ACTEC COMMENTARIES ON THE MODEL RULES OF PROFESSIONAL CONDUCT
MRPC 1.2
Scope of Representation.
(a) A lawyer shall abide by a client's decisions concerning the objectives of the representation, subject to paragraphs (c), (d) and (e), and shall consult with the client as to the means by which they are to be pursued. A lawyer shall abide by a client's decision whether to accept an offer of settlement of a matter. In a criminal case, the lawyer shall abide by the client's decision, after consultation with the lawyer, as to a plea to be entered, whether to waive jury trial and whether the client will testify.
(b) A lawyer's representation of a client, including representation by appointment, does not constitute an endorsement of the client's political, economic, social or moral views or activities.
(c) A lawyer may limit the objectives of the representation if the client consents after consultation.
(d) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.
(e) When a lawyer knows that a client expects assistance not permitted by the rules of professional conduct or other law, the lawyer shall consult with the client regarding the relevant limitations on the lawyer's conduct.
* * * * * * * * * * * * * * ACTEC COMMENTARY ON MRPC 1.2
General Principles. The client and the lawyer, working together, are relatively free to define the scope and objectives of the representation, including the extent to which information will be shared among multiple clients and the nature and extent of the obligations that the lawyer will have to the client. If multiple clients are involved, the lawyer should discuss with them the scope of the representation and any actual or potential conflicts and determine the basis upon which the lawyer will undertake the representation. As stated in the Comment to MRPC 1.7 (Conflict of Interest: General Rule) with respect to estate administration, "The lawyer should make clear the relationship to the parties involved." Also, as indicated in the ACTEC Commentaries on MRPCs 1.6 (Confidentiality of Information), 1.7 (Conflict of Interest: General Rule) and 2.2 (Intermediary), it is often permissible for a lawyer to represent more than one client in a single matter or in related matters. A lawyer may wish to consider meeting with prospective clients separately, which would give each of them an opportunity to be more candid and, perhaps, reveal potentially serious conflicts of interest or objectives.
In the estate planning context, the lawyer should discuss with the client the functions that a personal representative, trustee, or other fiduciary will perform in the client's estate plan. In addition, the lawyer should describe to the client the role that the lawyer for the personal representative, trustee, or other fiduciary usually plays in the administration of the fiduciary estate, including the possibility that the lawyer may owe duties to the beneficiaries of the fiduciary estate. By doing so the lawyer better equips the client to select and give directions to fiduciaries. The lawyer should be alert to the multiplicity of relationships and challenging ethical issues that may arise when the representation involves employee benefit plans, charitable trusts or foundations.
Multiple Fiduciaries. A lawyer may represent co-fiduciaries in connection with the administration of a fiduciary estate subject to the requirements of the MRPC, particularly Rules 1.7 (Conflict of Interest: General Rule) and 2.2 (Intermediary). Before accepting the representation the lawyer should explain to the co-fiduciaries the implications of the representation, including the extent to which the lawyer will maintain confidences as between the co-fiduciaries. If the co-fiduciaries become adversaries with respect to matters related to the representation, the lawyer may be permitted to continue the representation of one co-fiduciary with the informed consent and waiver of the other co-fiduciary. If the lawyer has been engaged to act as an intermediary under Rule 2.2 the lawyer would be required to withdraw from the representation ("as intermediary") upon the request of one of the co-fiduciaries.
Communication With Beneficiaries of Fiduciary Estate. The lawyer engaged by a fiduciary to represent the fiduciary generally in connection with a fiduciary estate may communicate directly with the beneficiaries regarding the nature of the relationship between the lawyer and the beneficiaries. The fiduciary is primarily responsible for communicating with the beneficiaries regarding the fiduciary estate. A meeting between the fiduciary, the lawyer, and the beneficiaries may provide all parties with the best understanding of the proceeding and lead to the most efficient administration. See ACTEC Commentaries on MRPCs 4.1 (Truthfulness in Statements to Others) and 4.3 (Dealing with Unrepresented Person).
As a general rule, the lawyer for the fiduciary should inform the beneficiaries that the lawyer has been retained by the fiduciary regarding the fiduciary estate and that the fiduciary is the lawyer's client; that while the fiduciary and the lawyer will, from time-to-time, provide information to the beneficiaries regarding the fiduciary estate, the lawyer does not represent them; and that the beneficiaries may wish to retain independent counsel to represent their interests. As indicated in MRPC 2.3 (Evaluation for Use by Third Persons), the lawyer may, at the request of a client, evaluate a matter affecting a client for the use of others.
Representation of Fiduciary in Representative and Individual Capacities. The lawyer may represent the fiduciary in a representative capacity and as a beneficiary except as otherwise proscribed, as it may be in some cases by MRPC 1.7 (Conflict of Interest: General Rule).
Example 1.2-1. Lawyer (L) drew a will for X in which X left her entire estate in equal shares to A and B and appointed A as executor. X died survived by A and B. A asked L to represent her both as executor and as beneficiary. L explained to A the duties A would have as personal representative, including the duty of impartiality toward the beneficiaries. L also described to A the implications of the common representation, to which A consented. L may properly represent A in both capacities. However, L should inform B of the dual representation and indicate that B may, at his or her own expense, retain independent counsel. In addition, L should maintain separate records with respect to the individual representation of A, who should be charged a separate fee (payable by A individually) for that representation. L may properly counsel A with respect to her interests as beneficiary. However, L may not assert A's individual rights on A's behalf in a way that conflicts with A's duties as personal representative. If a conflict develops that materially limits L's ability to function as A's lawyer in both capacities, L should withdraw from representing A in one or both capacities. See MRPC 1.7 (Conflict of Interest: General Rule) and MRPC 1.16 (Declining or Terminating Representation).
