Tuesday, August 8, 2017

North Dakota: Personal Representatives And Personal Conflicts

The North Dakota Supreme Court imposed a six-month suspension of an attorney who had engaged in a conflict of interest as attorney-in-fact and personal representative of his mother and her estate.

The will left the estate to the attorney's daughter. He fathered a son after his mother's death and wanted him to share

The hearing panel reasoned that Allen acted as the attorney for himself as the personal representative of the estate, thereby binding himself to the rules of professional responsibility, and that he had a duty "to advance the cause of the estate through his actions and counsel." The panel found that "[w]hen Allen's son was born in 2013, Allen's personal interests became adverse to the interests of the estate and contrary to his fiduciary duty because Allen wanted [his son] to receive a portion of the estate," and "[t]hese contrary interests created conflicts of interest" in violation of the rule "when Allen failed to withdraw as counsel for the personal representative." The panel reasoned, "Allen's role as personal representative and attorney for the personal representative prevented him from self-dealing with regard to the estate property" under N.D.C.C. § 30.1-18-13 (U.P.C. § 3-713), and "[b]y attempting to negotiate a proposal of which he was a direct beneficiary, Allen created . . . a conflict of interest by placing himself in a situation where he was unable to place his duty to his client before his personal interest." The panel found that "Allen's two adverse interests kept Allen from being able to consider, recommend, or carry out [a] course of action on behalf of his client" and that by continuing the representation despite the conflicts, Allen violated the rule.

But the court rejected this finding

The hearing panel found that when Allen filed the application for informal probate in April 2012, he made statements of material fact indicating the will was validly executed, he was unaware of any documents revoking the will, and the instrument submitted was Margaret Allen's last will. The panel found that sometime before his son's birth in July 2013, Allen decided the son "should be included within the distribution of the estate, even though [the son] could not take under the terms of Margaret's will." The panel found, "Allen's conclusion that [the son] became a potential heir was not shared with the court and Allen made no corrective filings to the informal probate documents, nor were any other actions taken by Allen to advance his position at that time." When Allen attempted to negotiate with Baker after the son's birth, "[n]o terms of Allen's proposals were contemplated by the will." The panel found that Allen resigned as personal representative in January 2014 and filed the petition for formal adjudication of intestacy in May 2014, claiming "for the first time . . . that Margaret's will was invalid, that [the son] took under the will, and that Allen himself was entitled to property as an intestate heir." The panel found this position was "factually inconsistent" with the April 2012 informal probate documents. The panel concluded the rule was violated because "Allen failed to correct a statement made to the court when he did not inform the court that the previously provided information, which had been the basis for the informal probate, was now believed to be incorrect after further consideration of Margaret Allen's will."

The court's decision to impose a moderate sanction was influenced by the unlikelihood that the misconduct would recur.

The hearing panel recommended that "a more severe sanction of disbarment is warranted" in this case, but determined "Allen's lack of a disciplinary record merits a downward departure." The panel further recommended that "Allen's conduct is egregious and he should be made to demonstrate to the Court that he has taken steps to ensure that such conduct will not occur in the future." In addition to Allen's lack of a disciplinary record, we are persuaded to depart downward because the circumstances that led to discipline here are unlikely to reoccur.

No mothers left presumably.

Justice Crothers concurred

Our decision today makes clear that lawyers acting in a non-lawyer representational capacity are exposed to disciplinary sanction for professional misconduct AND potentially limit their future ability to assert personal claims. I agree with the Court's order. I write separately to highlight what I believe is the impact of our ruling on the ability of a family member-lawyer to later assert any claim against a decedent's estate. Specifically, if a lawyer agrees to serve in a familial fiduciary capacity such as a personal representative, the lawyer likely is barred from using information obtained in that capacity (and by the inherent simultaneous representation by the lawyer under Rule 1.7) in any subsequent proceeding involving the estate...

Reading Rules 1.71.8 and 1.9 together leads to the conclusion that lawyers acting as family member-personal representatives are barred in the future from asserting any claims that may adversely affect the former client. This limitation applies whether the lawyer personally asserts a claim or later represents another party against a successor personal representative. The Rules presumably bar such claims whether a lawyer self-represents or hires counsel. The exception is when a personal representative (meaning the successor personal representative) expressly consents according to the particular requirements in Rules 1.7(d)and 1.8(b)See Majority, at ¶ 19.

 I write separately to highlight these constraints placed on lawyers and to point out that today's case will broadly impact a lawyer's ability to assert future claims. In light of our ruling, lawyers should advisedly and cautiously accept representational positions in family-related matters where they might have a personal interest that is or might be adverse to the estate.

(Mike Frisch)


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