USA – CALIFORNIA Trends and Developments Contributed by: Jennifer J. McCall, Paul Fraidenburgh, Alexandria Marx and Maria Williams, Pillsbury Winthrop Shaw Pittman LLP
tor’s decision and remanding the case to the Superior Court).) The arbitration agreement may also be limited in scope. In Browne v Falk , No. A163049, 2023 WL 164606, at *1 (12 January 2023), the defendant was unable to enforce the arbitration agreement because the scope of the plaintiff’s original claim was not encompassed in the arbitration agreement. Settlement As demonstrated in the above Antonio case, settle- ment may ultimately be the most cost-effective and private way to resolve a trust dispute. Data Reflecting Comparative Results From Trial, Arbi- tration, and Mediation In California: a helpful article – see David Horton, Reid Kress Weisbord & Chris- topher J. Ryan, Jr., Trust Litigation, 104 Wash. U. L. Rev. (forthcoming 2026), manuscript at 1, 43–53) – that analyses data collected from 640 contested trust petitions filed in the San Francisco Superior Court between 2014 and 2020 to assess the effectiveness and trends related to no-contest clauses, mandatory arbitration provisions, and mediation. The findings highlight: (i) a paradox related to no-contest clauses: although 80% of trusts in litigated cases included one, it was only invoked in about 1% of cases; (ii) the limited role of arbitration clauses – they were present in about 5% of trusts, with only a single motion to compel arbi- tration, and are generally limited to “internal” disputes (eg, trustee–beneficiary conflicts over administration) rather than validity claims; and (iii) mediation’s strong foothold in trust dispute resolution – 85% of cases with mediation resulted in settlement, as opposed to only 46% of cases without. This article is important because it analyses informa- tion that is difficult to obtain. Because trusts are often resolved outside the judicial system – as opposed to Wills, which typically proceed through probate – there is comparatively less data available. Thus, the trends identified in this article provide a valuable insight into the world of trust dispute resolution and can help shape actions and strategies for parties moving for- ward. In California Office of Tax Appeals 2025 WL 4641563, the court highlights the tax implications of an arbitra- tion award, holding that while the division of a legal
claim may qualify as a transfer “incident to divorce”, in this case the subsequent receipt of income from that claim was separately taxable and did not receive non-recognition treatment. As such, the tax effects of an award should be part of negotiations. In this case, while still married, the employee- spouse entered an arbitration proceeding against their employer for lost income. After the spouses divorced, an arbitration award was granted in favour of the employee-spouse. The non-employee-spouse sought one-half, arguing that the income was com- munity property. The court found that the non-employee-spouse was entitled to half. Further, the court held that while the division of the underlying claim qualified as a transfer “incident to divorce” under IRC, Section 1041, it distin- guished between the claim and the later award. During the marriage, the spouses owned only the claim, not the award. Thus, the non-employee-spouse received the award based on that retained interest. Because the recovery was taxable and there was no offset- ting basis, the full amount was includable in the non- employee-spouse’s gross income the year of receipt. Under IRC, Section 451, income is recognised upon actual or constructive receipt. Because the marriage had already dissolved when the employee-spouse received the award, the non-employee-spouse lacked control over the funds, and their rights were subject to legal restrictions. Accordingly, the non-employee- spouse recognised the income upon actual receipt. The Hang v RG Legacy I , LLC , 88 Cal. App. 5th 1243 (2023) case demonstrates how economic factors are considered by the court when determining whether to allow or deny arbitration. In this case, the plaintiff (the successor in interest to his father, the decedent) filed an action alleging elder abuse and negligent hiring and supervision against the defendant (the nursing facility where the dece- dent resided). As part of the decedent’s residency, the plaintiff executed arbitration agreements on the decedent’s behalf with the defendant. In response, the defendant filed a petition to compel arbitration. The estimated total cost of the arbitration was USD33,000. The plaintiff argued that the decedent was unable to
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