Facilitating Informed Judgment by Clients. In the course of the estate planning process the lawyer should assist the client in making informed judgments regarding the method by which the client's objectives will be fulfilled. The lawyer may properly exercise reasonable judgment in deciding upon the alternatives to describe to the client. For example, the lawyer may counsel a client that the client's charitable objectives could be achieved either by including an outright bequest in the client's will or by establishing a charitable remainder trust. The lawyer need not describe alternatives, such as the charitable lead trust, if the use of such a device does not appear suitable for the client. As indicated below, the lawyer should describe the tax and nontax advantages and disadvantages of the plans and assist the client in making a decision among them. The client might choose to ask the lawyer or another professional to prepare any tax returns that are required.
Defining and Refining the Scope of Representation. As the lawyer obtains information from a client, the lawyer and the client are typically working together toward defining further the scope and objectives of the representation, which are often revised as the representation progresses. One of the lawyer's goals should be to educate the client sufficiently about the process and the options to allow the client to make informed decisions regarding the representation. See ACTEC Commentary on MRPC 1.4 (Communication). In furtherance of that goal many lawyers review with an estate planning client the appropriate alternative methods by which the client's general estate planning objectives could be implemented. In the course of doing so the lawyer should express to the client the relative cost advantages of the alternatives, including the present and future tax, legal and other costs, such as trustee's fees. See ACTEC Commentary on MRPC 2.1 (Advisor).
Formal and Informal Agreements. Variations in the circumstances and needs of trusts and estates clients and in the approach and practice of individual lawyers naturally result in lawyers and clients adopting different methods of working together. The agreement between a lawyer and client regarding the scope and objectives of the representation is often best expressed in an engagement letter or other written communication. However, most often their agreement is implicit--reflected in the manner in which lawyer and client choose to work together. Their approach will reflect the client's needs (as perceived by the client and the lawyer) and the lawyer's judgment regarding the client's needs and objectives and the ways in which they may reasonably be fulfilled.
Lawyer May Not Make False or Misleading Statements. In all cases the lawyer shall not, in dealing with third persons, make a false statement of material fact or law or fail to disclose a material fact when disclosure is required in order to avoid assisting a criminal or fraudulent act by a client. See MRPC 4.1 (Truthfulness in Statements to Others). This requirement applies to accountings or other documents that the lawyer for a fiduciary may prepare on behalf of the fiduciary.
Disclosure of Acts or Omissions by Fiduciary Client. In some jurisdictions a lawyer who represents a fiduciary generally with respect to the fiduciary estate may disclose to a court or to the beneficiaries acts or omissions by the fiduciary that might constitute a breach of fiduciary duty. See ACTEC Commentary on MRPC 1.6 (Confidentiality of Information). In jurisdictions that do not require or permit such disclosures, a lawyer engaged by a fiduciary may condition the representation upon the fiduciary's agreement that the creation of a lawyer-client relationship between them will not preclude the lawyer from disclosing to the beneficiaries of the fiduciary estate or to an appropriate court any actions of the fiduciary that might constitute a breach of fiduciary duty. The lawyer may wish to propose that such an agreement be entered into in order better to assure that the intentions of the creator of the fiduciary estate to benefit the beneficiaries will be fulfilled. Whether or not such an agreement is made, the lawyer for the fiduciary ordinarily owes some duties (largely restrictive in nature) to the beneficiaries of the fiduciary estate. The nature and extent of the duties of the lawyer for the fiduciary are shaped by the nature of the fiduciary estate and by the nature and extent of the lawyer's representation.
Representation of Fiduciary in Representative Not Individual Capacity. If a lawyer is retained to represent a fiduciary generally with respect to the fiduciary estate, the lawyer represents the fiduciary in a representative and not an individual capacity--the ultimate objective of which is to administer the fiduciary estate for the benefit of the beneficiaries. Giving recognition to the representative capacity in which the lawyer represents the fiduciary is appropriate because in such cases the lawyer is retained to perform services that benefit the fiduciary estate and, derivatively, the beneficiaries--not to perform services that benefit the fiduciary individually. The nature of the relationship is also suggested by the fact that the fiduciary and the lawyer for the fiduciary are both compensated from the fiduciary estate. Under some circumstances it is appropriate for the lawyer also to represent one or more of the beneficiaries of the fiduciary estate. See ACTEC Commentary on MRPC 1.7 (Conflict of Interest: General Rule) and Example 1.7-2.
General and Individual Representation Distinguished. A lawyer represents the fiduciary generally (i.e., in a representative capacity) when the lawyer is retained to advise the fiduciary regarding the administration of the fiduciary estate or matters affecting the estate. On the other hand, a lawyer represents a fiduciary individually when the lawyer is retained for the limited purpose of advancing the interests of the fiduciary and not necessarily the interests of the fiduciary estate or the persons beneficially interested in the estate. For example, a lawyer represents a fiduciary individually when the lawyer, who may or may not have previously represented the fiduciary generally with respect to the fiduciary estate, is retained to negotiate with the beneficiaries regarding the compensation of the fiduciary or to defend the fiduciary against charges or threatened charges of maladministration of the fiduciary estate. If the lawyer has previously represented the fiduciary generally and is now representing the fiduciary individually, the lawyer should advise the beneficiaries of this fact.
