patriot's dilemma · 2016. 4. 8. · patriot's dilemma . part i . pat patriot is a...

PATRIOT'S DILEMMA

Part I

Pat Patriot is a partner at the venerable Boston law firm Bunker, Hill and Patriot, and a

proud officer on the Executive Committee of the National Society of the Offspring of the

American Revolution ("OAR"), a non-profit, tax-exempt volunteer service organization.

From time to time over her many years as an OAR member, Pat has provided legal

advice to the organization pro bono. She is currently representing OAR on a pro bono basis in

obtaining permits and reviewing licenses in connection with OAR's upcoming gala. and Pat has

made it widely known that she will, at no charge or substantial discounts from her regular rates,

draft wills and trusts for OAR members and others who wish to leave a substantial legacy to

OAR. She has done so on many occasions. Pat’s extensive contacts and affiliation with OAR

have also led to a great deal of business for a wide variety of services in her law practice. OAR

recommends Pat to any potential donors who need a lawyer for trust and estate work and any

other legal services they may need.

By virtue of her role as an officer of the OAR Executive Committee, Pat is privy to most

of the confidential information of the organization. She has also gained knowledge of

confidential information through her representation of the organization in several loan

transactions and advising OAR on tax matters.

Questions:

1. Is Pat permitted under the law and the applicable ethical rules to provide pro bono or

reduced rate services to those who are making bequests to OAR?

2. What ethical rules should Pat be consulting before she does this?

3. What, if anything, must Pat disclose to the clients?

4. Does Pat's current representation of OAR create a conflict?

5. What litigation risks should Pat consider?

PATRIOT'S DILEMMA -- Part II

On July 4, 2015, Pat Patriot received a call from Sam Adams, Pat’s former client, asking

Pat to consult with Sam’s brother-in-law, Alex Hamilton. Alex, an 88-year-old bachelor with no

descendants, wished, after a lifetime of parsimony, to make a substantial gift at his death to

OAR, but did not wish to pay a lawyer.

Pat met with Alex two days later, joined by Sam and by Alex’s companion, Abigail

Adams. Pat confirmed when they met that she would bill Alex for none of her legal services,

then discussed Alex’s wishes with Alex, Sam and Abigail, and then left the meeting with a typed

list, given to her at the meeting, identifying specific gifts that Alex wished to leave certain

individuals and to certain charitable organizations, including $500,000 each to Sam and to

Abigail. The list stated that Alex wished to leave the residuary of his estate to OAR.

Pat then drafted a revocable trust agreement consistent with these directives, along with a

pour-over will. Pat met with Alex, Sam and Abigail two weeks later to preside over Alex’s

execution of his documents and to advise Alex and Abigail to transfer Alex’s assets into Alex’s

newly established trust.

Questions:

1. Does it matter that Sam is a former client?

2. Are there any facts Pat should have disclosed to Alex?

3. Who is Pat's client?

4. What ethical rules should Pat review in connection with this representation?

5. Does it matter that Alex knew ahead of time that he would leave his estate to OAR?

6. What potential litigation risks should Pat consider? PATRIOT'S DILEMMA --

Part III

Shortly after meeting with Alex Hamilton, Pat received a frantic telephone call from

OAR's Executive Director telling her that the CFO had absconded with all of the organization's

bank accounts and securities. The Executive Director asked Pat to draw up some emergency

loan documents to borrow funds to get them through the crisis. He confided in Pat that he was

not sure whether OAR would be able to survive without some infusions of cash.

During her meeting with Alex Hamilton, Pat had learned that Alex was very friendly with

Ari Burr, a very wealthy shipping magnate. Alex told her that Ari was looking for an attorney to

assist him with his estate plan. After her conversation with OAR's Executive Director, Pat

decided to call Ari and offer her services. Ari was somewhat startled that a lawyer had called

him out of the blue, but he agreed to meet with Pat.

Pat met with Ari and discussed various methods of minimizing taxes on the estate. Ari

confided that he wanted to leave his assets to charity, but he did not have a particular charity in

mind. Pat suggested that OAR was a worthwhile organization that offered service to the

community and that Ari might want to consider leaving a portion of his estate to it. She

happened to have a brochure describing the organization which she gave to Ari. Within an hour,

he had decided to leave the residuary of his estate to OAR with a few minor bequests to

individuals, including Abigail Adams.

During the meeting Ari also confided in Pat that he was a convicted felon and had been

investigated for sedition.

Pat drafted a trust and a will. Ari named Pat as the trustee of the trust and the executor

of his estate Pat charged Ari her regular fee for drafting the documents. She will also receive

fees as a trustee and an executor.

Questions:

1. What ethical rules should Pat have considered before calling Ari?

2. Does Pat have a conflict?

3. If she has a conflict, is it waivable?

4. What, if anything, should Pat have disclosed to Ari?

5. Did Pat have an obligation to tell Ari that OAR is in financial extremis?

6. Should/can Pat tell OAR about Ari's background?

(Part III (cont'd)

7. What litigation risks should Pat consider?

PATRIOT'S DILEMMA -- Part IV

Alex and Ari shot each other to death in a duel on April 1, 2016. Pat learned to her great

wonder that the residuary gift to OAR in Alex's will exceeded $20 million and that the residuary

gift in Ari's will was approximately $ 10 million. Pat emailed that news to the President General

of OAR, who responded that she had never heard of Alex Hamilton or Ari Burr, although their

names sounded like something out of a Broadway musical.

In a burst of candor, Pat told the President General that Ari was a convicted felon.

On May 11, 2016, Alex’s closest heir, Howe Opportune, instituted a trust contest action

seeking to invalidate Alex’s trust alleging that it resulted from undue influence. The next day,

Raymond Burr, Ari's closest heir, also commenced an action seeking the same relief on the same

grounds. Burr also filed a grievance against Pat with the Massachusetts disciplinary authorities.

Questions:

1. What happens now?

2. Are the Hamilton and Burr cases different? How?

3. Are there bases for malpractice or other claims against Pat? What are they? By

whom?

4. What may be the basis of the grievance Burr filed?

397423.1

15902886.1

Selected Bar and Ethics Opinions

ABA C-687 (1963) (attorney can solicit funds for various causes and organizations including the solicitation of gifts by bequest or devise, but the individuals “solicited should be told to have any wills they may wish to have drawn prepared by their own attorneys.”)

ABA 1181 (1971) (“Since there is an obvious possibility of the existence of a conflict of interest between the prospective donor and the [] organization, for whom the lawyer works on a regular basis, it is extremely important that the lawyer make full disclosure to the prospective donor.”)

ABA Informal Op. 1288 (1974) (if a church made the services of an attorney available to its members, where the fee would be donated to the church and a donation to the church would be requested, “[t]he lawyer will be influenced by the precondition of a gift to the church . . . [and] would be influenced before the attorney-client relationship ever arose and would be reluctant to seem disloyal to the church which has recommended him . . . .,” and thus, the attorney may be reluctant to advise the client to make a smaller donation, which may be in the donor’s best interest).

Cal. Eth. Op. 1982-65 (1982) (allowing an organization to auction an attorney’s services to raise money provided that certain disclosures are made to ensure that all participants understand the nature of the situation/the reasonable value of the services/etc. “[T]he lawyer must exercise caution in order that the various provisions of the rule are not violated inadvertently.”).

CT Eth. Op. 94-28 (1994) (A client may be referred to the attorney-nonprofit directoronly if the attorney-director fully discloses his or her relationship… [T]he parties can readily have directly adverse interests in spite of their common goals. See C.R.P.C., Rule1.7(a) and (b). The attorney-directors who choose to proceed with the simultaneous representation of multiple clients must discuss the implications of this type of representation with both the grantor and the fiduciary.)

N.H. Eth. Op. 2011-12_07 (2012) (“harsh reality test”:; (1) Whether a disinterested, objective lawyer reasonably believes that an existing concurrent conflict of interest actually can be waived? (Reviewed post hoc; objective test); and(2) Whether informed consent was obtained?))

Ky. Bar Ass’n Ethics Op. KBA E-391 (attorney may not enter into an agreementwith a charitable organization to charge a reduced fee to members of the organizationin consideration for a bequest to the organization; an attorney mayagree to provide estate planning services for free to a member of a charitable organization, such as a synagogue or church, so long as the attorney discloses the attorney’s relationship with the charitable organization and ensures that the attorney’s

15902886.1

professional judgment was not compromised by his relationship with the charitable organization).

Md. Eth. Op. 2003-08 (it was impermissible for an attorney, who was on a church’s legacy committee – whose function was to promote charitable giving to the church from its members – to seek to volunteer his services in drafting estate documents for unrepresented members). Note subsequent Maryland opinion with oppositeoutcome.

Md. Eth. Op. No. 2015-02 (2015) (finding that an attorney could represent a donor –despite the attorney’s role as pro bono counsel/trustee of the organization – where the donor had already decided what organization he was giving to before approaching the attorney) (“Given that Attorney A did not solicit the bequest in the current scenario, the conflict is diminished.”).

Mich. Professional Ethics Committee Op. RI-147 (attorney may allow charity to recommend his services where (a) the person or organization had had a prior professional relationship with the lawyer to enable the person or organization to be knowledgeable about the lawyer’s services, (b) the lawyer reviewsthe advertisement prior to publication for compliance with ethics rules, and (c) nothing ofvalue beyond the reasonable costs of the advertising is given to the person or organization by the lawyer.”)

Mich. Ethics Op. No. RI-163 (A Michigan attorney is permitted to communicatethat he will donate a portion of his fees for estate planning services to a charitable organization where “the charitable organization [was] not involved in the communication of the pledge by the lawyer, the organization [was] not using the lawyer’s offer as an incentive, [was] not endorsing the lawyer’s qualifications, and [was] in no way encouraging the use of the lawyer’s services,” which would otherwise constitute “giving of value” for a referral from an organization in violation of MRPC 7.2(c)).

Neb. Ethics Advisory Op. for Lawyers No. 06-11 (an attorney maydonate his estate planning services to a charitable auction where the attorney’sdonated services are only in the lawyer’s area of competence, the specific service and identity of the attorney are clearly disclosed, the attorney retains the right to decline the representation for conflicts of interest or other ethical reasons in which case the attorney will refund in full the auction price paid by the client, and all communicationsregarding the auction comply with these requirements and are not false or misleading).

State Bar of Nevada Standing Committee on Ethics and Professional Resp. Formal Op. No. 47 (Oct. 27, 2011) (representation of a client who wishes to make a bequestto a charity for which the attorney serves as a director is not prohibited, per se, but mayrise to the level of an impermissible conflict. The conflict can be waived if the attorney does not “reasonably believe the representation will not be adversely affected” by his relationship with the charity).

15902886.1

New York County Lawyers’ Association Committee on Professional Ethics, Op. No. 656

Or. Eth. Op. 1989-525 (1989) (“[A]n attorney-director of a charity who provides legal advice to it may not simultaneously advise the charity and the donor in respect of a so-called unitrust transaction (i.e., a present charitable gift to the charity with a retained interest in the donor) unless the attorney-director first makes full disclosure.”).

Or. Formal Op. No. 2005-11

S.C. Op. 04-03 (2004) (per se unreasonable for a lawyer to receive percentage of gift amount to charity as fee).

