Category: Legal writing

Plaintiffs’ lawyers may exhibit confidence, but not confidences

A week ago Law360, a LexisNexis newsletter, reported that a Florida law firm and its principal attorney had sued a unit of AIG, an insurance carrier, for allegedly “misleading them into defending a sports memorabilia collector and his company” in an SEC investigation that resulted in charges.  The item helpfully named the case and linked to a copy of the complaint.

In the complaint the plaintiff law firm and lawyer, who are representing themselves, identified the client by initials only as MK, stating that “providing the initials is proper for the present pleading, considering the ongoing active criminal and related civil proceedings regarding that person who needs legal representation.”  The AIG unit had hired the plaintiffs to represent and defend a husband and wife in the underlying investigation.  Throughout the complaint the lawyers carefully refer to the husband only as “MK” and don’t name MK’s wife.  The plaintiffs did state in the complaint that in addition to facing the SEC civil charges MK was a defendant in two criminal cases, both cited by case number.  The complaint describes MK’s arrest and detention in Germany, his extradition to the United States, his detention in Nevada, and his eventual plea bargain.

The exhibits to the complaint include an e-mail from AIG’s outside counsel to MK and some invoices from the plaintiff to AIG.  The plaintiffs redacted MK’s name from the e-mail and redacted almost all of the substantive content from the invoices, including all mentions of MK’s name.

The plaintiffs did not, however, redact from the e-mail three mentions of MK’s wife, whom the law firm was also representing.  Two references are by Mrs. MK’s first name only; the third is by her full and uncommon name.  Eleven of the first 12 Google results for searching for Mrs. MK’s full name disclose MK’s name and the Ks’ legal troubles.

Rule 4-1.6 of the Florida State Bar’s rules of professional conduct states that “A lawyer must not reveal information relating to a client’s representation except as stated in subdivisions (b), (c), and (d), unless the client gives informed consent.”  (The Oregon State Bar’s Rule 1.6 is nearly identical except for formatting.)

Florida does not define the term “information relating to a client’s representation.”  Oregon does define its similar term, “information relating to the representation of a client,” to include not just privileged information (private attorney-client communications about the representation) but also any information that the lawyer gathers in the course of the representation “the disclosure of which would be embarrassing or would be likely to be detrimental to the client.”  Information doesn’t cease to be embarrassing or detrimental just because it’s available to members of the public who know where to look.

The lawyers may have obtained the consent of MK and Mrs. MK to the disclosures that they made in their complaint against the Ks’ insurer before they filed the complaint.  The case is nevertheless a reminder to practitioners to beware of disclosing confidential or embarrassing information about a client, not just in memoranda, but in the exhibits.

A badly-tailored trust causes three suits to be pressed

Image licensed from Shutterstock.com

            When you drop a stitch in a garment, an unexpected strain may make it fall apart.  When you alter one part of a garment, sometimes the alteration affects the garment somewhere else.  The same is true for trust agreements: a missing clause or a careless amendment may throw the trust out of whack and send a warring family to their lawyers.  Three cases in Washington County show what happens next.

            In 1998 a successful industrialist (“Trustor”) adopted a revocable living trust agreement and placed his assets into the trust.  As is usual, Trustor was the initial trustee.  In Paragraph 11.1 he provided for successor trustees:  “If the Trustee becomes unable or unwilling to serve, the Trustor hereby appoints Brother One and Brother Two [two brothers of the trustor] as the Co-Successor Trustees,” or if they weren’t available then Son One as the first alternate successor, and Son Two as the second alternate successor.  Son One and Son Two are two of the trustor’s three children; Daughter is the other child.

            Trustor provided a means for his family to remove Brothers One and Two.  In Paragraph 11.7 he stated:  “After the death or incapacity of the Trustor and upon the written request of a majority of the income beneficiaries who are not incapacitated, the Trustee shall resign in favor of the next Successor Trustee designated in Paragraph 11.1 above, if any.”  If none of the Successor Trustees named in Paragraph 11.1 remained, then the Trustee would ask a court to appoint a Successor Trustee, either a trust company, a bank with trust powers, or a disinterested individual.

            The lawyer who drafted the 1998 trust agreement was capable and competent, but he did not define “income beneficiaries” —  he dropped a stitch, so to speak.  The missing definition plagues Trustor’s family today.  I’ll come back to that.

            In 2008, Trustor hired a different lawyer, less familiar with trusts, to change the order of his successor trustees.  The new lawyer may have got a Word copy of the original trust, because almost all of the 2008 trust is the same as the 1998 trust.  The drafter left Paragraphs 4.3 and 11.7 alone, but changed Paragraph 11.1 to read: “If the Trustee becomes unable or unwilling to serve, the Trustor hereby appoints Brother One, Brother Two, and Friend One as Successor Co-Trustees.”

            The Trustor amended Paragraph 11.1 several more times, either by himself or with the second lawyer.  In 2014 he amended Paragraph 11.1 to read:  “If the Trustee becomes unable or unwilling to serve, the Trustor hereby appoints Brother One, Brother Two, Son-in-Law, Friend Two, Friend Three, and Friend Four as Successor Co-Trustees.”  The Trustor did not amend Paragraph 11.7, which continued to provide that if a majority of the “income beneficiaries” requested the trustee (meaning a successor trustee) to resign, then the trustee would resign in favor of the next Successor Trustee designated in Paragraph 11.1, or if none, then a court would appoint a trust company or disinterested individual as the successor trustee or trustees.

