"Crowdsourcing" appellate briefs in million dollar malpractice verdict against Gunster

The level of interest expressed in connection with the million dollar malpractice verdict against Gunster recently upheld by the 4th DCA [click here] is so high, I've decided to post copies of the 200+ pages of appellate briefs filed in that case as follows:

What do you make of the briefs; what could Gunster have done differently?

The 4th DCA's opinion is woefully lacking in the sort of factual detail needed to provide real day-to-day guidance to practitioners or future litigants.  To make any sense out what happened here, you need to read the briefs.  Rather than attempting to figure out the briefs on my own, I'd like to tap into the collective wisdom of the readers of this blog.  After you've read the briefs, please post a comment answering the following question:

QUESTION:

Assuming the 4th DCA correctly decided the case, and everyone was acting in good faith and in the best interest of the client, what could Gunster could have done differently to avoid being sued?

Your comments will hopefully help all of us avoid being the target of the next estate-planning/ probate malpractice claim.  If you're a law student, banker, accountant, etc., I'd like to hear from you too.  Every Florida attorney who reads this blog will appreciate your thoughts (which can be posted anonymously), and I'm guessing that "crowdsourcing" these appellate briefs will result in collective insights none of us on our own would have ever dreamed of.

Malpractice insurance carrier: wills and estates-related legal malpractice claims on the rise

I've received a number of inquiries regarding the $1 million estate-planning/probate malpractice verdict recently upheld on appeal, which I previously wrote about [click here].  I think many practitioners are trying to figure out what went wrong in that case and what they can do to avoid making the same mistakes.

Against this backdrop, a recently published article by LawPRO, a Canadian professional liability (malpractice) insurance provider, should be of interest.  Wills & estates law claims on the rise by Deborah Petch and Dan Pinnington provides claims statistics and risk management advice specifically focused on the probate/estate planning practice area.  Although written for a Canadian audience, the advice seems equally applicable in Florida.

I was especially interested to see that "lawyer/client communication failures" was far and away the single most common cause of malpractice claims.  This finding is in line with the med-mal statistics and "don't-be-a-jerk" risk management advice given to doctors I previously wrote about [click here].  Another way of stating the don't-be-a-jerk rule is: respectfully listen to and communicate with your clients.

Here are a few excerpts from the linked-to article:

In both count and cost, wills and estates-related legal malpractice claims have slowly increased over the last several years. By area of law, wills and estates is the fifth most common area of claims: Only litigation, real estate, corporate and family claims are higher. 

Over the last five years, wills and estates-related claims averaged 6.0 per cent of LAWPRO’s claims count (112 claims per year), and 5.4 per cent of our claims costs ($3.9 million per year). On average, resolving a wills and estates claim costs LAWPRO $34,404.

This article examines the reality behind the numbers: It highlights the most common errors, and the steps you can take to reduce the likelihood of a claim.

The most common errors

In the wills and estates area, the most common causes of claims
are the following:

  1. lawyer/client communication failures;
  2. inadequate discovery of facts or inadequate investigation;
  3. failure to know or properly apply the law;
  4. time and deadline-related errors;
  5. conflicts of interest; and
  6. clerical/delegation.
What is striking to most lawyers is that law-related errors rank third.  Lawyer/client communication-related errors are actually the most common, representing almost 40 percent of the errors in the wills and estates area.

*     *     *     *     *

Avoiding communications errors

When it comes to avoiding or reducing the likelihood of a communications-related claim, the importance of putting things in writing cannot be over-emphasized. While the failure to have written confirmation of instructions and advice is not negligence in and of itself, such written communication can be extremely helpful in defending you in the unhappy event that a claim is made against you. Why? Because more often than not, this type of claim involves the lawyer recalling that one thing was said or done, or not said or not done, and a disappointed beneficiary that alleges something different. This type of claim is very hard for LAWPRO to defend successfully. At the end of the day it essentially comes down to a question of credibility. Unfortunately, we frequently find inadequate documentation in the lawyer’s file to back up the lawyer’s version of what occurred. All too frequently, we see files with no correspondence or reporting letters whatsoever.

Fortunately this error is one of the easiest to prevent. You can significantly reduce your claims exposure by documenting your work. Confirm the information that your client provided to you, your advice to the client, the client’s instructions to you, and what steps were taken on those instructions. Document the time spent reviewing the provisions of the will, including what issues were discussed. This can be done in your notes, and in interim or final reporting letters, or even in an e-mail message.

Even taking a few seconds to make more detailed dockets can be a lifesaver. "Conference with client re review of draft will, including provisions re cottage” is much better than just "Conference with client re draft will."

A special caution is warranted for matters involving family members and close friends: We do see claims on these matters, and quite often find almost no documentation in the file. This probably happens because the lawyer is familiar with the personal circumstances of the client, and fails to make and document all appropriate inquiries. It would be best not to act for them; but, if you feel that you must, treat them as though you had never met them before. Remember, often it is not your client who is the potential claimant, rather it is a beneficiary or disappointed beneficiary, with whom you have no personal relationship.

"Thin-slicing" trusts and estates malpractice claims

I previously wrote here about a $71 million jury verdict entered against a large Texas firm for estate planning malpractice even though this same jury found that the client had suffered zero economic damages; and here about a $1.2 million jury verdict against a large Florida firm for estate planning malpractice even though the plaintiff in that case alleged only $1 million in damages.

In both of these cases it appeared to me that the attorneys were first sued then fared very poorly at trial not because of the economic harm caused, but rather because the plaintiffs felt that the trust they had placed in their attorneys' good faith had been betrayed.  In other words, non-economic factors were far more important than economic factors in determining the outcome of these cases.  A study of medical malpractice claims discussed in Malcolm Gladwell's 2005 book, Blink: The Power of Thinking Without Thinking, supports my theory.

In Blink Gladwell explores the power of the trained mind to make split second decisions, the ability to think without thinking, or in other words using instinct.  The author describes this phenomenon as "thin slicing": our ability to gauge what is really important from a very narrow period of experience. In other words, spontaneous decisions are often as good as—or even better than—carefully planned and considered ones.  When it comes to client interactions with professionals, be it lawyers or doctors, if the client's initial impression, hunch or instinct is that he or she isn't being seriously listened to, or that he or she is being talked down to or isn't being treated with respect, then the likelihood of a malpractice claim materializing somewhere down the line skyrockets.  Here's an excerpt from Blink discussing this phenomenon in the context of medical malpractice claims:

Believe it or not, the risk of being sued for malpractice has very little to do with how many mistakes a doctor makes. Analyses of malpractice lawsuits show that there are highly skilled doctors who get sued a lot and doctors who make lots of mistakes and never get sued. At the same time, the overwhelming number of people who suffer an injury due to the negligence of a doctor never file a malpractice suit at all. In other words, patients don’t file lawsuits because they’ve been harmed by shoddy medical care. Patients file lawsuits because they’ve been harmed by shoddy medical care and something else happens to them.

What is that something else? It’s how they were treated, on a personal level, by their doctor. What comes up again and again in malpractice cases is that patients say they were rushed or ignored or treated poorly. “People just don’t sue doctors they like,” is how Alice Burkin, a leading medical malpractice lawyer, puts it. “In all the years I’ve been in this business, I’ve never had a potential client walk in and say, ‘I really like this doctor, and I feel terrible about doing it, but I want to sue him.’ We’ve had people come in saying they want to sue some specialist, and we’ll say, ‘We don’t think that doctor was negligent. We think it’s your primary care doctor who was at fault.’ And the client will say, ‘I don’t care what she did. I love her, and I’m not suing her.’”