Lawyer Should Not Attempt to Diminish Duties of Lawyer to Beneficiaries Without Notice to Them. Without having first given written notice to the beneficiaries of the fiduciary estate, a lawyer who represents a fiduciary generally should not enter into an agreement with the fiduciary that attempts to diminish or eliminate the duties that the lawyer otherwise owes to the beneficiaries of the fiduciary estate. For example, without first giving notice to the beneficiaries of the fiduciary estate, a lawyer should not agree with a fiduciary not to disclose to the beneficiaries of the fiduciary estate any acts or omissions on the part of the fiduciary that the lawyer would otherwise be permitted or required to disclose to the beneficiaries. In jurisdictions that permit the lawyer for a fiduciary to make such disclosures, the lawyer generally should not give up the opportunity to make such disclosures when the lawyer determines the disclosures are needed to protect the interests of the beneficiaries.
Duties to Beneficiaries. The nature and extent of the lawyer's duties to the beneficiaries of the fiduciary estate may vary according to the circumstances, including the nature and extent of the representation and the terms of any understanding or agreement among the parties (the lawyer, the fiduciary, and the beneficiaries). The lawyer for the fiduciary owes some duties to the beneficiaries of the fiduciary estate although he or she does not represent them. The duties, which are largely restrictive in nature, prohibit the lawyer from taking advantage of his or her position to the disadvantage of the fiduciary estate or the beneficiaries. In addition, in some circumstances the lawyer may be obligated to take affirmative action to protect the interests of the beneficiaries. Some courts have characterized the beneficiaries of a fiduciary estate as derivative or secondary clients of the lawyer for the fiduciary. The beneficiaries of a fiduciary estate are generally not characterized as direct clients of the lawyer for the fiduciary merely because the lawyer represents the fiduciary generally with respect to the fiduciary estate.
The scope of the representation of a fiduciary is an important factor in determining the extent of the duties owed to the beneficiaries of the fiduciary estate. For example, a lawyer who is retained by a fiduciary individually may owe few, if any, duties to the beneficiaries of the fiduciary estate other than ones the lawyer owes to other third parties. Thus, a lawyer who is retained by a fiduciary to advise the fiduciary regarding the fiduciary's defense to an action brought against the fiduciary by a beneficiary may have no duties to the beneficiaries beyond those due to other adverse parties or nonclients. In resolving conflicts regarding the extent of the lawyer's duties some courts have considered the source from which the lawyer is compensated. The relationship of the lawyer for a fiduciary to a beneficiary of the fiduciary estate and the content of the lawyer's communications regarding the fiduciary estate may be affected if the beneficiary is represented by another lawyer in connection with the fiduciary estate. In particular, in such a case unless the beneficiary and the beneficiary's lawyer consent to direct communications, the lawyer for the fiduciary should communicate with the lawyer for the beneficiary regarding matters concerning the fiduciary estate rather than communicating directly with the beneficiary. See MRPC 4.2 (Communications with Persons Represented by Counsel). However, even though a separately represented beneficiary and the fiduciary are in a conflict with respect to a particular matter, the fiduciary and a lawyer who represents the fiduciary generally continue to be bound by duties to the beneficiary. Additionally, the lawyer's communications with the beneficiaries should not be made in a manner that might lead the beneficiaries to believe that the lawyer represents the beneficiaries in the matter except to the extent the lawyer actually does represent one or more of them.
In this connection note the Comment to MRPC 4.3 (Dealing with Unrepresented Person) stating that a lawyer should "not give advice to an unrepresented person other than the advice to obtain counsel."
Lawyer Serving as Fiduciary and Counsel to Fiduciary. Some states permit a lawyer who serves as a fiduciary to serve also as lawyer for the fiduciary. Such dual service may be appropriate where the lawyer previously represented the decedent or is a primary beneficiary of the fiduciary estate. It may also be appropriate where there has been a long standing relationship between the lawyer and the client. Generally, a lawyer should serve in both capacities only if the client insists and is aware of the alternatives, and the lawyer is competent to do so. A lawyer who is asked to serve in both capacities should inform the client regarding the costs of such dual service and the alternatives to it. A lawyer undertaking to serve in both capacities should attempt to ameliorate any disadvantages that may come from dual service, including the potential loss of the benefits that are obtained by having a separate fiduciary and lawyer, such as the checks and balances that a separate fiduciary might provide upon the amount of fees sought by the lawyer and vice versa.
ANNOTATIONS
(Refer to Caveat)
Duties of Lawyer for Fiduciary to Beneficiaries:
Cases:
Alaska:
Linck v. Barokas & Martin, 667 P.2d 171 (Alaska 1983). In this legal malpractice case the Supreme Court of Alaska held that a complaint alleging that an attorney-client relationship existed between family members of the decedent and the defendant lawyers and that the lawyers had negligently failed to advise the surviving spouse and her children with respect to the availability and consequences of the surviving spouse's right to disclaim her interest in the estate as a result of which the surviving spouse incurred gift taxes and fees in connection with certain gifts made to her children in lieu of a disclaimer stated a cause of action for professional negligence.
Arizona:
In re Estate of Shano, 869 P.2d 1203 (Ariz. 1993). This case is discussed in the Annotations following the ACTEC Commentary on MRPC 1.7.
California:
Goldberg v. Frye, 266 Cal. Rptr. 483 (Cal. App. 1990). In this malpractice action the court stressed the absence of an attorney-client relationship between the lawyer for the personal representative and the beneficiaries:
Contrary to the allegations of the complaint, it is well established that the attorney for the administrator of an estate represents the administrator and not the estate. . . A key element of any action for professional malpractice is the establishment of a duty by the professional to the claimant. Absent duty there can be no breach and no negligence. . . . By assuming a duty to the administrator of an estate, an attorney undertakes to perform services which may benefit legatees of the estate, but he has no contractual privity with the beneficiaries of the estate. 266 Cal. Rptr. at 488.
