ACTEC COMMENTARIES ON THE MODEL RULES OF PROFESSIONAL CONDUCT
MRPC 1.7
Conflict of Interest: General Rule.
(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:
(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
(2) each client consents after consultation.
(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:
(1) the lawyer reasonably believes the representation will not be adversely affected; and
(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.
* * * * * * * * * * * * * * *
ACTEC COMMENTARY ON MRPC 1.7
General Nonadversary Character of Estates and Trusts Practice; Representation of Multiple Clients. It is often appropriate for a lawyer to represent more than one member of the same family in connection with their estate plans, more than one beneficiary with common interests in an estate or trust administration matter, co-fiduciaries of an estate or trust, or more than one of the investors in a closely held business. See ACTEC Commentary on MRPC 1.6 (Confidentiality of Information). In some instances the clients may actually be better served by such a representation, which can result in more economical and better coordinated estate plans prepared by counsel who has a better overall understanding of all of the relevant family and property considerations. The fact that the estate planning goals of the clients are not entirely consistent does not necessarily preclude the lawyer from representing them: Advising related clients who have somewhat differing goals may be consistent with their interests and the lawyer's traditional role as the lawyer for the "family". Multiple representation is also generally appropriate because the interests of the clients in cooperation, including obtaining cost effective representation and achieving common objectives, often clearly predominate over their limited inconsistent interests. Recognition should be given to the fact that estate planning is fundamentally nonadversarial in nature and estate administration is usually nonadversarial.
Disclosures to Multiple Clients. Before, or within a reasonable time after, commencing the representation, a lawyer who is consulted by multiple parties with related interests should discuss with them the implications of a joint representation (or a separate representation if the lawyer believes that mode of representation to be more appropriate and separate representation is permissible under the applicable local rules). See ACTEC Commentary on MRPC 1.6 (Confidentiality of Information). In particular, the prospective clients and the lawyer should discuss the extent to which material information imparted by either client would be shared with the other and the possibility that the lawyer would be required to withdraw if a conflict in their interests developed to the degree that the lawyer could not effectively represent each of them. The information may be best understood by the clients if it is discussed with them in person and also provided to them in written form, as in an engagement letter or brochure. See MRPC 1.7(b)(2). As noted in the ACTEC Commentary on MRPC 1.2 (Scope of Representation), a lawyer may, with appropriate disclosure and agreement, represent co-fiduciaries whose interests do not conflict to an impermissible degree. A lawyer who represents co-fiduciaries may also represent one or both of them as beneficiaries so long as no disabling conflict arises. Before accepting a representation involving multiple parties a lawyer may wish to consider meeting with the prospective clients separately, which may allow each of them to be more candid and, perhaps, reveal conflicts of interest.
Existing Client Asks Lawyer to Prepare Will or Trust for Another Person. A lawyer should exercise particular care if an existing client asks the lawyer to prepare for another person a will or trust that will benefit the client, particularly if the client will pay the cost of providing the estate planning services to the other person. Such a representation may be appropriate if the client and the other person are closely related, the other person is competent and adequately informed, and the terms of the will or trust do not unduly benefit the client. In any case, the lawyer must comply with MRPC 1.8(f) and should consider cautioning the client and the other party of the possibility that the client may be presumed to have exerted undue influence on the other person because the client was involved in the procurement of the document.
Joint or Separate Representation. As indicated in the ACTEC Commentary on MRPC 1.6 (Confidentiality of Information), a lawyer usually represents multiple clients jointly. However, some experienced estate planners regularly represent husbands and wives as separate clients. They also less frequently undertake to represent other related clients separately with respect to related matters. Such representations should only be undertaken with the consent of the clients after full disclosure of the implications of the separate representation. The necessary disclosures are best made in written form, perhaps in an engagement letter that may cover other subjects as well.
Example 1.7-1. Lawyer (L) was asked to represent Husband (H) and Wife (W) in connection with estate planning matters. L had previously not represented either H or W. At the outset L should discuss with H and W the terms upon which L would represent them. Many lawyers believe that it is only appropriate to represent a husband and wife as joint clients, between whom the lawyer could not maintain the confidentiality of any information relevant to the representation. However, some experienced estate planners believe that it is appropriate to represent a husband and wife as separate clients, each of whom is entitled to presume the confidentiality of information disclosed to the lawyer in connection with the representation. If permitted by the jurisdiction in which the lawyer practices, the lawyer may properly represent a husband and wife as separate clients. Whether the lawyer represents the husband and wife jointly or separately, the lawyer should do so only with their consent after disclosure of the implications of doing so. The same requirements apply to the representation of others as joint or separate multiple clients, such as the representation of other family members, business associates, etc.
Consider Possible Presence and Impact of Any Conflicts of Interest. A lawyer who is asked to represent multiple clients regarding related matters must consider at the outset whether the representation involves or may involve impermissible conflicts, including ones that affect the interests of third parties or the lawyer's own interests. The lawyer must also bear this concern in mind as the representation progresses: What was a tolerable conflict at the outset may develop into one that precludes the lawyer from continuing to represent one or more of the clients.
Example 1.7-2. Lawyer (L) represents Trustee (T) as trustee of a trust created by X. L may properly represent T in connection with other matters that do not involve a conflict of interest, such as the preparation of a will or other personal matters not related to the trust. L should not charge the trust for any personal services that are performed for T. Moreover, in order to avoid misunderstandings, L should charge T for any substantial personal services that L performs for T.