*     *     *     *     *

Malpractice sounds like one of those infinitely complicated and multidimensional problems. But in the end it comes down to a matter of respect, and the simplest way that respect is communicated is through tone of voice, and the most corrosive tone of voice that a doctor can assume is a dominant tone.

*     *     *     *     *

Next time you meet a doctor, and you sit down in his office and he starts to talk, if you have the sense that he isn’t listening to you, that he’s talking down to you, and that he isn’t treating you with respect, listen to that feeling. You have thin-sliced him and found him wanting.

Lesson learned: don't be a jerk

My experience has been that personal representatives or trustees or attorneys who treat estate beneficiaries dismissively or discourteously are exponentially more likely to have their fees challenged, accountings challenged, investment decisions challenged, distribution decisions challenged and generally end up in court over and over again until the beneficiaries resign themselves to the mistreatment or the professional resigns.  In other words, the best way to avoid getting sued if you are a personal representative or trustee or attorney is to be nice.  Nice trumps negligence any day of the week.  And just as importantly, being a jerk can get you sued, no matter how good you are at your job.

$1 Million Malpractice Award Against Gunster Yoakley Upheld

Gunster, Yoakley & Stewart, P.A. v. McAdam, --- So.2d ----, 2007 WL 2376658 (Fla. 4th DCA Aug 22, 2007)

As reported here, a unanimous panel of the 4th DCA just upheld a $1 million legal malpractice judgment against the law firm Gunster Yoakley & Stewart awarded to the heirs of the Gannett newspaper fortune.  [Click here for copy of appellate briefs.]

Here's how the 4th DCA summarized the trial court proceeding in the linked-to opinion:

Frank Gannett McAdam and Charles McAdam, III, individually, as personal representatives of the Estate of Charles V. McAdam, Jr., and as trustees of The Charles V. McAdam, Jr. Revocable Trust, brought an action against Gunster Yoakley, one of Gunster Yoakley's probate attorneys and J.P. Morgan Trust Company, N.A., (“J.P.Morgan”). In their complaint, plaintiffs asserted claims of breach of fiduciary duty, constructive fraud, civil conspiracy, negligence and unjust enrichment. The substance of these accusations was that Gunster Yoakley wrongfully procured J.P. Morgan's appointment as corporate fiduciary and caused the estate administration to be more expensive. As such, plaintiffs sought, among other things, recompense for all “avoidable probate expenses” and disgorgement of all fees paid to Gunster Yoakley by decedent Charles V. McAdam, Jr.

After settling their claims against J.P. Morgan, plaintiffs proceeded against Gunster Yoakley and ultimately won a $1.2 million jury verdict. The trial court, however, granted remittitur and entered final judgment of $1,043,430, including interest and costs.

Once the "disloyalty" charge sticks, you're dead:

I'll get to the legal issues below, but as an initial point I think it's important to note the case against Gunster was framed in conflict-of-interests terms.  Basically, the case presented to the jury was that Gunster was disloyal to its estate-planning client in order to secretly favor J.P. Morgan.  This type of allegation against a lawyer is radioactive.  As I've reported before [click here], it's claims of disloyalty NOT negligence that will really get you in trouble.  Even if the facts show no economic harm was done, juries will crucify you if there's even a whiff of disloyalty.  In the linked-to case the jury originally awarded the plaintiffs $1.2 million -- even though they only asked for $1 million! (See here).

Yes, the heirs have standing to sue you:

So says the 4th DCA:

[W]e hold that the .  .  .  plaintiffs demonstrated they had standing to bring suit against Gunster Yoakley-Plaintiffs showed that their father's intent, as expressed in his will, was frustrated by the negligence of Gunster Yoakley and that, as a direct result of such negligence, their legacy was diminished. See Hewko v. Genovese, 730 So.2d 1189, 1192 (Fla. 4th DCA 1999).

Proving liability in estate planning malpractice cases:

Florida law isn't exactly clear on whether heirs can sue a decedent's estate planning attorney for malpractice.  In this case the 4th DCA seems to open the door to these claims.  All trusts-and-estates attorneys need to keep this point in mind.  Here's how the 4th DCA framed the liability issues:

We have considered the issues raised by Gunster Yoakley on appeal, including its contentions that .  .  .  it was not liable to the estate for administration expenses or damages arising out of the appointment of J.P. Morgan  .  .  .  .  As to [this] point, we hold that reversal is not merited on any of the grounds argued by Gunster Yoakley because:

[1]  Plaintiffs sought relief not available to them in probate and therefore could, contrary to Gunster Yoakley's assertion on appeal, collaterally attack the appointment of J.P. Morgan. See Espinosa v. Sparber, Shevin, Shapo, Rosen & Heilbronner, 586 So.2d 1221 (Fla. 3d DCA 1991) (holding testator's estate can maintain legal malpractice action against attorney who prepared the will of the deceased in order to address issues not remedied in probate court);

[2]  The trial court did not err in submitting to the jury the question of whether Gunster Yoakley had a duty to fund a revocable trust during decedent's lifetime as there was sufficient evidence that Gunster Yoakley implicitly agreed to do so. See Tibbs v. State, 397 So.2d 1120, 1123 (Fla.1981) (“[T]he concern on appeal must be whether, after all conflicts in the evidence and all reasonable inferences therefrom have been resolved in favor of the verdict on appeal, there is substantial, competent evidence to support the verdict and judgment.”); see also Lane v. Cold, 882 So.2d 436, 438 (Fla. 1st DCA 2004) (holding action for breach of fiduciary duty may be maintained where, “A relationship exist[s] with respect to the acts or omissions upon which the malpractice claim is based,” and a party may demonstrate this relationship by showing that his attorney implicitly agreed to undertake these responsibilities); and

[3]  The trial court did not abuse its discretion in denying Gunster Yoakley's request for jury instruction, nor did the court err in making an award under the “wrongful act doctrine.” See In re Amendment to Rules Regulating Fla. Bar, 605 So.2d 252, 309 (Fla.1992) (providing that rules of professional conduct “are not designed to be a basis for civil liability”); see also Martha A. Gottfried, Inc. v. Amster, 511 So.2d 595, 598 (Fla. 4th DCA 1987) (“Where the wrongful act of the defendant has involved the claimant in litigation with others, and has placed the claimant in such relation with others as makes it necessary to incur expenses to protect its interests, such costs and expenses, including reasonable attorney's fees upon appropriate proof, may be recovered as an element of damages.”) (quoting Baxter's Asphalt & Concrete, Inc. v. Liberty County, 406 So.2d 461 (Fla. 1st DCA 1981)), quashed on other grounds, 421 So.2d 505 (Fla.1982).

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Jury: Milbank's Blattmachr Breached His Fiduciary Duty

As reported here by the New York Probate Litigation Blog, a New York jury found last month, in a mixed verdict, that Jonathan Blattmachr, one of the country’s leading trusts and estates lawyers, breached his fiduciary duty to a client in connection with a planning strategy called a “split-dollar insurance arrangement,” involving the purchase of life insurance to avoid estate taxes.

The following is an excerpt from Jury: Milbank’s Blattmachr Breached His Fiduciary Duty, as reported in the WSJ Law Blog:

Among the T&E bar, wrote New York Times tax reporter David Cay Johnston in his book “Perfectly Legal,” Blattmachr “enjoys the status of some Hollywood stars — his first name alone prompts recognition.” (We know Blattmachr’s a big macher, but can the name “Jonathan” alone really prompt recognition?)


But one of Blattmachr’s wealthy clients, Marvin Schein, was none too happy with Blattmachr’s services. Schein, whose father founded medical-supplies company Henry Schein Inc., sued Blattmachr and Milbank in 2003. Click here for the amended complaint, in which Schein alleged, among other things, that Blattmachr persuaded Schein to pursue a tax-avoidance strategy even though Blattmachr sensed IRS hostility toward it.

