Media magnate Rupert Murdoch lost a legal battle recently when a Nevada probate commissioner ruled he could not amend the terms of his family trust.
Murdoch, whose holdings include Fox News, The Wall Street Journal and the New York Post, was attempting to ensure that his oldest son, Lachlan Murdoch, would receive sole control of his media empire after his death. Under the current terms of the trust, each of the 93-year-old Murdoch’s four children will have equal voting shares.
It’s a family drama straight out of an episode of HBO’s “Succession” and one that could have significant implications for the domestic and international media landscape in the years ahead.
University of Virginia School of Law professor Naomi Cahn, co-director of the Family Law Center, recently discussed the matter and the legal intricacies that could help shape the future of some of the most prominent news organizations in the country.
Q. Why was Rupert Murdoch attempting to change his family trust?
A. Murdoch apparently argued that he was trying to preserve the value of his business by ensuring that his son Lachlan remained in control so that Fox News would maintain its current editorial approach. Murdoch was not trying to change his children’s financial interests, but was focused on who would have control over the businesses in the trust. This all seems to have been precipitated by an episode from “Succession,” the HBO drama.
It is important to note that the court proceedings are all sealed, and what we know is based on stories by reporters who were able to look at the confidential court documents. A group of news organizations sued to open the proceedings, but a Nevada probate court judge rejected their petition.
Naomi Cahn is the Justice Anthony M. Kennedy Distinguished Professor of Law and Armistead M. Dobie Professor of Law at the UVA School of Law. (Photo by Julia Davis)
Q. Why did the Nevada probate commissioner rule against Murdoch?
A. The commissioner decided that Rupert and Lachlan had acted in “bad faith” by trying to change control after Rupert’s death. The commissioner found that, rather than making changes in the best interests of all the beneficiaries, the goal was simply to put Lachlan in charge.
Q. How difficult is it to change a family trust once it has been signed?
A. Family trusts can be either revocable or irrevocable. Revocable trusts are relatively easy to change. The Murdoch trust was irrevocable, set up as a result of Murdoch’s divorce from his second wife, Anna, who negotiated to protect the children’s interest in the family business. The trust reputedly has a limited ability to be amended solely to benefit the heirs. Even with this clause, amending an irrevocable trust is difficult, although not impossible. The court was faced with determining whether the standard for modification had been met.
Q. Is the matter now settled, or can Murdoch appeal?
A. In Nevada, a probate commissioner’s recommendations will be adopted by the probate judge in the absence of a request for review, but I would assume Rupert Murdoch will pursue all avenues he can to get the result he wants. Indeed, a news report indicates that Murdoch plans to appeal.
Q. What lessons or legal ramifications from this case could broadly impact family law or trust law?
A. This is an extremely wealthy and high-profile family, but there are important lessons for anyone setting up a trust.
