2018 was another interesting legislative year for those of us toiling in the vineyards as trusts and estates lawyers. Here’s my summary of what happened on the probate and trust front. I’ll post a separate summary of 2018’s guardianship legislation.

[1] Waiver of homestead rights through deed:

Under Florida law a surviving spouse’s testamentary rights in the couple’s marital homestead residence are spelled out in Art. X, § 4(c) of the Florida Constitution and F.S. 732.4015(1). Spouses are free to contractually waive their homestead rights, and often do for estate planning purposes. The statutory requirements governing those waivers are found in F.S. 732.702. These waivers can be incorporated into any kind of “written contract, agreement, or waiver,” including a deed.

However, deeds often include all sorts of antiquated catchall phrases lawyers have been using for centuries, like “tenements, hereditaments, and appurtenances,” that most of us would never guess include spousal homestead rights. And yet, a pair of appellate decisions concluded that these boilerplate phrases still matter, which means they were enough to constitute homestead waivers under F.S. 732.702. The first decision was published in 2011 by the 3d DCA in Habeeb v. Linder (which I wrote about here), and the second decision was published in 2014 by the 4th DCA in Stone v. Stone (which I wrote about here).

Homestead rights are a big deal. If someone’s going to waive those rights, it shouldn’t happen by accident, like by signing a joint deed that never mentions the word “homestead”. To make sure that doesn’t happen, CS/SB 512 created new F.S. 732.7025, which clarifies when a person knowingly waives homestead rights in a deed. Under the new statute, if you’re going to waive your homestead rights by signing a deed, you need to explicitly say so by including the following or substantially similar language in the deed: “By executing or joining this deed, I intend to waive homestead rights that would otherwise prevent my spouse from devising the homestead property described in this deed to someone other than me.”

For more on the backstory to this statute you’ll want to read the Legislative Staff Analysis.

[2] Beneficiary “best interests” vs. Settlor “intent”: Who wins?

Traditionally, strong public policy principles were the only limits placed on settlor intent (inter-faith marriage clauses are classic example, see here). That’s changing. Today, a trust beneficiary’s “best interests” are also weighed heavily against, and sometime permitted to trump, a settlor’s contrary intent. For an excellent examination of this trend you’ll want to read The New Direction of American Trust Law. Here’s an excerpt:

There is a central tension in the law of trusts between the rights of the donor and the rights of the beneficiaries. On the one hand, the position of the donor seems paramount. The donor—known in trust law as the “settlor”—establishes the terms of the trust and, therefore, has the power to determine the extent of the beneficiaries’ equitable interests and the power to control the actions of the trustee in the trust’s administration. Indeed, the organizing principle of the law of donative transfers, as stated in the Restatement (Third) of Property: Wills and Other Donative Transfers, is that the “donor’s intention is given effect to the maximum extent allowed by law.” On the other hand, the position of the beneficiaries also has a claim to supremacy. Only the beneficiaries hold the ownership interests in the trust, not the settlor. Of course, it sometimes happens that the settlor is also a beneficiary, but here we are speaking of the settlor as such. The beneficiaries, not the settlor, have the equitable ownership of the trust assets, and this would seem to limit the power of the settlor to control the trust. And indeed the Restatement (Third) of Trusts emphasizes that “a private trust, its terms, and its administration must be for the benefit of its beneficiaries.”

In navigating between the extremes of settlor control and beneficiary control, the law of trusts has at times taken a position more favorable to the settlor, and at other times a position more favorable to the beneficiaries.

HB 413 tilts the scales in Florida decidedly in favor of settlor intent, which may or may not be the best public policy, but it certainly clarifies things for our courts and the litigants appearing before them. The bill amends sections of our Trust Code to remove current language that a trust and its terms be administered for the benefit of the beneficiaries. The effect is to establish the settlor’s intent as the guiding principle with respect to the terms, interests, and purposes of a trust. Specifically:

  • The definition of “interests of the beneficiaries” under s. 736.0103(11), F.S. is amended to mean the beneficial interests intended by the settlor as provided under the terms of the trust.
  • The exception to the general rule that the terms of the trust prevail over provisions of the Code contained in s. 736.0105(2)(c), F.S., is amended to remove the mandatory requirement that the terms of the trust be for the benefit of the beneficiaries.
  • Section 736.0404, F.S., is likewise amended to remove the requirement that the trust and its terms be for the benefit of the beneficiaries. As amended, a trust’s purpose only needs to be lawful, not contrary to public policy, and possible to achieve.

For more on the backstory to these changes you’ll want to read the bill’s Legislative Staff Analysis.

“Glitch” warning:

On the other hand, HB 413 leaves untouched the single most powerful tool available to beneficiaries seeking to have trust agreements modified to better address their interests. That provision is found in F.S. 736.04115(1), which allows our courts to modify otherwise irrevocable trusts “if compliance with the terms of a trust is not in the best interests of the beneficiaries.” The public policy underlying this provision is best stated in the following commentary to s. 412 of the Uniform Trust Code:

Although the settlor is granted considerable latitude in defining the purposes of the trust, the principle that a trust have a purpose which is for the benefit of its beneficiaries precludes unreasonable restrictions on the use of trust property. An owner’s freedom to be capricious about the use of the owner’s own property ends when the property is impressed with a trust for the benefit of others. See Restatement (Second) of Trusts Section 124 cmt. g (1959). Thus, attempts to impose unreasonable restrictions on the use of trust property will fail. See Restatement (Third) of Trusts Section 27 Reporter’s Notes to cmt. b (Tentative Draft No. 2, approved 1999).

I’ve been told informally that the folks who worked on the legislation emphasizing settlor intent in HB 413 never intended to invalidate F.S. 736.04115(1), and that the apparent contradictions were unintentional. Hopefully this will all be cleared up in a future “glitch” bill.

But then again, often the easiest way to amend an irrevocable trust to address valid beneficiary concerns is to just “decant” into a new trust with new and improved terms, which avoids having to go to court altogether. And guess what? Florida’s decanting statute is now broader than ever.

[3] Decanting irrevocable trusts just got easier in Florida:

If you’re working with an irrevocable trust that needs fixing for some reason, your first thought should be to simply re-write the trust by using Florida’s “decanting” statute (F.S. 736.04117). Decanting lets trustees re-write irrevocable trust agreements by figuratively pouring the assets from an old trust into a new one. Decanting is all the rage in estate planning circles, as it should be: it’s a legislatively-sanctioned way to privately re-write an irrevocable trust without going through the costs and delays inherent to a judicial modification proceeding. (Yes, this all gets done out of court.) For a solid general introduction to decanting you’ll want to read Decanting is Not Just for Sommeliers.

Our old statute was great, but it had one major limitation: you could only use it if the trustee’s power to invade principal was “absolute”. In other words, you couldn’t decant if the trustee’s power to distribute trust principal was limited by an ascertainable standard, such as the classic health, education, maintenance, and support (“HEMS”) standard. HB 413 gets rid of that limitation, and basically overhauls the rest of the statute to make it work better for all concerned. For those of you hoping to make sense of the new and improved version of our decanting statute, you’ll want to read the bill’s Legislative Staff Analysis, which provides the following summary:

The bill substantially amends s. 736.04117, F.S., related to the trustee’s power to invade principal and expands the ability of the trustee to decant when granted less than absolute power. The bill:

  1. Authorizes a trustee to decant principal to a second trust pursuant to a power to distribute that is not absolute. When such power is not absolute, the trustee’s decanting authority is restricted so that each beneficiary of the first trust must have a substantially similar interest in the second trust. The bill provides a definition for “substantially similar” to mean, in relevant part, that “there is no material change in a beneficiary’s beneficial interest or in the power to make distributions and that the power to make a distribution under a second trust for the benefit of a beneficiary who is an individual is substantially similar to the power under the first trust to make a distribution directly to the beneficiary.”
  2. Authorizes a trustee to decant principal to a supplemental needs trust where a beneficiary is disabled. The trustee may take this action regardless of an absolute discretionary power or discretionary power limited to an ascertainable standard. The bill provides a definition for “supplemental needs trust” to mean a trust that the authorized trustee believes would not be considered a resource for purposes of determining whether the beneficiary who has a disability is eligible for governmental benefits.
  3. Expands the notice requirements under the state’s current decanting statute. Specifically, notice is required to be provided to the settlor of the first trust, if the first trust was not a grantor trust and the second trust will be a grantor trust, all trustees of the first trust, and any person with the power to remove the authorized trustee of the first trust. Moreover, the notice must include copies of both the first and second trust instruments.

