A California appellate court refused to compel arbitration of multiple claims related to a charitable remainder trust where multiple inconsistent arbitration and litigation outcomes could result because not all of the parties requested arbitration of the matter and because the improper handling of such a trust is an interest of public policy not necessarily subject to arbitration in spite of an agreement to arbitrate.

In Patton v. Estate Strategies, Inc., 2d Civil No. B195508, 2008 WL 2454683 (Cal. Ct. App. June 19, 2008), Lowell Patton petitioned the court to remove the trustees of his estate and brought suit against Estate Strategies and other parties, alleging various claims including elder financial abuse and fraud. Estate Strategies moved to compel arbitration based on an agreement to arbitrate contained within engagement letters signed by Patton.

The trial court denied the motion to compel arbitration because some issues were non-arbitrable, which gave rise to a possibility of inconsistent rulings and piecemeal arbitration. The trial court's concern over piecemeal arbitration was heightened by Patton's deteriorating health. Estate Strategies appealed.

On appeal, the Court found that the trial court did not abuse its discretion. As an initial matter, because other potential parties to the dispute had not requested arbitration, the dispute could not be entirely resolved through arbitration. Also, according to the Court, even though Patton died during the pendency of the appeal, the trial court's reasoning remained valid. The record showed a clear possibility for piecemeal litigation and inconsistent rulings.

Additionally, as the Court noted, the Attorney General is charged with enforcing charitable trusts and must be made a party where a dispute arises in regards to such a trust, as was the issue here. To arbitrate this claim regarding a charitable trust made by Patton would, according to the Court, undermine the role of the Attorney General.

Moreover, the claims alleged by Patton involved fraudulent fundraising schemes, a matter of interest to the public which may not properly be arbitrated, regardless of whether Patton agreed to arbitrate claims arising from his estate plan. See Klussman v. Cross County Bank, 134 Cal.App.4th 1283, 1290 (2005).

As Estate Strategies was unable to make a showing that the trial court abused its discretion, the Court affirmed the denial of the motion to compel arbitration.