The strategy, called a “split-dollar insurance arrangement,” involved the purchase of life insurance to avoid estate taxes. In December 2000, Schein paid roughly $12 million in premiums for about $340 million in life-insurance policies. The IRS effectively halted the strategy in August 2002, a move Schein said rendered his policies useless.

North Carolina tax attorney cleared of all tax-fraud charges related to off shore trust scheme

In a blog post entitled Offshore trust scheme leads to former U.S. Attorney pleading guilty to tax fraud, I wrote about two North Carolina attorneys who had been charged with conspiring to commit tax fraud in connection with a tax evasion scheme revolving around the use of off-shore trusts.

One attorney, Samuel T. Currin, a former North Carolina U.S. Attorney, state judge and state Republican chairman, agreed to plead guilty to conspiring to launder $1.45 million through his law firm's client trust account and to lying on his taxes by failing to report an offshore debit card account.  The second attorney caught up in the prosecution was North Carolina tax attorney Rick Graves.

In fairness to Mr. Graves, I feel compelled to follow up on my original blog posting by reporting that he was recently cleared of all charges by a unanimous jury verdict of NOT GUILTY.  The following are excerpts from this post on the North Carolina Estate Planning Blog:

Mr. Graves is a lawyer in Wilmington, North Carolina, who was charged a year ago with two federal crimes: 1) Conspiring to Defraud the IRS and 2) Obstructing the IRS. Both charges arose from Mr. Graves’ association with other individuals who engaged in “off-shore” criminal activities – without Mr. Graves’ knowledge -- relating to tax planning and asset protection. Mr. Graves has always asserted his complete innocence, and based upon all the evidence, including a 7-hour cross-examination of Mr. Graves, the jury agreed.

*     *     *     *     *

Co-counsel, Will Terpening added that, “over the last two weeks, during the trial, Rick Graves was finally given an opportunity to defend himself and to clear his name. With the jury’s verdict ---- He has done both.” Reflecting on the investigation, the trial, and the jury’s verdict, Rick Graves wondered how he gets his good reputation back. More specifically, he stated that “the case against me was based on false assumptions and guilt by association.” He added that, “the prosecutors indicted first, and investigated later.”

Lawyer Anderson also added that:
The investigation of Rick Graves raises important issues about the increasing use of criminal punishment in highly regulated areas, like tax planning. In this arena, the line between mistakes” and “crimes” is often too blurry for fair prosecutions. Criminal charges should only
be used for truly “bad actors.”

Lawyer Terpening added that:
Mr. Graves was a lawyer with an impeccable reputation, who was a deacon in his church, and who had a 20-year military career. At a minimum, he should have been given the chance to address the government’s concerns before being indicted. In the end, Rick Graves was thrilled with the outcome and with the hard work of his legal team. He concluded by stating that: “Justice has finally been served. This nightmare is over. My name is finally cleared.”

Lesson learned: Make sure you get paid for taking on the risks associated with an estate tax practice.

My personal belief is that estate planning attorneys often take on risks they are not paid for.  In other words, the fees they charge for the tax services they provide do not adequately compensate them for the risks they assume.  This case is a prime example.  I have no idea what Mr. Graves was paid for the tax work he did in this case.  But I am absolutely certain that it in no way adequately compensated him for the risk of possibly being the subject of a two-year nightmare/criminal prosecution.  In the corporate context, CPAs and tax attorneys charge very large sums of money to compensate them for the risks they assume when they give their corporate clients tax advice.  Much of those fees are generated in the "due diligence" phase of the corporate engagement.  My sense is that this rarely happens in the estate-planning context.

Attorney's license suspended for 90 days due to botched probate administration

The Florida Bar v. Maurice, --- So.2d ----, 2007 WL 1074948 (Fla. Apr 12, 2007)

Practicing law is not an easy way to make a living.  As this case shows, even when you're well intentioned and cause no real harm to anyone . . . you can end up losing your license.  This case also underscores the fact that probate matters can be very technically demanding.  Attorneys - like the respondent in this case - who simply "dabble" in probate as an ancillary to their primary practice do so at their own risk.

The following excerpts from the linked to case do a good job of summing up the relevant issues:

Findings:

The evidence and factual findings support the referee's conclusion that Maurice violated rules 4-1.1 and 4-1.7(b). Maurice's belief that the condominium could be treated as an estate asset although it had previously been deeded to Gerard and William Spelker is sufficient to establish a violation of rule 4-1.1. See generally Fla. Bar v. Batista, 846 So.2d 479 (Fla.2003) (holding that an attorney violated the competence rule by failing to determine the probable outcome in his clients' cases within a reasonable time and failing to communicate the unavailability of a result to his clients). The referee found that probate proceedings were unnecessary, as most of Helen Spelker's property was either exempt or transferred upon her death. Maurice failed to explain this to the heirs. Maurice opened an estate in an attempt to ensure that Oliveri was given the opportunity to purchase the condominium from Gerard and William Spelker. She did not tell Pamela Spelker or her attorney that the ownership of the condominium had been transferred to Gerard and William in November 1998 and she did not provide a copy of the quitclaim deed she had prepared. The referee found that Maurice's judgment regarding the necessity of an estate was clouded by her expressed concern for Helen Spelker's caretakers, one of whom was Oliveri. These actions establish a violation of rule 4-1.7(b) in that her desire to ensure that Gerard and William Spelker gave Oliveri a chance to purchase the condominium conflicted with her duty to her clients, Helen Spelker's heirs.

Veteran attorney, clean record:

Maurice has been a member of the Bar for over two decades and has no prior discipline. Maurice's actions resulted in the heirs and true owners of the condominium having to wait several months to obtain what was rightfully theirs, but she did not profit from it. Rather, she seems to have been motivated by a genuine but misguided desire to fulfill what she believed were Helen Spelker's true wishes for the disposition of her property. According to her brief, she has already reimbursed the Bar for its costs and has already taken the CLE courses recommended by the referee.

90-day suspension:

Accordingly, based on the caselaw discussed above imposing one-year suspensions for more egregious misconduct of a repetitive nature, we conclude that the two-year suspension recommended by the referee is not reasonably supported by the caselaw. We disapprove that recommendation and instead suspend Maurice for ninety days. The other conditions recommended by the referee are approved.

 

Briefs:

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New York Probate Court Rejects Will Leaving $5 Million to Former Lawyer

The will contest reported on in Surrogate Rejects Will Leaving $5 Million to Former Lawyer is interesting because it highlights the distinction between an ethics violation and a breach of law.  The former can give rise to sanctions against attorneys, the latter is the basis for seeking recourse in a court of law.  Sometimes the same conduct can be the basis for ethics sanctions and legal recourse, but not always.

In the linked-to news report, the focus is on lawyer misconduct that gave rise to grounds for legal recourse in the form of a probate-court order rejecting a will on the grounds of undue influence and fraud (classic grounds for rejecting a will under Florida law: F.S. §732.5165).  For the reasons I wrote about here, the same conduct would likely be grounds for ethics sanctions under Rule Reg. Fla. Bar 4-1.8(c), which prohibits an attorney from preparing an instrument giving the attorney or a person related to the attorney any “substantial gift” from a client, including a testamentary gift, unless the client is related to the proposed donee.


Here's an excerpt from Surrogate Rejects Will Leaving $5 Million to Former Lawyer:

A New York probate court has thrown out a will that bequeathed almost $5 million to the lawyer who drafted it on behalf of her deceased "paramour."