Johnson v. Superior Court, 45 Cal. Rptr. 2d 312, 317 (Cal. App. 1995). This case distinguishes the holding in Morales v. Field, discussed below, stating that California courts have not followed Morales and suggesting the decision should be limited to cases where the fiduciary's attorneys have made affirmative representations of care to the beneficiaries.
Lasky, Haas, Cohler & Munter v. Superior Court, 218 Cal. Rptr. 205 (Cal. App. 1985). This is an evidentiary privilege case in which the court denied the beneficiaries access to the work product generated by the lawyers for the trustee but not communicated to the trustee. The court stated that the beneficiaries of a private trust are not clients of the trustee's lawyers.
Pierce v. Lyman, 3 Cal. Rptr. 2d 236 (Cal. App. 1991). This case holds that the beneficiaries of a trust state a cause of action against the trustee's lawyer when the lawyer is alleged to have actively participated in the trustee's breach of fiduciary duty. "Active concealment, misrepresentations to court, and self-dealing for personal financial gain are described. We find this is sufficient to state a cause of action for breach of fiduciary duty [against lawyer for trustees]."
Morales v. Field, DeGoff, Huppert & MacGowan, 160 Cal. Rptr. 239, (Cal. App. 1980). In this malpractice action brought by a trust's beneficiaries against the lawyer for the trustee, the court stated:
An attorney who acts as counsel for a trustee provides advice and guidance as to how that trustee may and must act to fulfill his obligations to all beneficiaries. It follows that when an attorney undertakes a relationship as adviser to a trustee, he in reality also assumes a relationship with the beneficiary akin to that between trustee and beneficiary. In contrast to the third-party asserting a claim in Goodman, appellant here was not someone with whom respondent's client, the trustee Wells Fargo, was to negotiate at arms' length. 160 Cal. Rptr. at 243.
Saks v. Damon, Raike & Co., 8 Cal. Rptr. 2d 869 (Cal. App. 1992). In this case the court rejected claims by a trust's beneficiary directly against the attorney for the trustee sounding in negligence, breach of contract and breach of fiduciary duty. Goldberg v. Frye, supra, is cited with approval.
Colorado
Klancke v. Smith, 829 P.2d 464 (Colo. App. 1991). This case involved an action brought by the surviving children of an accident victim for breach of trust against the attorneys who had represented the victim's surviving spouse (the plaintiffs' step-mother) in a wrongful death action. The court held that the attorneys for the surviving spouse did not breach any duty they owed to the accident victim's surviving children when the attorneys paid the proceeds of a judgment entered in the wrongful death action directly to their client, the surviving spouse, without taking any steps to insure that the children received their claimed share of the proceeds.
Delaware:
Riggs Nat'l Bank v. Zimmer, 355 A.2d 709, 713-714 (Del. Ch. 1976). This case involved a successful motion by the beneficiaries of a trust to compel the trustee to produce legal memoranda prepared by the lawyers for the trustee:
As a representative for the beneficiaries of the trust which he is administering, the trustee is not the real client in the sense that he is personally being served. And, the beneficiaries are not simply the incidental beneficiaries who chance to gain from the professional services rendered. The very intention of the communication is to aid the beneficiaries.
District of Columbia:
Hopkins v. Akins, 637 A.2d 424 (D.C. App. 1993). In this action for legal malpractice involving estate administration the court held that the beneficiary of an estate may not sue the attorney for the personal representative for negligence absent an express undertaking between the attorney and the beneficiary, fraud or malice. Counsel for the estate is to be viewed as an employee of the personal representative in normal circumstances. The court cites with approval the analysis of the California court in Goldberg v. Frye, supra, discussed above.
Florida:
Barnett Nat'l Bank v. Compson, 639 So. 2d 849 (Fla. App. 1993). The court here rejected the analysis of Riggs Nat'l Bank v. Zimmer, supra. It held that the surviving spouse in litigation with the trustee of an inter vivos trust created by her deceased husband may not discover communications between counsel for the trustee and the trustee or between counsel for the trustee and counsel for other beneficiaries who were aligned with the trustee. "The trustee's charging its attorney's fees to the trust does not change our decision under the facts of this case."
First Union Nat'l Bank of Florida v. Whitener, 715 So. 2d 979 (Fla. App. 1998), review denied, 727 So. 2d 915 (1999). This case is discussed in the Annotations following the ACTEC Commentary on MRPC 1.6.
Estate of Gory, 570 So. 2d 1381 (Fla. App. 1990). In an action to disqualify the personal representative's lawyer from representing her at a compensation hearing the court recognized that the lawyer for a personal representative owes fiduciary duties to the beneficiaries of the estate. However, the lawyer does not represent the beneficiaries. Moreover, no conflict of interest results merely because one or more of the beneficiaries takes a position adverse to that of the personal representative.
In Florida, the personal representative is the client rather than the estate or the beneficiaries. Rule 4-1.7, Rules Regulating the Florida Bar (Comment). It follows that counsel does not generate a conflict of interest in representing the personal representative in a matter simply because one or more of the beneficiaries takes a position adverse to that of the personal representative. A contrary result would raise havoc with the orderly administration of decedents' estates, not to mention the additional attorney's fees that would be generated.
Illinois:
In re Estate of Halas, 512 N.E.2d 1276, 1280 (Ill. App. 1987), appeal denied, 522 N.E.2d 1244 (Ill. 1988) (attorney's fee dispute). Both parties conceded at argument that, "[t]he attorney for the executor, therefore, must act with due care and protect the interests of the beneficiaries."
In re Estate of Knoes, 448 N.E.2d 935, 940 (Ill. App. 1983). The attorney for the administrator, being "one who had a fiduciary duty to see that the estate was distributed to all who had an interest in it, was obligated to be a good deal more solicitous of the rights of possible heirs."
