What is ‘Probable Cause’ in bringing a No Contest Clause

Probable cause exists if, at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe that there is a reasonable likelihood that the requested relief will be granted after an opportunity for further investigation or discovery. Prob C §21311(b).

The Comment to Prob C §21311 indicates that “reasonable likelihood” means “more than merely possible, but less than ‘more probable than not’” and cites Alvarez v Superior Court (2007) 154 CA4th 642, 653 n4, and People v Proctor (1992) 4 C4th 499, 523. The comment also indicates that by tying “reasonable likelihood” to “requested relief,” the standard refers not only to the contestant’s factual contentions but also to the legal sufficiency of the grounds for the requested relief. Apparently this standard is intended to be more demanding than the “legally tenable” standard adopted in Estate of Gonzalez (2002) 102 CA4th 1296, 1304, referred to in the comment.

However, estimation of the likelihood of obtaining the requested relief is not limited to only the facts actually known to the contestant at the time of filing. Instead, it is judged by what a reasonable person would believe given what the contestant knows and what that reasonable person expects may turn up after an opportunity for further investigation or discovery.

It seems reasonable that the statutory phrase “facts known to the contestant” is not limited to facts within the contestant’s personal knowledge but should also include reasonably reliable information acquired by pre-filing investigation, even if based on the personal knowledge of third party witnesses, on business records or other apparently authentic documents, or on reasonably reliable hearsay evidence. The existence of probable cause is measured by what a reasonable person would have believed at the time of filing. The determination should not be affected by whether subsequent investigation or discovery turned out to strengthen or weaken the claim and should not depend on a continuing assessment of the likelihood of obtaining relief as investigation and discovery unfold.

What is a ‘Protected Instrument’ in a No Contest Clause?

A protected instrument means both of the following (Prob C §21310(e)):

  • The instrument that contains the no-contest clause; and
  • An instrument that is in existence on the date that the instrument containing the no-contest clause is executed and that is expressly identified in the clause, either individually or as part of an identifiable class of instruments, as being governed by the clause.

What does ‘Direct Contest Mean’ under No Contest Clause

A direct contest means a pleading filed with the court by a beneficiary that alleges the invalidity of a protected instrument or one or more of its terms on the basis of one or more of the following grounds (Prob C §21310(b)):

  • Forgery;
  • Lack of due execution;
  • Lack of capacity;
  • Menace, duress, fraud, or undue influence;
  • Revocation of a will under Prob C §6120, revocation of a trust under Prob C §15401, or revocation of an instrument other than a will or trust under the procedure for revocation that is provided by statute or by the instrument; or
  • Disqualification of a beneficiary under Prob C §6112, §21350, or §21380.

Enforceability of No Contest Clauses AFTER 2010

The current statutory scheme greatly restricts the enforceability of no-contest clauses. This law adopts a general rule that a no-contest clause “shall only be enforced” against contests that fall within one of three types (Prob C §21311):

(1) Direct contests brought without probable cause (see §§5.85.9);

(2) Challenges to certain property transfers if expressly barred by the no-contest clause ; and

(3) Filing or prosecution of creditor’s claims if expressly barred by the no-contest clause .

Thus, after January 1, 2010, for all instruments that became irrevocable on or after January 1, 2001, (Prob C §21315) no-contest clauses are not enforceable against contests that are outside these three types. As with the former law, however, the statute states that the common law governs enforcement of a no-contest clause to the extent that the statute does not apply. Prob C §21313.

What Law to use in No Contest Clause

The current statutory scheme at Prob C §§2131021315 ostensibly governs the enforceability of a no-contest clause in any instrument that became irrevocable on or after January 1, 2001.Prob C §21315(a). But whether this scheme is conclusive or not depends on the date of irrevocability.

For instruments that became irrevocable on or after January 1, 2010, the statutory scheme at Prob C §§2131021315 applies.

For instruments that became irrevocable on or after January 1, 2001, but before January 1, 2010, the current statutory scheme presumptively applies, but Prob C §3 might permit application of the former law. Donkin v Donkin (2013) 58 C4th 412. In a sense, there are overlapping enforcement regimes for instruments that became irrevocable in this period: they are now governed byProb C §§2131021315, but they were governed at the time of irrevocability by repealed Prob C §§2130021322 and associated case law. The default rule is hence that the current law presumptively applies to these instruments, subject to Prob C §3.

Different Enforcement policies for No Contest Clauses

As a result of the confusing interplay between the current statutory scheme, the former statutory scheme, and the accompanying case law, no-contest clauses are now governed by what counsel might regard as three different enforcement regimes. The applicable regime should depend on the date that the instrument in question became irrevocable.

  • Instruments that became irrevocable on or after January 1, 2010, are governed by the statutory scheme codified at Prob C §§2131021315.
  • Instruments that became irrevocable on or after January 1, 2001, but before January 1, 2010, are presumptively governed by the statutory scheme codified at Prob C §§2131021315. However, under certain circumstances, Prob C §3 might permit application of the law that was in existence when the instrument became irrevocable. Donkin v Donkin (2013) 58 C4th 412. This might lead the court to apply the repealed statutory scheme at former Prob C §§21300–21322.
  • Instruments that became irrevocable before January 1, 2001, should be governed by former law, i.e., by the repealed statutory scheme at Prob C §§2130021322 or by pre-2001 case law.

