More than Just the Tetons: A New Chancery Court Makes Wyoming Well Worth Discovering

Geyser Basin, Yellowstone Park, Wyoming (like the title says, more than the Tetons)

But for the missing photo of the magnificent Tetons, volume 11, number 1 of the 2011 Wyoming Law Review might be mistaken for a sales piece published by the Wyoming Business Council—the state’s economic development agency. Two articles in the journal tout Wyoming’s business and trust friendly laws. “The Undiscovered Country: Wyoming’s Emergence as a Leading Trust Situs Jurisdiction,”[1] Christopher Reimer argues that the state’s laws on directed trusts, trust protectors, self-settled trusts, and private trust companies, among other tools justify that claim. A few pages earlier, Dale Cottam and four others make similar claims with regard to limited liability companies. Not only did the new 2010 Limited Liability Company Act (“LLC Act”) replace Wyoming’s original—and first-in-the-nation—act, they point out, it included some “home cooking” that makes the Cowboy State the place to be . . . organized.[2] Come for the Tetons; stay for the business and trust friendly laws and the lack of a state income tax.

Seven years later, Amy Staehr revisited that theme in her piece “The Discovered Country: Wyoming’s Primacy as a Trust Situs Jurisdiction.”[3] In it, she updates what Wyoming’s part-time legislature had been up to in the intervening years. Among other things, new legislation provided more privacy protection to trusts and better asset protection with a new Wyoming Qualified Spendthrift Trust. Likewise, limited liability companies could now have a more flexible management structure. The message was again clear: Yes, the vistas are expansive and the sunsets beautiful, but have you looked at our business and trust friendly laws lately? “I think it’s exciting what Wyoming’s trying to do with its laws,” says Michael Greear, a state representative and member of the state’s Chancery Court Committee. “Anything we do to get more business and still keep the population at 500,000 is all good.”

But there was a hitch: Wyoming’s court system. It had essentially two tiers: Nine District Courts of general jurisdiction and a Supreme Court, the state’s only appellate court. And only the Supreme Court reported its cases online. In 2019 it issued 151 opinions, just 3 of them involving trusts and businesses, down from the 159 it heard in 2018, again, only 3 of them dealing with trusts and businesses. In short, Wyoming had great new business and trust laws, but too few court opinions published online to help interested observers discern how Wyoming courts might interpret those laws, an essential ingredient to a stable climate for business entities and trusts.

It didn’t help that recently—and unfortunately—the Court’s 2014 GreenHunter Energy case put the fear of creditors into the hearts of businessmen and women. The case’s result was certainly just, but the rule of the case appeared to ignore new veil piercing provisions in the LLC Act. It’s worth noting that the Wyoming legislature did its part to provide stability. Almost immediately after the Court issued its opinion, the legislature amended the LLC Act to essentially reset the law clearly and unequivocally to pre-GreenHunter days.[4]

In its 2019 session, the Wyoming Legislature acted again, this time to increase the size and density of the paper trail created by Wyoming courts in hopes of becoming the Delaware of the West. Delaware has a Chancery court, its docket devoted to trusts and business; so should Wyoming. And voila! After a concerted effort by some forward-thinking legislators and a stroke of the Governor’s pen, Wyoming has a Chancery Court dedicated to hearing nothing but trust and business cases.  Senate File 0104, the bill that started it all, now sits ensconced as Chapter 13 of Title 5 of the Wyoming Code. Where the court will sit and when it will open is another matter. “Two things will dictate when the factory is up and running: the adoption of court rules and making sure we’ve got the IT—the caseload management system and e-filing—in place,” says Senate President Drew Perkins, sponsor of the bill.

The Act mandates $1,500,000.00 of initial funding for the court and contains a broad outline for how the court should operate, among other things. In April 2019, the Supreme Court issued an order establishing the Chancery Court Committee to fill in the details of that outline. Justice Kate Fox was appointed its chairperson. “She gets two thumbs up,” Greear says. “She put together a great committee.”

The Committee did its job, particularly in developing court rules. Finally on January 7, 2020, an email went out to the Wyoming Bar, asking for comments on the proposed rules. The comment period ends on May 15, 2020, and final rules will go into effect six months later on November 15, 2020. That date makes sense because there is still a lot to work through, according to Justice Fox. That includes the rules, but also who the judges will be and where their court will sit. “The plan is to appoint judges with expertise in the statutory areas, much like in Delaware. Wyoming Chancery Court judges must be experienced or knowledgeable in the subject matter jurisdiction of the court,” she explains.