Additional Suggested Reading

ACTEC Commentaries on the Model Rules of Professional Conduct (Fourth Edition 2006), available at: http://www.actec.org/publications/commentaries/

Melissa Langa, ETHICS IN ESTATE PLANNING (Massachusetts Continuing Legal Education, Inc. 4th Edition 2015), at sec. 16.13.

Richard C. Mills, “Doing Good, While Doing Right By Your Client: A Guide to Ethical Considerations for Estate Planning Attorneys Serving on Charitable Boards,” Michigan Probate & Est. Planning J. 15 (Spring 2015), available at: http://higherlogicdownload.s3.amazonaws.com/MICHBAR/36b40f18-75e7-4b75-a650-4e26fe2c65ac/UploadedImages/pdfs/journal/spring15.pdf

The research assistance of Brian Morris, Esq. is gratefully acknowledged.

http://www.actec.org/publications/commentaries/

http://higherlogicdownload.s3.amazonaws.com/MICHBAR/36b40f18-75e7-4b75-a650-4e26fe2c65ac/UploadedImages/pdfs/journal/spring15.pdf

PERFORMANCE OF LEGAL AID SERVICES BOTH FOR..., ABA Informal Op....

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

ABA Informal Op. 1181ABA Comm. on Ethics and Professional Responsibility, Informal Op. 1181

American Bar Association

PERFORMANCE OF LEGAL AID SERVICES BOTH FORDONOR AND RECIPIENT—CHARITABLE ORGANIZATIONS

May 31, 1971

Copyright (c) by the American Bar AssociationI acknowledge your letter of (Date) in which you direct an inquiry to this Committee on the subject of the ethical propriety

of the Stewardship Counseling Service in use by Wycliffe Bible Translators, Inc., as set forth in a letter addressed to me byWycliffe Bible Translators, Inc. of (Date) and signed by (Name).

In (Name) letter he states that the Wycliffe organization is a nonsectarian charitable organization having 2,500 workersin 23 countries who translate the scriptures for the first time in over 500 languages. The organization also teaches theseworkers how to help in basic community development matters, including medical and agricultural education. The Wycliffeorganization performs no ecclesiastical functions. However, it does have four schools in the United States and schools inGermany, England, Brazil, Australia, New Zealand, West Africa, Mexico, and Nepal, in which they train people for thework above indicated.

The work is financed almost entirely by contributions, for which no solicitation is made. Monies from governmentand foundation support comprise less than 5 percent of Wycliffe's income. Each worker is responsible for his own support.Contributions are made to the organization designated for the account of the individual workers. Contributions to theorganization that are not designated are placed in a fund to help those who are low on support. No salaries are paid. Allworkers are on equal quotas, depending on the part of the world where they live and the number of dependents they have.This includes all of the administrative staff in the United States. The workers assess themselves an amount annually to payfor operating overhead such as publication of the organization's magazine, receipting contributions, etc.

Affiliated with the organization are two lawyers who receive their support from friends and their home church throughthe organization. They work full time assisting friends of the organization who inquire about wills, trusts, and such matters.In each case, only information of a general nature is given, encouraging the donor-friend to use their own counsel orassisting them in locating counsel if they desire. On a number of occasions, these inquirers have been most disappointedto learn that the lawyer member of the Wycliffe group could not represent them in the preparation of an estate plan andexecution of a will. You ask the help of this Committee in solving this problem of the Wycliffe organization.

You advise that you believe that if the donor requested in writing the service of the lawyer affiliated with theorganization, including in the statement that a gift to the organization was intended, that he did not have other counselwhom he desired to represent him, and that the ‘conflict of interest’ had been fully explained, then possibly the lawyercould represent such donor.

You feel confident that a conflict of interest does not exist in this situation for the following reasons: (A) the lawyer'ssalary only indirectly comes from the organization, but is actually paid by friends and home church; (B) the lawyer's incomeis so low that it assures anyone that his employment would not result in financial gain; (C) the lawyer or any other memberof the stewardship service has been carefully screened and trained in the philosophy and policy and practice of the serviceNOT to solicit contributions but to assist the friend of the organization in disposing of his assets for the proper care ofhimself, his loved ones, and any charitable work in which he might have an interest.

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You further advise that many of those people who make inquiry of the Wycliffe organization are hesitant aboutemploying professional counsel because of the cost involved and that most of them desire to make a bequest to the Wycliffeorganization. In many cases you have found that these friends simply cannot be persuaded to retain counsel to carry outtheir desires and you feel that this tendency is especially prevalent among the conservative type of person. You have beentold that Wycliffe cannot pay the fee to have a lawyer do the work, which it would be most happy to do, including a stronginstruction to the lawyer to do exactly what the friend wants to do without any regard to the interests of the Wycliffeorganization and without any necessity to divulge the nature or extent of the work performed.

It is not clear from the inquiry whether or not the friends of the Wycliffe organization will pay a fee for any of the legalservices contemplated.

Canon 3, entitled A LAWYER SHOULD ASSIST IN PREVENTING THE UNAUTHORIZED PRACTICE OF LAWholds (DR 3-102—Dividing Legal Fees with a Non-Lawyer) that ‘(A) A lawyer or law firm shall not share legal fees with anon-lawyer.’

Under the prohibition of this Canon, it would be improper for the Wycliffe organization to be paid a fee for legal servicesperformed by the organization's lawyer.

Canon 2, entitled A LAWYER SHOULD ASSIST THE LEGAL PROFESSION IN FULFILLING ITS DUTY TO MAKELEGAL COUNSEL AVAILABLE holds (DR 2-103—Recommendation of Professional Employment) that:

‘(D) A lawyer shall not knowingly assist a person or organization that recommends, furnishes, or pays for legal servicesto promote the use of his services or those of his partners or associates. However, he may cooperate in a dignified mannerwith the legal service activities of any of the following, provided that his independent professional judgment is exercisedin behalf of his client without interference or control by any organization or other person: . . .

‘(5) Any other non-profit organization that recommends, furnishers, or pays for legal services to its members orbeneficiaries, but only in those instances and to the extent that controlling constitutional interpretation at the time ofthe rendition of the services requires the allowance of such legal service activities, and only if the following conditions,unless prohibited by such interpretation, are met:

‘(a) The primary purposes of such organization do not include the rendition of legal services.‘(b) The recommending, furnishing, or paying for legal services to its members is incidental and reasonably related

to the primary purposes of such organization.‘(c) Such organization does not derive a financial benefit from the rendition of legal services by the lawyer.‘(d) The member or beneficiary for whom the legal services are rendered, and not such organization is recognized

as the client of the lawyer in that matter.’Under the provisions of this Canon, even though the ‘friends' could be considered members or beneficiaries of the Wycliffe

organization, the prohibition in (c) above would preclude the arrangement you suggest.

These conclusions are based on the new ‘Code of Professional Responsibility,’ which has been adopted by the AmericanBar Association to take the place of the previous Canons of Professional Ethics.

While under previous Canon 35, entitled INTERMEDIARIES charitable societies rendering aid to the indigents are notdeemed such intermediaries, nevertheless, under Canon 34 and its interpretations, it would be improper for a lawyer to dividea legal fee with a lay organization, if a fee is involved.

With regard to the statement: ‘we have been told we cannot pay the fee to have a lawyer do the work,’ this Committee, inits Informal Opinion 679, issued July 1, 1963, held that it was proper for a lawyer to accept a fee from a third party for legal

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services to another, where the lawyer had been recommended by the third party, but the lawyer's relations with the client werecompletely established and the client approved of the payment procedure.

In that Opinion there was no question of any benefit accruing to the party paying the fee.

It would appear that the real stumbling block to an affirmative answer to Wycliffe's inquiry is DR 2-103(D)(5)(c) quotedabove. Any action by the lawyer would properly have to conform to the requirements of this Disciplinary Rule.

In addition to the very specific problem mentioned above, there is also the ever-present problem of conflict of interestreferred to on page 2 of this Opinion. Since there is an obvious possibility of the existence of a conflict of interest betweenthe prospective donor and the Wycliffe organization, for whom the lawyer works on a regular basis, it is extremely importantthat the lawyer make a full disclosure to the prospective donor. This disclosure should be in writing and should make clearto the prospective donor the exact relationship between the lawyer and the Wycliffe organization, and the diversity of interestbetween the Wycliffe organization and the prospective donor to whom the lawyer is giving advice.

ABA Informal Op. 1181

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

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PREPARATION OF WILLS FOR CHURCH MEMBERS..., ABA Informal Op....


ABA Informal Op. 1288ABA Comm. on Ethics and Professional Responsibility, Informal Op. 1288


PREPARATION OF WILLS FOR CHURCH MEMBERSWITH FEE PAID DIRECTLY TO CHURCH AS DONATION

June 17, 1974

Copyright (c) by the American Bar AssociationYou have requested the opinion of our Committee regarding a lawyer, a member of a church congregation, who, by

preparing wills for members of the congregation, wishes to assist the church financially. You state that it would be made knownby the church that a lawyer (who would not be named in the announcement) would be available one evening a week to preparewills for members of the congregation. The church would be financially benefitted from this arrangement in two ways: (1) astandard fee would be charged but paid directly as a donation to the church; and (2) the church member would be requested tomake a donation to the church in the will; however, the requested donation would not be mandatory nor would any amount beinvolved, and the lawyer would not be the one making the request.

We conclude that based on these facts, the lawyer would be giving a thing of value to the organization recommending hisemployment and this is prohibited by DR 2-103(B) which provides:

DR 2-103(B)—

‘. . . (A) lawyer shall not compensate or give anything of value to a person or organization to recommend or securehis employment by a client, or as a reward for having made a recommendation resulting in his employment by a client.’

Under the present facts the relationship between the church and lawyer would violate DR 2-103(B) because the lawyerwould be directing the payment of his fee to the church and in return the church would be recommending its members to thelawyer for purposes of drafting wills.

DR 2-103 further provides:

‘(C) A lawyer shall not request a person to recommend or promote the use of his services or those of his partner orassociate, or any other lawyer affiliated with him or his firm, as a private practitioner. . . .’

There are exceptions stated in the rule which do not have application in this case.Informal Opinion C-687 has pointed out another danger:

‘It would be improper for a lawyer to be a member of the committee which has a program designed to encourageevery church member who owns property to write a will. While lawyers are pleased to see such programs adopted andcarried out by laymen, lawyers cannot participate in such a program. To serve on a committee which has such a programwould be to participate. . . .’

At another point in the Informal Decision this Committee stated:‘(A) lawyer being interested in the cause should not at the request of such a committee draw wills for persons who by

their wills give to the cause. The request to prepare wills must come from the maker of the will. There are cases where atthe request of one party, an attorney may render professional services to a third party, but in such case the attorney mustbring to his representation no divided loyalty. The true attorney and client relationship must always be established betweenthe attorney and the maker of the will.’

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PREPARATION OF WILLS FOR CHURCH MEMBERS..., ABA Informal Op....


In the case you have presented to us the only services offered to the church member would be the preparation of a will underwhich the church is expected to derive a benefit. A donation to the church of the attorney fee is also a part of the transaction.