In addition to these major changes, the bill:

  • Provides definitions for purposes of interpreting and applying the provisions of s. 736.04117, F.S., including absolute power, authorized trustee, beneficiary with a disability, current beneficiary, government benefits, internal revenue code, power of appointment, presently exercisable general power of appointment, substantially similar, supplemental needs trust, and vested interest.
  • Provides that, with respect to permissible or impermissible modification of certain trust provisions, the second trust may omit, create or modify a power of appointment.
  • Expands the existing prohibition on reducing certain fixed interests to include vested interests.
  • Provides that the second trust may extend the term of the first trust, regardless of whether the authorized trustee has an absolute discretionary power or discretionary power limited to an ascertainable standard.
  • Adds additional tax benefits associated with the first trust that must be maintained in the second trust to include the gift tax annual exclusion, and any and all other tax benefits for income, gift, estate or generation-skipping transfer for tax purposes.
  • Incorporates provisions regarding “grantor” trust status and the trustee’s ability to decant from a grantor trust to a non-grantor trust.
  • Provides that a second trust may be created under the laws of any jurisdiction and institutes certain safeguards to prohibit an authorized trustee from decanting to a second trust which provides the authorized trustee with increased compensation or greater protection under an exculpatory or indemnification provision.
  • Provides that a trustee may decant to a second trust that divides trustee responsibilities among various parties, including one or more trustees and others.

[4] Is there a limit on how far back you can ask for accountings from a trustee who’s never served accountings?

At its core, the job of trustee is as much about keeping beneficiaries adequately informed as anything else.  Most trust litigation can be traced back to a trustee’s inability to adequately explain him or herself to the trust’s beneficiaries, and the Corya v. Sanders case (which I wrote about here) was no different. That 4th DCA case involved several family trusts that had been irrevocable for decades before suit was filed — one dating back to 1953 — for which the trustee had never prepared accountings. When the trustee was finally sued, the plaintiff demanded trust accountings going back decades to each trust’s respective start date.

So what did the 4th DCA decide in Corya? The trustee only had to go back to 2003 for its accountings. And why did it decide that way? Because F.S. 736.08135(3) said it only applied to “trust accountings rendered for any accounting periods beginning on or after January 1, 2003.” That limitation apparently didn’t sit well with trust-accounting purists. So HB 413 amended F.S. 736.08135(3) to add the following new sentence at the end of the statute: “This subsection does not affect the beginning period from which a trustee is required to render a trust accounting.” Does this change mean there’s now no limit on how far back a trustee has to account for? I’m not convinced, but this statutory change definitely opens the door to that argument.

The Corya court also held that a plaintiff’s ignorance of the law (for example, his legal right to annual trust accountings) doesn’t toll the laches clock until he finally gets around to consulting a lawyer — decades after learning the operative facts for an accounting action. Which meant the trustee couldn’t be compelled to account for more than 4 years prior to getting sued. HB 413 attempts to statutorily reverse this ruling as well by amending F.S. 736.1008 to provide that a beneficiary’s actual knowledge that he or she has not received a trust accounting does not cause a claim to accrue against the trustee for a breach of trust. Moreover, the beneficiary’s actual knowledge of that fact does not commence the running of any statute of limitations concerning such claims.

Bottom line, for those of us who read the Corya case as setting January 1, 2003, as the farthest date back a court can compel a trustee to account if he or she’s never served accountings in the past, HB 413 attempts to statutorily undo that result. I’m not sure this is a good thing, and I’m also not sure the bill’s legislative changes accomplish what they set out to do, but you’ll want to know about these changes if one of these cases crosses your desk. For more on the backstory to these changes you’ll want to read the bill’s Legislative Staff Analysis.

[5] Revamp of Florida’s rules for electronically posting/serving trust accountings, trust disclosure documents, and limitation notices:

In today’s world banks do everything possible to communicate with us electronically, and trust companies are no exception, which lead to the inclusion of F.S. 736.0109(3) in our Trust Code. This statute allows a trustee to comply with its notice and reporting requirements by “posting on a secure electronic account or website.” But you only get to use electronic posting if you comply with a long list of requirements, which as a practical matter limits the rules use to corporate trustees.

Well, the electronic posting rules were revamped this year in HB 413.  If you work with corporate trustees and are looking for a quick summary of what’s changed, you’ll want to read the bill’s Legislative Staff Analysis, which summarizes the new electronic posting rules as follows:

The bill provides that the enumerated procedures for electronic posting are solely for the purposes of meeting the notice requirements of s. 736.0109, F.S., and are not intended to restrict or govern courtesy postings in any way. Moreover, the bill provides that the retention requirements only apply if electronic posting is the only method of giving notice.

The bill requires that the initial authorization specifically state whether trust accountings, trust disclosure documents, and limitation notices, each as defined in s. 736.1008(4), F.S., may be posted electronically, but allows a more general description of other types of documents that the sender may provide by posting.

The bill allows a recipient to terminate authorization by following the procedures on the web site instead of giving written notice of such termination.

The bill additionally amends the 4-year document retention requirement:

  • If access is terminated by the sender before the end of the 4-year retention period, then the running of the applicable statute of limitations periods contained in s. 736.1008(1) & (2), F.S., are suspended until 45 days after the sender sends a notice by separate means to the recipient that either access has been restored, or access has been terminated and that the recipient may request copies of the posted documents at no cost.
  • The applicable statute of limitations is also suspended from the time the recipient asks for copies until 20 days after those documents are provided.
  • Documents do not need to be maintained on the website once the recipient’s access has been terminated.
  • No retention is required, and no statute of limitations is suspended, if access is terminated by the action of, or at the request of the recipient. Revocation of authorization to receive documents via posting is not considered to be a request to terminate access to documents already posted.
  • Failure to maintain access does not invalidate the initial notice.

The “collaborative process” is an interesting dispute resolution alternative that’s been used for years — with great success — in the family-law context.

An important tenet of collaborative law is that, should the collaborative process fail, the parties’ lawyers and law firms are disqualified from subsequent litigation. In my opinion, this dynamic changes everything.

I think collaborative law could be the next big thing for resolving trusts and estates cases (which are almost always family disputes of one kind or another), and it’s in that spirit I agreed to be one of the panelists for a webinar that’s taking place on Tuesday of next week, September 18, 2018, from 12:00 PM – 1:00 PM (Eastern). The webinar is entitled Collaborative Process: Are Probate and Trust Disputes on the Horizon?, and it’s sponsored by the ADR Section of The Florida Bar. My co-panelists are Robert J. Merlin (Florida’s elder statesman of all things Collaborative) and A. Michelle Jernigan (lawyer, mediator and arbitrator extraordinaire), presently serving on the Executive Council of the ADR Section.

If you’re a trusts and estates lawyer who’s ever thought to yourself “there’s gotta be a better way,” this webinar’s for you. Click here to sign up.

The webinar is open to all Bar members and may be of particular interest to members of the Real Property Probate and Trust Law, Family Law and the ADR Sections. The purpose of the webinar is to educate members about the Collaborative Process and challenge them to use it as a dispute resolution tool in their practices.

In re Amends. to Fla. Evidence Code, — So.3d —-, 2018 WL 549179 (Fla. Jan. 25, 2018)

Our general-purpose attorney-client privilege rule is found in F.S. 90.502. Historically, this rule was subject to the common law “fiduciary exception,” which was bad news for all concerned because it inhibited the free flow of information between personal representatives, trustees and other types of fiduciaries, and their attorneys.

As I reported here, we legislatively closed that loophole in 2011 with the passage of F.S. 90.5021, a special purpose evidentiary code provision that extended the attorney-client privilege protections applicable in all other circumstances to fiduciaries.

