Arbitration is a non-judicial process for resolving disputes. Instead of litigating a contentious matter in
state and federal court, litigants go to an arbitrator to resolve the matter. It
is common to see mandatory arbitration clauses in employment and consumer
cases. For example, a very recent United States Supreme Court Case dealt with
the enforceability of an arbitration clause in a cellphone contract that disallowed
class-action suits, AT&T
Mobility v. Concepcion, 563 U.S. _____ (2011).
In regards to trusts, arbitration clauses
have been included in these documents as well. A recent court decision touched
upon the enforceability of arbitration clauses. In, Diaz v. Bukey (2011) 195 CA4th 315, two beneficiaries, Marie and
Paulette, became entangled in a legal squabble over the handling of their late
parents’ trust. Marie was the successor trustee as well as a beneficiary and
Paulette was the other beneficiary. In May 2009 Paulette requested that Marie
provide her an accounting of the trust. When Marie provided an unsatisfactory accounting
to Paulette, she filed a petition in November 2009 to have her removed as
trustee for breach of fiduciary duty. Marie tried to have the case dismissed
because the trust contained a mandatory arbitration clause. The trial court
overruled the dismissal and Marie appealed this decision to the Court of
Appeal. On appeal, the Court of Appeal held that the arbitration clause was unenforceable
because Paulette was not a party to the arbitration agreement when her parents
created the trust, which is generally required to enforce an arbitration
clause.
However, Marie appealed this decision to
the California Supreme Court and the Court agreed to review the appeal on
August 10, 2011. Thus, the enforceability of an arbitration clause in a
California trust hinges upon the decision of the California Supreme Court. So we shall see................