DR 5-107, Avoiding Influence by Others Than the Client, says:

‘(B) A lawyer shall not permit a person who recommends . . . him to render legal services for another to direct orregulate his professional judgment in rendering such legal services.’

The lawyer will be influenced by the precondition of a gift to the church. He may find it proper to tell his client that the giftis too large in relationship to the size of the estate and obligations to others or that the gift is unwise for other reasons. The lawyerwould be influenced before the attorney-client relationship even arose and would be reluctant to seem disloyal to the churchwhich has recommended him by recommending against a gift where such advice would be in the best interest of the testator.

ABA Informal Op. 1288


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LAWYERS ACTING ON BEQUEST COMMITTEES OF..., ABA Informal Op....


ABA Informal Op. C-687ABA Comm. on Professional Ethics, Informal Op. C-687


LAWYERS ACTING ON BEQUEST COMMITTEES OF CHURCHES

December 27, 1963

Copyright (c) by the American Bar AssociationYou requested the opinion of this Committee as to the propriety of a lawyer serving on a committee, the purpose of which

is to promote the making of wills by persons who will give by will to the cause in which the committee is interested. To moreclearly present the problem, you attached to your letter a copy of an article entitled ‘A Bequest Committee’ appearing in theOctober issue of Baptist Leader. This article advocates the establishment by churches of bequest committees for the purposeof ‘. . . promoting (1) the making of wills and (2) the inclusion of Christian causes in wills.’ The article goes on to state, ‘Thecommittee should be composed (if possible) of members of the church, who may be employed professionally as attorneys,bankers, tax accountants, trust officers and life insurance agents. . . . Some men on the committee should be familiar with thelegal aspects of will making, others with the tax angles, and some with the ability to promote this type of program in the lifeof the church.’ This article goes on to state that the committee should encourage every church member who owns propertyto write a will, and that although something can be accomplished by meetings and special events, the preferred method is bypersonal calls at the prospects' homes. The article suggests that appropriate materials be distributed and available materialscoming from law firms studied.

You also attached to your letter a copy of a letter dated October 5, 1962, from John E. Doe, Esquire, attorney, of (City,State), to the Director of Public Relations, Central Beptist Theological Seminary, who wrote the article. Mr. Doe's letter states:

‘I was interested in your article entitled ‘A Bequest Committee’ appearing in the October 1962 issue of the BaptistLeader. Of course, we lawyers apreciate those who urge others to avail themselves of our services. Also, those who heedthe advice of your article and have their wills drawn and estates planned by competent attorneys should be grateful to you.

‘Though I am not so sure that a promotional effort of the intensity described in your article is necessary or desirable, Iwould suggest that, if printed materials are to be used, they can and should be obtained from state and local bar associationsrather than from individual law offices. It would seem to be unethical for individual law offices to distribute literaturein any way that would be considered advertising a particular law office. Also, I would question whether a lawyer couldserve ethically on the Bequest Committee suggested in the article. Perhaps he could serve in an advisory capacity to thecommittee.’

We think that Mr. Doe should be commended for writing as he did.

Our Committee has not had this exact question presented to it. Formal Opinion 41 dealt with an analogous situation andis helpful. The Opinion reads:

Canons 27, 35, 47 (adopted in 1937)

‘A member of the Association asks the committee to express its opinion as to whether it is proper for a lawyer who isdirector of a bank or trust company, to allow his name to appear as a director in its advertisements which offer its servicesto the public in drawing wills and trust agreements and in making examinations of titles. .. .

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LAWYERS ACTING ON BEQUEST COMMITTEES OF..., ABA Informal Op....


‘This committee has already held, in Opinion 31, ‘that it is improper for an attorney to aid a corporation to practicelaw or in any way to participate in or sanction such practice.’ It is therefore improper for a lawyer to allow his name toappear as a director, officer, or employee of a bank or trust company which, in its advertisements, offers to draw wills ortrust agreements, give opinion on titles or perform other legal services.'

1. It would be improper for a lawyer to be a member of a committee which offers to prepare wills. The preparation of willsis legal work and such work should not be undertaken by a committee. It would also be improper for a lawyer to serve in anadvisory capacity to a committee which undertakes to prepare wills.

2. It would be improper for a lawyer to be a member of a committee which has a program designed to encourage everychurch member who owns property to write a will. While lawyers are pleased to see such programs adopted and carried outby laymen, lawyers cannot participate in such a program. To serve on a committee which has such a program would be toparticipate. Only through bar associations can lawyers have a part in such an educational program. A lawyer should not serve inan official advisory capacity to such a committee. He can through bar associations procure and make available material on theadvisability of persons having wills. He can also suggest sources, such as trust companies, for obtaining literature on the subject.

3. One other point it may be well to mention is that a lawyer being interested in the cause should not at the request of sucha committee draw wills for persons who by their wills give to the cause. The request to prepare wills must come from the makerof the will. There are cases where at the request of one party, an attorney may render professional services to a third party, butin such cases the attorney must bring to his representation no divided loyalty. The true attorney and client relationship mustalways be established between the attorney and the maker of the will.

This does not mean that a lawyer cannot solicit funds for various causes and serve on committees for such purposes. Suchcommittees as part of their work may solicit gifts by bequest or devise. Persons solicited should be told to have any wills theymay wish to have drawn prepared by their own attorneys.

ABA Informal Op. C-687


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ISSUE: MAY A LAWYER DONATE LEGAL SERVICES TO..., CA Eth. Op. 1982-65...


CA Eth. Op. 1982-65 (Cal.St.Bar.Comm.Prof.Resp.), 1982 WL 31789

California State BarStanding Committee On Professional Responsibility and Conduct

Copyright (c) 2011, State Bar of California Reprinted with permission. All rights reserved.

ISSUE: MAY A LAWYER DONATE LEGAL SERVICES TO A CHARITABLEOR NONPROFIT CORPORATION WHICH WILL AUCTION THE

SERVICES TO THE HIGHEST BIDDER AS A FUND RAISING DEVICE?

Formal Opinion Number 1982-65

1982DIGEST: Although there is no provision on the State Bar Act or the Rules of Professional Conduct expressly prohibitinga lawyer from donating legal services to be auctioned as a fund raising device for the benefit of a charitable or nonprofitorganization, a number of professional standards and ethical considerations circumscribe the manner in which the donation andthe auctioning of the legal services may be made. A lawyer, when considering whether to donate legal services for auction bya charitable or nonprofit organization, should give careful consideration to the rules and limitations discussed in this opinion.

*1 AUTHORITIES INTERPRETED: Rules 2-101, 2-102, 2-107, 2-110, 2-111, 3-102, 4-101, 5-101, 5-102 and 6-101 ofthe Rules of Professional Conduct of the State Bar.

DISCUSSION: A. Introduction

The Committee has been asked whether a lawyer may ethically donate his or her legal services to a charitable or nonprofitorganization which will auction the services to the highest bidder as a fund raising device. Members of the legal professiontraditionally have engaged in charitable and pro bono activities to contribute to the betterment of society. The donation at issuehere is just one of the many ways of making a contribution.

The Committee has concluded that there is no provision in the State Bar Act or the Rules of Professional Conduct expresslyprohibiting a lawyer from donating legal services to be auctioned as a fund raising device for the benefit of a charitable ornonprofit organization. However, a number of professional standards and ethical considerations circumscribe the manner inwhich the donation and the auctioning of the legal services may be made.

This is a question of first impression. There is no express case or statutory authority resolving the issues raised by the donationof legal services in the context of a charitable organization's auction. Accordingly, the Committee's analysis derives from thereview of long-standing general principles of professional responsibility, their application by California courts in analogoussituations to those posited here, and the public policy considerations underlying such principles. B. Does the Auctioning of Legal Services by the Charitable Organization Constitute Fee Splitting with a Non-Lawyer?

*2 A lawyer is not permitted directly or indirectly to share legal fees with nonlawyers. (Rule 3-102(A), Rules Prof. Conduct.)

Under the facts as presented to the Committee, the lawyer who donates legal services for auction has given up any right to,or expectation of, receiving fees for his or her services. Similarly, the person bidding on the services is aware that his or hermoney is to be paid directly to the charitable or nonprofit organization. Under this scenario, there is no sharing of fees.

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However, the lawyer might choose to donate a discrete number of hours, which turns out to be insufficient to complete theparticular matter that the client brings to the lawyer. For example, what if the lawyer says he or she will donate 10 hours of hisor her time, and the client's particular matter requires 15 hours of work? If the client agrees to pay directly to the lawyer a feefor the last 5 hours, has there been fee-splitting between the lawyer and the charitable organization?

The Committee has concluded that even in this fact situation there is no fee-splitting. The fee for the donated 10 hours has gonein its entirety to the charitable organization. From the outset, as a result of communications that accurately inform the auctionattendees of the nature and extent of the donated legal services (see Section D, infra), the lawyer, charitable organization, andpotential clients are aware that the fees for any legal services exceeding the donated services are subject to separate negotiationbetween the lawyer and the client. C. Does the Auctioning of Legal Services by the Charitable Organization Constitute Compensation to a Non-Lawyer for theRecommendation of Legal Services in Violation of Rule 3-102(B)?

Rule 3-102(B) of the Rules of Professional Conduct provides:

“A member of the State Bar shall not compensate or give or promise anything of value to any person orentity for the purpose of recommending or securing employment of the member or the member's firm bya client, or as a reward for having made a recommendation resulting in employment of the member or themember's firm by a client. A member's offering of or giving a gift or gratuity to any person or entity, whichhas made a recommendation resulting in the employment of the member or the member's firm, shall notof itself violate this rule, provided that the gift or gratuity was not offered in consideration of any promise,agreement or understanding that such gift or gratuity would be forthcoming or that referrals would be madeor encouraged in the future.

At first blush, a lawyer's contribution of legal services for charitable auction arguably might be characterized as a gift orcompensation for recommending or securing employment of the prospective client who is the highest bidder, within the meaningof rule 3-102(B) of the Rules of Professional Conduct. The Committee's analysis of the purposes of rule 3-102(B), as well asof the legally created exceptions to its proscriptions, suggest that such a characterization would be unfounded.

*3 None of the dangers against which this rule is designed to protect is present in our situation. Rule 3-102(B) of the Rules ofProfessional Conduct was drafted to guard against the abuses of competitive in-person solicitation by a layperson (Crawfordv. State Bar (1960) 54 Cal.2d 659, 665-666); the possibility of control of negotiations, litigation or representation in a legalmatter by a layperson interested in his or her own profit rather than the client's fate, (Utz v. State Bar (1942) 21 Cal.2d 100,

108); the lay intermediary's tendency to recommend the most generous, as opposed to the most competent, attorney; 1 (Linnickv. State Bar (1964) 62 Cal.2d 17, 21; Hildebrand v. State Bar (1950) 36 Cal.2d 504, 513 [Traynor, J., dissenting.]); and thepresence of a third party demanding the allegiance the lawyer properly owes to his or her client (People v. Merchants ProtectiveCorp. (1922) 189 Cal. 531, 539). Since these potential problems do not exist in our situation, it does not make sense to arguethat rule 3-102(B) automatically applies.

