Virginia Supreme Court Declines to Enforce Arbitration Clause in a Trust, Agrees Trusts Aren’t “Contracts” Under FAA and Virginia Law

Linda Anderson sued Sarah Boyle alleging that Boyle breached her duties as trustee of an irrevocable trust to which Anderson and Boyle were beneficiaries. Boyle moved to compel arbitration, citing an arbitration clause in the trust. The lower court denied the motion and Boyle appealed.

The Virginia Supreme Court granted the appeal solely to decide whether the Virginia Uniform Arbitration Act (VUAA) or the Federal Arbitration Act (FAA), each of which requires arbitration for “contracts,” compels enforcement of an arbitration provision in a trust. The court explained that a trust is, in general, a “donative instrument,” not an “agreement between two or more persons which creates an obligation to do or not to do a particular thing.” As such, the court held that a trust is not a “contract,” as required to fall within the ambit of both the VUAA and the FAA. While the VUAA also compels arbitration for certain “written agreements,” the court disagreed with Boyle that a trust qualifies as an “agreement.” Further, even if it did, the court noted that an arbitration clause would not be enforceable under the VUAA as it relates to claims between a trustee and a beneficiary, the latter of whom is not a party to any “written agreement to submit any existing controversy to arbitration.” The court therefore affirmed the lower court order denying Boyle’s motion, agreeing that neither the VUAA nor the FAA compels arbitration.

Boyle v. Anderson, No. 210382 (Va. Apr. 14, 2022).