Estate planning is challenging because planners are asked to anticipate issues that may or may not present themselves for decades to come.  The “adult adoptee” issue is a perfect example of the type of low-probability scenario that can come back to bite a family if not appropriately anticipated.

The New York Times reported on a high profile trust case involving an adult adoptee in Partner Adopted by an Heiress Stakes Her Claim.  The following are excerpts from the linked-to piece:

In 1991, Ms. Watson, then 43, adopted Ms. Spado, then 44, under a Maine law that allows one adult to adopt another. The reason, Ms. Spado has contended in court documents, was to allow Ms. Spado to qualify as an heir to Ms. Watson’s estate.

But less than a year after the adoption, Ms. Watson and Ms. Spado broke up. Then in 2004, Ms. Watson’s mother died, leaving multimillion-dollar trusts established by her husband to be divided among their 18 grandchildren.

Re-enter Ms. Spado with a claim: Because she was adopted by Olive F. Watson, she said, she is technically Thomas J. Watson Jr.’s 19th grandchild and is therefore eligible for a share of the trusts.

*     *     *     *     *

Many states allow adult adoption, but the laws were primarily intended for situations like a stepparent adopting a stepchild later in life, said D. Marianne Blair, an adoption expert at the University of Tulsa College of Law.

However, some same-sex couples began using the adoption process to establish financial security or inheritance for their partners, said Arthur S. Leonard, a professor at New York Law School.

“Before we had domestic partnership ordinances, before same-sex marriage or civil unions, back then there wasn’t much you could do,” Professor Leonard said.

In Florida, adults can be adopted, and for the purpose of intestate succession by or from an adopted person, the adopted person is considered a lineal descendant of the adopting parent and is one of the natural kindred of all members of the adopting parent’s family.  63.042, 732.108.

The adult-adoptee issue can be addressed with fairly simple boilerplate language inserted into the client’s will or trust.  The following is an example:

Effect of Adoption. A legally adopted child (and any descendants of that child) will be regarded as a descendant of the adopting parent only if the petition for adoption was filed with the court before the child’s thirteenth birthday. If the legal relationship between a parent and child is terminated by a court while the parent is alive, that child and that child’s descendants will not be regarded as descendants of that parent. If a parent dies and the legal relationship with that deceased parent’s child had not been terminated before that parent’s death, the deceased parent’s child and that child’s descendants will continue to be regarded as descendants of the deceased parent even if the child is later adopted by another person.

Special thanks to Miami commercial litigator Javier A. Reyes of Boies, Chiller & Flexner LLP for bringing the New York Times article to my attention.

I previously wrote here about Engelke v. Estate of Engelke, a 4th DCA opinion holding that homestead held in a revocable trust remained exempt from forced sale or lien by judgment creditors pursuant to Article X, Section 4(a) of the Florida Constitution.  The reason why opinions like Engelke are especially interesting for estate planners is because they chip away at the precedential value of In re Bosonetto, 271 B.R. 403 (Bankr.M.D.Fla.2001), a Middle District Bankruptcy Court opinion ruling that homestead property in a revocable trust lost its creditor protection.  Bosonetto has been the subject of heavy criticism every since.

We now have two new Middle District Bankruptcy Court opinions expressly refusing to follow Bosonetto:  In re Alexander, 346 B.R. 546, 19 Fla. L. Weekly Fed. B 356 (Bankr.M.D.Fla. Jul 25, 2006), and In re Edwards, — B.R. —-, 2006 WL 3788803 (Bankr.M.D.Fla. Oct 04, 2006).

This is good news for planners, although the issue is not yet dead.  Bosonetto hasn’t been overruled.  Until it is, planners should remain cautious.  The following excerpts from Edwards summarize the well-reasoned analyses underlying both opinions:

The issue for determination is whether real property in which a debtor resides qualifies for the Florida homestead exemption when title to the property is held by a revocable trust. The issue is governed by Florida state statutory and case law. Florida opted out of the federal bankruptcy exemption scheme and a debtor filing for bankruptcy protection in Florida must use Florida’s state law exemptions. The Florida exemptions include a homestead exemption found at Florida Constitution, Article X, Section 4(a)(1):

(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:

(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality; upon which the exemption shall be limited to the residence of the owner or the owner’s family.