Jewish Hosp. v. Boatmen's Nat'l Bank, 633 N.E.2d 1267 (Ill. App. 1994), cert. denied, 642 N.E.2d 1282 (Ill. 1994). In this case the beneficiaries of the testator's will sued the attorney who allegedly negligently prepared the will and who represented the personal representative of the testator's estate and allegedly negligently prepared the federal estate tax return. Applying a third-party beneficiary/breach of contract theory, the Illinois appellate court held that the attorney owed the beneficiaries a duty in preparing the will but, as counsel for the estate representative, owed no duty to the beneficiaries in handling the probate administration. The court observed:
Our supreme court has strongly embraced the concept that third-party-beneficiary status should be easier to establish when the scope of the attorney's representation involves matters that are non-adversarial, such as in the drafting of a will, rather than when the scope of the representation involves matters that are adversarial . . .
Often, the estate's adversary is a beneficiary of the estate who is contesting the will or making a claim against the estate or petitioning to have the executor removed or held liable for mismanagement of the estate. An attorney representing an estate must give his first and only allegiance to the estate, in the event that such an adversarial situation arises. Even though beneficiaries of a decedent's estate are intended to benefit from the estate, an attorney for an estate cannot be held to a duty to a beneficiary of an estate, due to the potentially adversarial relationship between the estate's interest in administering the estate and the interests of the beneficiaries of the estate. [Citations omitted.]
633 N.E.2d at 1277-1278.
Neal v. Baker, 551 N.E.2d 704 (Ill. App. 1990), appeal denied, 555 N.E.2d 378 (Ill. 1990). This case was an action brought by the beneficiary of a decedent's estate against the lawyer for the personal representative for alleged negligence in advising the personal representative. In it, the court stated that the lawyer does not owe a duty to a nonclient unless the nonclient was an intended third-party beneficiary of the contractual relationship between the lawyer and the personal representative. "Plaintiff's mere assertion that the attorney was hired with the intent to directly benefit plaintiff is not sufficient to state a cause of action. The intent plaintiff referred to in her complaint was nothing more than the general intent implicit in an executor hiring an attorney to assist in administering an estate. We hold no duty extends to a beneficiary under these circumstances." Id. at 706.
Rutkoski v. Hollis, 600 N.E.2d 1284 (Ill. App. 1992). In this case the decedent's surviving spouse, as executor under her husband's will, sued the attorney who had represented her deceased husband as executor of a third-party's estate (of which the husband was also a beneficiary). The wife contended that her husband, as a beneficiary, had a claim against the attorney for providing negligent tax advice in the administration of the estate. The appellate court found that husband as executor had a claim against the lawyer but affirmed the trial court's dismissal of the wife's action on behalf of her husband as beneficiary.
Indiana:
Hermann v. Frey, 537 N.E.2d 529 (Ind. App. 1989). The court here held that decedent's surviving spouse and sole heir at law had standing to pursue an action for legal malpractice against the attorney handling the estate where the surviving spouse, as personal representative, had retained the attorney and was therefore entitled to rely on the attorney's advice with respect to her personal cause of action for wrongful death.
Iowa:
Schmitz v. Crotty, 528 N.W.2d 112 (Iowa 1995). In this legal malpractice action the Supreme Court of Iowa found that an attorney retained to handle a decedent's estate had breached the duty of care he owed to the estate beneficiaries in negligently completing the estate's death tax returns and failing to recognize that the same parcel of land included on the return was being described three times and that some of the land included on the returns was subject to a life estate. The attorney also failed to thoroughly investigate and make reasonable efforts to verify the legal descriptions of the land set forth in the death tax returns after he was told that there was an error in the descriptions.
Louisiana:
Succession of Wallace, 574 So. 2d 348 (La. 1991). This decision upholds a disciplinary rule previously issued by the court which allows a client to discharge his or her lawyer at any time for any reason. Under the separation of powers provided for in the Louisiana constitution the court invalidated statute that allowed an executor to discharge a lawyer designated in a will only for "just cause". Citing numerous authorities the court stated that, "[I]t is universally held that when an attorney is employed to render services in procuring the admission of a will to probate, or in settling the estate, he acts as an attorney of the executor, and not of the estate, and for his services the executor is personally responsible." 574 So. 2d at 357.
Maryland:
Ferguson v. Cramer, 709 A.2d 1279 (Md. 1998). In this case, decided contemporaneously by the Court of Appeals (Maryland's highest court) with Noble v. Bruce, supra, discussed in the Annotations following the ACTEC Commentary on MRPC 1.1, the court held that the strict privity doctrine barred a suit by the estate's beneficiaries for alleged negligence on the part of the attorney retained by the personal representative to advise the representative with respect to the administration of the estate.
Massachusetts:
Spinner v. Nutt, 631 N.E.2d 542 (Mass. 1994). This case upholds the dismissal of a malpractice action brought by some of the beneficiaries of a trust against the lawyers for the trustees. The court was concerned that if a trustee's lawyer owed a duty in tort or contract to the beneficiaries, "conflicting loyalties could impermissibly interfere with the attorney's task of advising the trustee." The court also noted that the disciplinary rules require the lawyer to preserve the secrets of a client.