Example 1.7-3. Lawyer (L) represented Husband (H) and Wife (W) jointly with respect to estate planning matters. H died leaving a will that appointed Bank (B) as executor and as trustee of a trust for the benefit of W that meets the QTIP requirements under I.R.C. §2056(b)(7). L has agreed to represent B and knows that W looks to him as her lawyer. L may represent both B and W if the requirements of MRPC 1.7 are met. If a serious conflict arises between B and W, L may be required to withdraw as counsel for B or W or both. L may inform W of her elective share, support, homestead or other rights under the local law without violating MRPC 1.9 (Conflict of Interest: Former Client). However, without the informed consent of all affected parties L should not represent W in connection with an attempt to set aside H's will or to assert an elective share.
Conflicts of Interest May Preclude Multiple Representation. Some conflicts of interest are so serious that the informed consent of the parties is insufficient to allow the lawyer to undertake or continue the representation. Thus, a lawyer may not represent clients whose interests actually conflict to such a degree that the lawyer cannot adequately represent their individual interests. For example, a lawyer is almost always precluded from representing both parties to a pre-nuptial agreement or other matter with respect to which their interests directly conflict to a substantial degree. Thus, a lawyer who represents the personal representative of a decedent's estate (or the trustee of a trust) should not also represent a creditor in connection with a claim against the estate (or trust). This prohibition applies whether the creditor is the fiduciary individually or another party. On the other hand, if the actual or potential conflicts between competent, independent parties are not substantial, their common interests predominate, and it otherwise appears appropriate to do so, the lawyer and the parties may agree that the lawyer will represent them jointly subject to MRPC 1.7 (Conflict of Interest: General Rule) or act as an intermediary pursuant to MRPC 2.2 (Intermediary). Note, however, that in some states unless each party to a pre-nuptial agreement is independently represented the agreement may be invalidated. On the other hand, if the necessary preconditions are met, a lawyer may, with the informed consent of the parties, represent both parties to a transaction, such as the formation of a business enterprise, the execution of an employment agreement or a buy-sell agreement, or a joint spousal election to split gifts. See also MRPC 2.2 (Intermediary) and ACTEC Commentaries on MRPCs 1.13 (Organization as Client) and 2.2.
A lawyer who is asked to represent a corporate fiduciary in connection with a fiduciary estate should consider discussing with the fiduciary the extent to which the representation might preclude the lawyer from representing an adverse party in an unrelated matter. In the absence of a contrary agreement, a lawyer who represents a corporate fiduciary in connection with the administration of a fiduciary estate should not be treated as representing the fiduciary generally for purposes of applying Rule 1.7 with regard to a wholly unrelated matter. In particular, the representation of a corporate fiduciary in a representative capacity should not preclude the lawyer from representing an adverse party in connection with a wholly unrelated matter, such as a real estate transaction or labor negotiation or another estate or trust administration.
Prospective Waivers. A client who is adequately informed may waive some conflicts that might otherwise prevent the lawyer from representing another person in connection with the same or a related matter. Thus, a surviving spouse who serves as the personal representative of her husband's estate may give her informed consent to permit the lawyer who represents her as personal representative also to represent a child who is a beneficiary of the estate. However, a conflict might arise between the personal representative and the beneficiary that would preclude the lawyer from continuing to represent both, or either, of them. Overly broad waivers or waivers executed by an inadequately informed client are of little, if any, value. As noted in ABA Formal Op. 93-378 (1993):
[I]t would be unlikely that a prospective waiver which did not identify either the potential opposing party or at least a class of conflicting clients would survive scrutiny. Even that information might not be enough if the nature of the matter and its potential effect on the client were not also appreciated by the client at the time the prospective waiver was sought.
Selection of Fiduciaries. The lawyer advising a client regarding the selection and appointment of a fiduciary should make full disclosure to the client of any benefits that the lawyer may receive as a result of the appointment. In particular, the lawyer should inform the client of any policies or practices known to the lawyer that the fiduciaries under consideration may follow with respect to the employment of the scrivener of an estate planning document as counsel for the fiduciary. The lawyer may also point out that a fiduciary has the right to choose any counsel it wishes.
Appointment of Scrivener as Fiduciary. An individual is generally free to select and appoint whomever he or she wishes to a fiduciary office (e.g., trustee, executor, attorney-in-fact). None of the provisions of the MRPC deals explicitly with the propriety of a lawyer preparing for a client a will or other document that appoints the lawyer to a fiduciary office. As a general proposition lawyers should be permitted to assist adequately informed clients who wish to appoint their lawyers as fiduciaries. Accordingly, a lawyer should be free to prepare a document that appoints the lawyer to a fiduciary office so long as the client is properly informed, the appointment does not violate the conflict of interest rules of MRPC 1.7 (Conflict of Interest: General Rule), and the appointment is not the product of undue influence or improper solicitation by the lawyer. This conclusion is consistent with EC 5-6:
A lawyer should not consciously influence a client to name him as executor, trustee, or lawyer in an instrument. In those cases where a client wishes to name his lawyer as such, care should be taken by the lawyer to avoid even the appearance of impropriety.
(In some instances a lawyer may reasonably conclude that Rule 1.8 (Conflict of Interest: Prohibited Transactions) is implicated in which case the lawyer should comply with the provisions of Rule 1.8(a).)
For the purposes of this Commentary a client is properly informed if the client is provided with information regarding the role and duties of the fiduciary, the ability of a lay person to serve as fiduciary with legal and other professional assistance, and the comparative costs of appointing the lawyer or another person or institution as fiduciary. The client should also be informed of any significant lawyer-client relationship that exists between the lawyer or the lawyer's firm and a corporate fiduciary under consideration for appointment.