The court’s jurisdiction includes everything from breach of contract to fraud and misrepresentation, from statutory violations of laws governing asset sales and protecting trade secrets to transactions involving the Uniform Commercial Code and the Uniform Trust Code. Disputes concerning employment agreements, insurance coverage, and dissolution of corporations, LLCs, and other entities can all be heard by the Chancery Court. The statute says the Court “shall employ “alternative nonjury trials, dispute resolution methods and limited motion practice and shall have broad authority to shape and expedite discovery,” [5] a good idea, given that the new law requires “effective and expeditious resolution of disputes,” a term of art that means a majority of the actions filed in the court must be resolved with 150 days of filing. “The sponsors of the bill view the Chancery Court as kind of a business draw,” Fox says. “A speedier court with more particular [business and trust] expertise should be attractive to businesses who are considering incorporating in or coming to Wyoming.”

As for where the court will sit, “it will likely be in Casper or Cheyenne, just because they are bigger,” she continues. “But it’s also possible, depending on the case and where the parties are, that the judges could be mobile and hear cases in places like Jackson.”

The smart money is on Casper. It’s centrally located, new money was recently appropriated for a new state office building there, and it has good air service. “Last week I had meetings in New York with our investment bankers,” says Greear, who lives in Worland, Wyoming, where he’s the CEO of Wyoming Sugar Company. “I flew out of Casper, had a nice dinner in New York, met with my bankers and was home the next day. United and Delta service Casper really well.”

Perkins, who lives and works in Casper, hopes there will eventually be one or more courts outside of his hometown, maybe one in Cody or Sheridan and one in Cheyenne, for example. “That’s my vision for it, anyway. The idea is not about having the court in Casper; it’s about having the court available for quick resolution.”

As they say, time will tell. The job now is to get the first court up and running with a judge knowledgeable about business and trust law expeditiously issuing opinions. The hope is that, when published, those opinions will consistently and clearly demonstrate how things are done in the Wyoming. And done right, it’s all good—for the Equality State and the businesses that locate there.

[UPDATE] After this story went to press at the ABA, the Wyoming legislature failed to fund a variety of construction projects during the recent legislative session, including the construction of the Chancery Court in Casper. With the COVID-19 pandemic and the drop in oil prices, even Drew Perkins, a sponsor of the Chancery Court, thought it good to wait and watch.

[1] Pg. 165 (2011).

[2] “The 2010 Wyoming Limited Liability Company Act: A Uniform Recipe with Wyoming ‘Home Cooking,” pg. 49 (2011).

[3] Wyoming Law Review, Volume 18, Number 2, pg. 283.

[4] See “Wyoming Supreme Court Upholds Decision to Pierce the Veil of Single-Member LLC,” Rutledge, Thomas; November 13, 2014, (accessed 2/26/2020); and “Wyoming Cleans up Veil Piercing in LLC Act,” Fershee, Joshua; March 29, 2016, (accessed 2/26/2020).

[5] Wyo. Stat. § 5-13-111

I wrote the piece above for the April, 2020 issue of The LLC & Partnership Reporter, a publication of the ABA.

Estate Planning Seminar at Pleasant Grove Library

I’ll be presenting a seminar on DIY — Do It Yourself — Estate Planning at the Pleasant Grove Library on Wednesday, March 8, 2017 at 7 PM. Come an enjoy the discussion. The address is 30 E Center St, Pleasant Grove.

If you have a question about wills, trusts, and other aspects of estate planning, maybe I can answer it.

DAPTs: We’re #10 (Wyoming) or #12 (Utah)! Or Should Everyone Move to Nevada?

Scales of JusticeSo attorney Steve Oshins publishes annual state rankings of virtually all things trusts. Want to know where your state’s decanting statute ranks? Go here.  Interested in establishing a so-called dynasty trust? Look here to see what your state offers–if anything. How does your state treat non-grantor trusts for income tax purposes? Well, some states do better than others, let me tell you. Nevada and South Dakota, for example, are #1 or #2 for both decanting and dynasty trust statutes and have no state income tax.