Minnesota:
Goldberger v. Kaplan, Strangis & Kaplan, P.A., 534 N.W.2d 734 (Minn. App. 1995), review denied, 1995 Minn. LEXIS 859 (1995). In a lawsuit brought by the beneficiaries of an estate against a personal representative and its attorneys for alleged negligence, the court adopted a modified multifactor balancing test (first enunciated in Biakanja v. Irving, discussed in the Annotation following the ACTEC Commentary on MRPC 1.1), and dismissed the beneficiaries' claim against the attorneys, holding:
Here, appellants are not the direct, intended beneficiaries of the personal representative's attorneys' services. As permitted by statute, the personal representative hired the attorneys to assist and advise him in fulfilling his fiduciary duty to manage the estate in accordance with the terms of the will and the law and "consistent with the best interests of the estate." The attorneys' services, therefore, must be directed towards serving the best interests of the estate, and, thus, all beneficiaries. If any "person" is a third-party beneficiary of the attorneys' services, it is the estate itself; at best, individual beneficiaries of the estate are only "incidental beneficiaries" of the attorneys' services. Id. at 738-739.
Witzman v. Gross, 148 F.3d 988 (8th Cir. 1998). In this action by a trust beneficiary against the trustee's law firm for legal malpractice where the beneficiary's claims included failure to file accountings, excessive compensation, self dealing and imprudent investment, the court, applying Minnesota law, held that the lack of any attorney/client relationship between the beneficiary and the law firm barred any cause of action. (The beneficiary in this case was the trustee's sister and had previously settled her breach of fiduciary claims against her brother.)
Nevada:
Charleson v. Hardesty, 839 P.2d 1303 (Nev. 1992). In an action brought by the beneficiaries of a trust against the lawyer who allegedly represented the trustee, the Supreme Court of Nevada stated:
We agree with the California courts that when an attorney represents a trustee in his or her capacity as trustee, that attorney assumes a duty of care and fiduciary duties toward the beneficiaries as a matter of law. In the present case if [Defendant Lawyer] was the attorney for the trustee, we conclude that he owed the [Plaintiff Beneficiaries] a duty of care and fiduciary duties. Id. at 1307.
New Jersey:
Albright v. Burns, 503 A.2d 386 (N.J. Super. 1986). Before his uncle's death, a nephew acting pursuant to a power of attorney employed counsel to advise him in connection with the sale of certain stock and the making of a loan to the nephew's business. The attorney performed the requested services which included distributing the proceeds of the stock sale to the nephew. After the uncle's death, the attorney represented the nephew as personal representative of the estate. In an action by the estate beneficiaries against the attorney, the court applied the Biakanja multifactor balancing test and found that the attorney had a duty to the beneficiaries for breach of which he could be held liable.
Barner v. Sheldon, 678 A.2d 717 (N.J. App. Div. 1996). The court affirmed a summary judgment granted in favor of a lawyer who, while serving as the lawyer for the executor in an estate administration proceeding, had not advised the decedent's children to disclaim the bequests to them. Doing so would have increased the amount of the decedent's estate that would be received by the surviving spouse, thereby decreasing the estate tax liability of the decedent's estate. The appellate court held that under the circumstances, "the defendant had no duty to inform the beneficiaries of the tax consequences of their failure to disclaim." The court pointed to the decedent's wish to minimize the amount that passed to his surviving spouse. "Had plaintiffs, the testator's children, disclaimed, the testator's wife would have benefitted. This would have been contrary to the testator's intent." The trial court opinion (678 A.2d 767), which contains a useful summary of decisions regarding the duties the lawyer for a personal representative may owe to the beneficiaries, concludes that, "when an attorney is employed to render services in procuring admission of a will to probate or in settling the estate, he acts as attorney of the executor, and not of the estate and for his services the executor is personally responsible."
New Mexico:
Leyba v. Whitley, 907 P.2d 172 (N.M. 1995). In this case involving a suit by the conservator for the minor beneficiary of his father's estate against the lawyers representing the personal representative in a wrongful death claim, where the proceeds from the settlement of the claim were paid to the minor beneficiary's mother who then squandered the funds, the Supreme Court of New Mexico, applying the Biakanja multifactor balancing test, found that the attorneys owed a duty to the minor beneficiary.
Wisdom v. Neal, 568 F. Supp. 4 (D.N.M. 1982). In this legal malpractice case involving estate administration the court applied California's multifactor balancing test in holding that lack of privity was no defense to an action brought by decedent's niece and nephew against an attorney who had incorrectly determined that the estate should be distributed per stirpes rather than per capita.
New York:
Baer v. Broder, 436 N.Y.S.2d 693 (Sup. Ct. 1981), aff'd on other grounds, 447 N.Y.S.2d 538 (App. Div. 1982). In an action by the executor of a decedent's estate against the attorney whom he had hired to pursue a wrongful death claim (of which the executor was also a statutory beneficiary in his individual capacity), the court held that the plaintiff had a cause of action despite the lack of contractual privity because of several "face to face" meetings between the attorney and the plaintiff.
In re Estate of Clarke, 188 N.E.2d 128 (N.Y. 1962). In this case, discussed more fully in the Annotations following the ACTEC Commentary on MRPC 1.5, the court observed, "[a]n attorney for a fiduciary has the same duty of undivided loyalty to the cestui as the fiduciary himself."
Kramer v. Belfi, 482 N.Y.S.2d 898 (App. Div. 1984). Applying New York's strict privity doctrine, the court here denied standing to the beneficiary of a decedent's estate to sue the attorney for the executor for allegedly failing to give tax advice that would have saved estate taxes.
Weingarten v. Warren, 753 F. Supp. 491 (S.D.N.Y. 1990). In this lawsuit by the remainder beneficiaries of a trust against the trustee's attorney for allegedly negligently permitting trust principal to be converted to income, the federal district court, applying New York law, dismissed the beneficiaries' malpractice claim under New York strict privity rule. The court did hold however that the beneficiaries could state a cause of action against the attorney for breach of fiduciary duty based on the New York Court of Appeals' decision in In re Estate of Clarke, noted above.