Florida Supreme Court takes a pass:

But getting new evidence code provisions adopted is usually a two-step process. Under Florida’s state constitution, the authority to create new “substantive” law is reserved for the legislature, and the authority to create new “procedural” rules governing judicial proceedings is reserved for the Florida Supreme Court.

And because evidentiary code provisions can be both substantive and procedural in nature, new evidentiary code provisions usually have to be approved by both our legislature and our supreme court. Here’s an excerpt from The Florida Evidence Code and The Separation of Powers Doctrine, explaining how this balancing act is supposed to work:

The genesis of the substance-versus-procedure dichotomy under Florida law, along with its significance to the evidence code, lies in the separation of powers demarcated in the Florida Constitution. See Fla. Const. art. II, § 3 (prohibiting members of one branch of government from exercising “any powers appertaining to either of the other branches unless expressly provided herein”). In contrast with the federal system, the Florida Legislature holds the authority to create substantive law, and the Florida Constitution specifically reserves to the Florida Supreme Court the right to regulate procedure within its courts. Fla. Const. art. V, § 2. The Court’s powers are not without limitation, however. Article V, § 2 provides the Legislature with the authority to veto or repeal, but not amend or supersede, a rule enacted by the Court. Against this backdrop, Florida courts have addressed the constitutional question of whether a legislative enactment encroaches upon the powers reserved to the Supreme Court by Article V.

So what was the Florida Supreme Court’s take on F.S. 90.5021? They took a pass, questioning “the need for the privilege to the extent that it is procedural.”  In re Amends. to Fla. Evidence Code, 144 So.3d 536, 537 (Fla. 2014). But it’s not like they ruled against the statute, they just didn’t see a need to approve it. Did that matter? Yes.

Lack of Certainty = Litigation:

The lack of Florida Supreme Court approval didn’t kill F.S. 90.5021, but it did leave room for argument. And that’s never a good thing in litigation; as the parties in the Bivins v. Rogers case learned, when the statute’s effectiveness was challenged based on the absence of explicit Florida Supreme Court approval. As I reported here, this argument ultimately failed, but the lack of certainty lead to a whole lot of wasted time, money (and judicial resources) adjudicating what should have been a non-issue.

Florida Supreme Court roils the waters: 

And then, just when we thought it was safe to rely on a battle-tested F.S. 90.5021, the Florida Supreme Court stepped in again, but not in the way most of us would have expected (or wanted). In In re Amendments To Florida Evidence Code, 210 So.3d 1231, 1236 (Fla. Feb. 16, 2017), the Florida Supreme Court seemed to indicate that it hadn’t approved of F.S. 90.5021 not because it didn’t see a need to, but because it had “significant concerns” about the statute’s constitutionality. What?!

It has been this Court’s policy to adopt, to the extent they are procedural, provisions of the Florida Evidence Code as they are enacted and amended by the Legislature. However, on occasion the Court has declined to adopt legislative changes to the Evidence Code because of significant concerns about the amendments, including concerns about the constitutionality of an amendment.[FN4]

[FN4] See, e.g., In re Amends. to Fla. Evidence Code, 144 So.3d 536 (Fla. 2014) (declining to follow the Committee’s recommendation to adopt section 90.5021, Florida Statutes (2014), which establishes a fiduciary lawyer-client privilege) …

All’s well that ends well:

Recognizing the problems this latest turn of events was going to cause, the Florida Bar’s Probate Rules Committee and the Code and Rules of Evidence Committee swung into action, petitioning the Florida Supreme Court to reconsider its prior decision to not adopt F.S. 90.5021. And thankfully the court did the right thing; it went ahead and retroactively adopted the statute in In re Amends. to Fla. Evidence Code, — So.3d —-, 2018 WL 549179 (Fla. Jan. 25, 2018), which is good news for all of us.

After considering the Committees’ report, the comments submitted to the Committees and filed with the Court, and the Committees’ response, we now adopt section 1 of chapter 2011–183, Laws of Florida, as provided in the appendix to this opinion, to the extent it is procedural. Our adoption of chapter 2011–183 is effective retroactively to June 21, 2011, the date it became law.

Hat tip to Jonathan A. Galler for his excellent reporting here and here on the Florida Supreme Court’s belated adoption of F.S. 90.502 and all of the twists and turns it took for the court to finally get to the right place on legislation practitioners have been cheering for since 2011. Better late than never ….

Bivins v. Rogers, 2017 WL 5526874 (S.D. Fla., June 01, 2017)

The general trend in Florida is that a third-party beneficiary of your legal services can sue you for malpractice — and it doesn’t matter that the third party was never your client, had zero privity of contract with you, and may have even been adverse to your actual client in related litigation.

This risk is especially acute in contested probate and guardianship proceedings.

Past examples include cases in which the beneficiaries of a deceased ward’s estate had standing to sue the guardian’s lawyers for malpractice (see here), estate beneficiaries had standing to sue a decedent’s estate planning attorneys for malpractice (see here), a ward had standing to sue the attorney for his former court-appointed guardian for malpractice (see here), and a successor personal representative had standing to sue his predecessor’s attorney for malpractice (see here).

Risk management:

The way most probate and guardianship attorneys manage this kind of risk is to obtain court orders approving the actions of their fiduciary clients (preferably in advance). Surely you can’t get sued for actions a judge has previously ruled are OK, right? That’s the question addressed in this U.S. District Court order entered in the Bivins case (which has already been the subject of some commentary on this blog; see here for my take on the court’s ruling regarding Florida’s attorney-client privilege statute as applied to fiduciaries).

Will a guardianship judge’s orders approving your client’s actions shield you from third-party malpractice liability? NO

This case involves a contested guardianship proceeding involving millions of dollars in assets that bled over into a probate proceeding. After the ward died his son (who had been locked in ugly litigation against his father’s court-appointed guardians for years prior to his father’s death) was appointed personal representative of his father’s estate. And guess what he did next? He sued the same lawyers he’d been litigating against for malpractice.

The guardian’s lawyers cried foul, arguing that the claims against them were barred by either res judicata or collateral estoppel because the wrongful actions they were being accused of had all previously been approved of by the guardianship judge.

In what will probably come as a shock to most practitioners — the federal judge ruled against the lawyers despite the prior approving orders. Why? Because the lawyers weren’t actually parties to the underlying guardianship litigation; they were just counsel for one of the parties (the guardian). And because they weren’t parties, they don’t get the defensive benefits of those great orders the guardianship judge had entered saying they and their client had done a great job. Here’s how the court explained its ruling:

These claims are not barred by either res judicata or collateral estoppel for the simple reason that the Defendant attorneys were not parties or in privity with any party before the guardianship court. In Keramati v. Schackow, the court held that res judicata did not bar bringing a legal malpractice case against attorneys who had represented the plaintiffs in an earlier case even though the earlier case was settled and the clients certified that the settlement was “fair and just.” Keramati v. Schackow, 553 So.2d 741 (Fla. Dist. Ct. App. 1989). The court observed that, in the first case, “the adequacy of the amount settled for was not litigated.” Id. at 744. Here, Plaintiff did not have an opportunity to bring its legal malpractice and breach of fiduciary duties against the Defendant attorneys before the guardianship court.

In so finding, the Court rejects the Defendant attorneys’ argument that they are “joint tortfeasors” with the guardians and that there is no way to distinguish the alleged harm by the Defendant attorneys from the alleged harm by the guardians. To the contrary, the Defendant attorneys owe duty of care to the ward as well as to the guardian. Fla. AGO 96–94, 1996 WL 680981 (Fla. A.G. Nov. 20, 1996); see Saadeh v. Connors, 166 So. 3d 959, 964 (Fla. Dist. Ct. App. 2015) (finding that the ward is an intended third-party beneficiary of the attorney for the guardian and that therefore the attorney owed the ward a duty of care).

Next, in arguing that summary judgment should be granted on the claims against the Defendant attorneys for malpractice and breach of fiduciary duty, Defendants contend that the guardianship court already determined that all the actions being complained of were made in the best interest of the ward. The Court rejects this argument. As discussed supra, the guardianship court never considered whether the Defendant attorneys engaged in malpractice or breached their fiduciary duties. As such, the Court will not grant summary judgment on these claims on the basis of the guardianship court’s rulings.

