In the Matter of the CES 2007 Trust

In 2007, Craig Schubiner (defendant) created the CES 2007 Trust as a Delaware domestic asset-protection trust (DAPT). The trust was irrevocable, was governed by Delaware law, and provided that Schubiner could never serve as trustee. Schubiner’s brother had the power to appoint and remove trustees, and he appointed an independent trustee. Although the trustee had sole discretion over distributions, Schubiner retained complete authority to manage the trust’s investments. The trust also contained a spendthrift provision, which shielded the trust’s assets from beneficiaries’ creditors by prohibiting those assets from being used to satisfy a beneficiary’s debts. The beneficiaries were Schubiner’s children, his parents, and any future spouse. Schubiner transferred a 90 percent ownership interest in three limited-liability companies (LLCs) to the trust. The LLCs owned real estate, but Schubiner continued to manage them exclusively. In 2014, Can IV Packard Square, LLC (Packard) (plaintiff) loaned money to Schubiner for a development project. Schubiner defaulted, and, in 2019, Packard obtained a $14 million Michigan judgment against him. Meanwhile, Schubiner engaged in several transactions involving property owned by the trust’s LLCs. In 2016, he transferred property from one LLC to himself, pledged it as collateral for a loan, and then transferred his personal interest back to the LLC. In 2020, he transferred his personal interests in two additional properties to the trust’s LLCs for $1 each. Packard filed a petition in Delaware state court seeking to invalidate either the entire trust or, alternatively, its spendthrift provision so that Packard could reach the real estate held by the LLCs to satisfy the judgment. Packard argued that the trust was not a legitimate DAPT but instead a sham through which Schubiner retained effective control while shielding assets from creditors. Schubiner moved to dismiss the petition, and the court considered the motion.