Disabled Client. A lawyer may take reasonable steps to protect the interests of a client the lawyer reasonably believes to be disabled, including the initiation of protective proceedings. Doing so does not constitute an impermissible conflict of interest between the lawyer and the client. See ACTEC Commentary on MRPC 1.14 (Client under a Disability). However, a lawyer who is retained on behalf of the client to resist the institution of a guardianship or conservatorship may not take positions that are contrary to the client's position or make disclosures contrary to the provisions of MRPC 1.6 (Confidentiality of Information).
Rebates, Discounts, Commissions and Referral Fees. As indicated in the ACTEC Commentary on MRPC 1.5 (Fees), a lawyer should not accept a rebate, discount, commission or referral fee from a nonlawyer in connection with the representation of a client. The receipt by the lawyer of such a payment involves a conflict of interest with respect to the client. It is improper for a lawyer, who is subject to the strict obligations of a fiduciary, to benefit personally from such a representation. The client is generally entitled to the benefit of any economies achieved by the lawyer.
ANNOTATIONS
(Refer to Caveat)
Conflicts of Interest:
Cases (See also cases cited in the Annotations following the ACTEC Commentary on MRPC 1.5 regarding rebates, discounts, commissions and referral fees):
Arizona:
In re Estate of Shano, 869 P.2d 1203 (Ariz. App. 1993). This decision involves a lawyer who represented a friend of the decedent who was one of the primary beneficiaries of a holographic will executed by the decedent two days prior to his death. The lawyer obtained the friend's appointment as special administrator. The lawyer also later undertook to represent an independent third-party who was appointed as administrator, whose legal positions included opposition to claims made against the estate by the decedent's surviving spouse. This decision upholds an order disqualifying the lawyer from representing the administrator because of the conflict of interest between his duties to the decedent's friend and to the administrator and, derivatively, to the persons entitled to receive the decedent's estate. The decision follows Fickett v. Superior Court (discussed in the Annotations following the ACTEC Commentary on MRPC 1.14), stating that:
We conclude that at least where the surviving spouse is concerned, similar considerations apply to an attorney employed to represent the personal representative of an estate. First, "the lawyer is being compensated from the estate or trust, not by the fiduciary personally. His duty of loyalty and competence thus runs beyond the fiduciary to those whose property is being managed by the fiduciary." . . . As discussed above, the surviving spouse is one whose interest in the community property is managed by the personal representative. Second, in Fickett, although the guardian and not the attorney controlled the affairs of the guardianship, we held that the attorney for the guardianship owed a fiduciary duty to the ward. A stronger case exists for imposing a similar duty on the personal representative's attorney, who generally has some control over the administration of the decedent's estate. Because of his superior knowledge and position of trust, the attorney for the personal representative is in an excellent position to exert a positive influence on the personal representative to properly discharge the latter's fiduciary duty to the surviving spouse. The attorney representing the personal representative is more likely to exert such influence if the attorney's duty to the surviving spouse is congruent with that of his employer, the personal representative.
* * * We turn now to the question of whether [Lawyer] represented conflicting interests. We begin with the principle that the attorney for the personal representative of an estate must be neutral and should not favor the interests of any claimant to the estate. . . . Thus, [Lawyer] owed the same duty of fairness and impartiality to [Surviving Spouse] as he owed to all the beneficiaries of decedent's holographic will, including [the Friend]. But, because [Lawyer] also represented [Administrator] in probating the holographic will, he owed to her as a client a duty of undeviating and single allegiance. . . . Consequently, when [Lawyer] undertook the representation of Fiduciary [the Administrator], and with such representation the corresponding duty of fairness and impartiality, he undertook the representation of conflicting interests.
869 P.2d at 1208-1209.
Arkansas:
Purtle v. McAdams, 879 S.W.2d 401 (Ark. 1994). A lawyer could not reasonably believe that representing his niece by marriage would not adversely affect his representation of her former husband, a person with diminished capacity. Such a conflict cannot be permitted despite the consent of both parties.
California:
Estate of Auen, 35 Cal. Rptr. 2d 557 (Cal. App. 1994). This decision upholds the invalidation of certain inter vivos gifts and a will that made gifts to testator's lawyer and her family because of the presumption that the lawyer exercised undue influence over the client. "The relation between attorney and client is a fiduciary relation of the very highest character. . . . Transactions between attorneys and their clients are subject to the strictest scrutiny. . . . These general principles applicable to the attorney-client relationship support the trial court's reasoning that, when an attorney is acting as an attorney, any benefit other than compensation for legal services performed would be 'undue'". 35 Cal. Rptr. 2d at 562-563.
Estate of Rohde, 323 P.2d 490 (Cal. App. 1958). This case upheld the revocation of the probate of a will benefitting the scrivener and appointing him executor because of a presumption of undue influence.
Potter v. Moran, 49 Cal. Rptr. 229 (Cal. App. 1966). A decree settling the accounts of a trustee was not binding on the beneficiaries because the lawyers had failed to inform the court that they represented both the trustee and the guardian for the beneficiaries.
District of Columbia:
Griva v. Davison, 637 A.2d 830 (D.C. App. 1994). (A more complete summary of this case is included in the Annotations following the ACTEC Commentary on MRPC 1.13.) This case holds that it is possible for a law firm ethically to represent several individuals in creating a partnership after obtaining their informed consent and to represent the partnership and one or more of its members regarding partnership matters except when the representation would result in an actual conflict of interest. "Where dual representation creates a potential conflict of interest, the burden is on the attorney involved in the dual representation to approach both clients with an affirmative disclosure so that each can evaluate the potential conflict and decide whether or not to consent to continued dual representation." 637 A.2d at 845.
