligations. 88. Respondent Annalett has failed and refused to turn over Trust records to the Independent Trustee (Arthur Wingerter) and has cut off all communication with the Family Trustees. - 16 - 16 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 89. Respondent Annalett has failed to notify M&T Bank of his removal and has failed to take his name off of the Trust’s accounts. 90. The Family Trustees cannot access the Trust’s accounts with M&T Bank because Respondent Annalett continues to dispute his removal as Independent Trustee. 91. Dynabrade has scheduled a Welsch family informational meeting for November 13, 2020. Upon information and belief, Respondent Annalett intends to continue to act as Independent Trustee and voting trustee at that meeting. This would be done in direct conflict to Mr. Wingerter’s rights and responsibilities as Independent Trustee (and as voting trustee of the Voting Trust Agreement). 92. One of the roles of the Independent Trustee and voting trustee is to vote for Board Members of Dynabrade (in conjunction with a vote and/or consultation with the Trustees). 93. Upon information and belief, Dynabrade will not recognize the vote of the Independent Trustee (Arthur Wingerter) for Board Members of Dynabrade because Respondent Annalett has informed Dynabrade not to recognize anyone else but himself as Independent Trustee or voting trustee. 94. Upon information and belief, the Independent Trustee’s and voting trustee’s commissions are paid out of Dynabrade’s shareholders’ dividends in November of each year. Upon information and belief, in November 2020, Respondent Annalett will attempt to collect commissions in the amount of almost $200,000 even though he has been removed as Independent Trustee and voting trustee. - 17 - 17 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 95. Respondent Annalett has now actively interfered with the administration of the Trust, and the responsibilities and duties of the Family Trustees, the Independent Trustee, and the Trust Protector. FIRST CAUSE OF ACTION (Declaratory Judgment) 96. Petitioners repeat and reallege the above-referenced paragraphs as if fully set forth in this cause of action. 97. An actual, justiciable controversy has arisen and now exists between Petitioners and Respondent Annalett over Respondent Annalett’s removal as Independent Trustee of the Trust. 98. Uncertainty regarding the identity of the Independent Trustee of the Trust will harm Petitioners as Trustees and the Trust Protector, including but not limited to, inability to access the Trust’s accounts at M&T Bank and failure to recognize votes by the Independent Trustee (Arthur Wingerter) for Board Members of Dynabrade. 99. The Trust Instrument empowers the Trust Protector to remove an Independent Trustee if the Trust Protector concludes the Independent Trustee failed to fulfill his or her fiduciary obligations. 100. The Trust Protector made an independent determination that Respondent Annalett failed to fulfill his fiduciary obligations and exercised his power to remove Respondent Annalett as Independent Trustee of the Trust. 101. Respondent Annalett is no longer Independent Trustee of the Trust. 102. The Trust Protector has appointed Arthur Wingerter as Independent Trustee of the Trust. - 18 - 18 of 25 FILED: ERIE COUNTY CLERK 11/09/2020 12:59 PM INDEX NO. 814261/2020 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 11/09/2020 103. Petitioners are entitled to a declaration that: (a) Respondent Annalett has been removed as Independent Trustee: (b) Arthur Wingerter is the Independent Trustee of the Trust; (c) Respondent Annalett must turn over any and all Trust shares, records, and information to Mr. Wingerter; and (d) Respondent Annalett is barred from attempting to take any action on behalf of the Trust. SECOND CAUSE OF ACTION (Injunction) 104. Petitioners repeat and reallege the above-referenced paragraphs as if fully set forth in this cause of action. 105. By reason of Respondent Annalett’s conduct, Petitioners have suffered and will continue to suffer irreparable injury for which they have no adequate remedy at law. 106. As to each item of relief requested herein, greater injury will be inflicted upon Petitioners if relief is denied than will be inflicted upon Respondent Annalett by the granting thereof. 107. Petitioners are entitled to an injunction barring Respondent Annalett from holding himself out or exercising the authority of the Independent Trustee, or otherwise interfering with administration of the Trust, including attempting to vote as Independent Trustee or voting trustee and from accepting any commissions as Inde