            By 2020 Brothers One and Two had died, and Trustor had become incompetent.  Son-in-Law, Friend Two, Friend Three, and Friend Four became the successor co-trustees.  Disputes arose among the trustees.  In March 2021 Friend Two sued the other trustees over a dispute about whether or not to make certain distributions, which the trustees eventually settled.  The disputes continued, however, and the children and grandchildren of Trustor requested Friend Two to resign.  Friend Two did not resign.  In November 2022 Daughter (not herself a trustee) sued Friend Two and asked the court to require Friend Two to resign, presenting the consents of all of Trustor’s living descendants.  Last month Son-in-Law (Daughter’s husband, who is one of the trustees) filed suit number three, asking the court to remove all four trustees, including himself, and appoint a professional fiduciary in their place.

            The 2022 case brought to light the first drafting error.  Paragraph 11.7 gave the “income beneficiaries” the right to remove a trustee, but who are the “income beneficiaries”?  The Trustor is still living (he’s now 97).  He is the only person who has the right to compel the trustees to distribute money, and he is the only person currently entitled to receive income from the trust.  However, the trust agreement gave the successor trustees the right, but not the duty, to distribute trust funds to Trustor’s family in accordance with any gift plan that Trustor had undertaken, or if necessary for their health, maintenance, education, and medical care.  The trustee has the power to distribute income to the Trustor’s family, but they don’t have the right to compel the trustee to give them anything.  Are they “income beneficiaries”?

            The trust agreement does not define “income beneficiaries” – that’s the dropped stitch I mentioned.  Neither does Oregon’s trust code, though it uses the term “income beneficiary” in one place, at ORS 130.232(1)(b).  That’s the argument in the 2022 case: can the family members who are eligible to receive income oust Friend Two?  A careful drafter could have avoided dropping the stitch by phrasing Paragraph 11.7 like this:

            “If the Trustor dies or becomes incompetent, a majority of the Trustor’s then-living adult descendants may request any Successor Trustee to resign.”

            The 2008 and 2014 amendments created a different problem.  Paragraph 11.7 states that if a majority of the income beneficiaries request a trustee to resign, then the vacancy will be filled by the next successor trustee listed in Paragraph 11.1 – but Trustor removed all of the “next in line” successor trustees from Paragraph 11.1.  If the family members count as “income beneficiaries” under the trust, and if they can remove a trustee under Paragraph 11.7 but Paragraph 11.1 no longer names any successor co-trustees, must the court appoint a successor co-trustee to replace all four of the current trustees, or can the trust continue with three of the four co-trustees and no replacement?

            A dropped stitch in 1998 and sloppy alterations in 2008 and 2014 haven’t ruined any garments, but they’ve spawned three suits and hundreds of thousands of dollars in legal fees that one definition and a few added words might have avoided.

Late to the party wall? Here’s a drafting tip

Despite its jaunty name, a party wall is not a vertical place of amusement but simply a single common wall on a property line, built to support two buildings.  The people who created party walls and party wall agreements a century or two ago didn’t consider what would happen if one of the two adjoining owners should want to add on to the party wall to support more floors, or to take the party wall down and redevelop a property.  Raising and razing party walls both present practical problems.

Lawsuits about party walls go back to at least 1813 and a decision of the English Court of Common Pleas in Matts v. Hawkins, 5 Taunton 20 (1813).  Twenty-five years earlier adjoining owners had built a party wall.  Ten years before the dispute got to court, Hawkins demolished his building, leaving the party wall standing.  Hawkins then built a shed against the party wall.  Later on Matts, whose building still stood, began to extend the party wall upward to support a floor that Matts was adding to his building.  Hawkins tore down the wall extension.  When Matts started to rebuild it, Hawkins tore it down again, and Matts sued Hawkins for trespass.  Hawkins argued that they were tenants in common as to the wall, and that as a tenant in common Hawkins could not be liable in trespass to Matts because the wall belonged to both of them.  The court rejected the argument of Hawkins and held that Matts and Hawkins each had some rights to the portion of the wall on the property of the other, which the court described as being easements.

One lesson of Matts v. Hawkins and the many decisions on party walls since 1813 is that a good party wall agreement should cover three points:

  • How will the owners divide the cost to maintain and repair the party wall?
  • Can either neighbor extend the wall upward, and if so, then can the extending neighbor build the extension on both properties?
  • What happens to the wall if one building is destroyed or is demolished?

Owners who want to be able to replace the party wall with a new party wall can use this clause to describe when and how each will pay for the new wall:

            If the North Building and the South Building are both demolished or destroyed, then the North Owner and the South Owner will replace the party wall with a new party wall designed and built to be capable of supporting buildings on the North Tract and the South Tract of up to ___ floors above ground.  The party that replaces its building first (in this section, the “Building Party”) will pay the cost to build the party wall and furnish an accounting of the cost to the other party.  The second party will reimburse the Building Party for one-half the cost to build the party wall before the second party begins construction on the second party’s building.  The second party will reimburse the Building Party for one-half the cost to build the party wall whether the second party uses all or part of the party wall.

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