Illinois:
In re Estate of Marks, 569 N.E.2d 1342 (Ill. App. 1991), modified and aff'd after remand, 595 N.E. 2d 717 (Ill. App. 1992). This decision sets aside a receipt and approval of funding of marital bequest that the decedent's surviving spouse signed at the request of her two adult sons who, with her, served as co-executors of the decedent's will. According to the court the widow received "incomplete and unsatisfactory information" and was not independently advised. In particular, the court said that the sons, who were the "dominant" and self-interested executors, breached their fiduciary duties to their mother who "was left to fend for herself without independent counsel, armed only with incomplete and unsatisfactory information . . . ." 569 N.E.2d at 1352.
Kansas:
In re Estate of Koch, 849 P.2d 977 (Kan. App. 1993). In this action two respected commentators on ethics testified on behalf of opposing parties. The court upheld a will that was drafted for the testator by a lawyer who also represented the testator and two of her sons in litigation involving a charitable foundation brought by her other two sons. Her will, which left the bulk of her estate to her four sons, included a no-contest clause and a provision that conditioned the gifts on the dismissal by a beneficiary of any litigation that was pending against her within 60 days following her death. The lawyer did not discuss the testator's will with her sons, including the two sons who were clients of the firm in the litigation. The sons were all unaware of the terms of their mother's will, which was prepared "without any evidence of extraneous considerations." Id. at 997. The court continued that:
The scrivener's representation of clients who may become beneficiaries of a will does not by itself result in a conflict of interest in the preparation of the will. Legal services must be available to the public in an economical, practical way, and looking for conflicts where none exist is not of benefit to the public or the bar. 849 P.2d at 998.
The court distinguished the instant case from Haynes v. Nat'l State Bank, discussed below, in which the lawyer who represented one of the testator's children drew a new will for the child's mother that drastically changed the disposition of her estate to favor that child over the descendants of a deceased child.
Louisiana:
Succession of Lawless, 573 So. 2d 1230 (La. App. 1991). This case involved removal of the lawyer who was designated in the decedent's will as lawyer for the executor. The court found that just cause existed for the lawyer's removal because of (1) a conflict under Rule 1.7 concerning a gift of $50,000 to the lawyer that was included in a holographic codicil that the executor wished to challenge; and (2) a conflict arising in connection with a real estate listing agreement under which the lawyer's wife, who was a real estate agent, was to receive a percentage of the listing agent's fee. With respect to the latter the court said that the lawyer had "acquired a pecuniary interest in the estate property requiring adherence to Rule 1.8(a)."
Succession of Wallace, 574 So. 2d 348 (La. 1991). This case held that under the Louisiana disciplinary rules the executor had an unqualified right to discharge the attorney named in the decedent's will. The decision invalidated a Louisiana statute that would have prevented the decedent's personal representative from discharging a lawyer named in the will except for "just cause".
Minnesota:
Fiedler v. Adams, 466 N.W.2d 39 (Minn. App. 1991). Summary judgment in a malpractice action against a lawyer was reversed on appeal. The lawyer failed to inform the clients of multiple conflicts of interest, "arising from his duty as trustee [of employee benefit plan], his duty as [the Plaintiffs'] attorney, his personal interests in the real estate partnership and his interests as shareholder, director and attorney for [Trustee Bank]. [The lawyer] did not advise [the Plaintiffs] of alternative methods to deal with their financial difficulties, nor did he advise them to seek independent counsel." 466 N.W.2d at 41.
Matter of Trust Created by Louis W. Hill, 499 N.W.2d 475 (Minn. 1993). This decision upheld a trial court's determination that the law firm that represented the trustee no longer represented the beneficiary at the time the litigation arose. Hence, the propriety of the law firm's action was not subject to Rule 1.7. (For a more detailed summary see the Annotations following the ACTEC Commentary on MRPC 1.9.)
Mississippi:
Blissard v. White, 515 So. 2d 1196 (Miss. 1987). The court here held that a lawyer was "competent to render independent legal advice despite the fact that he had done legal work for [the testator's brother and primary beneficiary under the will drafted by the lawyer] (preparing a deed and two wills)." 515 So. 2d at 1200. The court continued that, "we are not concerned with [the lawyer's] independence so much as with [the testator's], of which there is evidence in abundance." Id. As in Estate of Koch, cited above, the court was concerned with the effect that a contrary rule would have: "Indeed, if we were to disqualify [the lawyer's] advice, we would create a trap which would void bona fide gifts and bequests among family members in small towns and rural areas all over this state." 515 So. 2d at 1200.
New Jersey:
Baldasarre v. Butler, 625 A.2d 458 (N.J. 1993). The Supreme Court of New Jersey observed:
This case graphically demonstrates the conflicts that arise when an attorney, even with both clients' consent, undertakes the representation of the buyer and the seller in a complex commercial real estate transaction. The disastrous consequences of [Lawyer's] dual representation convinces us that a new bright-line rule prohibiting dual representation is necessary in commercial real estate transactions where large sums of money are at stake, where contracts contain complex contingencies, or where options are numerous. The potential for conflict in that type of complex real estate transaction is too great to permit even consensual dual representation of buyer and seller. Therefore, we hold that an attorney may not represent both the buyer and seller in a complex commercial real estate transaction even if both give their informed consent. 625 A.2d at 466.
Greate Bay Hotel & Casino, Inc. v. Atlantic City, 624 A.2d 102 (N.J. Super. Ct. Law Div. 1993). A law firm that represents a business trust does not represent the individual members of the trust. Accordingly, Rule 1.7 does not preclude the law firm from representing an adverse party in litigation with a member of the trust with whom the law firm has no other connection.
