575 S.W.3d 144
Ark. Ct. App.2019Background
- Settlor Woodrow W. Anderson, Jr. executed a living trust (April 1, 2014) naming children Woodrow III and Kandice Gibbons as successor co‑trustees and grandchildren (including Seth and Trevor) as beneficiaries.
- On November 7, 2014, while allegedly ill and on heavy narcotics, Woodrow, Jr. executed a First Amendment to the Trust that changed discretionary distributions and included an arbitration clause; he died later that month.
- Beneficiaries (Seth and Trevor) sued the co‑trustees (Woodrow III and Kandice) seeking to set aside the Amendment for undue influence/incapacity and pleaded breaches of fiduciary duty and other relief.
- Trustees moved to dismiss or, alternatively, to compel arbitration based on arbitration provisions in the Trust and the Amendment; beneficiaries opposed, arguing they never consented and the Amendment was invalid.
- The trial court denied the motion to compel arbitration, ruling that allegations attacking the validity of the Amendment (fraud/duress/incapacity) are matters for the court, not arbitration.
- The trustees appealed; the Arkansas Court of Appeals affirmed, holding challenges to the validity of a trust or amendment must be decided by a court rather than by arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitration must be compelled despite beneficiary challenge to Amendment's validity | Beneficiaries: the Amendment (and its arbitration clause) is invalid due to undue influence/incapacity; arbitration cannot be enforced against non‑consenting beneficiaries | Trustees: Trust and Amendment contain broad arbitration clauses covering disputes arising from the Trust, so arbitration must be compelled | Held: Court declined to compel arbitration; validity of the Amendment (fraud/duress/incapacity) is for the court to decide |
| Whether issues of undue influence/incapacity are for arbitrator or court | Beneficiaries: allegations attack testamentary validity, so the court should determine credibility/validity | Trustees: arbitration clauses should govern and arbitrate disputes including validity questions | Held: Questions attacking the integrity/validity of the donative instrument are for the court, not arbitration |
Key Cases Cited
- Stipanuk v. Williams, 552 S.W.3d 34 (Ark. App.) (standard of review for denial of motion to compel arbitration)
- Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013) (approved arbitration clauses in trusts for disputes not attacking validity)
- McArthur v. McArthur, 224 Cal. App. 4th 651 (Cal. Ct. App.) (denial of motion to compel arbitration where beneficiary attacked validity of amended trust)