Michele Okin, a disbarred estate lawyer, was named the chief beneficiary in the January 2004 will of Pasquale Coviello, a local real estate developer who died in May 2004. Okin, 46, had been the estate lawyer for Coviello and his wife before she began an affair with Coviello in December 2002.

In a decision issued Tuesday, Orange County, N.Y., Surrogate Elaine Slobod said Okin had used this relationship to dupe Coviello, who died unexpectedly at age 62 on May 5, 2004, into executing a new will on Jan. 13, 2004. The surrogate ordered the bequests to Okin to be expunged "lest she be permitted to profit by her fraud and undue influence, or take advantage of her own wrong."

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The Attorney-Client Privilege and the 'Complete Lawyer': More than Mere Legal Advice

In order to be effective, trusts and estates attorneys must not only tell their clients what the law is, they also need to make recommendations on how their clients should proceed given the status of the law.  For example, counseling a trustee on the meaning of Florida's "prudent investor rule" (F.S. 518.11) isn't very helpful if you can't provide options and recommendations to the trustee for applying this general rule to the concrete facts of a particular deal.  Although the business-evaluation portion of this discussion is likely to focus on non-law issues, the communication is undeniably made for the purpose of providing effective legal advice.

If ever confronted with a challenge to the privileged nature of such communications, Florida trusts and estates attorneys should find comfort in Pritchard v. Erie County, a recent 2nd U.S. Circuit Court of Appeals opinion reported on in The Attorney-Client Privilege and the 'Complete Lawyer': More than Mere Legal Advice.  Here are a few excerpts from the linked-to opinion:

When clients seek legal advice, they have a right to expect their lawyers to do more than scan in the pertinent statute and e-mail it to the client, or recite to the client the elements of the applicable tort or criminal offense. Clients want lawyers to guide them, to provide viable options, and to suggest to them what they should do given the status of the law. A lawyer capable of doing that is very much acting as a lawyer. A client with the benefit of the services of such a "complete lawyer" also retains the protection of the attorney-client privilege.

*     *     *     *     *

ATTORNEY-CLIENT PRIVILEGE AND THE 'COMPLETE LAWYER'

In a recent decision, Pritchard v. Erie County, No. 06-2459-op (Jan. 3, 2007), the 2nd U.S. Circuit Court of Appeals held that a client does not forfeit the protection of the attorney-client privilege merely because that client has the good sense or good fortune to have hired a lawyer who is able not only to tell the client what the law is, but can also make recommendations and advise the client on how the client should proceed given the status of the law.

Pritchard is a class action filed on behalf of people who had been arrested and subjected to strip searches by the defendant, Erie County, N.Y. During discovery, the county, on the basis of the attorney-client privilege, withheld from production a series of e-mails between county officials and a county attorney. In the e-mails, the county attorney, who herself had no policy-making authority, did more than tell county officials what the law was; she, after explaining the status of the law, also "assessed the County's current search policy, recommended alternative policies, and monitored the implementation of these policy changes."

The trial court held that the attorney-client privilege did not protect the e-mails from disclosure because the county attorney, by proposing policy changes and then monitoring the implementation of those policy changes, went "beyond rendering legal analysis." In essence, the trial court concluded that the attorney-client privilege did not apply because the county attorney was acting as a policy maker, not as a lawyer.

The 2nd Circuit reversed, holding that the county attorney was merely doing her job as a lawyer, and doing it well, when she went beyond a mere rendering of legal analysis, and that the client did not lose the protection of the attorney-client privilege because she did so. The 2nd Circuit acknowledged, of course, that the privilege applies only to communications between client and counsel "made for the purpose of obtaining or providing legal assistance." And clearly, the attorney-client privilege would not apply if, for instance, county officials sought media relations advice from someone who happened to be a lawyer. In Pritchard though, the 2nd Circuit, upon an in camera review of the documents, held that the "predominant purpose" of the e-mails at issue was legal in nature. The fact that the e-mails included policy recommendations, assessments and oversight did not transform the county attorney into something other than a lawyer; nor did that fact render the attorney-client privilege inapplicable. Instead, the county attorney was merely doing what her client had a right to expect her to do as a "complete lawyer."

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Attorney Retaining Liens

As reported in Politician's Heirs Snare Thelen Reid in Complex Estate Battle, a New York firm successfully opposed a subpoena to turn over its files in connection with contested probate proceedings in Texas because the estate hadn't paid its bills.  The basis of the New York firm's retaining lien was described as follows in the linked-to piece:

In a Feb. 9 decision, Manhattan Supreme Court Justice Carol Robinson Edmead said Thelen Reid was entitled to a retaining lien allowing it to keep documents relating to Martinez's estate pending payment of outstanding legal bills. She quashed Gonzalez's deposition subpoenas on the same grounds.

The judge noted that, while all the firm's bills had been paid while Martinez was alive, Gonzalez had retained the firm after his death. Justice Edmead ruled that Gonzalez had retained Thelen Reid on behalf of Martinez's estate, not in her individual capacity.

"Since the Law Firm's rendition of services at the request of Ms. Gonzalez was made on behalf of the Estate of Dr. Martinez, such services entitle the Law Firm to a common-law retaining lien on any of the Estate's books, papers, money and securities which are in the attorney's possession," the judge wrote in In the Matter of the Application of Letizia Martinez de Gonzalez, 114877/06.

Florida Law: Ethics Opinion 88-11

Florida law also recognizes an attorney's right to a retaining lien over client files when bills go unpaid.  Here's how Florida Bar Ethics Opinion 88-11 summarized Florida law on this point:

Many attorneys are unaware that in Florida a case file is considered to be the property of the attorney rather than the client. Dowda and Fields, P.A. v. Cobb , 452 So.2d 1140, 1142 (Fla. 5th DCA 1984); Florida Ethics Opinion 71-37 [since withdrawn]. Under normal circumstances, an attorney should make available to the client, at the client's expense, copies of information in the file where such information would serve a useful purpose to the client. Opinion 71-37 [since withdrawn].


*     *     *     *     *

Florida common law recognizes two types of attorney's liens: the charging lien and the retaining lien. The charging lien may be asserted when a client owes the attorney for fees or costs in connection with a specific matter in which a suit has been filed. To impose a charging lien, the attorney must show: (1) a contract between attorney and client; (2) an understanding for payment of attorney's fees out of the recovery; (3) either an avoidance of payment or a dispute regarding the amount of fees; and (4) timely notice. Daniel Mones, P.A. v. Smith, 486 So.2d 559, 561 (Fla. 1986). The attorney should give timely notice of the asserted charging lien by either filing a notice of lien or otherwise pursuing the lien in the underlying suit. The latter approach is preferred.

Unlike a charging lien, a retaining lien may be asserted with respect to amounts owed by a client for all legal work done on the client's behalf regardless of whether the materials upon which the retaining lien is asserted are related to the matter in which the outstanding charges were incurred. A retaining lien may be asserted on file materials as well as client funds or property in the attorney's possession, and may be asserted whether or not a suit has been filed. Mones, 486 So.2d at 561.

$71 million Texas jury verdict against estate planners reversed on appeal

Baker Botts, L.L.P. v. Cailloux, --- S.W.3d ----, 2007 WL 460643 (Tex.App.-San Antonio Feb 14, 2007)

This case, which I previously wrote about here, reminds me of an excellent ethics seminar I once attended where the speaker said something that has stayed with me to this day.  When it comes to representing multiple clients with conflicting interests, the attorney essentially assumes the economic risk of all clients being 100% satisfied with the case.  Even if you do everything right, if one of the clients is unhappy at the end of the day, the attorney might end up paying for that dissatisfaction - regardless of actual fault.

