Wills, Trusts & Estates Prof Blog

Attorney Resigns for Bad Behavior as Agent

On January 15, 2008, the Supreme Court of Texas accepted the resignation of a Texas lawyer in lieu of discipline.

Here is a description of the attorney's evil conduct as described in Disciplinary Actions, 71 Tex. B.J. 226, at 228 (2008):

[A]cting under a power of attorney from the complainant, [attorney] withdrew funds from the complainant’s financial accounts for [his] personal use and obtained credit cards in the complainant’s name that [he] used for his own personal use, without the complainant’s knowledge or approval. After receiving a notice of revocation of the power of attorney, [he] continued to withdraw funds from the accounts and continued to use the credit cards. [He] committed the criminal offenses of theft and misapplication of fiduciary property.

Code of Professional Responsibility and Lawyer's Duty of Confidentiality

Charles M. Bennett (Attorney at Law, Blackburn & Stoll, LC) has recently published his article entitled Frontiers in Ethics: The Estate Lawyer's Duty of Loyalty And Confidentiality to the Fiduciary Client: Examining the Past to Make Wise Choices Now and in the Future, 33 Ohio N.U. L. Rev. 807 (2007).

Here is an excerpt of the introduction to his article:

In 1977, the President of the American Bar Association, ABA President William B. Spann, Jr. established a special Commission on Evaluation of Professional Standards to review and revise the Model Code of Professional Responsibility (the “CPR”). President Spann chose Robert J. Kutak to lead the commission. In its 1980 Discussion Draft of its proposed Model Rules of Professional Conduct (the “MRPC”), the Kutak Commission, as it came to be called, proposed a number of changes to the CPR, the majority of which were acceptable to lawyers throughout the ABA and the country. Even so, several proposals caused a “firestorm of controversy,” leading Professor W. William Hodes to note: “the Discussion Draft was not so much discussed as it was assaulted.” One proposal exemplified, if not fueled, the “firestorm.” In its Discussion Draft of the MRPC, the Kutak Commission's proposed to expand the circumstances where a lawyer could ethically disclose a client's confidential information to third parties. Many lawyers viewed this proposal as a radical change to what were not only tried and true ethical principles, but to principles upon which the very foundation of the attorney-client relationship was built. ***

In conclusion, I have a few thoughts about what the future may hold for the lawyer's duties of loyalty and confidentiality. Looking at the past gives insight to the future. Nonetheless, given the forces at work in the world at large and the every expanding wealth of knowledge and discovery, none of us should become too entrenched in our current views.

Attorney, serving as trustee, suspended from practice of law

A Texas lawyer received a one-year, fully probated suspension from the practice of law because of his misconduct while serving as a trustee.

Here is a description of his conduct as reported in Disciplinary Actions, 70 Tex. B.J. 544, 545 (2007):

A panel of the District 14-B Grievance Committee found that in March 2004, the complainant filed suit seeking an accounting in connection with certain trusts for which [attorney] was serving as trustee. In June 2004, a default judgment was entered in favor of the complainant, and [attorney] was ordered to provide the complainant’s attorney with a full and complete accounting of all financial transactions relating to the trusts on or before July 14, 2004. [Attorney] failed to obey the order.

[Attorney] violated Rule 3.04(d).  He was ordered to pay $302.62 in costs.

Texas Probate Lawyer Sanctioned for Misconduct

On September 13, 2007, a Texas lawyer was sanctioned for various acts of misconduct which occurred while he represented the executor of a decedent's estate.  See Disciplinary Actions, 70 Tex. B.J. 890, 892 (2007) which explains that this Dallas lawyer:

accepted a five-year, partially probated suspension effective Nov. 1, 2007, with the first two years actively served and the remainder probated. A panel of the District 6-A Grievance Committee found that [he] represented the independent executor of an estate. [He] failed to promptly distribute the assets of the estate to the beneficiaries. [H]e further failed to promptly pay a claim on the estate, misrepresenting to the attorney for the claimant that all assets of the estate had already been distributed to the beneficiaries.

Personal Representatives Sue Law Firm for Increased Administration Costs Due to Wrongful Appointment of a Trust Company

In a recent Florida case Gunster, Yoakley & Stewart, P.A. v. McAdam, Nos. 4D06-1594, 4D06-1624 (Fla. Dist. Ct. App. Aug. 22, 2007), the plaintiffs, individually and in their capacity as personal representatives and trustees, sued the law firm of Gunster, Yoakley & Stewart, P.A., one of the firm’s probate attorneys, and JP Morgan asserting breach of fiduciary duty, constructive fraud, civil conspiracy, negligence, and unjust enrichment.

The crux of the plaintiffs’ claim was that Gunster Yoakley wrongfully procured J.P. Morgan’s appointment as corporate fiduciary and caused the estate administration to be more expensive. The trial court entered a judgment for the plaintiffs in the amount of $1,043,430 and the appellate court affirmed.