Jury hits lawyers with $16.4M verdict:

So what do you think happened next? Here’s where your natural instincts as a practicing attorney used to thinking un-appealed court orders actually mean something, might be your undoing. If a judge has previously approved every transaction you’re currently being sued over, surely a jury of your peers isn’t going to slam you for that same conduct, right? Wrong!

When the case went to trial things went very, very badly for the defendant attorneys, as reported by the Palm Beach Post in Jury hits lawyers with $16.4M for doing senior wrong in guardianship. Here’s an excerpt:

Advocates for guardianship reform clamored in vain for years that Florida’s system failed to properly protect incapacitated seniors, that its primary purpose had been perverted to line the pockets of greedy attorneys and professional guardians with the hard-earned life savings of the elderly.

Now they can point to a new federal verdict awarding a whopping $16.4 million in a lawsuit claiming that two West Palm Beach attorneys breached their fiduciary duties while running up “unnecessary and excessive fees” of $1 million. .

The jury found on July 28 that attorneys Brian M. O’Connell and Ashley N. Crispin of the Ciklin, Lubitz & O’Connell firm not only breached their fiduciary duty but committed professional negligence.

The lawsuit claimed they failed to get appraisals on two high-end New York City properties being divided among family. They were not of equal value and as a result, Julian Bivins ended up with one that was worth millions less than other.

The jury’s decision to award $16.4 million makes up the difference.

So what’s the takeaway?

Shortly after the trial the primary parties settled, which means there likely won’t be any appeals of the trial court’s pre-trial orders. So for now, the last word we’ll have on whether a res judicata or collateral estoppel defense works in this kind of third-party malpractice litigation is the Bivins case, which I predict is going to give a lot of probate and guardianship lawyers heartburn. Forewarned is forearmed …..

Inheritance litigation is often the last battle in a war that’s been going on for a long time, especially in cases involving financial exploitation of the elderly. However, my experience is that all too often remedies designed specifically to attack this kind of pre-death wrongdoing get ignored by probate litigators (whose focus is usually on post-death claims). That may be changing.

I’ve previously written about recent efforts to beef up criminal prosecutions of elder financial exploitation in Florida (see here, here). But what about civil remedies for those crimes? Yup, we’ve got those too. They’re found in F.S. 415.1111, and they played a central role in a recent high profile case out of Tampa that resulted in a $34 million FINRA award against Morgan Stanley, as reported in Finra panel orders Morgan Stanley to pay $34 million to estate of former Home Shopping Network chief. Here’s an excerpt:

A Finra arbitration panel awarded more than $34 million to the estate of Roy M. Speer, the co-founder of the Home Shopping Network, in its claim against Morgan Stanley for churning Mr. Speer’s account.

The all-public arbitration panel ruled that Morgan Stanley, broker Ami Forte and branch manager Terry McCoy were jointly liable for unauthorized trading, breach of fiduciary duty/constructive fraud, negligence, negligent supervision and unjust enrichment.

The arbitrators also found that Morgan Stanley violated a Florida law against exploitation of vulnerable adults. It awarded $32.8 million in compensatory damages to Lynnda Speer, Mr. Speer’s widow and representative of the estate, as well as $1.5 million to reimburse costs incurred during the arbitration process, which spanned 13 months and involved 142 hearing sessions.

If you’re a probate litigator, you owe it to yourself and your clients to get to know F.S. 415.1111 (which explicitly authorizes punitive damages). And to do that you’ll want to start by reading an excellent article published by the attorneys on the winning side of the Speer case entitled Be Alert for Financial Exploitation of the Elderly. Here’s an excerpt:

Since the end of World War II, the greatest accumulation of wealth in the history of the world has been amassed in the U.S. We are now witnessing the greatest transfer of wealth ever encountered. Survivors of the greatest generation (those born in the 1920s and 1930s) will leave behind $12 trillion, and the baby boomers will transfer more than $30 trillion — all in the next two to three decades. Because much of this money will be transferred more than once, as the members of each generation die off, some estimates predict that over $60 trillion will be transferred over the next few decades.

This financial accumulation and wealth transfer is not limited to the oft-reported top 1 percent. Credible reports currently estimate the number of millionaires in the U.S. to be between 11 million and 15.6 million, with the number growing by about 400,000 per year. At the upper range of these extremes, nearly 6.5 percent of the U.S. population has achieved millionaire status. It is reasonable to assume nearly every practicing attorney in Florida has millionaire clients, and will face issues regarding the transfer of wealth from these clients to the next generation. The aging of many in this millionaire class creates a sea of opportunities for exploitation of the elderly by financial advisors, relatives, con-men and women, and outright thieves.

The irresistible lure of money has given rise not only to a sophisticated and legitimate industry of financial advisory services and tax planners, but also a nefarious underworld populated by various types of predators, some of whom may be affiliated with large, legitimate investment firms. There are several areas of financial vulnerability for older adults who are dealing with even moderate wealth. In addition to end-of-life medical expenses, the elderly are vulnerable to those who attempt to take their money by fraud or deceit, and by those who exert undue influence over the elderly person’s testamentary intent.

We can most certainly expect a continued increase in classic will contest cases. In addition, Florida lawyers will see an increase in the number of cases arising out of the pre-death financial exploitation of the elderly. Civil remedies under Florida’s Adult Protective Services statutes, codified in F.S. Ch. 415, can be an effective weapon in seeking redress for this exploitation. This article discusses some of the vulnerabilities of the elderly and potential civil legal remedies to financial exploitation.

But wait, there’s more!

After reading this post elder-law litigator extraordinaire Shannon Miller pointed out there are other — perhaps even more powerful — tools available for those fighting against financial exploitation of the elderly. I previously interviewed Shannon in connection with her work on the 2014 legislative revamp of F.S. 825.103, which criminalizes financial exploitation of the elderly (see here).

Shannon reminded me of F.S. 772.11, the civil flip side of F.S. 825.103. Under F.S. 772.11 you can sue a perpetrator for treble damages plus attorneys fees if there’s clear and convincing evidence that your client’s been injured in any fashion by reason of any violation of F.S. 825.103(1).

Shannon said litigators involved in these types of cases should also keep their eyes on CS/HB 1059, which is currently under consideration by the Florida legislature. Among other reforms, this bill would create a new cause of action authorizing immediate 15-day freeze orders of contested assets in elder abuse cases. Here’s an excerpt from the legislative staff analysis for the bill (which has yet to pass):

CS/HB 1059 creates a cause of action for an injunction for protection against the exploitation of a vulnerable adult. The bill defines the term “vulnerable adult” to have the same meaning as provided in the APSA, and defines the term “exploitation” to mean the same as it does under s. 825.103, F.S. The cause of action does not require that a party be represented by an attorney, nor is a party prohibited from filing an action if another cause of action is currently pending between the parties. The bill provides that a petition can be filed by any of the following individuals:

  • A vulnerable adult in imminent danger of being exploited or their guardian;
  • A person or organization acting on behalf of the vulnerable adult with the consent of that person or that person’s guardian; or
  • A person who simultaneously files a petition for determination of incapacity and appointment of an emergency temporary guardian.

A person’s right to petition for an injunction is not affected by the fact that the person has left a residence or household to avoid exploitation of the vulnerable adult. Moreover, the petition may be filed in the circuit court in which the vulnerable adult resides.

In the event a guardianship proceeding is pending at the time of filing, then the petition must be filed in that proceeding. There is no minimum requirement of residency to petition, nor is there a requirement for actual exploitation to have occurred for an injunction to be issued.

Kelly v. Lindenau, — So.3d —-, 2017 WL 2180970 (Fla. 2d DCA May 17, 2017)

If you or your attorney make a mistake when drafting your revocable trust, and there’s “clear and convincing evidence” that the mistake is contrary to your testamentary intent, we’ve got a fix for that, and it’s found in F.S. 736.0415.

And because the statute’s “remedial” in nature, we learned in Megiel-Rollo v. Megiel that courts should err on the side of granting access to it whenever possible — no matter how big the drafting error might be (see here).