Here, the estate planning attorneys at Baker Botts, lead by nationally-known estate planner and speaker Stacy Eastland (currently Managing Director of Goldman Sachs & Company (Houston)), seem to have done everything right.
  • They identified the potential conflict of interest.
  • Disclosed the conflict to the clients and received written waivers.
  • They severed their relationship with one of the clients once it became clear the clients were no longer interested in pursuing a mutually-agreed-upon course of action.
See ACTEC Commentary on Model Rule of Professional Conduct 1.7.


During the course of the engagement, one of the clients grew unhappy with the results, he looked around for the cause of his dissatisfaction, then sued the attorneys.  As recounted in the linked-to appellate opinion, the jury found that the attorneys had in no way caused economic harm to their clients:

A jury . . . found that . . .  [client] had zero "lost income" damages and zero "economic loss" damages as a result of [the conflict of interest].

This same jury entered a $65.5 million verdict against the defendants, which was increased to $71 million by the trial judge to factor in prejudgment interest!  The sin the jury was apparently most concerned with was the conflict of interest, and the attorneys were made to pay - big time - even though they had cause no economic harm to their clients.

Lesson learned:

Don't guarantee the deal.  Even if you do everything right, and even if you win once the client sues you - representing multiple clients with conflicting interests can morph into a nightmare.  Although Baker Botts won this round (see press release), this lawsuit must have been gut wrenching for the professionals involved - and it's not over yet - the plaintiffs say they're going to appeal (see here).

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Elderly Man's Malpractice Suit Over Estate Advice Dismissed

This recently published story, Elderly Man's Malpractice Suit Over Estate Advice Dismissed, underscores the "damned if you do, damned if you don't" risk inherent to the estate planning field and why even the slightest whiff of a client's diminished mental capacity has to be treated very, very seriously.

On the one hand, you can get sued for allegedly luring your very wealthy, but also very elderly, client into too much estate planning, i.e., transactions that may save millions in estate taxes, but are too complex for the client to understand and thus not something the client would have agreed to if his or her lawyer had adequately explained all the various permutations of the proposed planning strategy.  That's essentially what happened in the case discussed in the linked-to article, as excerpted below:

A Manhattan appellate court has dismissed a legal malpractice suit on behalf of an elderly man who claimed his lawyers misled him into signing away control of his estate, but a dissenting judge said the majority's decision "risks undermining the confidence of the public in the profession."

Jack E. Maurer, who died last year at age 86, sued the firm formerly known as Goodkind Labaton Rudoff & Sucharow in 2003 for allegedly failing to explain to him the import of estate planning documents he signed. He also claimed the firm was conflicted because it represented his wife Rona, who he named as a co-defendant in the suit.

According to Mr. Maurer's lawyer, Lawrence H. Silverman, the documents at issue gave Ms. Maurer control over a trust containing her husband's major assets, a $12 million Central Park West apartment and a $3 million house in Quogue, N.Y., and placed restrictions on Mr. Maurer's access to other retirement funds.

But a four-judge majority of the Appellate Division, 1st Department, ruled Tuesday that, despite Mr. Maurer's "apparent failure to make any effort at all to read the documents," he was bound by the "clear and unambiguous" documents he signed.

On the other hand, you can also get sued by upset heirs if they think you didn't do enough to save taxes -- even if mom and dad explicitly told lawyer "to keep it simple."  That's essentially what I think happened in a case involving one of Florida's most well respected law firms, which I previously wrote about in Gannett Newspaper Fortune: Probate Administration Malpractice Update #2.

Lesson learned:

Estate planning can be very complex, involving esoteric tax concepts, lengthy trust instruments, complex financial and insurance arrangements, etc.  Estate planning can also involve very elderly clients.  Combine these two elements and you end up with the type of "perfect storm" ethics conundrum that is loads of fun in law school, but extremely challenging to navigate in real life. Florida Bar Ethics Rule 4-1.14 (Client Under a Disability) offers little real concrete guidance, and as far as I can tell their isn't much on-point case law out there either.  See The Florida Bar v. Betts, 530 So.2d 928, 13 Fla. L. Weekly 579 (Fla. Sep 22, 1988); Vignes v. Weiskopf, 42 So.2d 84 (Fla. Jul 19, 1949).

I think the best anyone can do is to be on the look out for warning signs of incapacity and incorporate appropriate safety measures into your office procedures -- and your engagement agreement -- to manage this risk as much as possible.  For example, the following is the "diminished capacity" portion of my firm's standard engagement agreement:

The ethics rules that govern attorneys state that if you become unable to make adequately considered decisions, whether because of mental disability or other reasons, we may attempt to continue a normal attorney-client relationship with you as much as is possible. Those rules also state that we may seek the appointment of a guardian or to take other actions to protect your interests if we reasonably believe that to be necessary.

You can designate other persons to act on your behalf under a durable power of attorney and to make decisions for you concerning your estate planning, such as making gifts of your assets and signing trust agreements on your behalf. If you authorize someone to act on your behalf, and if we believe their authority is broad enough to allow them to instruct us on your estate planning, you agree that we can continue to do estate planning work for you by dealing with them, and that we can rely on instructions from them. You agree that we can communicate with them and disclose information they need to make informed decisions on your behalf, including information that is protected by the attorney-client privilege. However, if we believe that they do not have the authority to act on your behalf, or if we believe they are not acting in your best interests, we reserve the right to refuse to act on their instructions and instead to take whatever action that we reasonably believe is necessary to protect your interests.

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Fla. Bar Urged to Help Estate Lawyers Avoid Ethics Pitfall

I previously wrote here about Florida Bar Ethics Rule 4-1.8(c), which bars Florida attorneys from writing themselves into wills and trusts they draft for clients . . . and the hot water one Florida attorney was in for allegedly running afoul of that prohibition.  In Fla. Bar Urged to Help Estate Lawyers Avoid Ethics Pitfall a related issue is reported on: Florida attorneys naming themselves as personal representatives or trustees of wills and trusts they draft.  The underlying conflict here is that fees payable to PRs and trustees can be huge windfalls for the attorneys involved.

My firm's practice is to avoid serving as PR or trustee for our clients . . . when possible.  There are situations, however, when clients need this assistance.  For example, with respect to elderly clients with no family to speak of in Florida, you may be the only person in the world they can count on once they pass away to serve as PR, or the only person in Florida willing and able to step in as successor trustee of their revocable trust in the event of incapacity.  That's why a blanket ethics rule wont work in this context.  The linked-to article addresses the other end of the spectrum: attorneys who ALWAYS solicit this business and ALWAYS write themselves in as PRs and trustees for their clients.  Here are a few excerpts for the linked-to story:

Some estate and trust lawyers are urging the Florida Bar to recommend tighter rules governing lawyers who draft a client's will or trust and also serve as the personal representative or trustee for the estate.

Florida Supreme Court rules prohibit lawyers from being named as beneficiaries in the wills they draft for clients. But nothing stops them from being designated as personal representative or trustee. As the personal representative or trustee, an attorney stands to earn significant fees.

Rohan Kelley of Fort Lauderdale, who heads the Bar's real property, probate and trust law section, said too many lawyers "are writing themselves into documents for their own personal gain." Lawyers should not serve in fiduciary roles in more than 50 percent of the cases where they draft the will or trust, he said.

"We need a disciplinary rule for lawyers who serve as not only trustees but personal representatives," Kelley said. Lawyers who are found to be serving as the personal representatives or trustees for most of their estate cases should face discipline, he argued.

If lawyers place themselves in fiduciary roles in wills or trust documents they draft, it is imperative that they set up a legal mechanism that allows for their removal from such positions, said Christopher Boyett, Holland & Knight's South Florida private wealth team leader based in Miami. "It's absolutely awful to set up a situation where you cannot be removed," he said.