North Carolina:
Ingle v. Allen, 321 S.E.2d 588 (N.C. App. 1984), review denied, 329 S.E.2d 593 (N.C. 1985). This case involved an action brought by a beneficiary of a decedent's estate against the lawyer who represented a co-executor. The court stated that the lawyer "owed a duty of care to the plaintiff as a beneficiary under the will." However, the court concluded that the lawyer had acted with the care and skill required of a lawyer for the personal representative.
Jenkins v. Wheeler, 316 S.E.2d 354 (N.C. App. 1984), review denied, 321 S.E.2d 136 (N.C. 1984). In this action by an estate's sole heir against, among others, the estate administrator and counsel for the administrator, the court found that the heir had standing to sue the attorney in tort where the heir alleged that the attorney had failed to list the wrongful death action as an asset of the estate, gave incorrect legal advice to the administrator and continued the representation of conflicting interests. Interestingly, the court also held that the heir's alleged contributory negligence was no bar to the cause of action of malpractice.
Ohio:
Elam v. Hyatt Legal Serv., 541 N.E.2d 616 (Ohio 1989). In this case the Supreme Court of Ohio permitted a law suit brought by beneficiaries contending they had lost their inheritance through the negligence of the estate's attorney who had recorded a certificate of title to certain real estate in the name of the deceased testator's husband alone, despite the fact that the decedent's will had bequeathed the husband only a life estate in the property with the remainder devised to the plaintiff beneficiaries. The court distinguished Simon v. Zipperstein, discussed in the Annotations following the ACTEC Commentary on MRPC 1.1, and found that the estate's beneficiaries were in privity with the estate attorney because here their interests were vested, whereas in Simon the beneficiaries' interests were contingent and not vested.
Firestone v. Galbreath, 976 F.2d 279 (6th Cir. 1992). In this case the beneficiaries of a trust brought claims, inter alia, against the attorneys for the trustee. Applying Ohio law and resolving questions unanswered by Simon v. Zipperstein (discussed in the Annotations following the ACTEC Commentary on MRPC 1.1) and Elam v. Hyatt Legal Services (discussed above), the federal appellate court approved the federal district court's dismissal of the beneficiaries' claims against the trustee's attorneys based on an analysis of when the beneficiaries' rights in the trust vested.
Lewis v. Star Bank, N.A., 630 N.E.2d 418 (Ohio App. 1993). This decision upholds dismissal of a malpractice action brought by the beneficiaries of a revocable trust against the trustee and the lawyers for the deceased trustor for alleged failures to advise her properly regarding the generation-skipping transfer tax. Dismissal was proper because the beneficiaries were not in privity of contract with the trustee or the lawyers during the trustor's lifetime. In addition, the court observed that "While [the Trustor] was alive, the Law Firm owed her a duty of complete and undivided loyalty. If we were to hold that the duty was owed to [the Trustor] and to all the plaintiffs, as plaintiffs implicitly urge us to do, the Law Firm would have found itself representing divided and disparate interests, which is impermissible." 630 N.E.2d at 421.
Pennsylvania:
Pew Trust (2), 16 Fid.Rep.2d 80 (O.C. Montg. Cty (Pa.) 1995). This case is discussed in the Annotations following the ACTEC Commentary on MRPC 3.7.
Texas:
Thompson v. Vinson & Elkins, 859 S.W.2d 617 (Tex. App. 1993). Texas is one of the minority of jurisdictions applying the strict privity rule, and on that ground the court here barred an action by the beneficiaries of a trust against the trustee's attorneys for alleged negligence in the attorneys' distribution of the trust assets.
Washington:
Estate of Larson, 694 P.2d 1051 (Wash. 1985). The court was here asked to pass upon the reasonableness of the lawyer's fees in an estate administration. The Supreme Court of Washington overturned decisions of a court commissioner, the superior court and the court of appeals affirming the lawyer's fees. In the opinion the court stated that:
The personal representative stands in a fiduciary relationship to those beneficially interested in the estate. He is obligated to exercise the utmost good faith and diligence in administering the estate in the best interests of the heirs. . . . The personal representative employs an attorney to assist him in the proper administration of the estate. Thus, the fiduciary duties of the attorney run not only to the personal representative, but also to the heirs. 694 P.2d at 1054.
Leipham v. Adams, 894 P.2d 576 (Wash. App. 1995), review denied, 904 P.2d 1157 (Wash. 1995). In this legal malpractice action the court, applying the modified multifactor balancing test for determining when an attorney owes a duty of care to a non-client (see Trask v. Butler, discussed below), held that the beneficiaries of an estate were barred from suing the lawyer for the estate for the lawyer's alleged negligent failure to advise the decedent's surviving spouse with respect to a possible disclaimer of a joint tenancy account. The court found that the limited scope of the lawyer's undertakings on behalf of the surviving spouse distinguished this case from Linck v. Barokas & Martin, supra, discussed in the Annotations following the ACTEC Commentary on MRPC 1.1.
Trask v. Butler, 872 P.2d 1080 (Wash. 1994). In this decision the Supreme Court of Washington holds that the Biakanja multifactor balancing test should be applied in determining whether the beneficiary of a decedent's estate may bring an action against the lawyer who represented the executor in her fiduciary capacity. "After analyzing our modified multifactor balancing test, we hold that a duty is not owed from an attorney hired by the personal representative of an estate to the estate or to the estate beneficiaries." 872 P.2d at 1085.
Ethics Opinions:
ALI, Restatement, Law Governing Lawyers, ' 26, comments f and i (Proposed Final Draft No. 1, 1996):
f. Organizational, fiduciary, and class action clients.