But there are limits to the mistakes F.S. 736.0415 can fix. For example, you can’t use this statute to give someone an after-the-fact “do over” just because things don’t pan out as expected when their trust was first signed — as the parties in Morey v. Everbank learned (see here). And what about innocuous technical defects in a signing ceremony (e.g., two witnesses are present, but only one signs the document)? Can you use F.S. 736.0415 to work around that problem? That’s the question at the heart of this case.

Case Study:

Back in 2006, while he was still living in Illinois, a man named Ralph created a revocable trust that provided for his wife and children. According to the 2d DCA, “The trust was validly executed pursuant to Illinois law.” After Ralph’s wife died he moved to Bradenton, Florida, met a new woman (Lindenau), and lived with her in a house he purchased in 2009. In 2014 Ralph hired his Illinois attorney to amend his trust so that Lindenau would get the Bradenton house upon his death. Ralph died in 2015. Lindenau claimed the house, Ralph’s children said no.

According to the 2d DCA, “There is no dispute that Ralph’s intent was to leave the Bradenton house to Lindenau.” So what’s the problem? Think execution formalities.

While Ralph’s Illinois lawyer may have done a fine a job under Illinois law, he blew Florida’s special execution rules for revocable trusts including “testamentary” provisions. Although the amendment was signed by Ralph in the presence of two witnesses, only one of the witnesses signed it. That’s a problem under Florida law.

Execution formalities required for non-Florida revocable trusts:

Under Florida law trusts don’t always have to be in writing; in fact F.S. 736.0407 tells us that under certain circumstances oral trusts work just fine. And if your trust’s executed somewhere else (like Illinois), F.S. 736.0403(1) tells us it’s generally going to be valid in Florida if it’s valid back home. But that last rule is subject to some big limitations, including Florida’s special execution rules for revocable trusts having “testamentary” provisions. In those cases F.S. 736.0403(2)(b) tells us your non-Florida revocable trust has to comply with Floria’s execution formalities for wills — no matter what the rule might be back home. Here’s how the 2d DCA explained this last point:

In Florida, the testamentary aspects of a revocable trust are invalid unless the trust document is executed by the settlor of the trust with the same formalities as are required for the execution of a will. § 736.0403(2)(b), Fla. Stat. (2014). In turn, the portion of the Florida Probate Code that addresses the execution of wills requires that wills must be signed in the presence of two attesting witnesses and that those attesting witnesses must themselves sign the will in the presence of the testator and of each other. § 732.502(1)(b)-(c), Fla. Stat. (2014). Consequently, a trust—or an amendment thereto—must be signed by the settlor in the presence of two attesting witnesses and those witnesses must also sign the trust or any amendments in the presence of the settlor and of each other. These requirements are strictly construed. Cf. Allen v. Dalk, 826 So.2d 245, 247 (Fla. 2002) (explaining that strict compliance with statutory requirements for execution of a will is mandated in order to create a valid will and recognizing that absent the requisite formalities, a will “will not be admitted to probate”).

Can you reform a trust to cure innocuous technical defects in a signing ceremony? NO

One of Ralph’s children was his successor trustee. After her father’s death she challenged the trust amendment gifting Ralph’s Bradenton, Florida home to Lindenau. Lindenau admitted the amendment wasn’t properly witnessed, but countered with two defenses: reformation and constructive trust.

As her fist line of defense Lindenau argued for reformation under F.S. 736.0415 to work around the execution problem. She won this argument at the trial court level, but struck out on appeal. According to the 2d DCA, the statute can be used to fix drafting mistakes in an otherwise valid trust, but it can’t be used to validate an improperly executed document.

Section 736.0415 provides in relevant part that the terms of a trust can be reformed “to conform … to the settlor’s intent if it is proved by clear and convincing evidence that both the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.” Aside from the issue of the settlor’s intent, the statute thus focuses on the terms of the trust, not the execution of it. See also Megiel–Rollo, 162 So.3d at 1094 (quoting Morey v. Everbank, 93 So.3d 482, 489 (Fla. 1st DCA 2012), for the proposition that reformation is used to correct a “mistake in the form of expression or articulation” such as where a trust includes a term that “misstates the donor’s intention[,] fails to include a term that was intended to be included[,] or includes a term that was not intended to be included”). Indeed, in discussing Florida’s liberal policy regarding reformation, this court has acknowledged that the remedy is used “to cause the instrument to reflect the true agreement of the parties when the terms of the agreement have not been clearly expressed in the instrument because of [a] mutual mistake or inadvertence.” Id. at 1097 (emphasis added) (quoting Tri–Cty. Prod. Distrs., Inc. v. Ne. Prod. Credit Ass’n, 160 So.2d 46, 49 (Fla. 1st DCA 1963)). But here, the terms of the second amendment are clear that Ralph intended to leave the Bradenton house to Lindenau. Thus there were no terms of the trust that needed reformation. Rather, Lindenau sought reformation to remedy an error in the execution of the second amendment. But by the statute’s terms, reformation is only available to remedy mistakes that affect “both the accomplishment of the settlor’s intent and the terms of the trust.” § 736.0415.

Can an implied constructive trust rescue your invalidly executed trust agreement? NO

When the facts irrefutably demonstrate that strict compliance with our execution formalities will defeat a person’s testamentary intent (as in this case!), you’re probably going to get some sympathy from your judge. And sometimes that’s enough. It worked at the trial-court level in this case, and it also seems to have worked in In re Estate of Tolin, 622 So.2d 988 (Fla. 1993), in which the Florida Supreme Court held that a constructive trust should be imposed where the testator failed to validly revoke a codicil to a will because he mistakenly destroyed a copy rather than the original document.

But a lot’s changed since 1993. In today’s world the last thing any appellate judge wants is to get accused of legislating from the bench. So what does that mean? When in doubt, statutory execution formalities are going to trump testamentary intent, no matter how clearly the facts (and equities) may favor the contested document (as happened in a more recent Florida Supreme Court case: Aldrich v. Basile, see here). And — surprise! — that’s exactly what happened here.

We decline to hold that a constructive trust should be imposed in this case. We acknowledge that the court in Tolin used the constructive trust remedy to work around the invalid revocation of a codicil because the testator’s intent was clear and because a third party would otherwise benefit from the testator’s mistake at the expense of the intended beneficiary. Further, we are mindful of the facts that, as in Tolin, Ralph’s intent is clear in this case and a reversal of the final judgment will result in a benefit to Ralph’s estate (i.e., to Jill, Jeff, and Judy) at the expense of Lindenau. However, there was no dispute in Tolin about the validity of the original will or codicil. And in [Allen v. Dalk, 826 So.2d 245 (Fla. 2002)], the court expressly distinguished Tolin and declined to extend it beyond its facts. Allen, 826 So.2d at 248. Instead, the court in Allen refused to impose a constructive trust because the testator had failed to comply with a “major requirement for a validly executed will” (i.e., the testator’s signing of it) and thus “[a]n order imposing a constructive trust under these facts would only serve to validate an invalid will.” Id.

Read in conjunction, Tolin and Allen make it clear that while the imposition of a constructive trust might be appropriate where a will (and thus a trust) has been validly executed, that remedy is not appropriate where there is an error in the execution of the document. We conclude that that distinction should be extended to cases such as this one where an amendment to a trust was not validly executed. Because there was no valid, enforceable amendment, the imposition of a constructive trust on the Bradenton house “would only serve to validate an invalid” amendment. Allen, 826 So.2d at 248.

Florida-Supreme-Court-Seal-300

The Florida Supreme Court’s Mediator Ethics Advisory Committee (MEAC) has been issuing formal advisory ethics opinions to certified and court-appointed mediators since 1994. MEAC opinions deal with mediation-related ethics questions governed primarily by Florida’s Rules for Certified and Court-Appointed Mediators (effective January 1, 2017).

In addition to an active litigation practice, I also have an active mediation practice and am certified by the Florida Supreme Court as a Circuit Civil Mediator (certification # 32893 R). Click here for my mediator’s pledge.

I’ve found the MEAC opinions to be a valuable resource in my mediation practice, and would recommend them to anyone who professionally mediates in this state. To that end, below is my summary of the MEAC opinions for 2017. Each summary is hyper-linked to a copy of the original source document.

