May law firm that represented now-deceased spouses in preparing their wills and trusts represent trustees against wife’s personal representative?

Posted in: Appellate Practice, Estate Planning/Probate, Trial Practice by Steven Vartabedian on

Rulings on motions to disqualify opposing counsel have in recent months and years regularly found their way into the appellate courts. Some of these reviews have been by way of appeal as appealable injunctive orders. Others have taken the petition for writ of mandate route. The latter route was taken in Fiduciary Trust International of California v. Superior Court (filed 7/31/13) 2013 DJDAR 10119. And again, as was the case in the last disqualification case that appeared in this blog (June 26, 2013), the appellate court disagreed with the trial court. But this time it determined that disqualification should have been granted, rather than not.

Sandler & Rosen (S&R) drafted wills and trusts for Willet and Betty Brown concerning a joint estate worth more than $200 million. In short, the trusts generated substantial income and Betty became the marital trust income beneficiary for life upon Willet’s death; upon Betty’s death, the principal of the trust went into an Exemption Equivalent Trust that benefitted the parties’ four adult children. But after Willet died, Betty revoked her will that had previously benefitted all four of the children, and transferred the large majority of her assets to a trust that benefitted her daughter, the only of the four children that was hers by blood.

After Betty’s death, her personal representative, Fiduciary, and the marital trust trustees disputed who was required to pay the $27 million in estate and inheritance taxes due on Betty’s assets. The Brown’s estate plan indicated that upon the latter of the couple’s death the Marital Trust would pay the estate and inheritance taxes. After Willet’s death, Betty established a new trust that would, upon her death, distribute a significant majority of the trust assets to the one daughter mostly to the exclusion of the other children. Yet taxes due on her estate still were directed to be paid by the Marital Trust. In light of Betty’s changes, the Marital Trust trustees argued that it would be unfair to pay the full amount of taxes owed on the assets of Betty’s trust as the other 3 children would pay death taxes on funds they will never receive.

S&R represented the Marital Trust in this tax dispute. Fiduciary moved the court to disqualify S&R. The trial court determined that any communication that occurred at the time S&R prepared the estate plan (about 20 years earlier) were unlikely to be used in the current dispute and denied the motion to disqualify. The Court of Appeal, Second Appellate District, Division Seven, disagreed, finding that based upon the undisputed substantial relationship of the subject matter involved in both representations, and because the previous representation was “direct and personal” rather than “peripheral or attenuated,” disqualification was virtually automatic not allowing the trial court to inquire into any actual breach of confidentiality that would affect the present dispute.

The opinion is thorough and lengthy. I will simply summarize some of the court’s reasoning in rejecting the arguments of the trustee. The court found that the joint nature of S & R’s earlier representation of Willett and Betty is insufficient to avoid disqualification including that Evidence Code section 962, in stating that joint representation communications are not privileged, does not establish a blanket exception to adverse representation. Additionally there was no basis to find that the parties to the estate plan had waived or consented to future adverse representation. In essence the appellate court found that the trial court misfocused its inquiry on what might or might not have been communicated that would affect the present dispute.

I did not see any significant discussion of this in the opinion, but I wonder if the big difference between the way the trial court viewed the matter, compared to the appellate courts viewpoint, related to the appellate court’s reference to the two sides as “Willet” and “Mary.” In other words, the relationships formed by the attorneys with the clients survived their deaths. By contrast, the trial court seemed to view the tax dispute as between their successors–that what Willet and Mary had discussed with their attorneys did not present a conflict for S & R in representing one of the current disputants. The lesson I think is that counsel should take care that they still represent, in a sense, those clients who are now deceases when it comes to conflicts of interests.

I would also direct attention to the difference between this case and that of Baker Manock & Jensen v. Superior Court (2009) 175 Cal.App.1414. There, a beneficiary of an estate was viewed as acting personally, rather than in a representative capacity in challenging an executor, and his representation by the same counsel, who drafted the will in question. There the trial court was found to have erred in disqualifying executor’s counsel.

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