Fla. Const. Art. X, § 4 (emphasis added).

*     *     *     *     *

The Trustee relies on the decision In re Bosonetto, 271 B.R. 403 (Bankr.M.D.Fla.2001) in which the Bankruptcy Court held a debtor may not claim real property owned by a trust as exempt homestead property. The great weight of the relevant case law holds to the contrary. Fee simple title of the property is not required, and an equitable or legal interest should afford protection pursuant to the provision.


The Florida Appellate Court ruled in Engelke v. Estate of Engelke, 921 So.2d 693, 696 (Fla. 4th DCA 2004) a revocable trust was constitutionally protected homestead property and could not be used to pay claims and expenses of the grantor’s estate. The grantor of the trust retained an ownership interest in the property since the trust was revocable. The trust, due to its revocable nature, was owned by a “natural person” within the meaning of the Florida homestead exemption. The revocable trust only held title to the property, while the grantor retained ownership.

A recent case decided in the Middle District of Florida, In re Alexander, 346 B.R. 546 (Bankr.M.D.Fla.2006) is in agreement holding fee simple title to the property is not necessary to qualify for the homestead exemption.  “… [I]n order to claim property in which the individual resides as exempt it is sufficient that: (1) the individual have a legal or equitable interest which gives the individual the legal right to use and possess the property as a residence; (2) the individual have the intention to make the property his or her homestead; and (3) the individual actually maintain the property as his or her principal residence.” The Bankruptcy Court ruled homestead property titled in a revocable trust can be exempt from a debtor’s bankruptcy estate in a Chapter 7 case.

Cutler v. Cutler, — So.2d —-, 2007 WL 601866 (Fla. 3d DCA Feb 28, 2007)

Homestead is known as Florida’s legal chameleon because it has different meanings depending upon its context.  Here’s how the 3d DCA described the three faces of Florida’s homestead law in the linked-to opinion:

As the Florida Supreme Court noted in Snyder v. Davis, 699 So.2d 999, 1001-02 (Fla.1997), there are three kinds of homestead with one purpose: preserving the family home for its owner and heirs. The first kind, unrelated to this case, provides homestead with an exemption from taxes. See Art. VII, § 6, Fla. Const. The second protects homestead from forced sale by creditors. Art. X, §§ 4(a)-(b), Fla. Const. The third delineates the restrictions a homestead owner faces when attempting to alienate or devise homestead property. Art. X, § 4(c), Fla. Const.

This case is another example of homestead law derailing a Florida testator’s estate plan.  All parties conceded that the homestead property at issue was "freely devisable" under Florida law, and yet the testator’s intent was still frustrated by Florida’s homestead law.

The estate plan at issue was simple: mom, whose only surviving family was her adult son and daughter, specifically devised 2 pieces of real estate, her home to her daughter and an adjacent vacant lot to her son.  In the event the administrative expenses of her estate exceeded her residuary estate, mom wanted the remaining expenses to be shared equally by son and daughter.  Here’s how the 3d DCA described mom’s plan:

Edith’s [estate] plan [was] that if other available assets are insufficient to satisfy her creditors’ claims and the final expenses of her estate upon her death, the residence she devised to Cynthia and the adjacent vacant parcel she devised to her son Edward will abate equally to satisfy those expenses.

Daughter objected to apportioning any probate expenses to her devise of freely-devisable homestead property and the trial court agreed pursuant to the “inuring clause” of Article X, section 4(b) of the Florida Constitution, effectively frustrating mom’s clearly expressed testamentary intent.  The following excerpts from the linked-to opinion provide a good summary of the 3d DCA’s rationale for upholding the trial court’s ruling:

The specific homestead protection at issue in this case is protection against forced transfer for use by an estate after the death of a decedent. Art. X, § 4(b), Fla. Const. To clearly distinguish this particular protection in the Florida Probate Code from other forms of homestead, the Legislature has denominated it as “protected homestead.” See § 731.201(29), Fla. Stat. (2003)(defining “protected homestead as “[that] property described in s. 4(a)(1), Art. X of the State Constitution on which at the death of the owner the exemption inures to the owner’s surviving spouse or heirs under s. 4(b), Art X of the State Constitution”).