Summary: A mediator may not refer a party to a specific lawyer or not-for-profit advocacy group when contacted by the party after a mediation. Such a referral would be inconsistent with the mediator’s duty to maintain impartiality throughout the mediation process.

Opinion: A mediator’s impartiality is essential to the mediation process and must be maintained throughout the entire process. Rule 10.330(a), Florida Rules for Certified and Court-Appointed Mediators, states:

Generally. A mediator shall maintain impartiality throughout the mediation process.
Impartiality means freedom from favoritism or bias in word, action, or appearance, and
includes a commitment to assist all parties, as opposed to any one individual.

There is no rule which prohibits a mediator from speaking to a party after a mediation; however, the mediator must continue to provide information in a manner “consistent with standards of impartiality” under rule 10.370(a). In order to refrain from “bias in word, action, or appearance” and continue the “commitment to assist all parties, as opposed to any one individual,” rule 10.330(a), the mediator in the question presented may continue to advise a party of their right to seek independent legal counsel as set forth in rule I0.370(b) after a mediation, but should not recommend a specific lawyer or not-for-profit advocacy group. A specific referral would be inconsistent with the mediator’ s duty to maintain impartiality throughout the mediation process as it would be assisting one individual. The mediator’s continuing duty to remain impartial is confirmed by rule 10.620, Integrity and Impartiality, “A mediator shall not accept any engagement, provide any service, or perform any act that would compromise the mediator’s integrity or impartiality.”

Summary: A mediator shall not schedule a mediation in a manner that does not provide adequate time for the parties to fully exercise their right of self-determination. The process must allow for the mediation to be adjourned and reconvened to complete the mediation if the parties so choose. A mediator must respond in a manner consistent with the Rules for Certified and Court Appointed Mediators when asked by pro se parties to provide information. A mediator may assist the party in filling out Florida Supreme Court approved forms, but must ensure that the information provided for the forms is from the party whom they are assisting.

Opinion: Rule 10.400 states that a mediator is responsible for safeguarding the mediation process and the Committee Notes to the rule describe rules 10.400 – 10.430, pertaining to the mediator’s responsibilities to the mediation process, as containing a mandate for adequate time for mediation sessions, and the process for adjournment.

A party’s right to self-determination is essential to the mediation process and must be maintained throughout the entire process. Rule 10.430, Florida Rules for Certified and Court Appointed Mediators, states:

“A mediator shall schedule a mediation in a manner that provides adequate time for the
parties to exercise their right of self-determination.”

Under rule 10.420(b)(l), one of the mediator’s responsibilities is to offer the parties the option of adjourning the mediation to return on another day for an additional session if they so choose. This choice is part of the parties’ right of self-determination and would apply to the scenario described herein.

There is no rule that states a specific amount of time must be delegated for a mediation session. Some mediations take longer than others due to any number of factors, including the complexity of the issues and the parties to the case. It would not be correct to say that a mediation cannot be completed in two hours, or any specific amount of time, and conversely it would not be correct to say a mediation must be completed in two hours, or any specific amount of time. Rule 10.430 requires that the parties be provided adequate time to exercise their right of self-determination; therefore, it must be the party’s exercise of self-determination that dictates the time required to mediate and not the mediator or a person/entity responsible for scheduling the mediation.

Rule 10.370(a) provides that “a mediator may provide information that the mediator is qualified by training or experience to provide.” The mediator is constrained by rule 10.370(c) which states “a mediator shall not offer a personal or professional opinion intended to coerce the parties, unduly influence the parties, decide the dispute, or direct resolution of any issue.” Consistent with MEAC Opinions 2000-009, 2001-003, and 2009-007, a mediator may assist prose litigants with filling out forms approved by the Florida Supreme Court, however, the information submitted on the forms must come from the party whom the mediator is assisting. In the example provided, it would be appropriate for the mediator to provide a source for the
definition of a contingent asset, which in this case would be the Florida Supreme Court Long Form Financial Affidavit’s instructions, Step 4, the definition of “possible assets.” However, it would not be appropriate under the rules for the mediator to determine or advise the party whether an asset is a contingent asset.

Summary: A mediator’s business practices regarding fees and expenses must be consistent with rule 10.380 and the other standards of ethical conduct in the Florida Rules for Certified and Court Appointed Mediators. Any change in the terms and conditions of the fees and expenses must be agreed upon by the parties so as to be consistent with self-determination and impartiality.

Opinion: At the outset, it is important to note the general principle regarding mediation fees and costs stated in rule 10.380(a), Florida Rules for Certified and Court-Appointed Mediators, that “a mediator holds a position of trust.” “The public’s use, understanding, and satisfaction with mediation can only be achieved if mediators embrace the highest ethical principles,” rule 10.200. The parties’ trust is established by their experiences with the mediator.

The MEAC believes any change to the terms and conditions of fees and costs after the parties have received the mediator’s written explanation of them should only occur if the mediator proposes the revisions with enough advance notice to allow the pat1ies a reasonable amount of time to make an informed and voluntary decision regarding the revisions or opt to choose another mediator. Allowing the parties such time will: safeguard the parties’ trust in the mediator; protect their self-determination and avoid any appearance of coercion by the mediator, rules 10.220, 10.300, 10.310(b); avoid the appearance of partiality in the event that the change could appear to favor one party, rule 10.330(a); and maintain equal bargaining power between Mediator Ethics Advisory Committee Opinion 2017-004 the mediator and the parties regarding the fees and costs, rule 10.410. The mediator’s conduct prior to the beginning of mediation sets the tone for the entire process.

The situation posed in the second question highlights the ethical issues raised by the mediator changing the terms of the fee and cost payment after the parties have received the mediator’s written explanation. Changing the terms and conditions upon arrival of the parties at mediation may create an environment in which the pat1ies may believe that they are being improperly influenced or coerced to agree to the new terms and conditions, and they have no choice but to do so or incur the cost (lost salary for time away from work, transportation, child care, etc.) and time delay of scheduling mediation with another mediator. Additional pressure to agree may be experienced by the parties if they have an upcoming court date which does not permit them to choose a different mediator. The parties arrive at mediation relying on the terms and conditions they have received. Creating an environment in which the parties are asked to make a decision about new fee and cost terms and conditions quickly, perceive that they have no choice, or feel like they do not have equal bargaining power with the mediator, is likely to break their trust in the mediator and affect their satisfaction with the mediation process. As with any issue presented at mediation, the rules mentioned above require that the parties must be allowed sufficient time to make an informed and voluntary decision regarding the changes, including, if needed, time to negotiate the changes.

It is not permissible for the mediator, without the informed and voluntary consent of all parties to unilaterally change the parties’ pro rata share of the mediator’s fees as doing so would violate the parties’ rights to self-determination and fail to maintain the mediator’s impartiality as explained above.

The mediator may not condition their performance on one of the parties or lawyers agreeing to pay the other party’s share of the mediator’s fee in the event that the other party fails to pay unless the mediator has provided the parties or their lawyers with a written explanation of this condition prior to mediation as required by rule 10.380(c) and the parties have agreed to it as required by 10.380(c)(4). If the mediator made such a condition without meeting the requirements of the rule, the mediator would be failing to maintain their impartiality, rule 10.330(a), and creating a conflict of interest under rule 10.340(a) by favoring the party who is not responsible for their own fee.

Summary: A mediator’s business practices as to fees must reflect the principle of impartiality and be consistent with rule 10.380, Florida Rules for Certified and Court-Appointed Mediators.

Opinion: A mediator’s responsibility to the parties includes the ethical principle that “a mediator’s business practices should reflect fairness, integrity and impartiality,” rule 10.300, Florida Rules for Certified and Court-Appointed Mediators. Rule 10.330 requires that a mediator “maintain impartiality throughout the mediation process,” and defines “impartiality” as freedom from favoritism or bias in word, action, or appearance,” including “a commitment to assist all parties, as opposed to any one individual.”

Under the scenario presented, if the parties are dissatisfied with the mediator’s performance at mediation (even for a case that settles), it is permissible for the mediator to waive their mediator’s fee as to all parties. However, if one party is dissatisfied with the mediator’s performance, it is not permissible for the mediator to waive their fee as to the dissatisfied party and still charge the other party as doing so would violate the mediator’s impartiality by favoring and assisting one party. Unless the mediator’s fee is waived as to all parties, the mediator’s business practice is not consistent with rules 10.330, and 10.380(b)(3) and (c)(4).