*************

Some trust and estate lawyers say there are circumstances where the best way for a lawyer to represent a trust and estate client is to serve in a fiduciary role, and the lawyer should be fairly compensated.

"It's not easy to be a personal representative or a trustee, and it can come with a fair amount of liability," said Michael Simon, a partner at Gunster Yoakley & Stewart in West Palm Beach.

But lawyers also agree that the lack of ethical guidance from the Bar increases the potential for attorneys to take advantage of estate and trust clients, who generally are elderly and may not be at their mental peak.

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Offshore trust scheme leads to former U.S. Attorney pleading guilty to tax fraud

In Florida it is almost inevitable that attorneys -- and especially trusts and estates attorneys -- will end up counseling clients who have existing relationships with off-shore trust companies or are considering some sort of arrangement involving an off-shore trust.  Like any industry, there are good and bad actors doing business out there.  Perhaps unfairly, my inclination is to approach the entire industry with more than my usual degree of skepticism (which says a lot!).

Recent events underscore why Florida attorneys would be wise to counsel caution when evaluating tax savings ideas proposed to clients by off-shore trust operators.  In April of 2006 the heads of a Bahamian corporation operating under the name "Sterling Trust" were jailed in North Carolina after a sting operation mounted by undercover agents of the IRS in connection with an alleged tax fraud conspiracy.  The trust angle was described in Executives With Bahamas Ties Jailed as follows:

The indictment, signed by Assistant U.S. Attorney Matthew Martens, says Graves, the Woltzes and Currin "would and did concoct foreign ‘dual trust’ arrangements so that wealthy United States citizens could evade federal income tax."

According to the indictment, the IRS undercover agents solicited advice from Graves on evading U.S. taxes on the fictitious sale of "gaming rights" for $10 million. Graves allegedly recommended a scheme known as a "dual trust structure" by which Sterling Trust would set up two trusts that would facilitate the evasion of the taxes.

Attorneys can get personally stung by this type of fraud when they step over the line from simply acting as counselors to affirmatively facilitating their cleints' involvement in this type of scheme.  As reported in Former U.S. Attorney to Plead Guilty in Tax Fraud Scheme, a distinguished former U.S. Attorney is facing up to 43 years! in prison because of his involvement . . . in addition to the personal catastrophe this must be for his family.  Here are a few excerpts from the linked-to article:

A former U.S. Attorney, state judge and state Republican chairman has agreed to plead guilty to charges related to a tax fraud conspiracy, federal prosecutors in Raleigh, N.C., said Wednesday.

Samuel T. Currin will plead guilty to conspiring to launder $1.45 million through his law firm's client trust account and to lying on his taxes by failing to report an offshore debit card account, prosecutors said. Three others also have been charged.

He could be sentenced to as many as 43 years in prison.

Tax attorney Ricky Graves; Howell Way Woltz, president of Sterling Trust in the Bahamas; and his wife, Vernice Woltz, a director of Sterling Trust, are also charged.

Lesson learned: Caveat Emptor!

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Greenberg Traurig Drawn Into Estate Case

In almost all estate litigation cases attorneys' fees become an issue.  This law.com article shines the spot light on one case in particular because Greenberg Traurig, one of the country's largest and well known law firms, is involved.  But the issues in dispute are part and parcel of almost all such litigation -- which means parties need to anticipate them and plan accordingly.

Here are excerpts from the linked-to story:

Greenberg Traurig has become enmeshed in a bitter family feud between two sisters, one of whom is married to a senior partner at the law firm.

The estranged sisters, Linda J. Spector and Barbara Berlin, had both been named beneficiaries of a trust created in November 2003 by their mother, Eleanor Spector. Eleanor and Linda served as co-trustees until Eleanor's death in January 2004.

Shortly after her mother's death, Linda sought to have her then-fiancé, Albert Jacobs, the senior chair of Greenberg Traurig's national intellectual property practice, appointed co-trustee, arguing that the successor designated in trust, attorney Joel Sankel, had told her over dinner he would step aside.

*     *     *     *     *

Greenberg Traurig billed the estate almost $130,000, which is now at issue in a pending contempt motion. Sankel claims the amount should be repaid to the trust since Greenberg Traurig's services were retained for the personal benefit of Linda Spector and Jacobs, whom she eventually married.

In the contempt motion, Sankel also noted the disparity between the fees paid to Greenberg Traurig and his own firm in the course of the dispute. He noted that his firm had billed the trust $22,000 in the same time period. He is requesting invoices from Greenberg Traurig to back up charges, some of which he claims were "wholly frivolous."

Probate/Real Estate Attorney Indicted on Embezzlement Charges

Sometimes you come across stories of attorney misconduct that are so outrageous they trigger deep, soul-searching philosophical questions, like . . . "was this person NUTS!?" Well, it turns out that the Allentown, Pa., attorney at the center of this latest scandal may actually be crazy (or crazy like a fox?). Here are a few excerpts from the linked-to story:

An Allentown, Pa., lawyer was indicted Thursday on charges of embezzling more than $1.5 million from the heirs of estates he was handling and real estate clients by transferring their funds to his own personal bank account -- sometimes forging his clients' signatures on checks.


Prosecutors claimed attorney Michael D. Kasprenski, 43, used some of the stolen money to buy a vacation home in Nova Scotia and to pay boarding costs for his horse.

* * * *

Kasprenski was arrested in February and was ordered to undergo a psychiatric evaluation by U.S. Magistrate Judge Arnold C. Rapoport. According to Kasprenski's lawyer, John J. Waldron of Huber & Waldron in Allentown, Kasprenski was found incompetent to stand trial.

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Miami Probate Attorney Disbarred, Subject of Criminal Investigation

This story is both sad and instructive. On the one hand, an attorney who for decades seemed to embody the best of the profession has been caught red handed stealing money that belonged to his clients, many of whom were either poor or elderly. On the other hand, this case shows why Florida probate judges will often require that all estate funds be deposited with a local bank in a "restricted depository account" governed by F.S. § 69.031. In other words, an attorney's trust account is no longer deemed "safe enough" by the courts. For example, in Miami-Dade County there is a blanket policy requiring ALL estates to place liquid funds in restricted depository accounts - no exceptions granted.

The following are a few excerpts from the linked-to story:

"Mark Valentine, probate lawyer and counsel to Miami's civil service board for more than twenty years, was disbarred in late April. In court documents, the Florida Bar Association compared Valentine's dealings to a "Ponzi scheme" -- a scam that uses new investors to pay off earlier investors. The State Attorney's Office has opened a wide-ranging investigation, according to SAO spokesman Ed Griffith, and one former client's heirs have sued. More lawsuits are likely."


"[A]uditor Carlos Ruga began an 'exhaustive and exhausting' analysis of Valentine's finances. Ruga discovered that for years Valentine had been taking the money left by his clients' husbands, wives, mothers, and fathers -- at least two million dollars from at least sixteen estates -- and using it to repay funds he had withdrawn from others. Using his firm's trust account as a conduit, Valentine sometimes took as much as $700,000 at a time from one estate to repay money taken from others, Ruga's analysis revealed.

Valentine used the funds for, among other things, $55,000 in credit card bills, according to the audit. More than one million dollars remains missing, says Maureen Kennon, attorney for the estate of Louise Dargans-Fleming, one of Valentine's former clients.

