Rupert Murdoch’s Appeal to Alter Family Trust Faces Uphill Battle

Rupert Murdoch’s attempt to alter his family trust in order to solidify his son Lachlan’s control over the global media empire — while ensuring the trust continues its conservative editorial stance after his death — now hinges on a challenging legal maneuver within the complex Nevada probate court system.https://wordpress.com/

The first step for Mr. Murdoch is to persuade a district court judge in Reno to overturn a recent ruling by a local commissioner, who had concluded earlier this month that Mr. Murdoch acted in “bad faith” when he attempted to secretly modify the trust, which had previously split control of his empire equally among his four eldest children. Mr. Murdoch’s legal team must submit a brief countering this judgment by Monday.

If Mr. Murdoch fails in this attempt and the commissioner’s recommendation is upheld, his lawyers have indicated they will appeal the decision. Under Nevada law, this appeal would go directly to the State Supreme Court.

To succeed, Mr. Murdoch, 93, faces a significant legal challenge — he must prove that the probate commissioner’s finding of bad faith was “clearly erroneous,” based on the legal standards set by the Reno court system.

“These types of cases are notoriously difficult to overturn due to the ‘clearly erroneous’ standard,” said Kevin P. Walsh, a Nevada estate planning and litigation lawyer familiar with the Reno probate court. “It would require something so blatantly incorrect that it’s unmistakable.”

This challenge could be particularly daunting given the thoroughness and clarity of the December 7 recommendation filed by Probate Commissioner Edmund J. Gorman.

The 96-page report, which was obtained by The New York Times, concluded that Mr. Murdoch’s efforts to change the Murdoch Family Trust were nothing more than “a carefully crafted charade” designed to secure Lachlan’s position as Mr. Murdoch’s successor, while sidelining three of Lachlan’s siblings.

The dispute over the trust is as much about power as it is about money. If Mr. Murdoch and Lachlan manage to overturn the ruling and amend the trust, Lachlan will not only consolidate his voting power over the Murdoch empire but also gain control over the shares held by his siblings. Failure to do so may leave Lachlan with no option but to buy out his siblings — potentially at a premium due to the commissioner’s findings — to maintain control of the empire.

The basic structure of the trust was established in 1999 following Mr. Murdoch’s divorce from his second wife, Anna. As part of their settlement, Anna insisted that Mr. Murdoch’s four children at the time — Prue, Elisabeth, James, and Lachlan — share equal control over the Murdoch trust after his death. The trust holds the family’s voting shares, which control a global media empire encompassing Fox News, The Wall Street Journal, and major newspapers and TV networks in Australia and the UK.

By 2019, Mr. Murdoch had made it clear that he wanted Lachlan to succeed him. However, the terms of the trust, which were designed to be extremely difficult to alter, presented a potential issue after his passing. Prue, Elisabeth, and James, who are more politically liberal than Lachlan, would have an equal say in voting the trust’s shares, which could result in them opposing Lachlan’s leadership or even undermining his position.

In a pretrial ruling, Commissioner Gorman had stated that Mr. Murdoch would be allowed to amend the trust if he could demonstrate that he was acting in accordance with a 2006 amendment that permitted changes. However, this amendment specified that any changes must be made in good faith and with the “sole purpose” of benefiting all the heirs.

To meet these conditions, Mr. Murdoch and Lachlan argued that the other siblings were conspiring to remove Lachlan and alter Fox News’s conservative editorial stance after Mr. Murdoch’s death, which would harm the value of the trust for all beneficiaries.

To support their case, Mr. Murdoch’s attorneys presented evidence of plotting among the other siblings, according to Gorman’s opinion. This included a memo written in 2023 by Elisabeth’s representative, Mark Devereux, who had watched an episode of Succession, an HBO drama about a media mogul’s death causing chaos among his children and business.

While Gorman acknowledged the memo raised questions about how Murdoch’s heirs might react to his death, he concluded that it did not support claims of a coordinated effort to change the company’s management. He also found no evidence that the siblings were conspiring against Lachlan.

Instead, Gorman argued that it was Lachlan who took the first step in 2023 to alter the trust through a plan dubbed “Project Family Harmony.” Part of the plan focused on dealing with what it called the “Troublesome Beneficiary” — Lachlan’s younger brother, James.

Gorman also rejected the argument that changing the trust to centralize Lachlan’s power was solely in the interest of Murdoch’s heirs. He pointed out that one clear motive for the change was Rupert Murdoch’s desire for Fox and News Corp to remain conservative voices in media after his death, which he acknowledged was a personal goal, rather than one strictly tied to the companies’ financial value.

The commissioner’s finding of “bad faith” was largely based on his view that Lachlan’s representatives and Mr. Murdoch’s team — which included former U.S. Attorney General William P. Barr — had acted with dishonest intent and had not sufficiently ensured that the changes were in the best interests of all the heirs.

Joshua S. Rubenstein, chairman of the private wealth department at the law firm Katten, Muchin, and Rosenman, noted that district judges are typically reluctant to overrule a commissioner who has presided over extensive testimony and reviewed a large body of evidence. “The fact-finding in these cases is very hard to challenge,” he said.

Nonetheless, there may still be some room for appeal. For instance, Gorman dismissed the argument that Mr. Murdoch acted in good faith by seeking court approval for the trust changes, even though he was not legally required to do so. The district judge or the State Supreme Court may have a different view.

If the ruling stands, Rubenstein suggested it might be wise for Mr. Murdoch and Lachlan to work together with Prue, Elisabeth, and James to negotiate a buyout or some form of compromise. “They should sit down and have a conversation,” he said.