Equally convincing is the fact that certain programs, which on their face appear to violate rule 3-102(B) of the Rules ofProfessional Conduct, have been explicitly excepted from this rule. It has been decided that such programs do not offend thefundamental public policies described above, and that the public services and benefits of such programs outweigh the likelihoodof abuse. Examples of programs excepted from the rule are lawyer referral services, legal services programs and group andprepaid legal insurance programs. In Emmons, Williams, Mires & Leech v. State Bar (1970) 6 Cal.App.3d 565 [86 Cal.Rptr.367], the Court of Appeal for the Third Appellate District upheld the payment of a referral fee from a lawyer to a county barassociation's lawyer reference service, despite the prohibitions against fee-splitting and payment of fees for recommendations

of employment contained in former rules 2 and 3 of the Rules of Professional Conduct. 2 The court concluded that the basic







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features of the lawyer referral service in question did not offend the public policy considerations underlying these rules. Thecourt reasoned that the bar association lawyer referral service sought not individual profit, but public and professional objectives;and that lawyer referral services had a legitimate, nonprofit interest in making legal services more readily available to the public.(Emmons, Williams, Mires & Leech v. State Bar, supra, 6 Cal.App.3d, at p. 574.)

*4 Similarly, for many years, lawyer participation in group and prepaid legal insurance programs was prohibited on the groundthat such participation violated the principles contained in present rule 3-102 of the Rules of Professional Conduct. However,the Rules of Professional Conduct were amended by the addition of rule 2-102(A), which encourages lawyers' participationin legal service organizations (which are administered in part by laypersons) and group and prepaid legal services programs.Rule 2-102(A) states that a lawyer's participation in a program, activity or organization that furnishes, recommends, or paysfor legal services is encouraged and is not, in and of itself, a violation, so long as it is “bona fide.” A program, activity ororganization is not bona fide if it allows any third person, organization or group to interfere with or control the performanceof the lawyer's duties to the client; allows unlicensed persons to practice law; allows any third person, organization or groupto receive, directly or indirectly, any part of the consideration paid to the lawyer; or would violate the provisions relating toadvertising and solicitation contained in rule 2-101 of the Rules of Professional Conduct. (Rule 2-102(A), Rules Prof. Conduct.)Rule 2-102(A) was intended to ratify and expand the exception for lawyer participation in programs that furnish legal servicesto indigents and in group and prepaid legal service arrangements. This rule recognized that there are situations where a lawyer'sassociation with a lay organization or its members presents no risk of conflicting interests or other abuses. (Final Report andRecommendations of the Special Committee on Lawyer Advertising and Solicitation, November 1978, at pp. 38-39.)

On the limited facts presented, the Committee has concluded that a donation of legal services for charitable auction is moreclosely analogous to the types of activities permitted by rule 2-102(A) than to the activities that rule 3-102(B) was intendedto guard against. The mere auctioning of donated legal services does not involve the danger of control by laypersons or bythe charitable or nonprofit organization. The organization's interest lies in acquiring funds for the operation of its program.Once the auction is over and the funds are received, the organization ordinarily would have no further interest or concern inthe attorney-client relationship.

Similarly, the charitable organization's auction will not lead to the unauthorized practice of law by someone who is notlicensed to practice. The facts contemplate that all legal services are to be performed by the donating member of the bar. Theorganization's interest is making legal services available as an item at an auction and in obtaining funding for the continuanceof its public services, rather than engaging in the practice of law. Finally, the organization does not receive direct or indirectcompensation paid to the lawyer. In the auction situation, the lawyer has donated the value of the described legal services tothe organization. Conversely, the persons bidding on the legal services know and understand that any funds they pay will godirectly to the organization for charitable or public service purposes, rather than to the lawyer.

*5 Balanced against the remote likelihood of abuse of fundamental public policies are the benefits that flow from an attorney'sdonation of legal services to a public service or charitable organization's fund raising event. Encouraging members of the barto donate funds or legal services for the benefit of society is consistent with the highest goals and historic role of the legalprofession. (See Bus. & Prof. Code, § 6068(h); ABA Code of Prof. Responsibility, canon 2 and EC 2-1.) D. Does the Communication of the Donation of Legal Services for a Charitable Auction Violate the Prohibitions Against False,Misleading and Deceptive Advertising or Solicitation?

In the traditional formation of a lawyer-client relationship, the client comes to the lawyer following an advertisement or referralfrom another individual. During the initial consultation, the lawyer and the client have the opportunity to reach an understandingregarding the terms and conditions of the engagement, as well as the nature and extent of legal representation.

The formation of the lawyer-client relationship in the auction setting is very different. The client's understanding of the legalservices to be provided will come from the descriptions contained in any available promotional literature, or from the oral










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statements made by the charitable organization, the auctioneers, or their agents. In the auction situation, the client may nothave the opportunity to ask questions about the nature and extent of the legal services to be provided, and the lawyer may nothave the opportunity to clarify the misunderstandings or misapprehensions of the prospective client. Thus, unless the lawyertakes certain precautions, there exists the danger that persons bidding on legal services may not be making an informed choiceof legal counsel.

Accordingly, the lawyer contemplating a donation of legal services must take steps to ensure that the nature and extent of thedonated legal services are accurately described. Communications describing the legal services should not contain any untruestatement and should not contain any matter or present any matter in a manner or format which is false, deceptive or whichtends to confuse, deceive or mislead the public. (See rules 2-102(A)(1) and (2), Rules Prof. Conduct.) The lawyer has theaffirmative duty to see that the auction attendees clearly understand the area of the lawyer's expertise, the types of matters orquestions which the lawyer will not or cannot address, and the limitations upon the extent of the legal services, whether it beexpressed by the number of hours or by the matter or problem handled. Only in this fashion can the lawyer and client reacha meeting of the minds.

Furthermore, the lawyer's participation in the proposed auction should be conditioned upon the charitable organization'sagreement not to distribute or otherwise publicize any communication concerning the nature and extent of legal services tobe provided without prior approval of the lawyer. Because a lawyer might be held professionally responsible for the deliveryof such communication, a prudent lawyer should prepare the description of the donated services and condition the donationof services upon the organization's use of that description in order to insure that it is not misleading or deceptive. (See rule2-101(A)(1-6), Rules Prof. Conduct, and Standards (1) through (4) adopted pursuant to rule 2-101(D), Rules Prof. Conduct.)

*6 Rule 2-101(B) of the Rules of Professional Conduct prohibits a lawyer or his or her agent from soliciting professionalemployment from a potential client for pecuniary gain in person or by telephone. Since pecuniary gain will be obtained bythe charitable or nonprofit organization, rule 2-101(B) arguably applies in our situation. Therefore, a lawyer who chooses toparticipate in an auction should ensure that, prior to the auction, no communications concerning the donated legal servicesare delivered in person or by telephone to any potential bidder. However, this rule would not prevent telephonic or in-personpublication of the auction itself.

Communications concerning the donated legal services might also disclose the reasonable value of such services, were theyprovided to an ordinary client. Rule 2-107(A) of the Rules of Professional Conduct prohibits a member of the bar from enteringinto an agreement for, charging or collecting an illegal or unconscionable fee. Rule 2-107(B) of the Rules of ProfessionalConduct describes an unconscionable fee as a fee that is “so exorbitant and wholly disproportionate to the services performed asto shock the conscience of lawyers of ordinary prudence practicing in the same community.” In order to prevent a prospectiveclient from inadvertently entering into an unconscionable fee arrangement, a lawyer should consider disclosing the reasonablevalue of the services being provided. Presumably, some auction attendees will be motivated in part by a desire to assist thecharitable organization and therefore may be willing to pay a higher price than they otherwise would agree to pay. In such acase, and where the lawyer has disclosed the reasonable value of the legal services, the prospective client has given his or her“informed consent” within the meaning of rule 2-107(B)(9).

Additionally, rule 2-101(E) of the Rules of Professional Conduct would require the participating lawyer to retain for one year“a true and correct copy or recording of any ‘communication’ made by written or electronic media pertaining to the member orthe member's firm.” For example, the lawyer should retain a copy of any communication prepared concerning the nature andextent of legal services to be provided which is disseminated by the lawyer, the organization, or the auction's representatives,and keep a recording of any portions of the auction pertaining to the legal services.

In sum, although a lawyer's donation of legal services to be auctioned as a fund raising device for the benefit of a charitableor nonprofit organization is not per se violative of rule 2-101 of the Rules of Professional Conduct, the lawyer must exercisecaution in order that the various provisions of the rule are not violated inadvertently.















E. Does the Auctioning of Legal Services to the Highest Bidder Permit a Lawyer to Maintain Independent Professional Judgmentand Discretion and to Avoid Conflicts of Interest?

*7 The difficulty with the provision of legal services at a charitable auction is that the lawyer will not have an opportunity tointerview the client prior to the auction. Indeed, the identity of the client is unknown until the competitive bidding process hasbeen completed. Thus, the lawyer does not know whether representation of the client will conflict with the lawyer's professionalobligations. A variety of facts, circumstances, and situations inherent in the client's legal matter could compel the lawyer todecline representation.

For example, rule 2-110 of the Rules of Professional Conduct prohibits a lawyer from accepting employment where the potentialclient wishes to accomplish any of the following objectives:“(A) Bring a legal action, conduct a defense, or assert a position in litigation, or otherwise take steps, solely for the purpose ofharassing or maliciously injuring any person or to prosecute or defend a case solely out of spite.

“(B) Present a claim or defense in litigation that is not warranted under existing law, unless it can be supported by good faithargument for an extension, modification or reversal of existing law.

“(C) Take or prosecute an appeal solely for delay, or any other reason not in good faith.”

Rule 2-111(B) of the Rules of Professional Conduct requires a lawyer to withdraw from representation of a client in any ofthe following circumstances:“(1) He knows or should know that his client is bringing a legal action, conducting a defense, asserting a position in litigation,or otherwise having steps taken for him solely for the purpose of harassing or maliciously injuring any person or solely out ofspite, or is taking or prosecuting an appeal merely for delay, or for any other reason not in good faith; or

“(2) He knows or should know that his continued employment will result in violation of these Rules of Professional Conductor the State Bar Act; or

“(3) His mental or physical condition renders it unreasonably difficult for him to carry out the employment effectively.”

Also, a lawyer may not accept employment that is adverse to any current or former client, with respect to any matter in whichthe lawyer has obtained confidential information, unless the lawyer obtains the written consent of such client. (Rule 4-101,Rules Prof. Conduct.) A lawyer may not enter into a business transaction with a client or acquire an ownership, possessory,security or other pecuniary interest adverse to a client unless the terms of the transaction are fully disclosed to the client andare fair and reasonable to the client. Furthermore, the client must be given an opportunity to seek the advice of independentcounsel regarding the transaction. (Rule 5-101, Rules Prof. Conduct.) A lawyer may not represent conflicting interests, unlessall parties have given their written consent. (Rule 5-102(B), Rules Prof. Conduct.) If the lawyer has some relation with theadverse party or some personal interest in the subject matter of the employment, he or she must disclose such facts to the clientbefore accepting the client's business, and then obtain a written waiver from the client. (Rule 5-102(A), Rules Prof. Conduct.)

*8 Finally, during the initial interview or during the course of representation, a lawyer may become aware that he or she doesnot have the requisite competence to handle the client's matter within the meaning of rule 6-101 of the Rules of ProfessionalConduct. If and when this occurs, the lawyer may be unable to complete the legal services that were described and bid uponduring the auction.












