No contest clauses – which ostensibly act to disinherit any party who seeks to contest the dispositive terms or validity of estate planning documents – are generally liked by estate planning clients and employed by planners. Why wouldn’t they be? When directing the distribution of your assets after your death, who wouldn’t want to prevent a disfavored or disinherited heir from questioning one’s intent and causing one’s estate to incur substantial expense defending a contest?
But despite their popularity, problems have long existed in the enforcement of no contest clauses. No contest clauses have limited effect on fully disinherited heirs who already have nothing to lose. And recent statutory changes have further limited the applicability of no contest clauses to apply only to certain specific types of legal actions – the most common being direct attacks on the estate planning documents themselves, known as “direct contests” – and even then, only to those direct contests which are brought without probable cause.[1] Thus, there is often a significant chance that any such no contest clause, even if found to be applicable under these statutory restrictions in response to a direct contest, will be nullified by a probable cause justification.
More recently, another factor has come into play that should cause litigators to think twice before seeking to enforce a no contest clause and to tread lightly when they do – the anti-SLAPP statute. SLAPP is an acronym for Strategic Lawsuit Against Public Participation. California Code of Civil Procedure section 425.16 is California’s anti-SLAPP statute and provides a special motion to strike a complaint where the complaint arises from activity exercising the rights of petition and free speech. In Urick v. Urick[2], the Second District Court of Appeal held that that the anti-SLAPP statute is also applicable to probate petitions which seek to enforce no contest clauses.
Urick’s Application of the Anti-SLAPP Statute to No Contest Clauses
Urick involved a trust agreement and the effect of extrinsic evidence of the settlor’s testamentary intent, in interpreting a trust amendment. Settlor Allyne Urick originally executed a trust agreement structured as a charitable remainder annuity trust, with the annuity to pay equally to settlor’s daughter Dana Urick, son Willis E. Urick, III, and grandson Trentyn Urick-Strass. Upon termination of the annuity, the remaining principal and any accrued interest was to be distributed to Phillips Academy of Andover.
Several months after the execution of the trust, Allyne signed a handwritten note removing Willis as a beneficiary of the trust. Then, several months later with the assistance of an attorney, Allyne executed an amended and restated trust. Despite Allyne’s prior attempt to disinherit Willis, the amended and restated trust was again structured as a charitable remainder annuity trust, again naming Dana, Willis and Trentyn as recipients of the annuity income, and again naming Philips Academy as the recipient of the remaining principal and any undistributed income upon termination of the annuity.
After settlor’s death, Dana assumed the role of successor trustee. Dana then filed a petition to reform the trust. In support of her petition, Dana cited mistake and misrepresentation as grounds for reformation, claiming that (based on the decedent’s handwritten note) it was Allyne’s intent to disinherit Willis, that the terms of the trust were misrepresented to Allyne by the drafting attorney, and that Allyne had mistakenly signed the amended trust believing it reflected her true intent. Dana proposed a reformation of the trust which caused trust assets to be split into two shares, to be held in trust for ten years for the benefit of Dana and Trentyn, and then to be distributed outright to each of them. If neither of Dana nor Trentyn survived the settlor, the assets would be divided in four equal shares and distributed to four institutions, one of which was Phillips Academy.
Because the proposed reformation petition would again disinherit Willis and would substantially reduce the remainder gift to Phillips Academy, Willis and Phillips Academy each objected. Willis also filed a petition for instructions as to whether the reformation petition violated the Trust’s no contest clause. Dana responded with an anti-SLAPP motion purportedly brought in her capacity as trustee. The trial court granted the anti-SLAPP motion and ordered Willis to pay Dana’s substantial attorney fees of $25,000.00.
Willis appealed the decision, and the matter was reviewed de novo, to “determine not only whether the anti-SLAPP statute applies, but whether the complainant has established a reasonable probability of prevailing on the merits.”[3] The Court of Appeal held that the anti-SLAPP statute does apply to efforts to enforce a no contest clause on its face, but that Willis was able to establish a reasonable probability of prevailing on the merits. In regard to the latter finding, the Court looked at: 1) the evidence which indicated that Dana had filed the petition as a trust beneficiary (and not as a trustee)[4] who would therefore be subject to the no contest clause; 2) that there was prima facie evidence that the reformation petition constituted a direct contest on the grounds of fraud; and 3) that there was prima facie evidence that Dana did not have probable cause to file the reformation petition.
In reaching its opinion, the Court recognized that its application of the anti-SLAPP statute was likely contrary to the policies behind no contest clauses, in that it would increase litigation costs and potentially cause delay. However, the court reasoned that the clear and unambiguous language of the anti-SLAPP statute required its application in this context and that application of the anti-SLAPP statue was not at odds with any provision of the Probate Code. Based on the foregoing, the Court indicated that its hands were tied, but clearly invited the legislature to make this change: “There may be valid reasons to exempt enforcement of no contest clauses from the anti-SLAPP statute, but if so, it is for the Legislature to create an exception.”[5]
Important Takeaways From Urick
Urick is a valuable tool for litigators seeking to contest a will or trust, and inversely, serves as dangerous pitfall for the unwary fiduciary or heir seeking to enforce a no contest clause. A party will no longer be afforded the luxury of pursuing enforcement of a no contest clause in questionable circumstances. Instead, he or she will need to preliminarily assess the applicability of the no contest clause and the reasonable probability of prevailing before initiating any enforcement proceeding. While a justified and well drafted petition may survive an anti-SLAPP motion, significant expenses will undoubtedly be incurred defending against the motion itself. Moreover, if the arguments set forth in the anti-SLAPP motion are persuasive and the motion is granted, the enforcing party will be forced to pay the legal expenses of the contestant. This automatic attorneys’ fee provision, however, is not reciprocal, as the court may only award attorneys’ fees to the prevailing party of an unsuccessful anti-SLAPP motion, if said motion was frivolous or brought solely to cause unnecessary delay.[6] Consequently, the risk to a contestant in bringing an anti-SLAPP motion in this context is minimal as compared to the risk to the enforcing party. Thus, this holding will likely result in fewer attempts to enforce such no contest clauses in the future.
Familiarity with the Urick decision and the underlying anti-SLAPP legislation is therefore essential to any attorney bringing or defending a will or trust contest. The case highlights the need to exercise caution in the form and relief sought in any enforcement of a no contest clause and more generally when bringing petitions in trust and estate litigation. This case also serves as yet another example of why it is important for any litigation attorney practicing in probate court to be qualified and well versed in the uniquely applicable law and procedures.
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[1] See Prob. C. § 21310 et seq.
[2] (2017) 15 Cal.App.5th 1182.
[3] “Resolution of an anti-SLAPP motion involves two steps. In the first step, the moving party must establish that the claim at issue arises from free speech or petitioning activity protected by section 425.16 [as] an act in furtherance of a person’s right of petition or free speech under the United States or California Constitution. . . .If the moving party establishes that the claim arises from protected activity, the burden shifts to the opposing party to demonstrate a probability of prevailing on the merits. This second step has been compared to a summary judgment-like procedure.” Id. at 1191 (internal citations omitted).
[4] For example, the caption and attorney signature block of Dana’s petition “stated the attorneys represented Dana, without identifying her as trustee”, and Dana signed a verification which did not state that she was filing as a trustee. And perhaps most telling, was Dana’s invocation of Civil Code section, 3399, which allowed reformation of a written instrument by “an aggrieved party”; Dana was aggrieved as a beneficiary, but not as trustee. See id. at 1195-96.
[5] Id. at 1195.
[6] See Code Civ. Proc. §§ 128.5, 425.16(c).