In the scenario described, the MEAC does not believe that waiving the mediator’s fee for both parties based on their dissatisfaction with the mediation process is a violation of rule 10.380(t) as doing so is not based on the outcome of the process, but the parties’ opinion of the process regardless of the outcome.

Summary: A mediator may report “agreement,” “no agreement,” or “partial agreement” to the court without comment or recommendation. No other descriptors or modifiers may be used in the mediator report unless the parties have consented to them in writing.

Opinion: After review of previous MEAC opinions and analysis of the various rules of procedure regarding reporting the outcome of a mediation, the MEAC retracts its 2014-002 opinion and any other opinion inconsistent with this opinion. The committee interprets the rules to allow a mediator to report “agreement,” “no agreement,” or “partial agreement” to the court, without comment or recommendation.

Further, as is stated in Florida Rule of Civil Procedure 1.730(a) and Family Law Rule of Procedure 12.740(f)(3), in civil and family law cases only, with the consent of the parties, the mediator’s report may also identify any pending motions or outstanding legal issues, discovery process, or other action by any party which, if resolved or completed, would facilitate the possibility of a settlement. To report anything additional without agreement of the parties, or add descriptors or modifiers to “agreement,” “no agreement,” or “partial agreement,” would be providing information to the court, an action which is prohibited by the Mediation Confidentiality and Privilege Act, sections 44.401-405, Florida Statutes. However, these rules do not restrict the parties from including in the written agreement their consent to the inclusion of additional language, descriptors, or modifiers in the mediator’s report.

Summary: If a mediator is a party in case A, it would be a clear conflict of interest which would compromise the mediator’s impartiality for the mediator to mediate case B which involves the mediator’s attorney and the attorney and opposing party in case A.

Opinion: According to the scenario presented, Mr. Smith is a party in the Miami-Dade County cases and it appears that Law Firm CDE represents him in those cases. Law Firm ABC represents Business XYZ which is the opposing party to Mr. Smith in a case. Due to Mr. Smith’s relationships with the law firms ABC and CDE and Business XYZ, his own attorney and the attorney and opposing party in the Miami-Dade County cases, his serving as a mediator for those parties would compromise or appear to compromise his impartiality, a violation of rule 10.330(a), Florida Rules for Certified and Court-Appointed Mediators. It would also create a clear and non-waivable conflict of interest under rule 10.340(a), Florida Rules for Certified and
Court-Appointed Mediators.

The situation described by the inquirer in Scenario B is essentially identical to that described in Scenario A due to the fact that a bankruptcy trustee is a party in a bankruptcy case. The opinions expressed by the writer of the question that “the mediator has done things to the detriment of the debtor as trustee in the Middle District because she did not appreciate the behavior of Law Firm CDE in the Southern” and that the mediator is “a powerful” party with influence in another district” are not relevant to the MEAC’s disposition of the question, nor does the MEAC base its opinion on them. As in scenario A, in scenario B, the mediator is a party – the trustee – in cases involving Law Firms ABC and CDE and Business XYZ; therefore, the mediator cannot ethically mediate for the law firms and Business XYZ in other cases for the reasons stated in the answer to Scenario A above.

Summary: Prior consultation with a party to a mediation by a member of the mediator’s law firm requires disclosure by the mediator, but is a waivable if the parties agree.

Opinion: MEAC Opinions are based on the facts presented in the question. Rule 10.340(a)-(c), Florida Rules for Certified and Court-Appointed Mediators, states:

(a) Generally. A mediator shall not mediate a matter that presents a clear or undisclosed conflict of interest. A conflict of interest arises when any relationship between the mediator and the mediation participants or the subject matter of the dispute compromises or appears to compromise the mediator’s impartiality.

(b) Burden of Disclosure. The burden of disclosure of any potential conflict of interest rests on the mediator. Disclosure shall be made as soon as practical after the mediator becomes aware of the interest or relationship giving rise to the potential conflict of interest.

(c) Effect of Disclosure. After appropriate disclosure, the mediator may serve if all parties agree. However, if a conflict of interest clearly impairs a mediator’s impartiality, the mediator shall withdraw regardless of the express agreement of the parties.

In MEAC Opinion 2011-014 the committee stated that the factors of the particular case determine whether a conflict can be waived by the parties. In the case presented, the law firm did not engage in representation involving the party to the mediation and the mediator had no contact with the party who consulted with the attorneys at the firm so a clear conflict of interest is absent under subdivision (a) of the rule, however, the mediator must disclose the matter to the parties involved in the mediation according to subdivision (b), and the potential conflict is waivable if agreed to by the parties under subdivision (c). The circumstances written of here may reasonably be regarded as allowing the mediator to maintain impartiality under rule 10.330(a), Florida Rules for Certified and Court-Appointed Mediators, if the parties agree the consultation does not compromise the mediator’s impartiality.

Flanzer v. Kaplan, — So.3d —- 2017 WL 5759041 (Fla. 2d DCA November 29, 2017)

Your favorite probate lawyer calls; she’s got a potential trust case for you, but isn’t sure if it’s time barred.

You’d think something as basic as knowing how long you have to file a lawsuit would be simple to figure out. And you’d be wrong. Why? Because trust cases are almost always based on “equitable” law, which means they don’t fit neatly into our statutes of limitations (found in F.S. Ch. 95).

For example, if you’re going to sue a trustee for some kind of breach of trust, the general rule is that you’ve got 4 years to file your lawsuit, but depending on the particular facts of your case, your actual filing deadline could vary wildly: from a low of 6 months to a high of 40 years! (see here, here).

And if you’re challenging the validity of a trust based on undue influence (the most common line of attack), your limitations period is again usually going to be 4 years, but it could be up to 12 years depending on whether or not the “delayed discovery doctrine” applies to your case.

Florida’s delayed discovery doctrine:

The delayed discovery doctrine generally provides that a cause of action does not accrue until the plaintiff either knows or reasonably should know of the tortious act giving rise to the cause of action. This doctrine’s been codified in F.S. 95.031(2)(a) as follows:

An action founded upon fraud under s. 95.11(3), including constructive fraud, must be begun within the period prescribed in this chapter, with the period running from the time the facts giving rise to the cause of action were discovered or should have been discovered with the exercise of due diligence, instead of running from any date prescribed elsewhere in s. 95.11(3), but in any event an action for fraud under s. 95.11(3) must be begun within 12 years after the date of the commission of the alleged fraud, regardless of the date the fraud was or should have been discovered.

The delayed-discovery doctrine is an exception to the general rule, and it usually only applies to fraud and products liability claims. The question at issue in this appeal is whether the exception can also apply to undue influence claims.

Case Study:

This case involves an irrevocable trust created in 2005 by philanthropists Gloria and Louis Flanzer. The fact that it’s an irrevocable trust is important. Most trust cases involve revocable trusts; and F.S. 736.0207(2) tells us you can’t litigate a revocable trust until it becomes irrevocable, which is usually upon the settlor’s death. In this case, because the subject trust started off as an irrevocable trust, it was subject to challenge from its date of inception. But that’s not what happened.

The settlors’ daughter waited 10 years (after her parents had both passed away) to file suit challenging the validity of the trust on undue influence grounds. All sides agreed the generally-applicable limitations period was 4 years:

The parties agree that under chapter 95 the limitations period applicable to [plaintiff’s] action is four years. See § 95.11(3). Indeed, a review of section 95.11 reveals that undue influence claims can only fall under subsection 95.11(3)(j), “[a] legal or equitable action founded on fraud.” See Peacock v. Du Bois, 90 Fla. 162, 105 So. 321, 322 (1925) (“Fraud and undue influence are not, strictly speaking, synonymous, though undue influence has been classified as either a species of fraud or a kind of duress, and in either instance is treated as fraud in general.”); In re Guardianship of Rekasis, 545 So.2d 471, 473 (Fla. 2d DCA 1989) (describing undue influence as a “species of fraud” and holding that statute of limitations on undue influence claim did not begin to run until the influence terminated or someone on Rekasis’ behalf became aware of the influence).

