California was a pioneer in safeguarding members of the public against lawsuits aimed solely at intimidating them from speaking out on public issues, and its “Anti-SLAPP” law is still regarded as providing the broadest protection among the 28 states with similar statutes.
The acronym “SLAPP” stands for “Strategic Lawsuit Against Public Participation,” meaning a lawsuit brought to silence opponents or critics with the threat of costly litigation.
Anti-SLAPP laws enable those who are the subject of a SLAPP suit to ask the court to throw out the case and reimburse their legal fees. The very existence of an anti-SLAPP law can deter litigants from filing retaliatory lawsuits.
But sometimes this powerful weapon can backfire on an overzealous moving party, as it did in a case recently decided by the California Court of Appeal (Gaynor v. Bulen).
The underlying extended family dispute over the management and control of their family trust had been in and out of probate court in San Diego for many years. A wealthy real estate developer who died in 1983 left his estate to his three adult children in the form of a trust which owned a large shopping center that generated substantial income.
The trust was divided equally among the three children. One of the developer’s sons was named as the trustee, with the developer’s accountant to succeed the son, and a bank to succeed the accountant. The trust gave the trustee the authority to distribute income among all the beneficiaries.
A few years later the son asked the probate court to approve a change to the trust, such that a committee of three trustees – one from each branch of the family – would oversee it. The court approved the new arrangement.
Over the next 20 years several trustees resigned or died, and were replaced by other members from that trustee’s branch of the family.
In 2006, according to court documents, the trustees – allegedly advised by family member James Bulen ("Bulen"), who was not a trustee – put the shopping center into a limited liability company.
This allegedly caused the trust to lose its “control premium” value associated with its management of the center, and allegedly benefitted Bulen and other senior beneficiaries, to the detriment of the younger generation beneficiaries.
By 2011 there were 46 beneficiaries to the trust, but all income went only to the senior generation.
The co-trustees asked the probate court to again modify the trust to give them sole authority to nominate successor trustees without regard to family branch, and to allow only the nine senior-generation beneficiaries then receiving income to vote for successor trustees. This would give them control over how the distributions would be made.
The Gaynor beneficiaries, one branch of the family, opposed the modification. A trial was held in 2012, and the probate judge ruled in their favor. The Gaynor beneficiaries then asked the court to remove the co-trustees and appoint a financial institution to serve as trustee.
The co-trustees instead proposed that they be allowed to select a corporate trustee, and suggested one who allegedly was unqualified and would favor the senior beneficiaries. The co-trustees also asked the court to give them “virtually unlimited discretion” to distribute the trust’s income.
After months of hearings and the filing of multiple briefs, the court said it would appoint the trustee proposed by the Gaynor beneficiaries.
The Gaynors then asked the court to have the trust pay their legal fees, arguing that their efforts benefitted all beneficiaries by ending the “senior-generation-only” distribution and installing a neutral, professional trustee to protect and preserve the trust’s assets.
The co-trustees (allegedly with Bulen’s involvement) opposed the motion, and spent trust funds on legal fees and expenses to do so.
The probate judge awarded the Gaynor group more than $300,000 in fees, expenses and interest.
The Gaynors also filed a “surcharge petition” against the co-trustees and Bulen (as an alleged “de facto” trustee), seeking repayment to the trust of legal fees and costs, along with double damages under probate law and punitive damages.
The 25 breaches of fiduciary duty alleged in the Gaynors' petition included improper decisions about distributing trust income, failing to inform beneficiaries of their right to receive income, failing to provide trust accounting, hiding the mental impairment of one co-trustee and other alleged actions, and filing the prior petitions with the probate court to modify the trust terms.
Bulen filed an anti-SLAPP motion, asking the court to strike the claims against him. He argued that the Gaynor petition arose from his alleged participation in the probate litigation, and that these actions were protected under the anti-SLAPP law because they were in furtherance of his constitutional right to petition the court.
California’s anti-SLAPP statute says a court can throw out a lawsuit against a person “arising from any act of that person in furtherance of the person’s [constitutional] right of petition or free speech … unless the court determines … there is a probability that the plaintiff will prevail on the claim.”
As one court decision put it, “you have a right not to be dragged through the courts because you exercised your constitutional rights.”
Bulen argued that the Gaynors’ surcharge petition against him was triggered by his legally protected right to participate in the probate litigation to modify the terms of the trust to his benefit. For that reason, he argued, their petition should be subject to the anti-SLAPP statute.
The appellate court rejected Bulen’s argument. The anti-SLAPP law protects against lawsuits “arising from” constitutionally protected speech. That wasn’t the case here, the court said.
The Gaynor beneficiaries’ claim of breach of fiduciary duty was not based on Bulen’s litigation in probate court, the court said, but on his alleged efforts to control the trust to the detriment of other beneficiaries and the waste of trust assets.
“Holding that a trust beneficiary’s surcharge petition is subject to an anti-SLAPP petition whenever a beneficiary challenges the trustee’s use of trust assets to fund self-serving litigation would significantly deter beneficiaries from bringing such actions,” the court noted.
“If a fiduciary could strike breach of duty claims at the pleading stage before discovery and subject the beneficiaries to attorney fee awards, this would substantially burden a beneficiary’s constitutional petition rights and undermine the Probate Code protections for beneficiaries, thereby reducing the probate court’s ability to monitor trustee activities,” it ruled.
The appellate court affirmed the probate court’s dismissal of Bulen’s anti-SLAPP motion, and ordered him to pay the Gaynors’ costs on appeal.
California’s anti-SLAPP law is a strong shield against abusive litigation, but the courts won’t allow that protection to be misused by the alleged wrongdoer who often has more means to litigate in a scorched earth fashion.
By Lynda I. Chung