This divergence between enforcement schemes arose from a growing concern that the strict enforcement of no-contest clauses was increasing litigation rather than reducing it. Over time, some practitioners came to the conclusion that the increasingly common requests for safe harbor rulings were creating an unproductive burden on the courts and beneficiaries and causing delay in the administration of estates and trusts. This view led the legislature to request a study by the California Law Revision Commission. In January 2008, the Commission issued a report recommending revision of the no-contest clause statutes. See 37 Cal L Rev’n Comm’n Reports 359 (2007).

The Commission’s report recommended that no-contest clauses in instruments that became irrevocable on or after January 1, 2001, should become enforceable only against three specified types of contests, starting January 1, 2010. The Commission’s report also recommended that the safe harbor procedure should apply only to three specific types of contest for instruments that became irrevocable on or after January 1, 2001. Regarding enforcement of no-contest clauses in instruments that became irrevocable before January 1, 2001, the report recommended that existing law continue to apply. In 2008, the legislature enacted Stats 2008, ch 174, repealing the existing Part 3 of Division 11 of the Probate Code (former Prob C §§21300–21308 and 21320–21322) and adding a new Part 3 (Prob C §§2131021315), operative January 1, 2010. In doing so, the legislature generally followed the Commission’s recommendations, except that it repealed the statutory safe harbor procedure completely for instruments that became irrevocable on or after January 1, 2001.

The result was to establish two divergent enforcement regimes regarding no-contest clauses, with the split taking place on January 1, 2010. On its face, the new statutory scheme was to apply to all instruments that became irrevocable on or after January 1, 2001. But as a practical matter, given the issue of statutory retroactivity and the effect of Prob C §3, there are now three separate enforcement regimes, with each of them governing instruments that became irrevocable at a different point in time.

Thus, the starting point is the question of when the instrument containing the no-contest clause became irrevocable.

Seeking a “Safe Harbor” in a No Contest Clause

For more than a century, the general rule in California was that no-contest clauses are enforceable, subject to certain public policy exceptions. The underlying theory was that a testator or settlor should be free to condition a gift on the beneficiary’s acquiescence to other terms of the instrument, provided those conditions did not violate public policy.

Over the years, no-contest clauses evolved to cover much more than traditional will contests based on claims of undue influence or lack of capacity. Practitioners developed broadly worded no-contest clauses that sought to disinherit a beneficiary who undertook almost any action that challenged the testator’s or settlor’s estate plan or its administration, except actions that were immune on public policy grounds.

Starting in 1989, the legislature developed statutory provisions codifying much of the case law concerning the enforceability of no-contest clauses. See former Prob C §§21300–21307. In subsequent years, the legislature added refinements, including a procedure for potential litigants to seek a “safe harbor” ruling from the court in advance of filing a proposed action, to determine whether the proposed action would be a contest and trigger a forfeiture (former Prob C §21320). While the safe harbor procedure was pending, the statute of limitations on the underlying action was tolled. Former Prob C §21308.

In light of the drastic impact of violating a no-contest clause and the potentially wide scope of a broadly worded clause, it became essential to pay careful attention to whether a proposed action would amount to a contest. Thus, it became standard practice for potential litigants to seek a safe harbor ruling before filing anything that might be a contest. If the court ruled that a proposed action would not be a contest, the potential litigant was at liberty to proceed without fear of a forfeiture. If the court ruled that a proposed action would be a contest, the potential litigant could decide whether or not the potential benefits of the claim outweighed the possibility of forfeiture.

No Contest Deterrent Effect

Although no-contest clauses are intended to discourage litigation, a no-contest clause does not, in and of itself, preclude litigation. Rather, if enforceable, it requires the beneficiary to choose between accepting the gift provided in the instrument and pursuing a claim that is a contest. Of course, if the instrument makes no gift to the beneficiary, the no-contest clause is ineffective as a deterrent because the already disinherited beneficiary has nothing to lose by pursuing the claim.

Clauses disinheriting a beneficiary that also say that if the beneficiary contests the will, he or she shall receive 1 dollar and no more likewise have no deterrent effect. A testator or settlor who wants a no-contest clause to actually deter contests must make a gift to the anticipated contestant that is large enough to provide a substantial disincentive to litigation.

Furthermore, broadly worded no-contest clauses that apply to “any beneficiary or heir” sometimes boomerang and trigger unintended consequences, forcing a favored beneficiary with a legitimate issue to remain silent to avoid risking the loss of a substantial gift (substantial because he or she is a favored beneficiary), whereas a disfavored beneficiary would face a smaller risk or no risk at all if already disinherited. Drafters should review with the client the possibility of using targeted no-contest clauses that identify by name the potential contestants to be silenced and call for a forfeiture by them only instead of using indiscriminate broad classifications.

No Contest Clauses Historical Overview

While the enforceability of no-contest clauses has been restricted over time, these clauses were traditionally regarded as the biggest single obstacle to trust and estate litigation. A no-contest clause is a provision in an otherwise valid instrument that, if enforced, would penalize a beneficiary if the beneficiary files a contest with the court. Prob C §21310(c); former Prob C §21300(d). A typical no-contest clause provides that a beneficiary will forfeit his or her beneficial interest in the estate plan if he or she seeks to invalidate or impair the instrument or any of its provisions.