Lawyers Need Not Live in Terrorem of No-Contest Clauses by Alex M

LOS ANGELES

www.dailyjournal.com

WEDNESDAY, NOVEMBER 19, 2014 PERSPECTIVE Lawyers need not live in terrorem of no-contest clauses By Alex M. Weingarten and Logan M. Elliott and replaced the prior reasonable er held “a belief, from a reasonable challenger’s sister in connection with cause standard with the UPC’s proba- person’s perspective, of a reason- estate assets. “no-contest,” or in terrorem ble cause standard. Intuitively, “probable likelihood of success.” Proba- In South Carolina, however, the (Latin for “in fear”), clause able cause” implies a stricter standard ble cause was satisfied because the court in Russell v. Wachovia Bank, Ais a provision in a will or than reasonable cause. However, the challenger’s tenuous claims were not N.A. (2006) limited a contestant’s trust that threatens to disinherit a opposite appears to be true. Section “illogical” or “obviously invalid” in right to petition by applying the same beneficiary if they challenge a will 21311(b) states that “probable cause the face of likely defenses. The chal- probable cause standard enforced in or trust in court. Such clauses dis- exists if, at the time of filing a con- lenger’s reasonably held belief in the Marsh. In that case a contestant was courage beneficiaries from litigating test, the facts known to the contestant validity of her claims controlled, even disinherited under a no-contest provi- after the death of a testator. Some would cause a reasonable person to if the claims were almost certain to sion where the decedent had specifi- states, such as Florida, deem no-con- believe that there is a reasonable like- fail as a matter of law. cally anticipated a meritless challenge test clauses unenforceable under any lihood that the requested relief will be While Terry demonstrates the by the contestant that was based only circumstances. Others, such as Mas- granted after an opportunity for fur- broad leeway granted to challengers on “family discord and strife, coupled sachusetts, enforce them without ex- ther investigation or discovery.” The under the new probable cause stan- with a less-than-favorable inheri- ception. The Uniform Probate Code new probable cause standard shifts dard, Marsh suggests there are limits. tance.” “If a no-contest clause cannot (UPC) provides that no-contest claus- the inquiry from whether the chal- In Marsh, the Court of Appeal found be upheld under these facts,” the court es are enforceable unless the contest lenger has facts sufficient to believe that a widow did not have proba- reasoned, “such a clause would not is based on probable cause. that his factual contentions will be ble cause to challenge her deceased ever be enforceable.” In 2010, the California Legislature proven true, to whether the challeng- husband’s will because her claims Viewed through the probable cause enacted significant changes to the er has facts sufficient to believe that relied upon unsupported “conclusory standard applied by Terry, Marsh and Probate Code with the goal of clarify- the requested relief may eventually be allegations” and patently “frivolous” the courts of myriad other jurisdic- ing the law and limiting the enforce- granted. Even if the average reason- legal arguments. The widow was tions, no-contest clauses appear to be ment of no-contest clauses by insti- able person would doubt the veracity therefore disinherited under the will’s unenforceable in all but the rarest of tuting a probable cause requirement. of the challenger’s allegations, prob- no-contest clause. cases. When assessing whether a lit- The idea behind these changes was able cause is nonetheless satisfied Terry and Marsh establish there is igant has probable cause to challenge to bring clarity to the Probate Code. if it is reasonable to believe that the likely a low bar for what would con- a will or trust, California courts will Although there are no published opin- requested relief may ultimately be stitute probable cause under the new likely consider whether the challenge ions interpreting “probable cause” in granted, regardless of whether the statute. So long as a challenge is not rises above a minimum level of friv- this context, these changes appear to challenger’s factual contentions are obviously invalid or frivolous from olous from the perspective of a rea- have resulted in a test that will result proven to be true. the perspective of a reasonable per- sonable challenger. If so, a no-contest in no-contest clauses being unen- But how have California courts son, a no-contest clause will not be provision will be disregarded. This forceable under all but the most ex- defined and applied the new proba- enforced. lax standard follows the Legislature’s treme circumstances. ble cause standard? Unfortunately, Other jurisdictions, including goal of allowing good faith probate The pre-2010 statute provided that the issue has received limited atten- some that adopted the UPC’s prob- contests to move forward without a “direct contest” (a suit seeking to in- tion. Two recent unpublished Court able cause standard, apply a similar prejudicing the challengers. It will validate a trust on specified grounds, of Appeal opinions — Estate of Terry test. In Colorado, the Court of Appeal also likely invite more such contests such as forgery, incompetence, (2012) and Estate of Marsh (2014) — found in Estate of Peppler (1998) that given that contesting beneficiaries fraud and undue influence) could be suggest that California courts do not probable cause is likely satisfied if will have little to fear from the infa- brought without triggering a no-con- enforce no-contest clauses in all but the challenger “relied upon the ad- mous terror clause. test clause if the challenging party the most extreme cases. vice of disinterested counsel sought had reasonable cause, which required In Terry, the widow of a deceased in good faith after a full disclosure Alex M. Weingarten is a partner and the challenging party to possess facts man sought to replace her late hus- of the facts,” without specific con- Logan M. Elliott is an associate at that would cause a reasonable person band’s trust with a handwritten will sideration of merit or likelihood of Venable LLP in Los Angeles. to believe that the challenger’s alle- purportedly executed a year after the success. In Michigan, the court in gations may eventually be proven. trust. In assessing whether the widow Estate of Stan (2013) found proba- However, as noted by the state Su- had probable cause, the court set a re- ble cause for a petition contesting the preme Court in a 2013 case, Donkin v. markably low bar. The court rejected appointment of the challenger’s sister Donkin, the prior law was needlessly the son of the decedent’s argument as personal representative of their complex and “promoted ... uncertain- that the widow could not show prob- deceased father’s estate although the ty as to the scope of application of a able cause because her claims were challenger contested the wrong tes- no-contest clause.” barred by various defenses, noting tamentary document and presented To remedy such uncertainty and that probable cause analysis was not no evidence to support her claims. reduce the frequency of unjust dis- an “outcome-directed focus, with Though the petition was legally in- inheritances, the state Legislature its emphasis on whether respondent valid, it was nevertheless reasonable adopted the recommendation of the could have been successful.” Rather, from the challenger’s perspective ALEX WEINGARTEN LOGAN ELLIOTT California Law Review Commission probable cause exists if the challeng- based on questionable conduct by the Venable LLP Venable LLP