Thus, a lawyer may discover during the initial client interview, or at some point thereafter, that he or she cannot continue torepresent the client because of the provisions of the Rules of Professional Conduct, particularly rules 2-110, 2-111, 4-101,5-101, 5-102 or 6-101. In the usual relationship, when a lawyer is not able to represent the client, the lawyer must refund anypart of the fee paid in advance that has not been earned, unless the fee is a true retainer. (See rule 2-111(A)(3), Rules Prof.Conduct.) By contrast, in the auction situation, it is the charitable organization and not the lawyer who has received the moneybid for the legal services.

One solution to this dilemma is as follows: (1) as a condition to donation of the legal services, the charitable or nonprofitorganization must agree in advance to refund the auction price bid if the lawyer cannot take the case; (2) the organization mustagree to refund the pro rata portion of the auction price bid if, as a result of his or her professional obligations, the lawyeris unable to complete the engagement; (3) the lawyer, the charitable organization, and the auctioneer should state clearly inadvance that the lawyer's services will be available only if, following the initial consultation, the lawyer determines that therepresentation is consistent with his or her professional obligations; and (4) if the lawyer cannot accept the employment or isrequired to withdraw from representation, the lawyer should assist the client in obtaining a refund of all or part of the auctionprice bid.

CONCLUSION

Lawyers may be asked to donate legal services to a charitable or nonprofit organization which will auction such services asa fund raising device. The legal profession traditionally has contributed to charitable and pro bono activities, and should beencouraged to continue doing so.

However, a number of professional standards and ethical considerations circumscribe the manner in which the lawyer maymake his or her donation of legal services, and the manner in which such services may be auctioned. The prudent lawyer shouldpay careful attention to these rules and considerations.

This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. Itis advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunalscharged with regulatory responsibilities, or any member of the State Bar.

Footnotes1 The Committee assumes that the charitable organization will auction the legal services of every lawyer who offers to donate his or

her time, and does not distinguish among the potential lawyer-donors based upon the dollar value of the services donated.

2 The substance of former rule 3 has been incorporated into present rule 3-102 of the Rules of Professional Conduct.

CA Eth. Op. 1982-65 (Cal.St.Bar.Comm.Prof.Resp.), 1982 WL 31789











Attorney Who is Director of Non-Profit Organization..., CT Eth. Op. 94-28 (1994)


CT Eth. Op. 94-28 (Conn.Bar.Assn.), 1994 WL 780845

Connecticut Bar AssociationCommittee on Professional Ethics

Copyright (C) 2011 by the Connecticut Bar Association Reprinted by permission of the Connecticut Bar Association

ATTORNEY WHO IS DIRECTOR OF NON-PROFITORGANIZATION RECOMMENDING FIRM FOR LEGAL WORK

Informal Opinion Number 94-28

October 19, 1994*1 We have been asked the following question:

May an attorney who serves without compensation as a director of a Connecticut non-profit organization,exercising fiduciary powers under a special act of the legislature, recommend such corporate fiduciary'strust services to the attorney's client, where the attorney also represents the client in establishing the trust ofwhich such fiduciary is sole trustee and sole remainder beneficiary; and may the attorney also participateon the fiduciary's behalf, as a member of the fiduciary's board of directors in an action that affects the clientas grantor and present beneficiary of the trust?

Several attorneys who serve without compensation on the board of directors of a non-profit organization, with fiduciarypowers, have asked whether, in the circumstances described herein, the Connecticut Rules of Professional Conduct, Rule 1.7(b),governing conflicts of interest, or any other Rule, may be violated.

The fiduciary is a non-profit organization devoted to assisting the disabled and their families. The fiduciary utilizes four trustagreements which are designed to receive and manage a disabled grantor-beneficiary's state and federal benefits. Each trust hasoptional provisions, one of which is that upon grantor-beneficiary's death, the unexpended corpus of the trust is given to thefiduciary outright. In all cases trust income is used to carry out a “personal care plan” for the grantor-beneficiary, designed bythe grantor-beneficiary and the fiduciary; the plan is incorporated in the trust instrument either expressly or by reference.

The fiduciary's services are especially tailored for disabled grantor-beneficiaries. Moreover, the expense involved in creatingsuch a trust document might be unwarranted, in view of the small sums involved. Additionally, such trusts would often lacksufficient principal to support reasonable trustee or custodial fees. Accordingly, the fiduciary has engaged the services of anational bank as custodian to manage the trust funds; and the custodian-bank handles all investments and many details ofadministration at below-market rates.

The client pays the fiduciary a one-time enrollment fee when the fiduciary accepts the trust. Partially or fully funded trustsare charged an annual, agreed fee by the custodian bank, and the fiduciary charges agreed hourly fees for its services. Afterthree years an annual membership fee is also charged for an annual review and revision of the grantor-beneficiary's “personalcare plan.”

There are several Connecticut attorneys on the fiduciary's board of directors. The attorney-directors are not compensated forserving on the board and none receives any financial benefit from so serving. The fiduciary has no employees and relies onits attorney-directors, therefore, to design and review the grantor-beneficiary's “personal care plan;” to give legal advice inconnection with trust acceptance, administration, and termination; and to promote, publicize and raise funds for the fiduciary.Seemingly, everything that can be done to reduce cost and provide a much needed service to the client-grantor has been doneby the attorney-directors.

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*2 Several of the attorney-directors have now asked whether they can:1. Refer their clients to the fiduciary, either by suggesting that their clients speak with another attorney-director about fiduciaryservices, or by directly recommending the fiduciary's services to a client;

2. As attorney-directors, vote to accept a trust created by one of them for a client;

3. Participate in any action on the fiduciary's behalf that affects the attorney-director's client as grantor or beneficiary of the trust;

4. Recommend that the attorney-director's client make a gift to the fiduciary; and

5. Draft a trust or other dispositive instrument under which the attorney-director's client gives money or property to the fiduciary.

On the facts posed, each of these five questions is answered in the negative. As discussed hereinafter, however, in specificsituations where the appropriate disclosure is made, and client consent is obtained properly, the attorney-directors may bepermitted to undertake the representation. In such specific instances, the recommendation of the fiduciary's services would beproper, and the residuary gift to the fiduciary would not be objectionable.

A client may be referred to the fiduciary only if the attorney-director fully discloses his or her relationship with the fiduciary.In analyzing this situation, it is helpful but not dispositive to consider the ACTEC Commentaries. However, our decision isbased on the ethical rules and court decisions. See generally, Am. Coll. Tr. & Est. Coun., ACTEC Commentaries on the ModelRules of Professional Conduct, 49 (Oct. 8, 1993) (hereinafter ACTEC Commentaries). Moreover, it has been consistently ruledthat one in the position of the attorney-director, on the facts assumed here, may only refer a client to the fiduciary after fulldisclosure of all relevant information to the client. See, e.g., S.C. 90-16, (1990) (South Carolina ethics opinion to that effect).See also, ACTEC Commentaries, 47, 53-54. The attorney-directors are advised to make the recommended full disclosure inwriting. See, e.g., In Re Germundson, 724 P.2d 793 (Or. 1986)

In certain circumstances, not present on the facts given, an attorney-director may undertake the representations in questionwith the consent of the clients, after consultation. See, ACTEC Commentaries, supra at 47-57. Alternatively, the provisions ofConnecticut Rules of Professional Conduct Rule 2.2 permit an attorney-director to act as an intermediary in the circumstancesand under the conditions stated in that Rule, although “the representation of multiple clients in estate planning matters is notordinarily provided pursuant to [Rule 2.2].” ACTEC Commentaries, supra at 79.

Rule 2.2 provides:*3 (a) A lawyer may act as intermediary between clients if:

(1) The lawyer consults with each client concerning the implications of the common representation, including the advantages andrisks involved, and the effect on the attorney-client privileges, and obtains each client's consent to the common representation;

(2) The lawyer reasonably believes that the matter can be resolved on terms compatible with the clients' best interests, that eachclient will be able to make adequately informed decisions in the matter and that there is little risk of material prejudice to theinterests of any of the clients if the contemplated resolution is unsuccessful; and

(3) The lawyer reasonably believes that the common representation can be undertaken impartially and without improper effecton other responsibilities the lawyer has to any of the clients.

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(b) While acting as intermediary, the lawyer shall consult with each client concerning the decisions to be made and theconsiderations relevant in making them, so that each client can make adequately informed decisions.

(c) A lawyer shall withdraw as intermediary if any of the clients so requests, or if any of the conditions stated in paragraph(a) is no longer satisfied. Upon withdrawal, the lawyer shall not continue to represent any of the clients in the matter that wasthe subject of the intermediation.

The factual setting posed by the attorney-directors and their clients in this opinion is an appropriate one for intermediation,at least on its face.

While as a general rule the practice of estate and trust law is characterized by its ordinary nonadversarial nature, it is rife withpotentially conflicting interest. On the facts here, for example, the decisions to create a trust, to choose a trustee, and designatethose beneficially entitled, is the grantor's. Similarly, the decision of a fiduciary to accept appointment as trustee, and uponwhat terms and conditions, is the fiduciary's. See C.R.P.C. Rule 1.2(a). Moreover, there is a substantial likelihood that the twowill have conflicting interests as well as common goals.

The attorney-directors of the fiduciary decide whether to accept the client's trust. It is they who choose, and thereafter directand supervise, the custodian-bank respecting the investment of trust assets and related duties assumed by the fiduciary underthe trust. The fiduciary acts only through its constituents and the attorney-directors are such in respect of the fiduciary. SeeC.R.P.C. Rule 1.13(e).

The attorney-directors owe to the fiduciary and to each other the highest degree of loyalty, whether or not they are compensatedfor their services as such directors. Moreover, the attorney-directors not only review trust instruments before acceptance, but alsothey have undertaken to provide legal advice to the fiduciary throughout all phases of trust administration and upon terminationand final accounting.

In the circumstances, not only might the attorney-directors' own personal interests be directly implicated as constituents of thefiduciary, but also the parties can readily have directly adverse interests in spite of their common goals. See C.R.P.C., Rule1.7(a) and (b).

*4 The attorney-directors who choose to proceed with the simultaneous representation of multiple clients must discuss theimplications of this type of representation with both the grantor and the fiduciary. The discussion must include the impact ofsuch multiple representation on the lawyer's duty to maintain the clients' confidences. Finally, counsel must not only believethat such multiple representation can be ethically undertaken, but must carefully observe the conditions of Rule 1.7 at all times,even after the representation commences.

C.R.P.C. 1.7 provides:(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 clients; 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 owninterests, 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, theconsultation shall include explanation of the implications of the common representation and the advantages and risks involved.

With respect to gifts to the fiduciary where the attorney-director is involved, whether as draftsperson or otherwise, one ethicscommittee's opinion, Oregon 1989-525 (1989), requires full disclosure. It states that an attorney-director of a charity whoprovides legal advice to it may not simultaneously advise the charity and the donor in respect of a so-called unitrust transaction(i.e., a present charitable gift to the charity with a retained interest in the donor) unless the attorney-director first makes fulldisclosure.