Some of the main holdings of this case include the following:

• Plaintiffs could collaterally attack wrongful appointment of a corporate fiduciary by bringing action against Gunster Yoakley because relief was not available to them in probate.
• The trial court correctly submitted to the jury the question of whether Gunster Yoakley had a duty to fund a revocable trust during decedent’s lifetime.
• Plaintiffs had standing to sue Gunster Yoakley because they demonstrated that the firm’s negligence frustrated decedent’s intent, diminishing their legacy.

T&E Lawyer Drains Client's Estate, Arrested Playing Video Poker in Casino

The following is from Kim Martineau, Lawyer Arrested at Casino Suspected of Siphoning Money from Elderly Woman's Estate, Hartford Courant, July 19, 2007:

A Wallingford attorney accused of draining the estate of an elderly widow, potentially to cover heavy gambling losses, was arrested Wednesday [July 18, 2007] while playing video poker at Mohegan Sun. ...

A year ago, 99-year-old Elsie Nolds suffered a stroke. Not long after Nolds arrived at the hospital, her attorney, [Richard] Hannan, appeared at her bedside, offering to pay her bills through power of attorney. At the time, Nolds had $183,000 in stock and savings. Today, police suspect most of that money is gone. ...

During their investigation, police discovered Hannan had cashed his client's $100,000 savings CD and secretly placed her cash into his law firm account, according to court papers. He had also written checks from her account to his firm and sold off her stock without permission, the state complaint says. The money appeared to be flowing to one place: Mohegan Sun Resort and Casino in Montville. When police looked at Hannan's records they saw pages of red ink. Between 2005 and 2006, he had racked up more than $400,000 in losses, the state complaint says. The alleged misconduct has stunned lawyers in Wallingford, where Hannan runs a practice on Main Street with his son, Gregg Hannan, handling probate and real estate matters.

Special thanks to Prof. Paul Caron for bringing this article to my attention.

More on the Bishop Estate

Earlier on this blog, I discussed a book authored by Samuel P. King (Judge, U.S. District Court for the District of Hawai'i) and Randall W. Roth (professor, University of Hawai'i School of Law) which presents an extremely well-researched and highly interesting (and shocking) account of the problems arising from the Bishop Estate in Broken Trust: Greed, Mismanagement & Political Manipulation of American's Largest Charitable Trust (2006).

In Erosion of Trust, ABA J., Aug. 2007, at 48, these authors update readers on some of the developments that have since occurred.  They note that:

The fact that it took the heavy hand of the IRS to finally break the legal logjam in the Bishop Estate scandal has not been lost on members of Congress and state legislators in their consideration of proposed measures to better protect charities from insider abuse.

The authors then discuss actions taken (or considered) by several states such as California, Massachusetts, and New York.

They conclude that "lawyers must take their duties seriously when representing nonprofits.  The legal profession can and should assist in efforts to make it harder to abuse the trust that the public places in charities and in the people who run them."

Avoiding Attorney Liability When Representing a Fiduciary

Suzanne L. Shier (Chapman and Cutler LLP, Chicago, Illinois) has published her article, Avoiding Attorney Liability When Representing a Fiduciary, in the May 2007 edition of Estate Planning.

Here is the introduction:

Trustees and other fiduciaries undertake a multitude of duties in the administration of trust estates, and it is the role of counsel for the fiduciary to advise and assist the fiduciary in fulfilling its duties. When a breach of trust is asserted against a fiduciary, counsel for the fiduciary is called upon to defend the fiduciary. This is all familiar territory for counsel engaging in the representation of fiduciary clients. However, the situation changes dramatically when a be3neficiary alleges that the attorney representing the fiduciary has participated in the breach of trust of a fiduciary client or was negligent in the performance of fiduciary legal services. In those cases, the attorney faces the specter of personal liability tot eh beneficiary. Thus. A lawyer representing a fiduciary is well-advised to understand clearly not only the duties of the fiduciary client, but also his own responsibilities in such representation.

Danger -- Don't Draft Wills Benefiting Your Paralegal

In Jones v. Krown, 218 S.W.3d 746 (Tex. App.—Fort Worth 2007, pet. filed), Attorney drafted a will for Testator which named Paralegal (an independent contractor) as both a beneficiary and as the executrix.  After Testator died, his sister filed a motion for a declaratory judgment to set aside the gift to Paralegal under Texas Probate Code § 58b which states that a testamentary gift to “employee of the attorney who prepares or supervises the preparation of the will is void.”  Both the trial and appellate courts agreed that Paralegal’s gift was void and that the property passed via intestacy to his sister.

The court was unimpressed with Paralegal’s arguments that § 58b did not apply to her.  The court found it irrelevant that Paralegal was not involved with the drafting of Testator’s will and that she was not present when Testator executed the will.  In addition, her technical status as an “independent contractor” did not keep her from falling within the purview of the term “employee” as used in the statute.  Because § 58b does not define the term, the court relied on the “plain and common meaning” of the word, that is, someone who works for someone else and receives payment for that work.  Because Paralegal worked for Attorney and was paid for her work, she qualified as an employee.  The court also explained that the application of § 58b to void Paralegal’s gift “is consistent with the Legislature’s intent * * * which was to avoid having an interested person use his position of trust to benefit himself.”  Jones at 749.