*     *     *     *     *
Here, we are confronted with two specific devises of property, which, in the general residuary clause of her will, Edith directed should be contingently available to her personal representative, if necessary, to pay the expenses of her estate. See Park Lake Presbyterian Church v. Estate of Henry, 106 So.2d 215, 217 (Fla.1958)(defining a specific devise as “a gift of a particular thing or of a specified part of a testator’s estate so described as being capable of distinguishment from all others of the same kind,” and defining a residuary legacy as “a general legacy wherein fall all the assets of the estate after all other legacies have been satisfied and all charges, debts, and costs have been paid”). On their face, these two specific devises appear equal in dignity. But upon closer examination, it is clear that they are not. In the case of the specific devise of the vacant land to Edward, there is no question but that Edith had the legal right to subject this devise to the debts of the estate if she so desired. § 733.805(1) Fla. Stat. (2004)(“Funds or property designated by the will shall be used to pay debts [of the estate] … to the extent the funds or property is sufficient.”); In re Estate of Potter, 469 So.2d 957, 959 (Fla. 4th DCA 1985). However, as we have learned, the devise to Cynthia was followed by a constitutional exemption from forced sale of her devise to satisfy the expenses of Edith’s estate. This constitutionally created benefit is personal to Cynthia, and hers to assert. For reasons of her own, she has determined to do so. We do not consider ourselves liberated to deny her this constitutional benefit.

Lesson learned:

The lesson to be drawn from this case is that the creditor protection aspects of even freely-devisable homestead property will trump all other interests — including a testator’s individual property rights in his or her own home.  This point is made by the Judge Schwartz in his dissent:

The ground of my dissent is aptly stated in the appellant’s brief:

When there is no surviving spouse or minor child, as in this case, the decedent’s homestead may be freely transferred, gifted, or devised without limitation. Art. X, Section 4(c), Fla. Const.; City National Bank of Fla. v. Tescher, 578 So.2d 701, 703 (Fla.1991). … If Mrs. Cutler could have left her properties to someone outside of her family, which she could have done, why could she not leave it to her heirs with the provision that the properties be available to satisfy her debts? The answer to this question is simple-she was lawfully entitled to do so.

See also DeMayo v. Chames, 934 So.2d 548, 551 (Fla. 3d DCA 2006) (Shepherd, J., concurring) (persuasively stating view that property owner should have authority to deal with homestead property as she sees fit), review granted, 937 So.2d 122 (Fla. 2006).FN6

FN6. I hope, without confidence, that the majority is not saying that the limitation on the devise would have been okay if it were contained in the same sentence or paragraph as a condition of the devise, but it is not and the testatrix’s clearly expressed wishes must be frustrated because it is in a separate provision of the will. If my hope is unjustified, as I write I can hear workers installing the words-in Gothic letters, of course-“All common sense abandon, ye who enter here” over the doors to our courtroom.

I am sympathetic to Judge Schwartz’s position, as I previously stated here.

Professor Judith G. McMullen, Marquette University – Law School, just published a new article that should be of interest to probate litigators trying to make sense of the underlying dynamics driving most will contests: Keeping Peace in the Family While You are Resting in Peace: Making Sense of and Preventing Will Contests.

Here’s the SSRN abstract of this article:

Abstract:

This Article focuses on post-mortem challenges to wills. All such will challenges involve a clash between the testator’s stated intentions and the disappointed heirs’ expectations and desires. While the legal issues may differ somewhat in individual cases, the claims are almost invariably the result of a disappointed heir feeling that she has been treated unfairly or has not received what she expected to receive. Rather than focusing on the technical issues of will drafting or execution, this Article reflects on the emotional causes of fighting over an estate and suggests some ways to reduce the family fighting and hard feelings that result in will contests.