This Oregon opinion resolves a question substantially identical to that raised by the attorney-directors in connection with thecreation of a trust by the client, where the trust contains a remainder gift of trust principal to the fiduciary, outright and freeof all trust, on the client's death.

The issues raised by the attorney-directors and the response here are not exhaustive of the issues that may arise. ACTECCommentaries, supra, contains a full discussion of the estate planning and trust administration area and Rule 1.7, with numerouscitations to the opinions of other ethics committees and judicial interpretations which amplify and exemplify the provisions

of Rule 1.7. See Id. at 51-57. 1

For example, to the extent that an attorney-director (having a prior attorney-client relationship with the client) chooses to referthe client to another attorney (having no prior involvement with the fiduciary), the attorney-director's actions on behalf of thefiduciary may involve a violation of Rule 1.9. (At a minimum, in most situations, prudence will dictate the involvement ofindependent counsel to avoid a claim of undue influence. See generally, Geoffrey C. Hazard, Jr. & William Hodes, The Lawof Lawyering, § 1.8:402 at p. 270 (2d ed. 1990).)

*5 In advising the fiduciary whether to accept the trust in the first instance, and in connection with trust administrationthereafter, the attorney-director may become involved with the representation of the fiduciary against a former client of theattorney-director. It is noted that the attorney-director almost of necessity will use information relating to the representationof the former client. The attorney-director may not represent the fiduciary in this circumstance, without the informed consentof the grantor - former client.

C.R.P.C. 1.9 provides:A lawyer who has formerly represented a client in a matter shall not thereafter:

(a) Represent another person in the same or a substantially related matter in which that person's interests are materially adverseto the interests of the former client unless the former client consents after consultation; or

(b) Use information relating to the representation to the disadvantage of the former client except as Rule 1.6 would permit with

respect to a client or when the information has become generally known. 2

Informal Opinion 88-4 addresses the issue presented by the attorney-director's proposed conduct in giving legal advice to thefiduciary (where a director has assumed that function) with respect to a trust established by the attorney-director's former client.In that Opinion, this Committee stated: “The risk of confidences arising from the former employment [for the client-grantor-beneficiary] being made available in the subsequent representation [providing legal advice to the fiduciary in connection withacceptance of the trust and in its administration] is marked.”

Moreover, the Committee's opinion notes that one in the position of the attorney-director may have a “degree of knowledge” andan “awareness” of facts “material to the matter,” although the attorney has not been involved in the specific act of advising on,





or drafting the particular trust in question, since such information is protected by C.R.P.C. 1.6 and 1.9(b) (client confidentiality),the attorney-director should not advise the fiduciary whether to accept the trust created by the former client, to accept it withlimitations, or otherwise become involved in the matter without complying with Rule 1.9. See generally Informal Opinion 88-4,February 25, 1988.

The Committee on Professional Ethics

Raymond B. GreenChair

Footnotes1 For a general discussion of issues of similar type that arise when representing the elderly, see Fordham Law Review, Volume LXII,

No. 5 (March 1994) “Ethical Issues in Representing the Older Client.”

2 It does not appear that any of the specifically prohibited transactions enumerated in Rule 1.8 are involved on the facts presented.

The trust instrument may contain an exculpatory clause prospectively limiting the fiduciary's and possibly the attorney-director's

personal liability in connection with the fiduciary's conduct. Rule 1.8(h) read literally applies only to malpractice claims. On the

other hand, the failure to at least negotiate for an exculpatory clause in some cases, or to refuse to accept a trust without such a

clause, when the attorney-director is acting on the fiduciary's behalf implicates C.R.P.C. 1.3 (failure to represent the fiduciary with

reasonable diligence).

CT Eth. Op. 94-28 (Conn.Bar.Assn.), 1994 WL 780845


KENTUCKY BAR ASSOCIATION Ethics Opinion KBA E-391

Issued: July 1996 The Committee has received a number of questions regarding the limitations imposed by the Rules of Professional Conduct on lawyer assistance to charitable organizations in their fund raising activities, and with regard to a lawyer providing estate planning services to donors of charitable organizations. Question 1: May a lawyer enter into an agreement with a charitable

organization pursuant to which the lawyer will charge a reduced fee to the organization or the organization's member for estate planning services, conditioned on a bequest to the organization?

Answer: No. Question 2: May a lawyer agree to provide pro bono wills or other estate

planning services for the members of a church or other charitable organization?

Answer: Qualified yes. Question 3: If a lawyer serves on a charitable organization's "planned giving

committee" which offers estate planning seminars to potential donors, may the lawyer later accept employment from a client who attended the seminar?

Answer: Qualified yes. Question 4: If a donor has already decided to give a bequest to a charity, but

wants the charity to recommend a lawyer to provide the legal services

Since the adoption of the Rules of Professional Conduct in 1990, the Kentucky Supreme Court has adopted various amendments, and made substantial revisions in 2009. For example, this opinion refers to Rule 1.7, which was amended. Lawyers should consult

the current version of the rules and comments, SCR 3.130 (available at http://www.kybar.org), before relying on this opinion.

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necessary to effectuate the gift or bequest and/or pay any lawyer fees associated with the making of the gift or bequest, may a lawyer accept such representation?

Answer: Qualified yes. References: Indiana Op. 8 of 1986; (lawyer may not participate in a program

where charity or its members are charged a reduced fee for the preparation of a will); Nevada Formal Op. 5 (June 16,1987) (lawyer may not charge reduced legal fees for estate planning services upon condition that savings be paid to charity); New York City Op. 81-69 (estate planning services may not be conditioned on a gift or bequest to the charity); New York County Op. 656 (1980) (lawyer may not participate in a church sponsored program to write wills for free upon condition of will containing gift to church); compare: Oregon Formal Op. 1991-116 (lawyer who represents charity and serves on its Board of Directors may represent donor who desires to create charitable remainder trust and prepare will leaving bequest to donor); and Philadelphia Inquiry 91-34 (lawyer may, on his own, advertise that he will prepare free "living will" for anyone who has [already] given a gift to a particular charity); KBA E-293 (1984); ABA Informal Opn. 1288.

OPINION

Any agreement between a charitable organization and a lawyer to provide services for its members and/or benefactors must comply with the provisions of the Kentucky Rules of Professional Conduct prohibiting third-party solicitation. Specifically Rule 7.20(2) prohibits any lawyer from giving “anything of value to a person for recommending the lawyer’s services.” By offering services at a reduced fee or by conditioning services on a gift or bequest results in the lawyer giving the organization something of value as consideration for offering legal services. "Although in form it is the charitable organization which solicits members of the public in connection with the preparation of their wills, in substance it is the lawyer who, by participating in the plan, offers his professional services and solicits the employment." See New York County Opinion 656 (November 1980). Consequently, the offering or recommendation of services may not be conditioned on a gift or bequest to the charitable organization. However, ethical considerations do not prevent a lawyer from offering services on a pro bono basis to members of the organization.

With regard to Questions 2, 3, and 4, in each instance the lawyer must evaluate the relationship between the lawyer and the charity, the relationship between the donor client and the charity, and the relationship between the lawyer and the client. This evaluation must involve an analysis of the potential for a conflict of interest, and the resolution of such conflicts. Agreements between a lawyer and a charitable organization for the recommendation of services

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or for providing services to members and benefactors of the charity is fraught with the possibility of conflict of interest. However, a blanket prohibition of such arrangements is not necessary. Instead the lawyer must evaluate each relationship on a client by client basis as discussed herein. Rule 1.7(b). The client may consent to any possible conflicts of interest after consultation.1 Rule 1.7(b)(2). However, if the lawyer is unable to reasonably conclude that the representation will not be adversely affected by the relationship with the charity then the client cannot be asked to consent to the representation.

A lawyer must, at all times, ensure that the lawyer’s professional judgment is not compromised by influences outside the lawyer-client relationship. A situation where the lawyer’s independent judgment may be compromised could likely arise in an arrangement which allows for payment of the lawyer’s estate planning services from funds of the charitable organization. Rule 1.8(f) provides, in effect, that a lawyer may accept payment from a third person as long as there is no interference with the lawyer’s professional judgment and as long as the client consents after consultation.2 The ABA Ethics Committee has expressed concern that such a representation may result in a reluctance on the part of the lawyer to give independent advice to a donor client without seeming disloyal to the organization. See ABA Informal Op. 1288. However, we are of the view that if the decision to donate to the charitable organization is a result of the donor’s independent decision making process, and the lawyer is satisfied that such decision is the decision of the donor free of undue or inappropriate influence of the charitable organization, then the lawyer may proceed with the transaction. In coming to a reasoned decision the lawyer must be satisfied that the donor has the economic capacity to make the intended gift, the competency to honor and understand the transaction, and its affect on the donor and the donor’s family who are natural objects of the donor’s bounty. It is preferable that the donor’s commitment to the charity be in writing.

The lawyer must also ensure that the client’s confidentiality is maintained as required by Rule 1.6. Rule 1.6 prohibits a lawyer from revealing information concerning the lawyer-client relationship unless the client consents after consultation. Consequently an agreement that allows a lawyer to provide services only if a gift or bequest is made would violate the obligation of

1The Model Rules of Professional Conduct define "consult" or "consultation" as denoting "communication

of information reasonably sufficient to permit the client to appreciate the significance of the matter in question." A lawyer is obligated to disclose to the client the existence of the conflict, that multiple representation is sought, and then disclose the implications thereof, including its risks and advantages. In this regard pages 125 through 127 of the American Bar Association’s text, Annotated Model Rules of Professional Conduct, Second Edition, (1992) contain numerous citations and commentary on this issue of client "consultation," and is suggested reading for a further understanding of the requirements for and the meaning of "consultation." This Committee, as a matter of course, recommends that all communications between a lawyer and the client, regarding questions of conflict, be in writing, and that the client’s consent be in writing.

2 Also, see Comment 9 to Rule 1.7 which provides that "A lawyer may be paid from a source other than the client, if the client is informed of that fact and consents and the arrangement does not compromise the lawyer's duty of loyalty to the client.".... It is preferable that the donor’s commitment to the charity be in writing.

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confidentiality. However this obligation should not affect the situation where the benefactor notifies the charity of an intent to provide a gift or bequest and requests a recommendation or asks the charity to provide the services of a lawyer to effectuate the gift.

__________

Note to Reader

This ethics opinion has been formally adopted by the Board of Governors of the Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor rule). The Rule provides that formal opinions are advisory only.

MAY AN ATTORNEY REPRESENT A CLIENT WHO..., 48-AUG Md. B.J. 44


48-AUG Md. B.J. 44

Maryland Bar Journal

July/August, 2015

DepartmentEthics Docket

MAY AN ATTORNEY REPRESENT A CLIENT WHO PROPOSES TO MAKE TESTAMENTARY GIFTSTO CHARITABLE ORGANIZATIONS THAT THE ATTORNEY SUPPORTS OR VOLUNTEERS FOR?