Haynes v. First Nat'l State Bank, 432 A.2d 890 (N.J. 1981). At the behest of the testator's daughter, who had been a client for some time, the lawyer drew a will and trust for the testator, who was a new client, which drastically changed the disposition of the testator's estate in favor of the daughter who procured the will. "[T]here must be imposed a significant burden of proof upon the advocates of a will where a presumption of undue influence has arisen because the testator's attorney has placed himself in a conflict of interest and professional loyalty between the testator and the beneficiary." 432 A.2d at 900.
New York:
In re Estate of Clarke, 188 N.E.2d 128 (N.Y. 1962). A lawyer who received part of a commission that was paid to a real estate broker in connection with sale of property belonging to corporation controlled by the executors and trustees was not entitled to any compensation for services to the personal representative and trustee because of the conflict of interest. The court observed, "[a]n attorney for a fiduciary has the same duty of undivided loyalty to the cestui as the fiduciary himself. [Citation omitted.]" 188 N.E.2d at 130.
In re Estate of Lowenstein, 600 N.Y.S.2d 997 (Surr. Ct. 1993). In a suit brought by a lawyer to enforce a contract under which he was to be named as executor the court found the contract unenforceable and attorney had no claim for damages in amount of lost commissions. "[A] contract provision requiring the nomination of the attorney draftsman as fiduciary of the testator's estate is unenforceable unless it is clearly demonstrated to the satisfaction of the court that special circumstances required the services of the attorney draftsman and that the nomination was not the product of overreaching." 600 N.Y.S.2d at 998-999.
In re Matter of Ryan, 594 N.Y.S.2d 168 (App. Div. 1993). A lawyer was censured for exercising undue influence over client in drafting instruments that appointed lawyer's unqualified wife as fiduciary.
Matter of Birnbaum, 460 N.Y.S.2d 706 (Surr. Ct. 1983). The court denied a motion to disqualify the firm that represented one of the co-executors in her representative and individual capacities. In the opinion the court stated that, "It is well settled that the common practice of having one attorney or one law firm represent an executor as fiduciary as well as a beneficiary of an estate does not create a conflict of interest for the attorneys. . . . On the other hand, where the attorney represents his client in both capacities, he may not act to advance the personal interests of a fiduciary in such a way as to harm his other client, the estate." 460 N.Y.S.2d at 707.
North Carolina:
Ingle v. Allen, 321 S.E.2d 588 (N.C. App. 1984), review denied, 329 S.E.2d 593 (N.C. 1985). In this case a summary judgment in favor of the lawyer for a co-trustee was affirmed. Plaintiff, the other co-trustee, was independently represented in connection with the administration of the fiduciary estate. It was not a conflict of interest for the lawyer to represent the first co-trustee in an ejectment action against the other co-trustee.
Ohio:
Allison v. Allison, 238 N.E.2d 768 (Ohio 1968). If the executors-plaintiffs, as individuals, have a financial interest in the outcome of the will contest adverse to the financial interests of other parties in interest, and the powers of the executors, as such, may be used to their advantage as individuals and to the disadvantage of other parties in interest, in a trial of said contest, the executors may continue in that capacity, providing the will contest is dismissed and the estate distributed according to the terms and provisions of the will, or if the executors, as individuals, wish to continue the contest they may do so if they resign and impartial fiduciaries are appointed for the estate. 238 N.E.2d at 771. The opinion notes that the same law firm represented the plaintiffs both as individuals in the will contest and as executors of the decedent's will. Although the court did not comment on the propriety of the law firm serving in this dual capacity, the decision at least implies that doing so was improper.
Oregon:
In re Kinsey, 660 P.2d 660 (Or. 1982). The representation of the majority shareholders and the corporation did not originally involve a conflict of interest. However, assisting the majority shareholders in exploiting corporate opportunities constituted a violation of DR 5-105(A).
South Carolina:
In re James, 229 S.E.2d 594 (S.C. 1976). A lawyer for an estate who caused the estate to engage in unnecessary litigation with respect to which he received a substantial fee and deceitfully concealed his dual capacity as executor and attorney for the executor was indefinitely suspended.
South Dakota:
Gold Pan Partners, Inc. v. Madsen, 469 N.W.2d 387 (S.D. 1991). An order affirming sale of real property of estate was vacated because of defects in proceedings, including "confused legal advice given the executrix and the decedent's sons." The court observed: "Counsel may have become involved in representing conflicting interests by advising the executrix in her personal capacity and advising the sons. We recognize estate attorneys often find themselves being 'peacemakers.' Nevertheless, they should exercise caution to avoid being compromised in the representation of conflicting interests." 469 N.W.2d at 390, n. 4.
West Virginia:
State ex rel. DeFrances v. Bedell, 446 S.E.2d 906 (W.Va. 1994). This case (also discussed in the Annotations following the ACTEC Commentary on MRPC 3.7) concludes that a lawyer who had held one estate planning meeting with the now deceased testator, during which the testator did not divulge any confidential information and was not interested in retaining the firm's services, was not disqualified from later representing persons who contested the decedent's will.
Wisconsin:
Estate of Devroy, 325 N.W.2d 345 (Wis. 1982). This opinion recognized the general rule that the personal representative is free to employ the counsel of his or her own selection but upheld a will provision conditioning the appointment of an executor upon the executor's employment of the scrivener of the will as the executor's lawyer.
