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In Hanselman v. Frank, Case No. 09-P-1490, 2010 Mass.
App. Unpub. LEXIS 715 (June 23, 2010), a decision issued pursuant
to Rule 1:28, the Appeals Court affirmed the grant of a preliminary
injunction upon the motion by one beneficiary of an irrevocable
trust, Hanselman, to enjoin the trustee from making distributions
to another beneficiary, Edward, during the pendency of litigation
concerning whether Edward had violated the forfeiture provision of
the trust by petitioning for the removal of the trustee for failure
to account.
In affirming the grant of the preliminary injunction, the
Appeals Court reviewed (1) whether Hanselman had a likelihood of
success on the merits, (2) whether Hanselman would be irreparably
harmed if the injunction were not issued, and (3) whether a
balancing of the harms favored Hanselman.
Regarding the first element, likelihood of success on the
merits, Massachusetts has long recognized forfeiture clauses--also
known as in terrorem or no-contest clauses--as valid and
enforceable, and the Court held that Edward's petition to
remove the trustee triggered the forfeiture clause of the trust.
The Court noted that Edward had not merely sought an accounting
from the trustee.
Regarding the second element, irreparable harm, the Court
explained that potential inability to collect damages has sufficed
to entitle a plaintiff to a preliminary injunction that does no
more than preserve the status quo. Preserving the status quo was
held to be warranted here because the evidence suggested that
Edward would be unable to repay distributions if he were ultimately
found to have violated the forfeiture provision.
As to the third element, balancing of the harms, the Court
explained that the risk to a plaintiff of funds being dissipated by
a potentially judgment-proof defendant during litigation has been
found to outweigh the defendant's loss of use of the money
pending a final decision.
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