Ethics Docket No. 2015-02

The Ethics Committee

Copyright © 2015 by Maryland Bar Association; The Ethics Committee

A member of the Maryland Bar has requested that the Ethics Committee of the Maryland State Bar Association issue a writtenopinion addressing whether a potential conflict can be waived under the following scenario: Attorney A serves as a Trusteeof and pro bono counsel to the endowment fund of a local charitable organization (“Agency”). The Agency serves as thecentral fundraising entity for a number of local, national and international charitable organizations, including schools and socialservice organizations. A potential client has approached Attorney A and requested his representation in preparing various estateplanning documents. The potential client has indicated that he wishes to make substantial charitable bequests in his estate plan.More particularly, those bequests are to (a) the private school where Attorney's children have attended or currently attend,to which Attorney A contributes and which school is a major beneficiary of the Agency; (b) a religious organization whichhas a close relationship with the Agency; and (c) a national organization to which the Attorney and other firm attorneys maydonate from time to time. The potential client wishes to make a contingent bequest to any organization that the potential clientcontributed to during the last three years of his life, which, if current patterns of giving continue, would include the Agency.

Attorney A asks the Committee whether this situation presents a conflict that is waivable upon informed consent by the potentialclient. Attorney A's concern centers on Rule 1.7(a)(2) which states, “A conflict of interest exists if there is a significant riskthat the representation of one or more clients will be materially limited by the lawyer's responsibility to another client, a formerclient or a third party or by a personal interest of the lawyer.” More specifically, Attorney A is concerned that the representationof the potential client may run afoul of this committee's opinion in Ethics Docket No. 2003-08, which applied Rule 1.7.

In Ethics Docket No. 2003-08, this Committee addressed a scenario that, although similar in broad contours was different inkey respects. There, an attorney was on his church's Legacy Committee, whose function was to promote legacy giving from itsparishioners (i.e., bequests in wills, charitable trusts, charitable annuities, etc.) As Chair of the Legacy Committee, the attorney'srole was to explain and seek legacy giving from the church parishioners. The attorney there sought to volunteer his legal servicesto draft the estate planning documents (wills, codicils, and powers of attorneys) for unrepresented parishioners. The Committeeconcluded that the attorney could not draft these documents as parishioner's counsel because the attorney's “independentjudgment in advising parishioners regarding whether their own interests will be served by such giving in general or by bequeststo your church in particular, as issues regarding the nature, magnitude and timing of parishioners' giving might be affectedby considerations relating to your church's financial needs.” The Committee also expressed “reservations regarding whetherparishioners would be sophisticated enough to weigh the risks involved in order to knowingly consent to your representation.”

In the instant inquiry, Attorney A *45 recognizes that his role as pro bono counsel and Trustee for the Agency's endowmentcommittee, and, to a lesser degree, his indirect interests in some of the other beneficiaries, present a conflict between the potentialclient's interest and the Agency's interest and / or Attorney's interest. A significant distinction between the instant matter andEthics Docket No. 2003-08 rests in the fact that here Attorney A did not actively seek or encourage the potential client to

MAY AN ATTORNEY REPRESENT A CLIENT WHO..., 48-AUG Md. B.J. 44


contribute to the Agency or any other beneficiary. Rather, the potential client came to Attorney A already having decided that hewanted to make certain bequests. Accordingly, a major concern expressed in Ethics No. 2003-08 about the attorney's ability toexercise independent professional judgment in advising the parishioner client whether to make such bequests does not appear tobe present in the instant scenario. Though not expressly stated, it is suggested by the facts that the potential client here has alsopreviously determined the amounts that he wishes to give to his intended beneficiaries. If that is not the case, the potential clientwould need to be advised that Attorney A's professional judgment may be impacted with regard to the nature, magnitude, ortiming of any bequest to the school, religious organization, or the Agency. Any possible bequest to the Agency poses a potentialconflict, as may any bequest to a beneficiary of the Agency. Given the known connection between the Agency and its majorbenefactors (school and religious organization), Attorney A's role and involvement in the Agency endowment committee mayinfluence his professional judgment. The Committee believes that, absent more, an attorney's support of a national organizationgenerally would not impact the attorney's professional judgment. Any waiver sought for a conflict of interest must detail thelimitations on the scope of Attorney A's representation. However, if Attorney “A” concludes that the Agency's goals conflictwith the potential client's goals a different conflict analysis may exist.

As Attorney A recognizes in his inquiry, the central question is whether the conflict can be waived. Given that Attorney A didnot solicit the bequest in the current scenario, the conflict is diminished. With regard to whether the conflict can be waived, asecond distinction between the two scenarios is significant. In Ethics Docket 2003-08 the Committee expressed concern aboutthe parishioners' sophistication in weighing the risks and waiving the conflict. Here, the potential client is “an attorney of greatsophistication”. Plainly, the potential client here has the sophistication to understand any expressed limitations on the Attorney'srepresentation and can give informed consent.

Consequently, it is the Committee's opinion that any conflict of interest can be waived upon the potential client's informedconsent.

48-AUG MDBJ 44


Ethics Committee Advisory Opinion #2011-12/7Limitations on Client Gifts to a Lawyer

By the NHBA Ethics Committee

April 11, 2012

RULE REFERENCES:

Rule 1.8(c)Rule 1.7Rule 1.7(a)(2)Rule 1.7((b)(4)Rule 1.0(f)Rule 1.0(b)Rule 2.1

SUBJECTS:

Client Gifts to LawyerConflict of InterestInformed ConsentConfirmed in Writing

ISSUES PRESENTED:

What ethical guidelines or limitations apply when a lawyer is asked by a client to benefit either the lawyer or thelawyer’s family by a present or testamentary gift?

Factual Background: Estate planning lawyers, especially in smaller New Hampshire communities, may be calledupon by their clients when drafting client wills and trusts to include provisions that may benefit the drafting lawyeror that lawyer’s family. In this situation, following a recent health scare, a long standing client is now focusing onestate planning matters. During discussions with the lawyer drafting a revocable trust for the client, the clientdesires to provide for certain distributions of money and items of tangible personal property from an estate valuedat roughly 3 million dollars that possibly could benefit the lawyer or her family. Over the last twenty years, thelawyer has assisted the client with estate planning, business matters and a myriad of other assorted legal issuesaffecting the client and his family. In fact, the client’s brother is married to the lawyer’s daughter. The client is along-standing board member for the local hospital, in which both client and the lawyer serve on the endowmentcommittee to steer a major campaign (of which the lawyer is the chair). In this context, the client desires to makethe following testamentary and lifetime gifts:

Scenario 1: Client desires to leave in his trust a recently purchased sports car to the lawyer’sson-in-law (and the client’s brother).

Scenario 2: Client desires to leave in his trust a valuable painting to the lawyer’s daughter (and theclient’s sister-in-law).

Scenario 3: In appreciation for all the work provided over the years, client desires to give thelawyer tickets to the Palace Theater and $200 for a nice dinner out for the lawyer and her husband.

Scenario 4: Client desires to leave in his trust $50,000 to the hospital’s endowment fund forgeneral use purposes.

ANALYSIS:

Guidance concerning gifts from a client is found in Professional Conduct Rule (hereafter "Rule") 1.8(c), that statesas follows:

NHBA - Ethics-Opinion-2011-12_07 https://www.nhbar.org/legal-links/ethics-opinion-2011-12_07.asp

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"(c) A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, orprepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer anysubstantial gift unless the lawyer or other recipient of the gift is related to the client. For purposesof this paragraph, related persons include a spouse, child, grandchild, parent, grandparent or otherrelative or individual with whom the lawyer or the client maintains a close, familial relationship."

This prohibition is triggered either through a solicitation by the lawyer (not involved in this situation) or the lawyer’spreparation of an instrument containing a substantial gift, which clearly includes the lawyer’s drafting of client’srevocable trust. Quite clearly Rule 1.8 (c) prohibits the lawyer from including any provision in the trust that wouldprovide any substantial gift directly to the lawyer drafting the trust unless the lawyer is related to the client.1

Scenario 1: The intended future gift of the sports car to the lawyer’s son-in-law certainly could be construed as apotentially prohibited transaction to a person related to the lawyer were it not for the fact that the son-in-law is alsothe client’s brother. Rule 1.8(c) defines related persons to include persons who "maintain a close, familialrelationship," as well as those related by blood to the lawyer or client. However, nothing in the Rule prohibits alawyer from preparing a document that gives a client’s assets to a person related to both the client and the lawyer.Thus, unless the client has an estranged relationship with his brother, he surely would be considered "a relatedperson to the client" and therefore exempted from the application of this Rule.

Scenario 2: The intended future gift of the valuable painting to the lawyer’s daughter is clearly prohibited since sheis definitely a "person related to the lawyer." It is possible that the client’s sister-in-law (married to client’s brother)may enjoy the same status of a person "related to the client" as is intended under Rule 1.8(c). Such a finding,however, would require a factual analysis of the familial relationship between the client and his sister-in-law todetermine whether the relationship is "close" and similar to other familial relationships listed in Rule 1.8(c), suchas a spouse, child, grandchild, or grandparent; it should not be summarily assumed by the lawyer that a sister-in-law would enjoy that status.

Scenario 3 and Unsolicited Client Gifts: The unsolicited gift of the tickets and $200 for dinner is not controlled by areading of Rule 1.8(c). Nevertheless, because a lawyer holds a position of trust and confidence whenrepresenting a client, the proposed transaction in Scenario 3 must be evaluated based upon applicable standardsgoverning fiduciary relationships. ABA Comment [6] is instructive, stating in part:

"A lawyer may accept a gift from a client, if the transaction meets general standards of fairness.For example, a simple gift such as a present given at a holiday or as a token of appreciation ispermitted. If a client offers the lawyer a more substantial gift, paragraph (c) does not prohibit thelawyer from accepting it, although such a gift may be voidable by the client under the doctrine ofundue influence, which treats client gifts as presumptively fraudulent..."

Substantial unsolicited gifts, however, will be closely scrutinized. See, e.g., Restatement of The Law, The LawGoverning Lawyers (2000), §127 (2), which states:

"(2) A lawyer may not accept a gift from a client, including a testamentary gift, unless:

(a) the lawyer is a relative or other natural object of the client’s generosity;

(b) the value conferred by the client and the benefit to the lawyer are insubstantialin amount; or

(c) the client, before making the gift, has received independent advice or has beenencouraged, and given a reasonable opportunity, to seek such advice."

The rationale for this, as stated in Comment b. to Section 127, is that any valuable gift to the lawyer "invitessuspicion that the lawyer overreached or used undue influence." See also ABA Comment [6] to Rule 1.8articulating the concerns of "overreaching and imposition on clients" which may accompany a lawyer’s receipt of asubstantial gift from a client. Comment f. to Section 127 also provides helpful guidance in determining whatconstitutes a "substantial" gift, which is evaluated based upon the relative wealth of the client. Thus, dependingupon the facts, a $100 gift from a poor client may be considered substantial, whereas a $1,000 gift from a wealthyclient may seem insubstantial. This Restatement section cites many cases in which unsolicited substantial giftsfrom a client to the lawyer were set aside as being unfair, or in which the lawyer was forced to disgorge anybenefit received from such gift. See also, those cases and other authority cited in The American College of Trustand Estate Counsel Federation (ACTEC), Commentaries on the Model Rules of Professional Conduct (4th Ed.2006), Annotations to Rule 1.8 ("Gifts to Lawyer"), pages 114-117. The ACTEC Commentary to Rule 1.8 (Ibid, atpage 112) also aids in assessing the "substantially of a gift" by indicating it "is determined by reference both to thesize of the client’s estate and to the size of the estate of the designated recipient. The provisions of this ruleextend to all methods by which gratuitous transfers might be made by a client including life insurance, jointtenancy with right of survivorship, and pay-on-death and trust accounts." [emphasis added]

In this particular scenario, however, since this is an unsolicited gift of one-time theatre tickets and a dinner by afairly wealthy client to his long time lawyer and friend, it would seem the unsolicited gratuity would be considered


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an insubstantial gift, and therefore, not prohibited either by Rule 1.8(c) or other law pertaining to gifts to lawyers.