With Ruga's audit as evidence, the bar association took the unusual measure of asking the state Supreme Court to suspend the lawyer on an emergency basis in October 2005. He was disbarred last month. In an affidavit, Ruga (who declined to comment in detail about the case) seemed flummoxed by the scope of Valentine's misappropriations. He pointed out the audit had ignored at least 100 other estates and guardianships under Valentine's supervision. 'I could go on and on,' Ruga testified, 'but I have to stop at some time.'"

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Connecticut Attorney Sanctioned for Angry Missive About Judge Handling his Mother's Estate

The ABA Journal reported here on a Connecticut Bar proceeding in which Connecticut attorney, Joseph J. Notopoulos, was sanctioned for writing a letter to the probate judge handling his mother's estate. What I found most interesting about this story is that Mr. Notopoulos was sanctioned for accusing the Connecticut probate system of the same nefarious conduct that Prof. John H. Langbein, the Sterling Professor of Law and Legal History at Yale Law School, complained of in written testimony just last year (see here).

The following are excerpts from the linked-to ABA story:

"A Connecticut attorney says he was writing as a common, if angry, citizen when he sent a letter blasting a probate judge. But that didn't stop him from being reprimanded--nor did his appeal to the state supreme court.


Stating that Joseph J. Notopoulos provided no factual basis for statements he made attacking the probate judge overseeing his mother's estate, the Connecticut Supreme Court upheld the Statewide Grievance Committee's reprimand of the attorney. The court rejected Notopoulos' claim that it was improper to reprimand him for comments made while acting outside his role as an attorney, and that the reprimand violated his free-speech rights. Notopoulos v. Statewide Grievance Committee, No. SC 17341 (Feb. 14)."

"Notopoulos says the disciplinary action ignores the real issue of the probate system in Connecticut, which he believes is rife with conflicts of interest and cronyism. In Connecticut, probate judges are "elected town politicians with no educational requirements placed on them," Notopoulos says. Yet he admits Berman is an attorney by training and a member of the Connecticut bar."

And here is an excerpt from Prof. Langbein's testimony:

"The sad truth is that much of what goes on in Connecticut probate courts can only be called a shakedown. Our procedures invite judges to extort money from the estates of decedents by insisting upon needless court filings and court approvals."

Maybe Prof. Langbein is next on the Connecticut Bar's hit list?

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Trust and Estates Lawyer as Trial Advocate and Witness: Opposing Side Cries Foul, 5th DCA Agrees

Eccles v. Nelson, 2006 WL 192633 (Fla. 5th DCA Jan 27, 2006)

Trust and estates lawyers often find themselves advising clients in anticipation of future litigation. Be it in the context of a will that disinherits family members or a trustee receiving a letter from counsel representing disgruntled trust beneficiaries, one issue that needs to be thought about at the very beginning is: will separate trial counsel be needed?

This 5th DCA case is a prime example of how these issues can come back to bite you if you're not anticipating them. Here opposing parties sought to probate conflicting wills, one signed in 2001 and the other in 2004. The validity of the 2004 will was challenged on grounds of undue influence, the decedent's lack of requisite mental capacity, and the genuiness of the decedent's signature. The attorney who drafted the 2004 will and also acted as a witness when the decedent purportedly signed the 2004 will was engaged by the party attempting to probate the 2004 will to be her trial counsel.

On a motion to disqualify, Seminole County Judge Gene R. Stephenson entered an order disqualifying the 2004-will-drafting attorney. It is important to note that the trial court did not disqualify him from representing his client either pre-trial or post-trial. The trial court's ruling was apparently based on Florida Bar Code of Professional Responsibility Rule 4-3.7, which reads in pertinent part as follows:

(a) When Lawyer May Testify. A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness on behalf of the client except where:

(1) the testimony relates to an uncontested issue;
(2) the testimony will relate solely to a matter of formality and there is no reason to believe that substantial evidence will be offered in opposition to the testimony;
(3) the testimony relates to the nature and value of legal services rendered in the case; or
(4) disqualification of the lawyer would work substantial hardship on the client.

The following excerpts from the official "Comment" to Rule 4-3.7 sum up the prejudice/conflict-of-interest concerns underlying the rule:

Combining the roles of advocate and witness can prejudice the opposing party and can involve a conflict of interest between the lawyer and client.


The opposing party has proper objection where the combination of roles may prejudice that party's rights in the litigation. A witness is required to testify on the basis of personal knowledge, while an advocate is expected to explain and comment on evidence given by others. It may not be clear whether a statement by an advocate-witness should be taken as proof or as an analysis of the proof.

On appeal the 5th DCA upheld the trial court's ruling on the following two grounds: First, Rule 4-3.7 supports disqualification and, second, disqualification of the 2004-will-drafting attorney did not violate his client's constitutional First Amendment right to association because Florida courts have a substantial and legitimate governmental interest in protecting the integrity of the litigation process.

Lesson Learned:

The last thing a client wants to hear is that large sums of money have been paid to an attorney in preparation for a trial that he or she is now disqualified from. It may make economic sense to engage the drafting attorney as pre-trial or post-trial counsel and hire a second lawyer to act as trial counsel. The point is that clients and their attorneys need to anticipate this issue and plan accordingly - not have it thrust upon them on the eve of trial.

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Law Firm Hit with $3 Million Judgment: Husband and Wife Conflict of Interest Case

Any estate planner worth his or her salt knows by now that the commonly accepted practice of representing both a husband and wife in estate planning is fraught with potential conflict-of-interest issues. In Ethics Opinion 95-4 the Florida Bar provided an excellent summary of the key issues to be aware of when representing couples.

These are not abstract, esoteric ethics questions. If you're not careful, they can come back to bite you in a very big way. In a story reported here, a well established Texas estate-planning attorney and his firm are reported to have been hit with a judgment for $1 million in damages for breach of fiduciary duty to "Husband," plus $2 million in punitive damages. The Texas attorney represented a couple. His firm also represented the wife's mom. After drafting estate planning documents providing that all assets went to the surviving spouse (thus taking full advantage of the unlimited estate tax marital deduction), wife's mom asked lawyer to rewrite will cutting husband out and making mom the beneficiary of wife's estate (presto! no more estate tax marital deduction). Lawyer rewrote wife's will, wife signed new will, no one ever said anything to husband (who was also lawyer's client), wife dies, husband sues: lawyer gets slammed.

Here are a few excerpts from the linked-to story:

"A [Comal County, Texas] jury Tuesday slapped a $3 million judgment on one of New Braunfels' oldest and most prestigious law firms in a lawsuit claiming gross negligence and malpractice.


If the verdict and jury award stands against attorney John Dierksen and his firm, Reagan, Burrus, Dierksen, Lamon and Bluntzer, it will be the largest ever in a Comal County court.

Jurors unanimously ruled the law firm and specifically Dierksen were grossly negligent, that the negligence injured Llano businessman Robert Maxwell -- a New Braunfels native -- and his businesses, Maxwell Marine and Meyer-Maxwell Properties, Ltd., among others, and that the law firm failed to meet its fiduciary duty to Maxwell -- costing him more than $1 million.

Along with the $1 million from failure to meet fiduciary duty, jurors set exemplary or punitive damages of $1.5 million against Dierksen and $500,000 against the law firm for a total of just over $3 million."

Source: Wills, Trusts & Estates Prof Blog

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Cautionary Tale: Attorney Goes to Jail for Filing False Estate Tax Return

Estate tax returns are complicated and technically demanding for even the most experienced attorney or CPA. Add to that mix the pressure sometimes applied by family members who are flabbergasted by the amount of tax they have to pay.