Moral:  An attorney should not draft a will which leaves property to one of his employees unless one of the exceptions in § 58b applies and even then, prudent practice may be to send the testator to a completely disinterested attorney.

Jury Finds Blattmachr Breached Fiduciary Duty BUT Finds No Damages Resulted

The following is reproduced from the Tax Prof Blog:

The Wall Street Journal reports today [May 16, 2007] that a New York jury has found that Jonathan G. Blattmachr, one of the country's leading estate planners and Chair of the Trusts & Estates Group at Milbank, Tweed, Hadley & McCloy (New York), breached the fiduciary duty he owed to a client, Marvin Schein, whose father founded medical-supplies company Henry Schein Inc.:

[T]he amended complaint 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. Schein’s win was a hollow one, though. The Long Island jury ruled that the breach wasn’t a substantial factor in causing Schein injury. As a result, Schein won’t be able to recover damages.

Soprano Want-to-be Attorney Resigns

A young attorney (30 years old) discovered that acting like Tony Soprano is not acceptable in the legal arena.  The lawyer was accused of telling Tom, one of his clients, that he could resolve the client's problem by having the person "hurt or killed for a fee."  The intended victim was also an attorney.

The attorney resigned on March 12, 2007 in lieu of discipline.  He was also sentenced to one year in jail (probated for one year) and assessed a fine of $1,000.

I hope he did not practice in the probate area -- but one never knows ---

See Bob Belcher, Local attorney pleads guilty, forfeits license, Corsicana Daily Sun (Texas), Dec. 22, 2006 and Disciplinary Actions, 70 Tex. B.J. 458, 460 (2007).

Wicked Estate Lawyer Relinquishes Law License

The State Bar of Texas announced yesterday (May 4, 2007) that a Texas lawyer whoin one case failed to properly disburse assets to people named in a will and commingled assets with his own money. He also failed to account for how he distributed the money and property, despite a court order.

In another case, the bar association said, [the lawyer] withdrew money from an estate and deposited it in his own bank account.

"The funds were then spent or otherwise exhausted by [the lawyer] and not utilized for the benefit of the estate," the association said.

[The lawyer] and his family also lived in the home of a deceased client from 1987 to 2002 and deposited money from the sale into his own bank account, the bar said.

See Tony Plohetski, Austin lawyer accused in estate theft cases gives up law license, American Statesman (Austin, Texas), May 5, 2007.

Special thanks to Prof. Wayne Scott (St. Mary's University School of Law) for bringing this article to my attention.

Creating wills and powers of attorney deemed to be the unauthorized practice of law

The testarix asked her friend, an insurance agent, to help draft her will.  The friend filled in the blanks in a computer generated generic will which the testatrix executed.  The friend was named executor.

In Franklin v. Chavis, 640 S.E.2d 873 (S.C. 2007) , the court found that the testatrix was not involved in drafting the document and did not review it.  The court held that the friend had acted as more than a scrivener and had engaged in the unauthorized practice of law.  The friend also drafted a power of attorney for the testatrix which did not involve filling in blanks in a form and this too was the unauthorized practice of law.  The court also determined that the friend could not receive compensation for acting as the executor.

Probate Attorney Resigns in Face of Disciplinary Action

A Texas attorney faced with a disciplinary action for outrageous conduct resigned from the practice of law.

Here is a summary of his evil conduct as described in Disciplinary Actions, 70 Tex. B.J. 274, 267-77 (2007):

[Attorney] was appointed the guardian of the person and estate of his aunt by the presiding probate judge * * *. The probate court had established various safekeeping accounts for the maintenance of the cash assets of the guardianship estate. Beginning in 2003, [Attorney] secured false probate court documents, including orders containing the forged signature of the presiding judge, and presented these documents to various financial institutions as legitimate authorizations to release funds belonging to the guardianship estate.  [Attorney] failed to make an accounting of the estate funds as required by law.

Unauthorized Practice of Law

In Franklin v. Chavis, No. 26251(S.C. Jan. 22, 2007), the Supreme Court of South Carolina considered the issue of whether an insurance agent engaged in the unauthorized practice of law by drafting a will, a power of attorney, a renunciation of administration, and a waiver of bond form.

The facts were as follows:

Ms. Weiss [the decedent] was ninety-one years old and in the hospital when she signed [her] will on July 31, 2004.  [Her grandnieces] claim Michael Lehman, Ms. Weiss’s nephew by marriage, took advantage of her condition to influence her to make this will leaving 60% of her estate to Lehman and only 10% to each of Ms. Weiss’s three grandnieces and their mother, Lynn Franklin.  Respondent [the insurance agent], a former neighbor of Ms. Weiss, drafted this will.  The will names respondent as personal representative of Ms. Weiss’s estate but he is not a beneficiary.

Respondent also drafted a power of attorney that Ms. Weiss signed along with the July 31 will.  This document names respondent as her attorney-in-fact.  Respondent used this power of attorney before Ms. Weiss’s death to close a real estate transaction on her behalf.  Ms. Weiss died on September 27, 2004.

