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Eaton Vance Senior Income Trust v. Saba Capital Master Fund, Ltd.

Eaton Vance Senior Income Trust v. Saba Capital Master Fund, Ltd.

Superior Court of Massachusetts, At Suffolk

March 31, 2021, Decided

SUPERIOR COURT 2084CV01533-BLS2

Opinion

Memorandum and Order on Motion to Dismiss Counterclaims

The Eaton Vance Senior Income Trust, a closed-end investment fund, seeks a declaration that an amendment to its bylaws is valid. This amendment provides that a trustee may be removed by vote of more than half of all outstanding shares; previously a trustee could be removed by a plurality of shares participating in the vote. In response, Saba Capital Master Fund, Ltd., challenges that amendment plus a second bylaw amendment adopted by three other Eaton Vance funds-. That amendment provides that any shareholder controlling more than ten percent of the voting power of one of the Trusts may not exercise its voting rights unless a majority of the other shareholders agree.

Saba asserts what it characterizes as counterclaims against the plaintiff and three other Eaton Vance investment funds (the "Trusts"1), their eleven trustees (the "Trustees"2), and the Eaton Vance entity that manages the Trusts (the "Adviser"3). It claims that, by adopting these amendments, the Trustees breached their obligations under the Declarations of Trust, breached their fiduciary duties, and violated [*2]  the federal Investment Company Act of 1940. Saba also claims that the Adviser wrongfully induced or helped bring about the amendments. And it seeks a declaration that both amendments are invalid.

The Eaton Vance parties have moved to dismiss all counterclaims. The Court will for the most part deny the motion, as Saba has stated viable counterclaims for breach of contract, breach of fiduciary duty, rescission of at least one bylaw amendment under the Investment Company Act, and declaratory judgment as to the validity of the bylaw amendments. However, it will allow the motion in part by dismissing the counterclaim against the Trusts and the Trustees for breach of the implied covenant of good faith and fair dealing, and the two claims against the Adviser for tortious interference with contractual relations and for aiding and abetting a breach of fiduciary duty.

1.1. Factual Background. The Trusts are organized as Massachusetts business trusts under G.L. c. 182. They are registered as closed-end investment companies under the Investment Company Act of 1940 (15 U.S.C. § 80a-1, et seq.). Saba holds shares in each of the four Trusts, which gives it a beneficial interest in the assets held by each Trust.

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2021 Mass. Super. LEXIS 48 *

EATON VANCE SENIOR INCOME TRUST v. SABA CAPITAL MASTER FUND, LTD.

CORE TERMS

shareholders, bylaw, Trusts, counterclaims, shares, fiduciary duty, election, business trust, allegations, voting rights, Declarations, business judgment rule, ten percent, declaration of trust, motion to dismiss, parties, voted, tortious interference, contractual, covenant, funds, breach of fiduciary duty, declaratory judgment, aiding and abetting, alleged facts, good faith, Stake Amendment, declaratory, outstanding, closed-end

Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Evidence, Inferences & Presumptions, Inferences, Business & Corporate Law, Corporations, Articles of Incorporation & Bylaws, Amendments to Bylaws, Estate, Gift & Trust Law, Private Trusts Characteristics, Trustees, Removal & Resignation, Meetings & Voting, Annual Meetings, Director Elections & Removals, Contracts Law, Contract Interpretation, Good Faith & Fair Dealing, Duties & Powers, Limitations, Capacity of Parties, Representative Capacity, Trustees, Standards of Care, Shareholder Actions, Actions Against Corporations, Direct Actions, Derivative Actions, Enforcement of Corporate Rights, Management Duties & Liabilities, Fiduciary Duties, Business Judgment Rule, Torts, Negligence, Gross Negligence, Causes of Action, Negligent Acts of Directors & Officers, Governments, Legislation, Statutory Remedies & Rights, Securities Law, Investment Advisers, Compensation, Investment Companies, Illegal Acts & Unlawful Representations, Voting Shares, Voting Trusts, Contracts, Intentional Interference, Elements, Commercial Interference, Employment Relationships, Causes of Action & Remedies, Breach of Fiduciary Duty, Multiple Defendants, Concerted Action, Civil Aiding & Abetting, Pleadings, Complaints, Requirements for Complaint, Intentional Torts, Declaratory Judgments, State Declaratory Judgments, Grounds for Relief, Scope of Declaratory Judgments