This story should be shared with any client tempted to push the envelope or play the audit lottery with the IRS when it comes to estate taxes. As reported here, a Texas lawyer is going to JAIL for intentionally falsifying an estate tax return. Here are a few excerpts from the linked-to story:

U.S. District Judge Robert Junell sentenced Ashley, 44, to two years in federal prison Tuesday on two charges related to tax fraud. Ashley was also ordered to pay $5,200 in fines and will be on supervised release for two years after he is released from prison.


Ashley admitted that during the preparation of the tax return of his father's estate, he directed his secretary to type four backdated gift deeds falsely reflecting that his father, Connell D. Ashley, had deeded a certain portion of a ranch he owned to his sons in 1989, 1990, 1991 and 1992, a news release said. In fact his father had not truly begun to deed portions of the ranch to Stephen Ashley or his brothers until 1993, the release said.

U.S. Attorney Johnny Sutton said in a news release that Stephen Ashley also had his father's former secretary forge a signature on the false deeds and had false notary records created.

Source: You and Yours Blawg

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Family to Contest Revised Will of St. Petersburg Millionaire: Latest Twist in a Two-year Battle over $1.5 Million Estate

Any time an attorney writes himself or one of his relatives into a client's will, red flags should shoot up all over the place. If this same attorney is also cutting the testator's family out of the will, the ethical and legal issues become so thick the attorney is almost guaranteeing future litigation over the will. That's exactly what happened in a St. Petersburg, Florida, case, as reported in this newspaper story. Here are a few excerpts from that story:

The millionaire walked into the St. Petersburg law office.


Harry Lieffers Jr., 76, looked over a five-page document and, with a few strokes of a pen, cut his two daughters and stepson out of his will.

On that October day in 2003, Lieffers decided that his roughly $1.5-million estate would be divided equally among two people: His 43-year-old real estate agent and the agent's 22-year-old girlfriend.

"I wish to reward them for the kindness they have shown me," the will said.

The attorney who drafted the will was the girlfriend's uncle.

The document, filed after Lieffers' death last month, is the latest point of contention in a two-year battle over Lieffers' health and estate.

Lieffers' children say he was vulnerable because of dementia and Alzheimer's disease. They say his real estate agent, Gerard Growney, and the attorney, Alan Watson, took advantage of Lieffers.

The family has filed a complaint against Watson with the Florida Bar and plan to contest the will.

* * * *

Lieffers' children know a lengthy court battle may wipe out all of the funds, but they believe Lieffers would have wanted them to push forward.

"If we ever needed Dad, he was there for us," said daughter Reibel. "We will continue to be there for him, to preserve his last wishes now that he is gone." (Emphasis added.)

Did Drafting Attorney Violate Florida Bar Ethics Rule?

Based on the linked-to story, the answer appears to be NO. Rule Reg. Fla. Bar 4-1.8(c) prohibits an attorney from preparing an instrument giving the attorney or a person related to the attorney any "substantial gift" from a client, including a testamentary gift, unless the client is related to the proposed donee. A person's niece or nephew is not considered "related" for purposes of this rule. The Florida Bar will have to grapple with this case, but the overriding question for all concerned should be "why get caught up in this mess to begin with?"

Contested Guardianship Proceeding as Precursor to Probate Litigation

One final note, if you read the linked-to story you'll note this family drama started out as a contested guardianship proceeding, emphasizing once again the remarks I've made (see here and here) regarding how these types of proceedings usually end up being precursors to probate litigation. Perhaps if someone had sought discovery of Mr. Lieffers' will as part of the contested guardianship proceedings the parties would have found out about his will's controversial dispositive provisions before his death and worked out these issues while he was still around to comment.

Source: Thanks to Heraldblog@gmail.com for brining this item to my attention!

New Years Resolution for Estate Planning Attorneys: No Secret Sex Tapes!!

Although many estate planning attorneys take pride in being trusted family advisors, there are certain boundaries that just shouldn't be crossed. Take secret sex tapes for example. Even if your client happens to be Britney Spears, no self-respecting estate planning attorney would ever allow secret sex tapes to be aired in his or her office.

Which, as reported here, is exactly what Ms. Spears is claiming in a $20 million libel lawsuit she filed against celebrity magazine Us Weekly, charging it published a false story reporting she and her husband, Kevin Federline, made a sex tape, had viewed it with their estate planning lawyers, and were worried about its release.

Here are a few excerpts from the linked-to story:

According to the lawsuit, the article was published Oct. 17 in the magazine's "Hot Stuff" column and claimed that Spears and her husband feared the release of a secret sex tape, which they had viewed with their estate planning lawyers.

The article stated that Spears gave a copy of the tape to the lawyers on Sept. 30 and that she and her husband were "acting goofy the whole time" while watching the video.

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Former Paul Weiss Partner Is Disbarred for Stealing From Family Trust

"Trust, but verify." That's what Ronald Reagan used to say about negotiating with the Soviet Union, but this maxim also applies whenever one person is entrusted with the care of another person's money. This New York Law Journal is but the latest example of that point. A retired partner of one of the largest and most prestigious law firms in the country, Paul, Weiss, Rifkind, Wharton & Garrison, has been disbarred for stealing more than $500,000 from a family trust for which he was a trustee. Allan L. Blumstein admitted he essentially depleted an account intended to benefit his elderly aunt, who was suffering from dementia and was confined to a nursing home. The former litigator said he took the money to maintain a lavish but unaffordable lifestyle, without which he feared his wife would leave him.

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"Dear Abby" Column: Wife Discovers Man's Will Would Leave Her Homeless

Who would have thought that "Dear Abby" could teach us something about practicing trusts and estates law in Florida? Read the following exchange (also available here) and ask yourself three questions:

  • Assuming the estate planning attorney described below only represented the husband, did the attorney violate his confidentiality obligations under Florida Ethics Rule 4-1.6? Answer: Yes.
  • Under Florida Bar Ethics Opinion 95-4, could the estate planning attorney represent both husband and wife in the scenario described below? Answer: No.
  • Is this type of behavior great advertising for Florida's homestead protection laws and spousal elective share rights? Answer: Yes!!!

DEAR ABBY: My husband, "Girard," and I have been married two years. We both have children from previous marriages. Girard always told me I would have a home if I outlived him, even though his children will eventually inherit the property.

One day I asked Girard if it was in the will, and he said no, but that he and his children "had discussed it." When I asked him to put it on paper, he agreed. His attorney drafted a document for him to sign. After it had laid around the house for more than a week, Girard told me he had lost it. I reminded him to get another copy, sign and return it. After two more weeks passed with no signed document, Girard told me his attorney was "busy" and "would get to it when he could."

I decided to call the attorney myself. Well, you guessed it. I was told the papers had been executed. When I confronted Girard he admitted he had lied and promised to have the will done over. When I looked at the document he had signed, I saw that Girard was giving me 90 days to get out of the house after his death.

I was upset, so he tore up the document. Am I being unreasonable? I am 76, and he is 84. -- DOESN'T WANT TO BE HOMELESS IN BATON ROUGE

DEAR DOESN'T: It's not unreasonable to want a roof over your head should your husband predecease you. Thank heavens you found out now what was planned for you, rather than being hit with it while you were helpless and grieving. Now that you know how your husband thinks, consult an attorney of your own and find out exactly what your rights are as a wife in the state of Louisiana. The law can vary from state to state, and it is extremely important that you know what you are entitled to.

Source: Wills, Trusts & Estates Prof. Blog

ABA Issues Formal Opinion on Estate Planning Conflicts

The ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 05-434, which address conflicts which may arise when an attorney represents several members of the same family in estate planning matters. The Wills, Trusts & Estates Prof Blog posted a good summary of the Opinion here. As a practitioner, I agree with the ABA's conclusion that the conflicts can be successfully managed. The Prof Blog argues that this type of representation is "simply not worth the risk."

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