Rupert Murdoch's attempt to change his family trust to consolidate his son Lachlan's leadership of his global media empire -- and lock in its conservative editorial direction after his death -- now depends on a long-shot move in the highly specialized Nevada probate court system.
The first step for Mr. Murdoch is to try to persuade a district court judge in Reno to reject a local commissioner's harsh ruling this month that he had acted in "bad faith" when he moved secretly to change the trust that left control of his empire divided equally among his four oldest children. Mr. Murdoch's brief challenging that opinion is now due by Monday.
If Mr. Murdoch fails, and the commissioner's recommendation is ratified by the judge, his lawyers have said Mr. Murdoch will appeal the probate court's decision. Under the Nevada system, that appeal would be filed directly to the State Supreme Court.
To prevail, Mr. Murdoch, 93, will have to clear a high legal bar -- proving that the Nevada probate commissioner's finding of bad faith was "clearly erroneous," according to the rules of the Reno-based court circuit.
"These types of decisions are not that easy to challenge because of this 'clearly erroneous' standard," said Kevin P. Walsh, a Nevada estate planning and litigation lawyer who appears regularly in the Reno probate court. "It would have to be something that really slaps you in the face as being a mistake."
That might prove especially difficult, he said, because of the breadth and unequivocal language of the Dec. 7 recommendation that the probate commissioner, Edmund J. Gorman, filed under seal this month.
The 96-page opinion, which was obtained by The New York Times, concluded that Mr. Murdoch's bid to change the Murdoch Family Trust was "a carefully crafted charade" to lock Lachlan in place as Mr. Murdoch's successor and take power away from three of Lachlan's siblings.
The battle over the trust is about both money and power. If Mr. Murdoch and Lachlan can overcome the decision and succeed in amending the trust, Lachlan will be able not only to consolidate his voting power over the Murdoch empire but also, in effect, to control his siblings' shares. If they fail, Lachlan may have no choice but to buy out his siblings -- perhaps at a premium now, because of the commissioner's ruling -- to retain control of the empire.
The general contours of the trust date back to Mr. Murdoch's 1999 divorce from his second wife, Anna. As part of their settlement, she insisted that his four children at the time -- Prue, Elisabeth, James and Lachlan -- share equal control of the Murdoch trust upon his death. The trust holds the family voting shares that control the world's most powerful conservative media empire, which includes Fox News, The Wall Street Journal, and major newspapers and television outlets in Australia and Britain.
By 2019, Mr. Murdoch had made it clear that he wanted Lachlan to be his successor. But the terms of the trust, which was structured to be very difficult to alter, presented a potential problem after his death. Prue, Elisabeth and James, who are all more politically liberal than their brother, would have an equal say in how the trust voted its shares, and could push back against Lachlan's wishes or even topple him.
In a pretrial ruling, Mr. Gorman had determined that Mr. Murdoch would be within his rights to alter the trust if he could prove that he was closely following the parameters of a 2006 amendment that allowed changes to it. But that amendment stipulated that any changes had to be conducted in good faith and for the "sole purpose" of benefiting each individual heir.
In an attempt to satisfy these conditions, Mr. Murdoch and Lachlan argued that Lachlan's siblings were plotting to oust him and change Fox News's conservative editorial bent after Mr. Murdoch's death, which would harm the value of the trust for all trust beneficiaries.
To bolster their case, Mr. Murdoch's lawyers argued that they had unearthed evidence of plotting among the three other siblings, according to Mr. Gorman's opinion. This evidence included a memo written in 2023 by Elisabeth's representative on the trust, Mark Devereux, after he watched an episode of the HBO drama "Succession." In that episode, a character loosely based on Mr. Murdoch suddenly dies, leaving his adult children and business in chaos.
Mr. Gorman acknowledged that the memo posited questions about how Murdoch's children and heirs might respond to his death. But he wrote that it did not "support the notion of a scheme to change management at the companies." He also said he saw no evidence that the three were committed to joining forces against their brother.
Instead, Mr. Gorman wrote, it was Lachlan who had moved first against his siblings in the middle of 2023 when he sought to change the trust under a plan code-named Project Family Harmony. The plan was focused partly on containing the perceived threat posed by what it described as a "Troublesome Beneficiary" -- Lachlan's younger brother, James.
Mr. Gorman also dismissed the argument that changing the trust to consolidate Lachlan's power was for the sole purpose of benefiting Mr. Murdoch's beneficiaries. He said there were other obvious reasons for the change, including "Rupert Murdoch's wish that Fox and News continue to be alternative, conservative voices in media after he dies, which he admits is an independent goal that is not just about the companies' value."
Mr. Gorman's finding of "bad faith" rested largely on his determination that representatives for Lachlan and Mr. Murdoch on the trust -- who included William P. Barr, the former attorney general -- "demonstrated a dishonesty of purpose and motive" in voting to approve the changes without determining whether they were truly, and solely, in the best interests of all of the children.
A district judge will probably be disinclined to overrule the commissioner, who presided over extensive in-person testimony and reviewed reams of evidence, said Joshua S. Rubenstein, chairman of the private wealth department at the law firm Katten, Muchin and Rosenman.
"The determination by the trier of what the facts were is just very hard to overturn," Mr. Rubenstein said. "They're the ones who sat through days and days of testimony."
Still, some hints of what a challenge might look like are contained in the ruling. Mr. Gorman dismissed the argument that Mr. Murdoch showed good faith by seeking approval for the change to the trust from the Reno probate court when it wasn't strictly necessary for him to do so. The district judge or State Supreme Court could disagree.
If the courts don't overturn the ruling, though, Mr. Rubenstein said, it would be wise for Mr. Murdoch and Lachlan to come together with Prue, Liz and James to find their way to a buyout or compromise. "They should get in a room and talk to each other," he said.