Ethics Opinions:
California:
San Diego Op. 1990-3 (1990). This opinion discusses the position of a lawyer who is asked by a son or daughter to prepare a new will for the child's parent. The opinion concludes that the person who is to sign the instrument is the client of the lawyer:
As stated above, in our view the person who will be signing the document is clearly a client of the attorney, and must be treated as such. However, unless it is agreed upon in advance the Son or Daughter may also be considered clients of the attorney. If so, the provisions of Rule 3-310 apply. The attorney must disclose the potential conflicts of interest to the clients in writing, and obtain their informed written consent to the representation in order to proceed. Depending upon the specific facts, the conflicts of interest may be so great that the attorney would be well advised not to represent both even if the clients were willing to give their consent.
Connecticut:
Conn. 89-18 (1989). Because of the conflicts of interest the same lawyer may not represent three clients, of whom two are heirs and one is a claimant against the estate if the estate does not have sufficient assets to satisfy all claims.
Delaware:
Board Case No. 102 (1998). A lawyer was privately admonished by the Preliminary Review Committee of the Board on Professional Responsibility for preparing a new will for a wife that excluded her husband as beneficiary after the lawyer had represented both husband and wife in several legal matters and the husband had filed for divorce. The lawyer was also criticized for permitting the wife to name the lawyer as a fiduciary of her estate without the lawyer having disclosed his personal financial interest in serving as a fiduciary.
Del. Op. 80-6 (1980). With full disclosure to a competent and knowledgeable beneficiary the lawyer for the personal representative of a decedent's estate could, after distribution to a beneficiary, purchase from the beneficiary shares in a country club at their established price. The opinion relies in part on ABA Informal Opinion 677 (1963), which allowed a lawyer to purchase property from an estate prior to distribution if the purchase was approved by the court.
Montana:
Eth. Op. 960731 (1996). This opinion concludes that, absent an existing conflict or evidence that the lawyer's independent professional judgment is likely to be adversely affected by the joint representation of a married couple who have retained the lawyer for estate planning services, the lawyer need not communicate the potential for conflicts of interest under MRPC 1.7 nor obtain a written conflict waiver from the married couple. However, although a written conflict waiver is not required, the opinion observes, "we believe that for the lawyer's purpose it is wise practice to obtain a written waiver."
New Jersey:
N.J. Op. 514 (1983) holds that even with full disclosure a lawyer who also holds a real estate broker's license, cannot act as a broker and as counsel to a party in a real estate transaction. The conflict of interest inherent in such a transaction is "overwhelming".
New York:
N.Y. Op. 619 (1991). Because of the conflict of interest involved, it is impermissible for a lawyer engaged in estate planning to offer life insurance products to clients who come to the lawyer for counselling in estate and trust matters, if the lawyer has a financial interest in the particular products recommended. Because of the wide array of insurance products that are available at differing costs, etc., there could not be "meaningful consent by the client to the lawyer having a separate business interest of this kind."
N.Y. Formal Op. 107 (1969), as modified, Opinion 107(a) (1970). A lawyer could, with full disclosure and client consent, retain a commission paid by a financial company with respect to amounts deposited by the lawyer's clients.
Nassau County Op. 90-11 (1990). The lawyer who represented a decedent's former wife in advancing a claim against the decedent's estate may not later undertake to represent the decedent's personal representative. "Because the interests of the former wife are different from the interests of the estate, inquiring counsel must not undertake to represent the estate. (See Disciplinary Rule 5-105)."
Nassau County Op. 81-3 (1981). A lawyer may not represent both the residuary legatee of a decedent's estate and a party against whom the personal representative is asserting a claim on behalf of the estate.
North Carolina:
N.C. Op. 22 (1987). A lawyer may not represent an administrator in individual and official capacities if the individual interests of the administrator conflict with those of the estate.
N.C. Op. 28 (1987). A lawyer may with informed consent represent the estates of a husband and wife both of whom were killed in the crash of an airplane piloted by the husband if the lawyer is convinced that the husband was not negligent in any way. In such a case it would be frivolous for an action to be brought by the wife's estate.
Oregon:
Or. Op. 525 (1989). A lawyer who is on the board of a charity and also represents it may not represent both the charity and a donor in a unitrust transaction. However, the lawyer may draft the donor's will in which the charity is designated as a beneficiary if the lawyer discloses his representation of the charity to the donor.
Or. Op. 1991-119 (1991). A lawyer may represent a widow individually and as personal representative of her deceased husband's estate; she is really only one client. The lawyer may not disclose the widow's breach of fiduciary duties but may not assist her in wrongdoing and may request that she remedy the wrongs; lawyer could disclose her intention to commit future crimes.
South Carolina:
S.C. Op. 90-16 (1990). With full disclosure to its clients of all relevant factors a law firm may refer estate planning clients to an insurance agency in which the law firm owns a 50% or greater interest. A similar arrangement regarding title insurance had previously been approved.
Joint Representation; Disclosures:
Ethics Opinions:
Florida:
Eth. Op. 95-4 (1997). This opinion discusses whether a lawyer has an ethical duty to counsel a husband and wife concerning any separate confidences which either the husband or wife might wish the lawyer to withhold from the other. It holds that until such time in a joint representation that an objective indication arises that the interests of the husband and wife have diverged or it objectively appears to the lawyer that a divergence of interests is likely to arise, a conflict of interest does not exist and thus the disclosure and consent requirements under the Florida Rules are not triggered.
New York:
N.Y. Op. 555 (1984). A lawyer retained by A and B to form a partnership, who received communication from B indicating that B was violating the partnership agreement, may not disclose the information to A although it would not be within the lawyer-client evidentiary privilege. The lawyer must withdraw from representing the partners with respect to partnership affairs. A minority of the Ethics Committee dissented on the ground that "the attorney must at least have the discretion, if not the duty in the circumstances presented, to disclose to one partner the facts imparted to him by the other partner, that gave rise to the conflict of interests necessitating the lawyer's withdrawal as attorney for the partnership."
