Rupert Murdoch Loses Succession Battle, Nevada Official Rules, Cites Mogul’s “Bad Faith” On Family Trust; Appeal Coming, Lawyer Tells NYT – Update

Update: Rupert Murdoch has suffered a rare defeat with a Nevada court official denying the 93-year-old media mogul’s wish to alter his family trust in favor of his eldest son Lachlan.

While the case took place behind closed doors in Reno earlier this year and all documents are under seal, Deadline has confirmed that commissioner Edmund J. Gorman Jr. has rejected the elder Murdoch’s move. If successful, Murdoch’s reordering of the complex trust would have left once favored siblings Elisabeth and James, as well as eldest daughter Prudence almost powerless to make decisions counter to that desired by Fox and News Corp CEO Lachlan.

The New York Times first reported the decision.

Gorman says in his almost 100-page December 7 ruling that the Australian-born Murdoch acted in “bad faith” seeking to restructure the trust between the siblings and the power balance at Fox News and other holdings once he is dead.

Murdoch lawyer Adam Streisand’s comment to the Gray Lady that there would be an appeal is also true, I hear.

Previously, Sept 12 PM Exclusive: The media and the public will not have access to the upcoming Nevada courtroom battle between Rupert Murdoch and most of his children over future control of the 93-year-old mogul’s media empire that stretches from Fox News to News Corp.

“The Motion for Access to the hearings in this case is denied,” probate commissioner Edmund J. Gorman Jr. recommended late Thursday, four days before the Murdoch family succession case is set to start in Reno. “All hearings in this case shall remain closed to the public and to the media, including the movants,” the 17-page order added.

Later in the day, a district judge signed off on the recommendation, locking in the proceedings to run September 16-20.

“A family trust like the one at issue in this case, even when it is a stockholder in publicly traded companies, is essentially a private legal arrangement, as the applicable sealing statutes recognize,” Gorman wrote on the matter that first hit the Nevada court last October and became sealed and “confidential” in January.

Covering the Nevada judiciary for the shutting of the courtroom doors, Gorman today also offered up the personal security of the divisive and divided Murdoch clan as part of the reason for being of his order.

“In addition to the protection of privacy interests that outweigh the public’s right to access these proceedings, the court also recognizes that several of the parties and witnesses in this case — as even movants concede —a re well known to the public and the subjects of intense media and public scrutiny,” Gorman wrote in the document on the still-sealed docket. “These parties warrant additional security measures to ensure that their own physical access to the courts is not infringed, and that malicious actors who might wish them harm cannot use their appearances in this probate court to facilitate that harm. Certainly, additional court security measures can partially mollify these risks, but closure of hearings is another tool this court can employ to ensure these parties’ safe access to the courthouse. In this particular case, while these considerations do not, by themselves, warrant complete closure of hearings to the public, these considerations weigh in favor of closure when combined with the other privacy factors discussed above.”

While the trial will go ahead without prying eyes, Gorman did also allow for a limited number of documents related to the case to be unsealed. However, before anyone starts preparing their Pulitzer Prize speech, most of those documents appear to be connected to whether or not documents in the matter should be sealed, like the approved recommendation today.

Determined to keep the whole matter behind closed doors, the elder Murdoch is trying to change the long-established family trust set up for his offspring so current CEO of Fox and favorite son Lachlan Murdoch would continue to rule Fox News and other media holdings after Rupert’s death. As the trust stands now, all four siblings would have an equal vote, which means the three other eldest Murdoch kids, most of whom are estranged from their father, could gang up on Lachlan.

A pile-on could see Lachlan given the boot or reined in.

Holding differing idealogical views than their father and eldest brother, siblings Elisabeth and James (who last week endorsed Kamala Harris for president) are fighting any change to the trust. Murdoch’s eldest daughter Prudence, from his first marriage, who is also a voting member of the trust, is also resisting the change and their father’s will. The two girls from the Aussie patriarch and his third wife Wendi Deng have an economic interest in the trust but no voting control.

As it stands, the trust controls News Corp and Fox, with about a 40% stake in super voting shares of each company.

Upon the death of the “Dirty Digger,” as the Wall Street Journal owner Murdoch has been called for decades for the muck his tabloids like the New York Post and the UK’s The Sun love to dig up on celebs and politicians, the four eldest children would be in shared control. However, having anointed Lachlan his heir in all professional aspects in 2019 after the sale of Fox Studios and other assets to Disney for $71.3 billion, the elder Murdoch hopes to alter the trust so his eldest son will enjoy the near complete control over the media holdings that the nonagenarian presently has.

In other words, a Murdoch civil war no matter which way you cut it.

The trust is irrevocable, but a Nevada probate commissioner previously found that there’s an opening for it to be altered it if the elder Murdoch is acting in good faith and seeking change for the benefit of all heirs — which, with former Trump-era Attorney General Bill Barr in his corner and in a move that reeks of HBO’s now completed Successionis what the elder Murdoch is claiming he’s doing. The idea is that feuding siblings, power moves and potential changes in strategy could wreck the value of the extremely lucrative Fox News empire in particular.

It’s all ironic in a sense since the elder Murdoch for decades attempted to place one of his children atop the family business. James was the heir at one point. Lachlan was in, but then exited the company for eight years, moving back to Australia, before assuming his trajectory and landing as the CEO of Fox Corp. and chairman of News Corp. Now that an heir is settled, it’s at risk.

The jousting has thoroughly exasperated at least one News Corp. shareholder, activist Starboard Value, which said this week the choppy transition of power from Rupert Murdoch to his children “has allowed for complicated family dynamics to potentially impact the stability and strategic direction of News Corp.” The firm plans to challenge the company’s dual-class share structure that gives control to Rupert Murdoch and makes it his to transfer.

“While we can understand how some could see a benefit to a visionary founder retaining outsized control for a limited duration of time, that potential understanding vanishes as super-voting power and the associated protections transition to others,” it said. “The four Murdoch siblings with voting rights within the Trust are reported to have widely differing worldviews, which, collectively, could be paralyzing to the strategic direction of the Company.”

Today’s order by the Nevada probate judge is a rebuke to the likes of the AP, CNN, NPR, the New York Timesthe Washington Post and Reuters, which all had filed to have the proceedings opened to the public and records unsealed. “Though some litigants may desire secrecy and some courts indulge this desire, this level of sealing does not pass constitutional muster,” lawyers for the media outlets said in First Amendment-based filings of their own last month.

Turns out, for the most part, they don’t agree in the Silver State.

Jill Goldsmith contributed to this post