The third document in question is a Renunciation of Administration regarding the estate of Ms. Weiss’s daughter, Sara Crossman, who died in May 2004.  Ms. Weiss  signed this document on September 14, 2004, relinquishing her right to act as personal representative for Sara’s estate and nominating respondent to act in that capacity.  Ms. Weiss also signed a waiver of bond form for Sara’s estate enabling respondent to serve without posting bond.

The court considered the four documents separately, beginning with the principle that when one acts as “more than a mere scrivener”, then “[e]ven the preparation of standard forms that require no creative drafting may constitute the practice of law.”  Such practice is unauthorized where the individual has not met local bar requirements.

The will:

Respondent selected the will form, filled in the information given by Ms. Weiss, and arranged the execution of the will at the hospital.  Although these facts are not in themselves conclusive, the omission of facts indicating Ms. Weiss’s involvement is significant.  There is no evidence Ms. Weiss reviewed the will once it was typed.  The will was not typed in her presence and although respondent relates the details of what Ms. Weiss told him to do, there is no indication he contemporaneously recorded her instructions and then simply transferred the information to the form.

We construe the role of “scrivener” in this context to mean someone who does nothing more than record verbatim what the decedent says.  We conclude respondent’s actions in drafting Ms. Weiss’s will exceeded those of a mere scrivener and he engaged in the unauthorized practice of law.

The Power of Attorney:

There are no details regarding respondent’s drafting of this document.  It uses legal phrasing with two pages of text and is not a simple form with filled-in blanks.  The document itself confers wide-ranging legal rights and would clearly require legal advice in its preparation.  We conclude respondent engaged in the practice of law in drafting this document.

The Renunciation of Administration and Waiver of Bond form:

While these forms do have legal implications, they are straight-forward and are provided to the public by the court.  These simple forms are clearly distinguishable from the will and power of attorney discussed above.  Respondent basically inserted names, addresses, and dates.  There is no evidence respondent gave legal advice to Ms. Weiss regarding these forms.  We find there is no factual support for the claim that respondent engaged in the practice of law by filling out these forms.

While the court did not remove the agent from his position as personal representative, it said that he was not entitled to the statutory compensation that a personal representative would otherwise receive. It also declined to find the will void, saying that was an issue for the trial court to decide in the underlying matter, and that “[the will] should not be invalidated simply because it was drafted by a nonlawyer.”  Finally, the court declined to grant restitution to the decedent’s grandnieces because there is “no private right of action in South Carolina for the unauthorized practice of law.”

Special thanks to Patrick S. Sylvester (Attorney, Wilmette, IL) for bringing this case to my attention.

New York Surrogate Censured

The following is from Tom Perrotta, Albany Surrogate Censured Over 'Evasive' Replies, N.Y. Law., March 1, 2007:

Cathryn M. Doyle, the surrogate in Albany County, should be censured for evasive responses to questions about a trust created to pay the legal expenses of Thomas J. Spargo, the former Supreme Court justice who was removed from the bench last year, the Commission on Judicial Conduct said yesterday.

The commission's administrator, Robert H. Tembeckjian, had sought Surrogate Doyle's removal from the bench, but the commission said the sanction was too harsh. No judge has ever been removed based solely on statements made to the commission.

Surrogate Doyle also was cleared of charges that her involvement in the trust for Mr. Spargo, her long-time friend, constituted a misuse of her office and compromised the integrity of the judiciary.

But the commission did say it would have voted to suspend Surrogate Doyle without pay because of her "shifting and evasive" testimony, if that sanction had been available to it.

Special thanks to Prof. Paul Caron for bringing this article to my attention.

Fiduciary Litigation -- The Cailloux Case

The fiduciary duty owed by attorneys to their clients in estate planning matters has come under ever-increasing scrutiny and has been the focus of a growing amount of litigation.

Cailloux v. Baker Botts is one of the more recent cases, famous for its jury award of $65.5 million.  After earning his fortune with Keystone International, the well-known valve manufacturing company, Floyd Cailloux moved to Kerrville, Texas in 1982.  Zeke MacCormack, Kerr jury sides with widow, MySA.com, Feb. 25, 2005.  He enlisted the law firm of Baker Botts as his attorney.  A lawyer for the firm prepared a will for Floyd, which he executed in 1995, appointing Wells Fargo as the executor.  Glenda Taylor, Cailloux Family Seeking Damages, Kerrville Daily Times, Jan. 14, 2005.  Further, Floyd established a marital trust for his wife and a trust for his children.  In January 1997, Floyd Cailloux died and was survived by his wife and children.  Baker Botts attorney Stacy Eastland suggested “that Floyd’s heirs disclaim their rights under his will,” to avoid hefty tax liability after disclaimer.  The Floyd and Kathleen Cailloux Foundation, previously created in 1994, received a 92% share from the estate, totaling $60 million dollars.  Wells Fargo bank officer Bill Goertz was director of the foundation.

