Dad Wins—No ContestDad Wins—No Contest

By John T. Brooks, partner, Foley & Lardner, Chicago, and Rorie M. Sherman, editor-in-chief, Trusts & Estates, New York

Some states, such as Florida, ban no-contest clauses in wills as against public policy. A greater number of states allow these measures -- also known as "in terrorem" clauses -- but rarely enforce them. It seems that the law and its practitioners are reluctant to deny people, even disgruntled heirs, their day in court. And there's that maxim: The law abhors a forfeiture.

Unfortunately for a brother and sister, though, other legal norms may have worked against their challenge to their dad's will. You see, dad was a sitting federal judge, due a certain amount of deference on that account alone. And when he said, "no contest," his judicial brethren listened.

The result: as punishment for their hubris in contesting the last will and testament that divvyed up Judge Donald Stuart Russell's $33 million estate, two of his children will get absolutely nothing. In fact, one daughter now owes at least half a million dollars to pay for others' attorneys' fees and costs.

Judge Russell served on the U.S. Court of Appeals for the Fourth Circuit from 1971 until his death in 1998 at the age of 92. As if that wasn't enough, he'd also been governor of South Carolina (1963 to 1965), a U.S. senator (1965 to 1966), and a federal district court judge for the Western District of South Carolina (1967 to 1971).

Two of his four kids, Mildred Russell Neiman (Mim) and Walker Scott Russell (Scott), each filed actions to set aside their dad's will, as well as his revocable and irrevocable trusts. Their complaints in general alleged that their father had been unduly influenced and coerced by Mim's children, and perhaps others, in the design of his estate plan. Named defendants included not only Mim's three children but also her ex-husband (Thad Williams); Wachovia Bank, the executor of the estate and the trustee; Judge Russell's wife, Virginia U. Russell (now deceased); and Russell's two other children, John R. Russell (Johnny) and Donald R. Russell, Jr. (Donnie).

Mim and Scott were upset because Judge Russell's will gave Johnny and Donnie $10.7 million each, minus taxes and costs. But Scott was to get only $750,000 in a trust. And while Mim was to receive one-third of the estate balance, about $10.7 million, the will stipulated that her share was to be divided evenly in trusts among her and her three children.

Mim and Scott brought suit despite the no-contest clause in their dad's will that vowed to disinherit anyone who challenged his estate plan. After all, even one of the lawyers representing Mim's children publicly stated he thought the South Carolina high court had never upheld a no-contest clause.

No-contest clauses are designed, explained the South Carolina Supreme Court in its most recent decision on the Russell case, "to protect estates from costly and time-consuming litigation and minimize the bickering over the competence and capacity of testators."

Still, many courts find it unfair to punish heirs who contest a will by disinheriting them utterly -- even if that's what the testator wanted.

For Mim and Scott, things started out badly. They lost in summary judgment, a ruling upheld by the South Carolina Supreme Court. "We found," the Supreme Court justices said, "that the record was 'devoid of any evidence that the Williams Children or Thad influenced the execution or any modification of [Judge Russell's] will.'" Russell v. Wachovia Bank, 353 S.C. 208, 333, 578 S.E.2d 329 (2003). "Similarly, as to the trust contest, we found that there was 'no evidence to make out a prima facie case of undue influence.'" Ibid. at 224, 578 S.E.2d at 337.

From there, things just kept getting worse. Mim's children filed suit seeking to have Mim and their Uncle Scott disinherited for having brought the litigation in the first place.

A trial court did side with Mim and Scott, finding that they did have probable cause to believe that before he died, Judge Russell had been unduly influenced by Mim's children, and perhaps others. In South Carolina, probable cause is one way around the no-contest clause's sanction. The trial court cited the strife and discord in the family, particularly between Mim and her children. The court also noted that Mim and Scott were treated less advantageously under the estate plan than they believed the testator had intended. As a result, the court ruled that the no-contest clauses were invalid and unenforceable.

Still, that court ordered Mim to pay fees and costs incurred by Wachovia to the tune of $264,995.31, by her mother's estate in the amount of $147,110.25, and by her brothers, Johnny and Donnie, in the amount of $97,412.83.

But the trial court denied a motion for sanctions filed against Scott and his attorneys. The court also denied Mim's kids their request for attorneys' fees and costs.

This Solomonic decision apparently satisfied no one. Everyone appealed, and the case landed before the South Carolina Supreme Court again. And that's when Mim and Scott really got slammed.

The justices reversed the trial court finding that they had a right to bring their suits. Even "[v]iewing the evidence in the light most favorable to Mim and Scott, we hold that summary judgment was improperly granted . . . Family discord and strife, coupled with a less-than-favorable inheritance, do not constitute probable cause." And just because their dad never mentioned that his will included Mim's children wasn't reason enough for Mim and Scott to think he'd been unduly influenced, the court said.

And here's where the justices' respect for Judge Russell really helped bury Mim's and Scott's cause. Remember, Russell sat on the Fourth Circuit until he died. So how could the South Carolina justices in any way declare him less than competent?

As the justices put it: "Any suspicions Mim and Scott may have had about the influence of others over Testator should have been dispelled by the overwhelming evidence of Testator's abilities . . . Testator maintained his physical and mental health up until his death. He continued to serve as a federal judge, driving himself to and from work. He was fully capable of executing testamentary documents. He maintained his independence, was freely permitted to come and go from his home and office as he desired, having opportunities to visit relatives, friends, and business associates without supervision."

As if that weren't enough, Judge Russell made sure that the full force of the law would work against anyone contesting his will. The record, says the state high court, showed that Judge Russell told Donnie (who was not only his son but also served as his attorney) that he anticipated a challenge to his will. He asked one of his former law clerks to represent his grandchildren, Mim's offspring, if there was a contest. He even went so far as to have himself examined by a psychiatrist to create a record of his testamentary capacity. And 15 months before he died, Judge Russell amended both his will and revocable trust to include provisions disinheriting beneficiaries who contested the validity of his estate plan.

Not only did the South Carolina high court rule that Mim and Scott were to be disinherited as per Judge Russell's no-contest clause, but it also kept in place the trial court's half a million dollar's worth of sanctions against Mim and even remanded to the trial court her children's bid to have their fees and costs paid as well.

Ouch.

But before you feel too sorry for Mim and Scott, you have to wonder: What were they thinking challenging the will of a man who'd spent three decades (count 'em, three) on a federal appeals bench?