North Carolina:
Eth. Op. RPC 229 (1996). This opinion holds that a lawyer who jointly represents a husband and wife in the preparation and execution of estate planning documents may not prepare a codicil to the will of one spouse without the knowledge of the other spouse if the codicil will adversely affect the interests of the other spouse or each spouse has agreed not to change the estate plan without informing the other. (Compare N.Y. Op. 619, discussed above.)
Joint Representation; Co-Fiduciaries:
Case:
New York:
In re Flasterstein's Estate, 210 N.Y.S.2d 307 (Surr. Ct. 1960). In this case the surrogate court denied a motion to disqualify a law firm that represented the executors, who were also residuary beneficiaries, because of an alleged inherent conflict of interest.
It is axiomatic that executors and fiduciaries generally are entitled to representation by attorneys of their own choosing. The fact that the executors are financially interested in the estate as residuary legatees and may profit individually through the services of their attorneys is immaterial and does not lead to a conflict of interest. In instances where an executor may assert a personal claim against the testator or the estate it may be claimed that an attorney representing the executor in his representative capacity and individually appears for conflicting interests as the allowance of such a claim may reduce the shares of others beneficially interested in the estate. 210 N.Y.S.2d at 308.
Ethics Opinions:
Virginia:
Va. Op. 1387 (1990). A law firm of which a co-fiduciary is a member may be retained to represent the fiduciaries with the consent of all fiduciaries. However, "the committee urges that the co-fiduciaries rather than the fiduciary/partner maintain the necessary communications with the firm throughout the administration of the estate."
Va. Op. 1473 (1992). A lawyer who was retained "to represent the interests of the estate" is treated as having represented the co-executors (each of whom had separate counsel) and not "the estate". The same lawyer may represent two of the executors in their capacity as trustees of a testamentary trust only with the consent of the third co-executor.
Articles:
Hazard, Conflicts of Interest in Estate Planning for Husband and Wife, 20 The Probate Lawyer 15 (the ACTEC Annual Joseph Trachtman Lecture, 1994). In Professor Hazard's view:
There are basic principles of practice that apply when concurrent representation is undertaken in any such situation:
-An assessment must be made whether both clients are genuinely autonomous in their situation, and whether either may have a tendency to fabricate or fantasize, either presently or in the future.
-Separate interviews should be held with each client, more than once if necessary. Separate interviews can reveal divergences in the clients' respective assumptions and purposes that otherwise would be masked by polite conversation.
-The lawyer should feel entirely comfortable in informing each client of the substance of the other client's wishes and purposes.
-There should be a written consent letter, the simpler the better.
-The lawyer should document the progress of the representation with both memos to the file and letters to the clients at important stages.
20 The Probate Lawyer at 23.
Moore, Conflicts of Interest in Estate Planning and Administration after ERTA: Recognition and Resolution, U. Miami, 17th Inst. Est. Plan. Ch. 6 (1983).
Appointment of Scrivener as Fiduciary:
Cases:
New York:
In re Estate of Weinstock, 351 N.E.2d 647 (N.Y. 1971). The appointment of a father and son team of lawyers as fiduciaries was struck down for overreaching of the 82 year old client in obtaining the appointment.
Tennessee:
Petty v. Privette, 818 S.W.2d 743 (Tenn. App. 1989). The court held that the scrivener of a will that appointed him as executor could be protected by the terms of an exculpatory clause that exonerated him from liability for any act of negligence that did not amount to bad faith, if the scrivener rebuts the presumption that the inclusion of the exculpatory clause in the will resulted from undue influence exerted by the scrivener. This case is criticized in a law review comment cited below.
Washington:
Fred Hutchinson Cancer Research Center v. Holman, 732 P.2d 974 (Wash. 1987). In this case excessive compensation was recovered from the scrivener of a will who was subsequently appointed co-trustee of a large testamentary trust. The court held that an exoneration clause did not protect the scrivener against liability: "As the attorney engaged to write the decedent's will, [defendant] is precluded from reliance on the clause to limit his own liability when the testator did not receive independent advice as to its meaning and effect." 732 P.2d at 980.
In re Estate of Shaughnessy, 702 P.2d 132 (Wash. 1985). In this case the court allowed the payment of fees to a lawyer-scrivener for services as executor and as counsel to the executor although the lawyer was the beneficiary of a $5,000 bequest and was a residuary beneficiary. The court expressed general disapproval of a lawyer drawing a will which names the lawyer as fiduciary or beneficiary.
Wisconsin:
State v. Gulbankian, 196 N.W.2d 733 (Wis. 1972). In a disciplinary action the court condemned the lawyer's consistent practice of drafting wills that named the lawyer or relatives of the lawyer as fiduciaries or as counsel for the fiduciary.
Statutes:
California:
California has adopted detailed legislation restricting the methods by which a client may appoint the client's lawyer as a fiduciary. Any individual who has a fiduciary relationship to the transferor who drafts, transcribes or causes to be drafted or transcribed any instrument of transfer (i.e., will, trust, deed, etc.) (including relatives, cohabitants and partners and employees of such individuals) is defined as a "disqualified person." Such an individual who is named as a sole trustee may be removed unless the court finds that it is fair, just and equitable that the trustee continue to serve as such. "Disqualified" status may be avoided if the otherwise disqualified person is related by blood or marriage to or is a cohabitant with the transferor or if an independent attorney certifies (on a statutorily prescribed form) that the transfer was not the product of fraud, menace, duress or undue influence. The legislation also places limits on dual compensation for an attorney who is also acting as a fiduciary. Cal.Prob.C. §§ 10804, 15642(b)(6).