Floyd’s wife, Kathleen Cailloux, and his children, represented by the Austin law firm Fritz, Byrne, Head & Harrison LLP and Kerrville attorneys Richard Mosty and Donald Dorsey, filed suit in the 198th District Court in August 2003.  Monica Perin, Kerrville judge affirms $71 million verdict against Baker Botts, Houston Business Journal, April 6, 2005.  Floyd’s son, daughter, and grandson nonsuited their claims once the trial began on February 8th, 2005.  Brenda Sapino Jeffreys, Jury Returns $65 Million Verdict Against Baker Botts, Other Defendants, Tex. Law., March 9, 2005).  The plaintiffs claimed in the sixth amended petition that “Baker Botts attorneys [had] conspired with [Wells Fargo] bank trust officers to formulate an estate plan favoring a family foundation which one of the bank officers, Bill Goertz, directed and served as a board member.”  The Caillouxes claimed that neither Kathleen nor the other heirs were fully informed of the plan’s implications.  However, at trial, Kenneth Cailloux, son and heir of Floyd Cailloux, testified that he had failed to inquire into the aspects of the estate plan that he did not understand.

The original defendants in the law suit were “the legal firm Baker Botts; Wells Fargo Bank Texas; William Goertz, one of four original directors of the Cailloux Foundation; S. Stacy Eastland and Stephen Dyer, attorneys with Baker Botts.”  Eastland and Dyer have since left Baker Botts and are now working for Goldman Sachs in Houston.  Upon reaching a settlement, Goertz was dropped as a defendant before the trial.  The settlement required the current members of the Cailloux Foundation board of directors to surrender their seats to Cailloux family members, who had been denied any role in the Foundation since the death of Floyd Cailloux.

The three-week trial ended after seventeen hours of jury deliberations, resulting in a $65.5 million dollar verdict in favor of the Cailloux family.  The jury found that Baker Botts, in failing to disclose all important information, had breached its fiduciary duty toward Kathleen Cailloux.  It also found a breach of fiduciary duty on the part of Wells Fargo, the executor of the will, in which Goertz had participated individually, as he headed the foundation that received the disclaimed estate property.  Though named as defendants, the jury was not asked to make any findings against either Eastland or Dyer.  The award was later adjusted upward by District Judge Karl Emil Prohl to $71 million to reflect $5.6 million in pre-judgment and post-judgment interest and court costs of $61,000.  Brenda Sapino Jeffreys, Baker Botts and Wells Fargo Bank Texas Hit With $71 Million in Damages, Other Defendants, Tex. Law., April 8, 2005.

The jury verdict, a 10-2 vote, “assessed 25 percent of the responsibility for the injury to Cailloux, another 25 percent against Baker Botts, and 25 percent each against Wells Fargo and Goertz.”  Partial responsibility was assessed against Kathleen Cailloux because, according to Juror Dennis, not enough questions were asked during the estate planning process.  The award money would go into the Kathleen C. Cailloux Equitable Trust, allowing Cailloux to use the trust’s interest and to withdraw up to 5 percent annually of the trust’s principal.

The award did not sit well with Wells Fargo defense attorney Dean Fleming, who said that, “[as] far as I can tell, it’s unprecedented in Texas law for a judge just to create a trust out of whole cloth,” referring to Prohl’s use of his equitable powers to establish the trust.

On February 14, 2007, the Texas Fourth Court of Appeals reversed the trial court's judgment explaining that Cailloux failed to prove causation.   The stated that there was "no evidence that any of the alleged breaches of duty by Wells Fargo caused Kathleen to disclaim her right to Floyd's estate."  The court reached a similar conclusion with respect to Baker Botts.  The court then rendered a take nothing judgment in favor of Baker Botts and Wells Fargo.  See Baker Botts LLP v. Cailloux, No. 04-05-00446-CV (Feb. 14, 2007).

In dicta, the court also noted that "even if we were to assume that causation was proven as a matter of law at trial, we would nonetheless hold the trial court abused its discretion by imposing an "equitable trust" upon Baker Botts and Wells Fargo."

Attorney-Trustee Resigns From Practice of Law After Converting Almost $450,000

A Texas lawyer has recently resigned from the practice of law because of his evil conduct.

Here is a description of his conduct as set forth in Disciplinary Actions, 70 Tex. B.J. 174 (2007):

[He] served as trustee of a trust since its creation on Jan. 5, 1995.  As part of the trust estate, the trustee owned the home in which the trust beneficiary resides. Traver’s trustee duties included being responsible for paying the expenses associated with the home from the trust estate. The beneficiary learned that many of the trust bills were being paid late or with insufficient funds and a lawsuit had been initiated to collect delinquent property taxes.  [The lawyer] finally paid the taxes and related costs and the lawsuit was dismissed. Subsequently, the beneficiary retained the complainant * * * to assist her in obtaining financial information from [the lawyer] regarding assets of the trust.  Thereafter, the complainant requested an accounting of the trust’s financial activities from inception to the present. The complainant secured the assistance of an accountant to prepare the accounting of the trust’s financial records. Based on the accountant’s examination of the trust’s financial records provided by [the lawyer], the complainant determined that [the lawyer], in his capacity as trustee, utilized funds from the trust for his personal benefit.  [The lawyer] entered into a settlement agreement to repay the beneficiary of the trust a total of $450,000.