The first section of the Article describes some of the common legal challenges used to prevent the enforcement of specific will provisions or to contest the will’s admission to probate. The Article then discusses the overarching issue of why surviving family members fight about property after the death of a love one. Here, the Article describes the legal concept of freedom of testation and contrasts a testator’s view towards property ownership and disposal with the views of potential family recipients. This section also discusses the implicit preference that the law gives to presumptive heirs – a preference that probably bolsters the resolve of disappointed heirs to engage in will challenges. In the final section, this Article describes specific steps that typically are recommended for use by testators to reduce the likelihood of will challenges, and it concludes by asking clients and their lawyers to mull over the long-term emotional and social repercussions of proposed estate plans.

Poor Judge Seidlin.  Even when he gets it right . . . he’s wrong.  Relying on the “tipsy coachman” doctrine, which allows allows an appellate court to affirm a trial court that “reaches the right result, but for the wrong reasons” so long as “there is any basis which would support the judgment in the record,” the 4th DCA upheld Judge Seidlin’s ruling granting power to decide where Smith will be buried to Richard C. Milstein, as guardian ad litem for Smith’s 5-month-old daughter, Dannielynn Hope Marshall Stern.

Arthur v. Milstein, — So.2d —-, 2007 WL 602630 (Fla. 4th DCA 2007)

According to the 4th DCA, the trial court incorrectly based its ruling on Florida statutes intended to guide funeral home operators and medical examiners:

The trial court relied upon section 406.50(4) to determine that Dannielynn had priority over Arthur. .  .  .  .  We find that neither section 497.005(37) [superceded by 497.005(39)], nor section 406.50, control the outcome of this case, which in essence involves private parties engaged in a pre-burial dispute as to the decedent’s remains. Otherwise stated, the trial court was not being asked to consider whether a funeral home or medical examiner was liable for its decision with respect to the disposition of a decedent’s remains.

Instead, as I predicted here, the 4th DCA held that its prior ruling in the Cohen case (which I wrote about here) was the correct basis for deciding this dispute: Anna Nicole Smith’s body should be disposed of in accordance with her intent, as established by clear and convincing evidence. Here’s how the 4th DCA articulated its rationale:

In this case, common law is dispositive. Kirksey v. Jernigan, 45 So.2d 188, 189 (Fla.1950); Cohen v. Guardianship of Cohen, 896 So.2d 950 (Fla. 4th DCA 2005); Leadingham v. Wallace, 691 So.2d 1162 (Fla. 5th DCA 1997). Generally, in the absence of a testamentary disposition, the spouse of the deceased or the next of kin has the right to the possession of the body for burial or other lawful disposition. Kirksey. In Cohen, we held that a written testamentary disposition is not conclusive of the decedent’s intent if it can be shown by clear and convincing evidence that he intended another disposition for his body. Cohen looked to decisions of other states which determined that whether to enforce the will provisions regarding disposition of the testator’s body depends upon the circumstances of the case.

*     *     *     *     *
Cohen noted that there were “no cases in Florida or across the country in which a testamentary disposition has been upheld even though credible evidence has been introduced to show that the testator changed his or her mind as to the disposition of his/her body.” 896 So.2d at 954. There, we found no abuse of discretion associated with the trial court’s finding of the decedent’s intent. See also Leadingham. We note that even under section 497.005[39], the first priority is to the wishes of the decedent “when written inter vivos authorizations and directions are provided” and that the remaining list of legally authorized persons are those who are most likely to know and follow those wishes. To the extent sections 497.005[39] and 406.05(4) provide guidance, the priorities therein could set forth a presumption, rebuttable by clear and convincing evidence of the decedent’s intent, as was the will in Cohen, and as found here.

Probate litigator’s toolkit: 

“Burial disposition” cases are rare. So if you find yourself involved in one, you’ll want to read Judge Seidlin’s trial court order [click here] and the excellent legal analysis of the case prepared by attorney Shane Kelley, which can be found in “Who Can Dispose of Her Body”: Disposition of the Remains of a Decedent under Florida Law.

For an excellent article tackling the need for better burial statutes nationwide, you’ll want to read Uniform Acts-Can the Dead Hand Control the Dead Body? The Case for a Uniform Bodily Remains Law. What I find particularly helpful about this article is that it provides a detailed, well-researched and thoughtful proposed statute from beginning to end. For those of you finding yourself involved in one of these cases, you’ll want to read this article. It highlights issues you’ll have never thought of on your own.