* * * * *
In trusts and estates practice a lawyer may have to clarify with those involved whether a trust, a trustee, its beneficiaries, or groupings of some or all of them are clients and similarly whether the client is an executor, an estate, or its beneficiaries. In the absence of clarification the inference to be drawn may depend on the circumstances and on the law of the jurisdiction. Similar issues may arise when a lawyer represents other fiduciaries with respect to their fiduciary responsibilities, for example a pension-fund trustee or another lawyer.
* * * * * i. Others to whom lawyers owe duties. In some situations, lawyers owe duties to non-clients resembling those owed to clients. Thus, a lawyer owes certain duties to members of a class in a class action in which the lawyer appears as lawyer for the class (see Comment f) and to prospective clients who never become clients (see ' 27). Duties may be owed to a liability insurance company that designates a lawyer to represent the insured even if the insurer is not a client of the lawyer, to trust beneficiaries by a lawyer representing the trustee, and to certain non-clients in other situations (see ' [__] [Chapter 6A] (counseling services to trustee); ' 215, Comment f; see also Comment f hereto). What duties are owed can be determined only by close analysis of the circumstances and the relevant law and policies. A lawyer may also become subject to duties to a non-client by becoming, for example, a trustee or corporate director. On conflicts between such duties and duties the lawyer owes clients, see ' 216; see also ' [__] [Chapter 6A] [advising corporate clients]. On civil liability to non-clients, see '' [73] & [77] [Chapter 4]. [Portions of ' 73 are excerpted in the immediately following Annotation.]
ALI, Restatement, Law Governing Lawyers, ' 73 and Illustrations 5, 6 and 7 thereto (Tentative Draft No. 8, March 1997):
For purposes of liability under ' 71 [Elements and Defenses Generally], a lawyer owes a duty to use care within the meaning of ' 74 [Standard of Care]:
. . . . (4) To a non-client when and to the extent that:
(a) The lawyer's client is a trustee, guardian, executor, or fiduciary acting primarily to perform similar functions for the non-client;
(b) Circumstances known to the lawyer make it clear that appropriate action by the lawyer is necessary with respect to a matter within the scope of the representation to prevent or rectify the breach of a fiduciary duty owed by the client to the non-client, where, (i) the breach is a crime or fraud or (ii) the lawyer has assisted or is assisting the breach;
(c) The non-client is not reasonably able to protect its rights; and
(d) Such a duty would not significantly impair the performance of the lawyer's obligations to the client. . . .
* * * * * * * * * * * * * * * * * * * * * * * * * *
Illustrations
5. Lawyer represents Client in Client's capacity as trustee of an express trust for the benefit of Beneficiary. Client tells Lawyer that Client proposes to transfer trust funds into Client's own account, in circumstances that would constitute embezzlement. Lawyer informs Client that the transfer would be criminal, but Client nevertheless makes the transfer, as Lawyer then knows. Lawyer takes no steps to prevent or rectify the consequences, for example by warning Beneficiary or informing the court to which Client as trustee must make an annual accounting. The jurisdiction's professional rules do not forbid such disclosures (see ' 117A). Client likewise makes no disclosure. The funds are lost, to the harm of Beneficiary. Lawyer is subject to liability to Beneficiary under this section.
6. Same facts as in Illustration 5, except that Client asserts to Lawyer that the account to which Client proposes to transfer trust funds is the trust's account. Even though a competent lawyer would have discovered this to be false, Lawyer does not do so. Lawyer is not liable to the harmed Beneficiary. Lawyer did not owe Beneficiary a duty to use care because it was not clear that appropriate action was necessary to prevent a breach of fiduciary duty by Client.
7. Same facts as in Illustration 5, except that Client proposes to invest trust funds in a way that would be unlawful, but would not constitute a crime or fraud under applicable law. Lawyer's services are not used in consummating the investment. Lawyer does nothing to discourage the investment. Lawyer is not subject to liability to Beneficiary under this Section.
Alaska:
Eth. Op. 91-2 (1991). An attorney representing the personal representative of an estate is not prohibited from representing the personal representative in disputes with heirs. The attorney may not, however, represent the personal representative in such disputes if the attorney has obtained relevant confidential information from the heirs while acting for the personal representative nor may the attorney assist or counsel the personal representative in conduct inconsistent with the best interests of the estate.
Illinois:
Advisory Op. 96-05 (1996). Although under some circumstances it may be professionally improper for a lawyer to represent both a renouncing spouse and a creditor in the same proceedings, it is not improper for a lawyer to represent the same person both in a representative capacity as executor and in an individual capacity as debtor of the estate where an independent special administrator has been appointed to collect the debt.
Kentucky:
Eth. Op. 401 (1997). In this extended opinion the Committee on Ethics of the Kentucky Bar Association first opined that a lawyer's representation of a fiduciary of a decedent's estate or trust neither expands nor limits the lawyer's obligations to the fiduciary under the MRPC. Secondly, the lawyer's representation of a fiduciary imposes on the lawyer no obligations to the beneficiaries of the decedent's trust or estate that the lawyer would not have toward other third parties. Thirdly, the Committee held that the lawyer's obligation to preserve client confidences under MRPC 1.6 is not altered by the fact that the lawyer's client is a fiduciary; and, finally, the Committee held that the lawyer for the fiduciary may also represent the beneficiaries of the decedent's trust or estate. The Committee quotes at length from the ACTEC Commentaries and describes them as "helpful" to the Committee's analysis. The Committee, however, adopts the position taken in ABA Formal Opinion 94-38 (1994) (discussed in the Annotations following the ACTEC Commentary on MRPC 1.6).
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