Which brings me to the subject of this post: Domestic [as opposed to foreign] Asset Protection Trusts or DAPTs. Oshins ranks them as well. How do Utah and Wyoming–the two states I practice in–stack up? Well, the headline gives away the answer. As of April 2016, sixteen states offered some form of a DAPT, including Oklahoma, Virginia, and West Virginia–the three new kids on the block. Wyoming ranks 10th on that list, Utah 12th. Sounds better if you say 10th and 12th out of 50, doesn’t it, especially since 34 states have no DAPT statute on the books. For the record, Nevada and South Dakota rank #1 and #2 among DAPT states.

Which brings me to an important question: If you’re interested in protecting your assets from predators–slip and fall creditors, for example, with a court judgment in hand–should you set your domestic asset protection trust up using your own state’s DAPT statute, if it has one, or should you use another state’s possibly more debtor-friendly statute? No surprise here: The answer is not clear.

Without getting too far into the weeds, let’s take a look at few comments that indicate there may be a bump or two in the road ahead for those who may decide to establish a DAPT using another state’s trust laws. First off is the Utah Supreme Court in the recent Dahl v. Dahl case (2015). Mrs. Dahl sued Dr. Dahl to get access to marital assets in a supposedly irrevocable trust established under Nevada law (a DAPT trust we assume, though that’s not clear from the case)–remember, Nevada purportedly has the best DAPT statute on the books.

One question before the court was whether to interpret the trust according to Utah or Nevada law–something the law refers to as a conflicts or choice of law question. The court decided to go with Utah law, saying:

Under Utah choice-of-law rules, we will generally enforce a choice-of-law provision contained in a trust document, unless doing so would undermine a strong public policy of the State of Utah. (emphasis added)

The strong public policy in this case was protecting the divorced spouse. And Utah’s law did just that. As the court said,

. . . to the extent that the Trust corpus contains marital property, Utah has a strong interest in ensuring that such property is equitably divided in the parties’ divorce action.

Who knows what the outcome would have been had the person suing been a slip and fall judgment creditor rather than an aggrieved spouse? Would the court of have interpreted the trust according to Nevada law, in which case, the party suing might have lost? That’s the problem: who knows?

Next up is the Uniform Laws Commission, which adopted amendments to the Uniform Fraudulent Conveyances Act in 2014, changing the name of the act to the Uniform Voidable Transactions Act and adding “a new Section 10 that provides that the law of an individual’s residence is to be the governing law concerning whether such individual has made a voidable transfer,” according a report by Leimberg Information Services. How does that apply to DAPTs? Well, again according to Leimberg,

The revisions to the comments [to the proposed law] erroneously state further that a transfer to a self-settled spendthrift trust [a DAPT in other words] is a voidable transfer per se and, therefore, that an individual who lives in a state that does not recognize asset protection trusts (“APTs”) cannot protect assets by creating an APT in a state that does recognize APTs . . .

Did you get that? According to Leimberg, residents of non-DAPT states can’t use another state’s DAPT statutes to protect their assets. Now, the comment doesn’t have the force of law–it’s just a comment after all. But it does give us some idea of how at least some legal eagles are thinking about asset protection trusts. They don’t like ’em.

All this is not to say that persons wishing to set up a DAPT using the law of another state should not consider doing so. However, it bears repeating that those who choose to do so should be careful, crossing all the T’s and dotting those I’s. That Dahl case I referred to above, the one where the Utah ex-wife got her share from the Dr.-husband’s Nevada-based DAPT? Despite the fact that the trust had “Irrevocable” in its name, that the trust was established under Nevada law, and that it was clearly intended to be a DAPT, the court said the trust was revocable. Why? Because the court wanted to protect the spouse and because a scrivener’s error–an error by the attorney who drafted the trust–gave them an avenue do so. Here’s what the trust said:

Trust Irrevocable. The Trust hereby established is irrevocable. Settlor [the Dr. in this case] reserves any power whatsoever to alter or amend any of the terms or provisions hereof. (emphasis added by the court)

Of course the attorney meant to say “Settlor reserves no power whatsoever,” and the court knew that, else why would the trust say it was irrevocable both just a few words before and in the title and in other places in the document as well? But the court needed an excuse and because a T wasn’t crossed and an I wasn’t dotted, the trust failed to do its duty.

Simple drafting errors aren’t the only thing that can get a DAPT into trouble, but the fact that something so minor can have such huge consequences, should be warning enough to take care of the big issues as well. We’ll discuss those larger issues in another post.

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