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

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

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

*     *     *     *     *

ATTORNEY-CLIENT PRIVILEGE AND THE ‘COMPLETE LAWYER’

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

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

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

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

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

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

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

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

Florida Law: Ethics Opinion 88-11

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

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

*     *     *     *     *

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

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

In stark contrast to the glowing reviews enjoyed by Attorney Richard C. Milstein (see here), most observers have been less than impressed with Judge Larry Seidlin.  The following excerpts from Florida Judge in Anna Nicole Smith Case Is Vilified as ‘Weepy Wacko’ sum up the national consensus:

From the state that brought you the hanging chad, now comes the crying judge.

Some members of the bar and other court-watchers are cringing over the way Judge Larry Seidlin wept — no, sobbed — on live, national TV as he announced a ruling Thursday in the dispute over where Anna Nicole Smith should be buried.

Some are accusing the brash former New York cab driver of showboating for the cameras, or worse, auditioning for his own courtroom TV show, with his one-liners, his personal asides and his smart-alecky Bronx delivery during the six-day hearing.

They say that he let the hearing drag on way too long, that he made inappropriate jokes for a dispute over a body, that he acted as if it were all about him.

"He’s like Judge Judy’s wacky little brother," legal analyst Jefrey Toobin quipped on CNN.

The New York Post called him a "Weepy Wacko," while the The New York Daily News asked, "How Low Can This Judge Go?" and referred to him as "Blubbering Seidlin." One of Miami’s most celebrated defense attorneys, Roy Black, said of the circus-like scene in Seidlin’s courtroom: "I sort of think it gives circuses a bad name."

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

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

Here, the estate planning attorneys at Baker Botts, lead by nationally-known estate planner and speaker Stacy Eastland (currently Managing Director of Goldman Sachs & Company (Houston)), seem to have done everything right.

  • They identified the potential conflict of interest.
  • Disclosed the conflict to the clients and received written waivers.
  • They severed their relationship with one of the clients once it became clear the clients were no longer interested in pursuing a mutually-agreed-upon course of action.

See ACTEC Commentary on Model Rule of Professional Conduct 1.7.

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

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

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

Lesson learned:

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

Juega v. Davidson, — So.2d —-, 2007 WL 465523 (Fla. 3d DCA Feb 14, 2007)

[THIS OPINION WAS WITHDRAWN AND SUBSTITUTED HERE]

Who has standing to sue and when is a recurring them in trusts and estates litigation.  In probate proceedings, the issue is framed in terms of who is an "interested person,"  In non-probate trust litigation, the issue is governed by Florida Rule of Civil Procedure 1.210(a).

In this case an estate administrator appointed as part of estate proceedings in Spain filed a 1994 lawsuit in Miami, Floria.  The case apparently dragged on for years.  In 2003, the Spanish estate was closed on the estate administrator was discharged.  Having acquired a taste for U.S. litigation, in 2004 the foreign administrator proceeded with his case in Miami after having been discharged in Spain.

The trial court dismissed the discharged-foreign administrator from the lawsuit on lack-of-standing grounds.  The 3d DCA agreed, providing the following helpful guidance:

Florida Rule of Civil Procedure 1.210(a) states, in pertinent part:

Every action may be prosecuted in the name of the real party in interest, but a personal representative, administrator, guardian, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party expressly authorized by statute may sue in that person’s own name without joining the party for whose benefit the action is brought.

By its express wording, Rule 1.210(a) enumerates six categories of persons who may bring an action for the benefit of another without joining the real party in interest. However, the real party in interest may prosecute in his own name as well even if one of those six categories of persons is available. See Estate of Morales v. Iasis Healthcare Corp., 901 So.2d 965, 966 (Fla. 2d DCA 2005) (“[i]n cases involving claims made by … an estate, there are two parties: the estate and the personal representative”). Here, [foreign administrator] ceased to be the estate administrator and the Estate ceased to be the real party in interest in 2003.

Because [foreign administrator] ceased to act in his representative capacity in 2003, he did not have standing in 2004 to raise claims on behalf of the estate.