Symposium on Ethical Standards for Elder Mediation

The Montgomery County Mediation Center, Institute for the Study of Conflict Transformation, and Temple University’s Elderly Law Project is sponsoring the First National Symposium on Ethical Standards for Elder Mediation on April 19-20, 2007 at the Temple University James E. Beasley School of Law.

The Symposium will feature Harry R. Moody, Nancy Neveloff Dubler and Robert Baruch Bush who will be joined by distinguished panelists from the fields of mediation, elder law, gerontology, bioethics, and geriatric healthcare in an effort to examine the ethical issues that arise during mediation involving older adults.

Elder mediation is a rapidly growing specialty of mediation practice and reflects the confluence of two trends: an increasing elder population and the growing appreciation of the value of mediation.  With the development of elder mediation practice has emerged a set of issues particular to the aging population.  The First National Symposium on Ethical Standards for Elder Mediation will bring together mediators and interested stakeholders from many disciplines within the aging services network to exchange ideas, share experience and work to define best practices and ethical standards.  Products of the Symposium will include recommendations for standards of practice, the identification of topics for further examination and published articles in a scholarly journal.

Attorney, as Agent for Mother, Misappropriates Over $1.2 Million

On September 25, 2006, a Texas lawyer resigned from the practice of law rather than face discipline.

The lawyer's mother designated her as her agent in a power of attorney.  The trust mother had in her daughter was misplaced; her daughter subsequently misappropriated a whopping $1,214,367 of her mother's property for the lawyer's own personal gain.

When the lawyer's actions came to light, a guardianship battle ensued and the probate court ordered her to render an accounting.  She failed to do so.

See Disciplinary Actions, 70 Tex. B. J. 90, at 94 (2007).

Blogging as Lawyer Advertising -- An Update

Earlier on this blog, I reported on proposed rules in New York which would include blogs within the scope of lawyer advertising if the blog could be accessed from a computer in New York, even if the attorney is not practicing or domiciled in New York.

According to Stephanie Francis Ward, New York Revises Ad Rules, ABA J e-Report, Jan. 19, 2007, "[i]n the final regulations, which go into effect Feb. 1, it's made clear that such computer advertising regulations only apply to licensed New York lawyers."

One of the new requirements is "that all attorney Web sites include the term attorney advertising on home pages."

Probate Judge Receives Public Reprimanded

The Probate Court Judge of Denton County, Texas received a public reprimand on August 31, 2006 by the [Texas] State Commission on Judicial Conduct.  See Disciplinary Actions, 69 Tex. B.J. 1084, 1088 (2006).  Here is the description of the judge's improper conduct:

The commission found that through his efforts to assist his wife’s company, Guardianship Services, Inc., court appointments given to a friend and business partner who owed him money, Windle lent the prestige of judicial office to advance his own private interests and the private interests of his wife and his friend, and conveyed the impression that his wife and his friend were in special positions to influence him, in violation of Canon 2B of the Texas Code of Judicial Conduct.

Furthermore, Windle’s business relationships with his wife and his friend reflected adversely on the judge’s impartiality and involved the judge in frequent transactions with persons likely to come before the court, in violation of Canon 4D(1) of the Texas Code of Judicial Conduct. As a result of the judge’s actions, the Dallas Morning News published an article raising serious questions about the judge’s impartiality, integrity, and independence and casting public discredit upon the judiciary and administration of justice in Denton County. In reaching this conclusion, the commission notes that [the judge] provided false and misleading information to the commission in his sworn written responses to the commission’s initial inquiry. [The judge's] lack of candor to the commission proved to be an aggravating factor in reaching a final decision in this case.

Texas Estate Lawyer Disbarred

A Dallas, Texas attorney was recently disbarred for his conduct with regard to a decedent's estate.  Here is an excerpt from the report in Disciplinary Actions, 69 Tex. B.J. 1002 (2006):

the complainant employed [attorney] to handle estate matters related to her brother’s death. An insurance carrier tendered a check in the amount of $61,000, dated March 5, 2004, to the complainant as beneficiary of a life insurance policy on her brother’s life.  [Attorney] deposited the check in his trust account, agreeing to turn the funds over to the complainant.  On March 17, 2004, [Attorney] gave the complainant $1,500 in cash and checks for $7,000 and $45,000 as her portion of the insurance proceeds. The check in the amount of $7,000 was not drawn on a trust account. Both checks were returned by [Attorney's] bank due to insufficient funds. By letter dated Jan. 6, 2005, [Attorney] was directed to provide information to the grievance committee by Jan. 20, 2005. [Attorney] failed to provide the information and did not assert any grounds for such failure.

Probate Lawyer Acting Badly Suspended from Law Practice

And yet another report about a probate lawyer who took at trip to the dark side and has paid the price.  The lawyer

received a 27-month, partially probated suspension effective May 5, 2006, with the first three months actively served and the remainder probated. An evidentiary panel of the District 4-B Grievance Committee found that Holliday was hired to prepare a last will and testament. In the will, Holliday named herself executrix and hired herself as an attorney to represent the estate in the probate of her client’s will. Holliday did not discuss her fees with the beneficiaries of her client’s estate. She charged $13,825 in fees, as both executrix and attorney for the estate. The value of the estate was $17,653.98. Her fees as executrix were in excess of the amounts allowed for executrix fees permitted by the Texas Probate Code. Holliday failed and refused to comply with each request until well after the probate matter had closed.

