The Texas Supreme Court recently held that a trust’s arbitration provision was enforceable. See Rachal v. Reitz, No. 11–0708 (Tex. May 3, 2013) (click here for opinion). In this case, a beneficiary sued a trustee for allegedly misappropriating trust assets, and the trustee responded to the lawsuit by asking the court to enforce the trust’s arbitration provision, which required arbitration of “any dispute of any kind involving this Trust or any of the parties or persons concerned herewith (e.g., beneficiaries, Trustees).”
In holding that the arbitration clause was enforceable, the court reasoned that the beneficiary accepted the benefits of the trust and sued to enforce its terms, and hence the beneficiary accepted the terms of the trust, which included the arbitration provision.
This case reminds me that George Washington’s will had a similar arbitration clause (click here to see will), and arbitration reformers during the 1920s tried to appeal to patriotism and cited this example of Washington’s will when lobbying for modern arbitration laws like the Federal Arbitration Act.