As a matter of law, an ethics violation isn’t the same as committing malpractice, but as a practical matter, the two are almost always interconnected. For me, the significance of this fact is that ethics rules can be your best friend. They help you identify future landmines before they blow up on you and take protective measures.
A tricky ethics issue most estate planners contend with on a daily basis (whether they’re aware of it or not) is the conflict of interests inherent to jointly representing married couples and/or parents and their children in estate planning. The best way to get your arms around this ethics minefield is to read the Florida Bar’s Advisory Opinion 95-4, and two excellent follow up Florida Bar Journal articles entitled Joint Representation of Spouses in Estate Planning: The Saga of Advisory Opinion 95-4 and Multiple Representation in Estate Planning: Beyond Advisory Opinion 95-4, Part 2.
Allegations of conflict of interests are at the heart of an estate-planning malpractice suit currently being prosecuted against one of the U.S.’s largest firms claiming “tens of million of dollars in damages.” Yes, even the big boys can step in it from time to time. As reported in Trial Begins in Malpractice Case Against Orrick, the firm is being sued by multimillionaire businesswoman Fritzi Benesch for allegedly favoring her daughter’s interests over hers in the course of its estate planning for the family. Here’s an excerpt, note all the references to conflicts of interest:
Benesch, 86, wants tens of millions of dollars in damages to repay the amount of stock she said she was misled into giving to her daughter, Valli, whose last name is now Tandler, and Valli’s husband, Robert, over the years.
The Benesches hired Hoisington in 1977. By the time he retired in 1999, he had helped Fritzi and Ernest Benesch make numerous stock transactions that gave the Tandlers control of the company.
But attorney Jonathan Bass argued Wednesday that Fritzi Benesch never intended that to happen.
“What this case is about is a law firm favoring one set of clients over another,” he said. “They were getting richer as my client was getting lesser.”
Bass, a partner at Coblentz, Patch, Duffy & Bass, seized on a document Hoisington prepared in 1996 to make the case that Orrick’s representation of both the Benesches and the Tandlers was a conflict of interest the firm tried to hide.
Hoisington had been asked by Benesch’s younger daughter, Connie, to help plan her estate and wrote a memo to the entire family, saying that “there may come a time when the disposition of property” creates a conflict, and so he must decline to represent any of them.
But in a deposition video played by Bass, Hoisington said he never sent the letter, because Robert Tandler told him it was “a bit insulting.”
“You will learn during this trial there is no exception to lawyers’ ethics that falls under ‘I was insulted,'” Bass said.
Orrick was loyal to the Tandlers because they could get more legal fees from the couple that, unlike Fritzi Benesch, now controlled the company, he said.
There’s nothing like the threat of a multimillion dollar lawsuit to focus the mind. And now that I’ve got you thinking about intrafamily conflicts of interest in estate planning, here’s how the issue was addressed in Multiple Representation in Estate Planning: Beyond Advisory Opinion 95-4, Part 2:
Beyond representation of married couples, Advisory Opinion 95-4 has significance with respect to situations in which a lawyer or law firm may also represent other family members in estate planning and other personal matters. It is commonplace for estate planning attorneys to represent entire families — parents as well as adult children (and sometimes their spouses). Advisory Opinion 95-4 does not disturb the estate planning attorney’s ability to take on such an expanded representation role in harmonious family situations. The estate planning attorney must be careful, however, to address conflicts of interest and confidentiality concerns among the different individuals within larger family groups. Some situations will present conflicts of interest and require the clients’ informed consent. For example, a closely held family business in which both parents and children participate as shareholders, directors, officers, and employees may be expected to present various difficult long-term estate planning issues concerning matters in which several family members have materially different interests. The attorney should be careful to make clear his or her responsibilities to different family members concerning sharing of confidential information. Some families may wish all material information to be shared among the several family units. Other families may wish for estate planning within each family unit to remain confidential and be handled as separate representations. When a law firm also is handling other legal work for a family, such as corporate representation of a family business, the estate planning attorney’s ethical responsibilities may be further complicated by interrelated corporate matters. Similar to the difficulties encountered with a separate representation of husband and wife, an attorney engaged in separate representations of different family units may be faced with serious practical difficulties associated with compartmentalizing the information pertaining to each separate representation.
If you’re looking for more background information on this case, click here for a copy of the brief submitted to the San Francisco Superior Court on behalf of the plaintiff/appellant; and click here for the ABA Journal’s take on the case.