See Disciplinary Actions, 69 Tex. B.J. 802, 804 (2006).

Attorney Reprimanded for Representing Husband and Wife

Despite repeated warnings of the risks associated with representing both spouses in preparing an estate plan, many attorneys continue the practice.

Recently, a Texas lawyer was given a public reprimand for such conduct.  Here is a summary of what happened:

[A] member of [the attorney's] law firm prepared estate planning documents for a husband and wife, including reciprocal wills. The husband had been represented by [his] law firm for other legal matters as well.

On April 12, 2002, [the attorney] drafted a new will for the wife naming the wife’s mother as the sole beneficiary of her estate.

[The Attorney] failed to obtain the prior consent of the former client husband before presenting the wife and drafting a new will.

See Disciplinary Actions, Tex. B.J. 902, 904 (2006).

Probate Lawyer Suspended

A San Antonio, Texas lawyer was recently suspended from the practice of law (one year of active suspension and two years probation) for probate misconduct.

The lawyer "neglected the representation, failed to reasonably communicate with his client, and failed to return unearned fees."

See Disciplinary Actions, Tex. B.J. 902, 906 (2006).

Florida Bar Considering Rules for Attorneys Serving as Executors

The following excerpt is from Daniel Ostrovsky, Fla. Bar Urged to Help Estate Lawyers Avoid Ethics Pitfall, Daily Bus. Rev., Oct. 27, 2006:

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. * * *

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.

Kelley said, however, that resolving this ethical dilemma is not high on the Bar's priority list.

Special thanks to Prof. Paul Caron for bringing this bill to my attention.

California's Busy Legislature

Here are some recent developments in California law:

• A will may refer to a writing that directs the disposition of tangible personal property not otherwise specifically disposed of by the will, except for property used primarily in a trade or business.  2006 Cal. Legis. Serv. ch. 280.
• A specific gift distributable under a trust will carry with it the same benefits and burdens as a specific gift under a will.  2006 Cal. Legis. Serv. ch. 569.
• An electronic advance health care directive or a power of attorney for health care is legally sufficient if the existing requirements for directives are satisfied, the directive is acknowledged before a notary public, and any digital signatures used meet specified requirements.  2006 Cal. Legis. Serv. ch. 579.
• Law Revision Commission will study the operation and effectiveness of provisions restricting donative transfers to certain classes of individuals, and to recommend revisions and improvements to those provisions.  2006 Cal. Legis. Serv. ch. 215.
• A guardian or conservator may select the least restrictive appropriate residence of a conservatee or ward.  2006 Cal. Legis. Serv. ch. 490.

Harrington Trust Saga

Sybil B. Harrington created an inter vivos trust, originally valued at approximately $100 million, which expressly provided that the trustees could make distributions only for charities in one Arizona county and 29 Texas counties.

However, the trustees have distributed a significant portion of the funds (over $1.5 million) to charities in New York, California, and other improper locations.

In addition, the trustees have favored the one Arizona county (Maricopa, where Phoenix is located).  For example, more than $18 million of the 21.6 million which the trustees distributed between October 2005 and the end of March 2006 went to charities in Maricopa County.

Some of the named Texas counties have received generous contributions while others have received nothing.

The Texas Attorney General has now ordered the trustees to make no further distributions to charities in Arizona until they answer the AG's questions.

See Karen Smith Welch, Texas attorney general orders trust fund trustees to stop giving money to Arizona, Lubbock Avalanche-Journal, Aug. 9, 2006, at A7.

Trust/Estate lawyer disbarred for false expense reports

At his disbarment hearing, former trusts and estates attorney Robert J. Pape claimed his severe ethical misconduct was a product of depression, in part from learning late in life that he was adopted. Read the full New York law Journal story, NYC T&E Partner Disbarred for Stealing $200k from Firm (June 28, 2006) by Anthony Lin.
   

Here are some excerpts:
   

A former Manhattan law firm partner who filed false expense reports for almost $200,000 to pay his yacht club membership and credit card bills has been disbarred.
   

"He showed a brilliance in the way he expanded the double dip system," wrote the referee, Benjamin Altman. "[Pape's] scheme created a host of different ways to defraud, i.e., billing two clients when neither was involved, billing a non-existent client, billing two different clients when no evidence of appointments were in any diary or calendar."
   

In arguing against disbarment, Pape had claimed his actions had arisen partly from depression he suffered. Barbara Falanga, a social worker who treated Pape after he was suspended from the firm, testified at his disciplinary hearing that his learning relatively late in life that he was adopted was also a factor in his conduct.
   

But the referee dismissed Falanga's testimony as having little value, noting that she was not a physician and, therefore, not qualified to diagnose Pape's mental health, much less whether it had any bearing on his conduct.
   