Texas:
Texas Probate Code § 58b, adopted in 1997, provides in subsection (a) that "A devise or bequest of property to an attorney who prepares or supervises the preparation of the will or a devise or bequest of property to an heir or employee of the attorney who prepares or supervises the preparation of the will is void." Subsection (b) exempts "a bequest made to a person who is related within the second degree by consanguinity or affinity to the testator . . . ."
Ethics Opinions:
California:
Op. 1993-130 (1993). An attorney who serves as both attorney for and executor of an estate may not receive compensation for legal services rendered to the estate. However, the attorney is not precluded from performing and receiving compensation for specific work that is properly the responsibility of the executor.
Georgia:
Ga. Op. 91-1 (1991). A lawyer who neither promotes his or her appointment nor exercises undue influence on the client may draft an instrument appointing the lawyer as fiduciary if the lawyer makes full disclosure to the client, obtains the client's written consent, and charges a reasonable fee.
Michigan:
Eth. Op. RI 291 (1997). A lawyer who is drafting a will for a client may not suggest that he be named as personal representative or as trustee to serve without bond for a reasonable fee. However, the lawyer may accept the nomination if asked independently by the client.
Montana:
Eth. Op. 951231 (1995). This opinion holds that neither MRPC 1.8(c) nor any applicable Comment admits of a broader prohibition than the prohibition against a lawyer preparing an instrument giving the lawyer or a person related to the lawyer any substantial gift, although it does observe that EC 5-6 (contained in the Model Code of Professional Responsibility) cautions attorneys to avoid "consciously influence[ing] a client to name him as executor, trustee, or lawyer in an instrument." The opinion therefore concludes "it is appropriate for an attorney, upon the client's request, to draft a will in which the attorney is named personal representative or trustee."
New Jersey:
Eth. Op. 683 (1996) This opinion holds that, subject to the applicable statutory and substantive case law, as a matter of professional ethics, a scrivener may properly prepare a will naming himself as a fiduciary and may properly be paid for services in both capacities. In doing so, counsel should be aware of the disclosure and consultation instructions set forth in RPC 1.7(b)(2).
New York:
N.Y. Op. 481 (1977). A lawyer may prepare a will in which the lawyer is appointed to a fiduciary office if the testator is competent, there has been a longstanding relationship between the lawyer and client and the suggestion that the lawyer serve as fiduciary originates with the client. A lawyer should not draft a document that contains a gift to the lawyer. A will or trust that contains a gift to a lawyer should be prepared by independent counsel.
N.Y. Op. 610 (1990). This opinion states that, "[e]xcept in limited and extraordinary circumstances, an attorney should not serve as draftsman of a will that names the lawyer as an executor and as a legatee." The opinion refers to Surrogate's Court Rules in Suffolk County that require that a will appointing an attorney as fiduciary be accompanied by an affidavit of the testator setting forth the following:
(1) that the testator was advised that the nominated attorney may be entitled to a legal fee, as well as to the fiduciary commissions authorized by statute;
(2) where the attorney is nominated to serve as a co-fiduciary that the testator was apprised of the fact that multiple commissions may be due and payable out of the funds of the estate; and
(3) the testator's reason for nominating the attorney as fiduciary.
South Carolina:
S.C. Op. 91-07 (1991). It is not unethical for a lawyer to prepare a will at the direction of a client that names the lawyer as personal representative and trustee except under the circumstances proscribed under MRPC 1.8(c) (substantial gifts to scrivener unrelated to client proscribed).
S.C. Op. 93-94 (1993). This opinion holds that an attorney for an estate does not have an ethical or a legal duty to inform a surviving spouse of his right to claim a 1/3 elective share of the probate estate provided there is no present or past attorney-client relationship with the surviving spouse. The attorney for an estate in probate is retained by and owes a duty to the personal representative, who is the fiduciary for the estate and its beneficiaries.
The opinion holds the same for an attorney who is acting as personal representative of an estate under the theory that the attorney as fiduciary owes a duty to act in the best interests of the beneficiaries of the estate within the framework of the will.
Virginia:
Va. Op. 1358 (1990). A lawyer may draft a will naming the lawyer as personal representative or trustee or in which the fiduciary is directed to retain the lawyer as attorney if the client consents after being informed of alternate representatives, all fees involved, and of the lawyer's own financial interest. A lawyer's suggestion of himself as fiduciary may constitute improper solicitation.
Va. Op. 1391 (1991). A lawyer who drafted a will and advised the beneficiaries may serve as successor trustee and foreclose on a deed of trust. However, in connection with the foreclosure, the lawyer must obtain consent of the beneficiaries if the lawyer had advised them with respect to the note or deed of trust.
Washington:
Wash. Inf. Op. 86-1 (1986). A lawyer may draft a document for an unrelated client that appoints the lawyer as fiduciary if the client is fully informed regarding the alternatives and costs and is advised that he or she is free to consult independent counsel.
Articles:
Comment, Ethics, Petty v. Privette: Exclusion of Attorney Liability in the Area of Estate Administration, 23 Memphis S. L. Rev. 687 (1993)
McGovern, Undue Influence and Professional Responsibility, 28 Real Prop., Prob. & Tr. J. 643 (1994)
Whitman, Exoneration Clauses in Wills and Trust Instruments, 4 Hofstra Prop. L. J. 123 (1992).
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