Applying a 4-year limitations period, the trial judge ruled the 2015 undue-influence claim (filed 10 years after the 2005 irrevocable trust was first created) was time barred and dismissed it. Whether or not the trial judge got this one right depends on whether or not Florida’s delayed discovery doctrine applies to this case, which could potentially extend the filing deadline from 4 to 12 years (through 2017).

Does Florida’s delayed discovery doctrine apply to undue influence claims? YES

And whether or not the delayed discovery doctrine applies depends on whether or not undue influence claims are “founded upon fraud” (in which case the doctrine applies). Trial judge said they’re NOT, 2d DCA said YES they are. 2d DCA wins; the doctrine applies. Here’s why:

On appeal, [plaintiff] argues that since courts treat undue influence as a species of fraud, undue influence is therefore subject to the delayed discovery doctrine. The Trustees challenge the application of section 95.031(2)(a) by emphasizing the elements that distinguish fraud and undue influence claims. They argue that such distinctions place undue influence claims outside the meaning of actions “founded upon fraud.” We disagree.

To be sure, undue influence claims and fraud claims are distinct causes of action. See GEICO Gen. Ins. Co. v. Hoy, 136 So.3d 647, 651 (Fla. 2d DCA 2013) (enumerating elements of fraud in the inducement); Greenberg v. Van Dam, 833 So.2d 810, 812 (Fla. 3d DCA 2002) (enumerating elements of undue influence). But the uses of the prepositions “founded upon fraud” and “founded on fraud” in sections 95.031(2)(a) and 95.011(3)(j), respectively, plainly countenance a broader class of claims than merely actions alleging fraud in general. As such, we see no reason why section 95.031(2)(a) would not apply to [plaintiff’s] claim—provided that [plaintiff] otherwise satisfies the requirements of that section. The Trustees point to no other legal authority supporting the circuit court’s conclusion that [plaintiff] must have challenged the philanthropic trust within four years of its becoming irrevocable. We therefore reverse the dismissal of Count V of [plaintiff’s] complaint and remand for further proceedings.

Illustration by Doug Thompson

If you’re litigating an inheritance case, chances are someone’s going to allege the person whose wealth is being disputed either lacked testamentary capacity and/or was the victim of undue influence. In both instances the issue of cognitive capacity is front and center, which means you’re probably in for some kind of battle of the experts.

Effectively cross examining expert witnesses doesn’t happen by accident; you need to have a strategy going in. But you don’t have to reinvent the wheel. There’s lots of good advice floating around out there on how to do this right. So where to turn?

Over the years I’ve found the ABA’s Litigation Journal to be a rich source of solid practical advice (here’s a favorite). So when I ran across an excellent article in the Fall 2017 issue entitled Effective Strategies for Cross-Examining an Expert Witness by veteran litigators Thomas C. O’brien and David D. O’brien, I made sure to hold on to it. Here’s an excerpt:

The truth is that most attorneys—even experienced advocates— lose ground when cross-examining an expert. This problem frequently boils down to poor strategy. Too often, lawyers who are prepared and know how to cross-examine fail because they pursue the wrong tack. They delude themselves into believing that they can actually win an argument with an expert on the subject matter of the expert’s opinion. This rarely succeeds.

However, there are ways to gain ground without launching a full frontal assault in the expert’s field of knowledge. With the right approach, cross-examination of an expert is not only a survivable event but also an opportunity to advance your case and score points with the jury. The following cross-examination strategies present both a low risk of danger and high potential for reward. While none guarantee success, they may significantly increase your odds of confronting an expert witness and living to tell the tale.

And here’s a list of the different strategies described in the article:

  1. The Résumé Attack: Challenging an Expert’s Credentials
  2. The Flagpole Strategy: Using the Expert to Advance Favorable Facts
  3. The Procedural Challenge: Identifying Departures from Established Protocol
  4. The Knowledge Test: Highlighting an Expert’s Lack of Information
  5. The Hired Gun Attack: Showing Bias, Interest, or Prejudice
  6. The House of Cards Strategy: Undermining an Expert’s Key Assumptions
  7. The Go-for-Broke Strategy: Mounting a Direct Attack

Good stuff, and a worthy addition to any litigator’s toolbox.

Stephenson v. Prudential Ins. Co. of Am., 2016 WL 6568085 (M.D. Fla. Nov. 4, 2016)

If you murder someone, you can’t collect on their life insurance policy. This is one of several iterations of the common-law “slayer rule” that’s codified in F.S. 732.802; a statute that gets litigated way more often than most people would guess (see here, here, here). But just because you kill someone doesn’t mean our slayer statute gets triggered. The killing has to be both “intentional” and “unlawful”.

F.S. 732.802(3): “A named beneficiary of a bond, life insurance policy, or other contractual arrangement who unlawfully and intentionally kills the principal obligee or the person upon whose life the policy is issued is not entitled to any benefit under the bond, policy, or other contractual arrangement; and it becomes payable as though the killer had predeceased the decedent.”

But just because you “intentionally” kill someone, doesn’t mean it’s “unlawful”. For example, an individual may lawfully kill in self-defense, an executioner may lawfully kill with the sanction of the State, and a soldier may lawfully kill under the rules of combat. It’s this kind of killing that’s at issue in this case.

Case Study:

This case involves two men, McGriff and Rigby. They got into some kind of fight; Rigby allegedly swung at McGriff, and McGriff responded by doing something that caused Rigby to fall and hit his head. Rigby eventually died from his injuries. McGriff claimed he was acting in self defense. There were no witnesses.

McGriff was the beneficiary of Rigby’s $466,000 life insurance policy. Rigby’s estate contested McGriff’s claim to the insurance money, which caused the insurance company to freeze the account. McGriff then sued the insurance company in this federal action. Rigby’s probate proceeding continued on its own independent parallel track.

McGriff was investigated but never prosecuted. According to the State Attorney, because Rigby died and there were no witnesses, the State would be unable to “rebut all reasonable hypothesis of [McGriff’s] innocence.” So was that the end of the story? No. Under our slayer statute you don’t need a murder conviction for the rule to apply.

F.S. 732.802(5): “… In the absence of a conviction of murder in any degree, the court may determine by the greater weight of the evidence whether the killing was unlawful and intentional for purposes of this section.”

Self Defense = Lawful Killing = No Slayer Statue Violation:

McGriff admitted being the cause of Rigby’s death, but claimed he was acting in self defense. When you kill someone in self defense, that’s an “intentional” act, which means the first prong of the statue was triggered.

Killing in self-defense is considered an intentional act. See Congleton v. Sansom, 664 So. 2d 276, 280 (Fla. 1st DCA 1995). As such, the only issue before the Court is whether McGriff acted unlawfully.

So did the court buy McGriff’s self-defense claim? YES. Apparently there was a prior ruling by the state probate judge involving the same parties that concluded McGriff hadn’t acted unlawfully. Add that ruling to the State Attorney’s decision not to prosecute, and we can all see where this case was headed. Here’s how the federal judge explained her ruling against the slayer-statute claim:

There are no living witnesses to the altercation, and the evidence before the Court regarding the details of the altercation consist of the 911 call, police report, autopsy findings, and the State Attorney’s decision not to prosecute. The Court has considered the fact that McGriff gave conflicting versions of the incident when he called 911 and when the police arrived at the scene. The Court has also considered the other evidence submitted by Harding, including her affidavit that she believed that McGriff and Rigby had a troubled relationship and that McGriff considered Rigby his “sugar daddy.” However, the totality of the evidence before the Court does not prove that it is more likely than not that McGriff acted unlawfully when he pushed Rigby, rather than that he acted in self-defense. Given due consideration to the record before the Court, the Court concludes that Harding has not and cannot show that McGriff acted unlawfully when he pushed Rigby, and as such, the Slayer Statute does not apply. This Court notes that its determination that the Slayer Statute does not apply is consistent with the state probate court’s determination on the same set of facts with the same parties before it.

Note to readers:

The linked-to order was published last year. I try to report on cases as they’re published. I don’t always succeed. This blog post is part of an ongoing project to report on older cases I wasn’t able to get to previously.