* * * [T]he referee said the matter was a straightforward case of a lawyer intentionally converting client funds for personal use. Disbarment is required in almost all such cases.

Probate Lawyer Behaving Badly

A Kerrville, Texas law recently received a 27-month suspension from the practice of law (three months actively served with the balance being probated) for engaging in conduct unbecoming of a probate lawyer.

Here is a description of the lawyer's conduct from Disciplinary Actions, Tex. B.J. 470, 471 (2006):

[The lawyer ] failed to respond to telephone calls, failed to keep his client reasonably informed about the status of the probate case, and failed to explain the matter to the extent reasonably necessary for the client to make informed decisions regarding the representation.  [He] neglected the representation by failing to pursue the probate matter in a timely manner, failed to protect the decedent’s estate, and failed to provide a requested accounting of funds he received on behalf of the estate. Upon termination of the representation, [he] failed to surrender papers, funds, and property to which the client was entitled.

Ethics & Malpractice

The American Bar Association Section of Real Property, Probate and Trust Law, the ABA Center for Professional Responsibility and the ABA Center for Continuing Legal Education is sponsoring a teleconference and live audio webcast CLE program on June 13, 2006 entitled Ethical Issues in Estate Planning and Administration -- Avoiding Ethics Violations and Malpractice.  Here is the description of this program:

This month , the American College of Trust and Estate Counsel released the fourth edition of the ACTEC Commentaries on the Model Rules of Professional Conduct.  The update provides stronger guidance on ethical issues and standards that estate planners and administrators must address to avoid ethics violations and malpractice.  The clarifications and additions included in the revisions illuminate new and evolving ethical issues that all attorneys involved in estate planning and administration should consider in everyday practice.

Join our experts to analyze the revised commentary and learn how the new revisions affect your estate planning practice. Specifically, the panelists will cover:

• How estate lawyers can violate their duty of confidentiality when representing spouses and other family members in estate planning.
• When a client has “diminished capacity” and how to avoid being the lawyer with “diminished skill.”
• How to assist clients in neighboring states without being charged by local lawyers with the unauthorized practice of law.
• How to avoid disqualification in estate litigation when interviewing a prospective client (also known as the “prospective defendant”).
• Why the ABA Model Rule was revised from “consent after consultation” in favor of “informed consent.”

Trustee/Lawyer Visits the Dark Side

Today in my Wills & Trusts class, we discussed the various civil sanctions against a trustee who breaches fiduciary duties such as removal from office and surcharge.  We also examined the criminal penalties that may be available.

In this regard, I found an interesting note about a San Antonio, Texas lawyer, George Gonzales, who received a 15 year prison sentence for misapplying approximately $380,000 from a trust.  Mr. Gonzales was the trustee of a trust established for a man who became a paraplegic after an accident.

See Lawyer is handed 15-year sentence, San Antonio Express-News, Oct. 15, 2004, at 2B.

And Now Probate Judges Behaving Badly

Recently on this blog, here and here, I reported on attorneys who have traveled to the "dark side" of probate practice.  It seems that judges are also not immune from temptation.

A recent report reveals that a surrogate judge, who had already been judicially removed from office for awarding excessive fees to a law school friend, and his associates are being investigated for allegedly engaging in host of improper activities including "brazen thefts from the assets of people who died without wills" in Brooklyn.  See Nancie L. Katz, B'klyn tomb-raid probe, NY Daily News, April 8, 2006.

Another Probate Lawyer Behaves Badly

A Wimberley, Texas attorney recently received a two-year, partially probated suspension with the first six months actively served because of less-than-professional conduct regarding the probate of a will.  According the report in Disciplinary Actions, Tex. B.J. 370, 374 (April 2006):

[Attorney] neglected a probate case by failing to file the application for six months, failed to prepare for a court hearing, canceled a hearing on the morning that it was to be held, and failed to ever secure another setting. [Attorney] failed to return her client’s telephone calls and failed to keep her client informed about the status of the case.  [Attorney] failed to withdraw from the representation when her physical condition impaired her ability to represent her client.

Probate Attorney Behaving Badly

A Houston, Texas attorney recently accepted a two-year, fully probated suspension because of less-than-professional conduct regarding the preparation of a will.  According the report in Disciplinary Actions, Tex. B.J. 370, 374 (April 2006):

[The] Grievance Committee found that on March 29, 2004, the complainant retained [attorney] to prepare a will for the complainant’s wife. The complainant paid a flat fee of $500 to the respondent for the will. Although the will was executed, neither the executed will, nor a copy of the will, were delivered to the complainant or his wife despite their repeated requests. In addition, [attorney] did not effectively respond to requestsfor communication by the complainant. Black failed to timely respond to notice of the complaint. * * *  [Attorney] agreed to pay $500 in restitution to the omplainant and $1,200 in attorney’s fees.

Probate Lawyer Exercised Undue Influence on His Parents

A judge in Long Island, New York recently ruled that Edward F. Campbell, Jr., a Manhattan probate attorney, exercised undue influence over his parents and used his superior legal skills to convince them to enter into an unwise transaction.

See Anthony Lin,