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UncategorizedFebruary 15, 20160 comments

Munger, Chadwick & Denker Prevails in Trust Litigation

In recent litigation involving a trust with over $4 million in assets, attorney Mark Chadwick obtained an extremely favorable settlement on behalf of his seven individual clients, including the trustee, against a multi-billion-dollar healthcare conglomerate.

The declaratory-judgment action featured multiple claims and counterclaims involving disputes over the entire corpus of the trust.  Several of the legal issues raised have implications for trust litigation generally, particularly for litigation involving revocable trusts.

The litigation began when the healthcare conglomerate challenged certain decisions by the trustee, seeking to invalidate gifts made under a pre-death amendment of the trust document.  Mr. Chadwick’s clients counterclaimed to establish the validity of the gifts and the decisions of the trustee, and further asserted that the healthcare conglomerate forfeited all of its interest in the trust pursuant to the trust’s no-contest clause.

Among the issues in the lawsuit was the question whether the no-contest clause was activated because the healthcare conglomerate lacked “probable cause” for its challenges — which is a required showing whenever a party seeks to activate a trust’s no-contest clause under the landmark case of In re the Shaheen Trust, 341 P.3d 1169 (App. 2015).  (Munger, Chadwick & Denker also represented the victorious trustee in the Shaheen Trust case.)

Another key issue in the case involved the absence of pre-death duties to beneficiaries under a revocable trust pursuant to A.R.S. § 14-10603(A).  Mr. Chadwick’s clients took the position that because the trust was revocable, the trustee owed no duties whatsoever to the contingent beneficiaries, including fiduciary duties or duties to account to the beneficiaries for pre-death decisions.  In the absence of such duties, contingent beneficiaries have no right to challenge pre-death decisions or obtain an accounting for pre-death decisions.

After a year and a half of intense litigation, the healthcare conglomerate effectively surrendered at a settlement conference.  Mr. Chadwick’s clients obtained their desired result of validating the challenged gifts — with no out-of-pocket expenditures for attorneys’ fees or costs.