Should a lawyer receive any substantial unsolicited gift from a client, either during life or by testamentary transfer,the best practice would be for the lawyer either to obtain, if feasible, Court approval before accepting such gift orsecure the consent of all other beneficiaries or devisees. In a probate proceeding, this could be obtained by thelawyer filing a motion to validate the gift as being fair under the circumstances and not the product of undueinfluence or fraud. In a trust context, this similarly could be handled by an appropriate Nonjudicial SettlementAgreement under RSA § 564-B:1-111, or by requesting a specific order from the Probate Court affirming the samepoints, e.g., RSA §§ 564-B:2-201(c), -203(a).

Scenario 4: The intended gift to the hospital clearly is nothing that benefits the lawyer or her family directly.Therefore, as long as the testamentary gift of $50,000 is not the product of solicitation or encouragement on thepart of the lawyer, preparing a trust that includes the gift is not prohibited under Rule 1.8(c). Because of thelawyer’s direct and close involvement with the hospital, however, this intended gift must be closely scrutinizedunder Rule 1.7. As chair of the endowment committee, the lawyer has fiduciary responsibilities to the hospital aswell as a personal interest in furthering the endowment committee’s success. These personal and fiduciaryconnections to the hospital, as the intended donee of the client’s gift, certainly present "a personal interest of thelawyer" and "responsibilities to…a third party" that would constitute a concurrent conflict of interest under Rule1.7(a)(2). In analyzing this issue the lawyer should further be mindful of the application of New Hampshire’s"harsh reality" rule, as is discussed extensively under the Ethics Committee Comment to Rule 1.7.

This "harsh reality" test effectively establishes a two-step process in proceeding under a Rule 1.7 analysis. Thefirst step is whether a disinterested, objective lawyer reasonably believes that an existing concurrent "conflict ofinterest" (in this situation the lawyer’s own personal interest in furthering the objectives of the hospital’sendowment committee) actually can be waived by the client in the first instance. Only after satisfying that first stepmay the lawyer then seek to accomplish the second step, which is to obtain the client’s informed consent. It isimportant to keep in mind, however, that the first step of this analysis always is reviewed after the fact, whensomething has gone wrong, by a disinterested lawyer, and not through the subjective lens and belief of the lawyeractually making the initial decision to proceed with the representation. It should also be noted that in Maryland’sEthics Op. 2003-08 (2003), that Committee concluded that a lawyer on a church legacy committee may not

prepare wills for church members who wish to bequeath property to the church. That Committee took the positionthat the drafting lawyer’s membership on the church legacy committee impeded the lawyer’s independentprofessional judgment and ability to render candid advice (under Rule 2.1), thus prohibiting the lawyer fromforming a reasonable belief that representation of fellow church members would not be "adversely affected." ThisCommittee, however, does not conclude that mere membership on an endowment committee of a hospitalbenefitting under a client’s estate plan creates such a concurrent conflict of interest that would, in all situations,prohibit the lawyer from seeking client consent in compliance with Rule 1.7(b).

Accordingly, the lawyer could only proceed to draft the provision for the client’s bequest to the hospital’sendowment fund after fully discussing the potential conflict with the client and obtaining the client’s informedconsent as required under Rule 1.7(b)(4). So while the lawyer is not prohibited from this transaction, care must betaken that the lawyer has sufficiently disclosed all "material risks of and reasonably available alternatives to theproposed course of conduct" (see, definition of "informed consent" provided in Rule 1.0(e)). It is important to bemindful that Rule 1.7(b)(4) requires that such informed consent be "confirmed in writing" as is defined in Rule1.0(b).

While Rule 1.7 does not require the client to sign and acknowledge the informed consent, certainly the bestpractice is to do so.

SUMMARY:

In conclusion, however innocuous a client’s request may be to have the lawyer accept a gift or draft legaldocuments that could be construed to benefit the lawyer or the lawyer’s family, each transaction must be carefullyscrutinized under the above Rules of Professional Conduct and law pertaining to clients making gifts to lawyers.

ENDNOTES:

1"New Hampshire’s Supreme Court addressed Rule 1.8(c) violations in two attorney disciplinary cases. Thelawyer in Kalled’s Case, 135 N.H. 557 (1992), pleading ignorance of Rule 1.8(c), and after undertaking severalother egregious Rule violations in addition to preparing instruments awarding the lawyer substantial gifts, wasdisbarred. The Court in Whelan’s Case, 136 N.H. 559 (1992), determined that the respondent/lawyer did notviolate Rule 1.8(c), through imputation under Rule 1.10, since he had no participation in drafting the will thatbenefited another lawyer in his firm; this was decided prior to New Hampshire’s adoption of Rule 1.8(k) (effectiveJanuary 1, 2008).


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291

FORMAL OPINION NO. 2005-116

Conflicts of Interest, Current Clients:Charity and Donor

Facts:

Lawyer represents Charity on a continuing basis and is also amember of its board of directors.

Donor asks Lawyer to represent Donor in making a sizable gift toCharity. Donor also asks Lawyer to prepare Donor’s will in whichCharity would be a named beneficiary.

Questions:

1. May Lawyer represent both Charity and Donor in thecharitable gift transaction?

2. May Lawyer represent only Donor in the charitable gifttransaction?

3. May Lawyer prepare Donor’s will naming Charity as abeneficiary?

Conclusions:

1. No.

2. Yes, qualified.

3. Yes, qualified.

Discussion:

1. The Charitable Gift.

Oregon RPC 1.7 provides:

(a) Except as provided in paragraph (b), a lawyer shall notrepresent a client if the representation involves a current conflict ofinterest. A current conflict of interest exists if:

(1) the representation of one client will be directly adverse toanother client;

(2) there is a significant risk that the representation of one ormore clients will be materially limited by the lawyer’s responsibilitiesto another client, a former client or a third person or by a personalinterest of the lawyer;

Formal Opinion No. 2005-116

292

(3) the lawyer is related to another lawyer, as parent, child,sibling, spouse or domestic partner, in a matter adverse to a personwhom the lawyer knows is represented by the other lawyer in the samematter.

(b) Notwithstanding the existence of a current conflict ofinterest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be ableto provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not obligate the lawyer to contendfor something on behalf of one client that the lawyer has a duty tooppose on behalf of another client; and

(4) each affected client gives informed consent, confirmed inwriting.

See also Oregon RPC 1.0(b) and (g):

(b) “Confirmed in writing,” when used in reference to theinformed consent of a person, denotes informed consent that is given inwriting by the person or a writing that a lawyer promptly transmits tothe person confirming an oral informed consent.. . . If it is not feasibleto obtain or transmit the writing at the time the person gives informedconsent, then the lawyer must obtain or transmit it within a reasonabletime thereafter.

. . . .

(g) “Informed consent” denotes the agreement by a person toa proposed course of conduct after the lawyer has communicatedadequate information and explanation about the material risks of andreasonably available alternatives to the proposed course of conduct.When informed consent is required by these Rules to be confirmed inwriting or to be given in a writing signed by the client, the lawyer shallgive and the writing shall reflect a recommendation that the client seekindependent legal advice to determine if consent should be given.

If undertaking or continuing a representation would give rise to anonwaivable conflict of interest under Oregon RPC 1.7(a)(1) and (b)(3),Lawyer may not proceed, even with informed consent from all concerned.A nonwaivable conflict of interest will ordinarily exist when a lawyerundertakes simultaneously to represent both sides of a buyer-seller,lender-borrower, or similar transaction. Cf. In re Claussen, 322 Or 466,909 P2d 862 (1996); In re Jordan, 300 Or 430, 712 P2d 97 (1985); In reRenn, 299 Or 559, 704 P2d 109 (1985); In re Johnson, 300 Or 52, 707P2d 573 (1985). Because of the potential for differing interests orpositions between Charity and Donor concerning the terms of thetransaction, representation of both Charity and Donor in the transaction


1 Care must be taken to determine what is a nonwaivable conflict of interest ratherthan a waivable conflict of interest. For example, a nonwaivable conflict ofinterest can result from a lawyer’s involvement in more than one specificproceeding or transaction. In In re Bristow, 301 Or 194, 721 P2d 437 (1986), forexample, the court found that a nonwaivable conflict existed when a lawyersought to uphold the validity of a particular franchising system on behalf of oneclient in one case while simultaneously seeking to overturn the validity of thesame franchising system on behalf of other clients in another case. The Bristowcase was decided under the former Oregon DRs; however, the result would be thesame under the Oregon RPCs and the representation would not be permissiblepursuant to Oregon RPC 1.7(b)(3). If Lawyer’s representation of Donor in theunitrust transaction gave rise to a similar situation, a nonwaivable conflict ofinterest, rather than a waivable conflict of interest, would be present, and therepresentation would not be permissible.

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would similarly constitute a prohibited, nonwaivable conflict of interestunder Oregon RPC 1.7(a)(1) and (b)(3). See, e.g., OSB Formal Ethics OpNos 2005-72, 2005-40.

It appears, however, that only a waivable conflict of interest underOregon RPC 1.7(a)(2) would be present if Lawyer represented onlyDonor in the charitable gift transaction while continuing to representCharity in other matters and to serve on its board.1 When, as here, thereis a significant risk that Lawyer’s representation of Donor would bematerially limited by Lawyer’s obligations to Charity, the representationis permissible with the informed consent of all clients, confirmed inwriting. Cf. In re Harris, 304 Or 43, 741 P2d 890 (1987); In re Baer,298 Or 29, 688 P2d 1324 (1984).

2. The Will.

Oregon RPC 1.7(a)(2) also would apply to Lawyer’s efforts to draftDonor’s will if Charity is to be a beneficiary. As discussed above, thereis a significant risk, in that situation, that Lawyer’s representation ofDonor will be materially limited by Lawyer’s obligations to Charity.Lawyer would therefore have to obtain informed consent, confirmed inwriting pursuant to Oregon RPC 1.7(b) from both Donor and Charitybefore undertaking the work. Cf. In re Harrington, 301 Or 18, 718 P2d725 (1986).

By contrast, however, the fact that Lawyer is counsel for Charitydoes not mean that Oregon RPC 1.7(a)(1) applies to the will transaction.This is because the interests of Donor and Charity are not adverse, within


2 If, in order to draft the will, Lawyer needed to disclose Charity’s confidentialinformation to Donor, Lawyer would also need Charity’s informed consentpursuant to Oregon RPC 1.6 and ORS 9.460(3). Cf. OSB Formal Ethics Op Nos2005-96, 2005-81, 2005-23.

COMMENT: For additional information on this general topic and other relatedsubjects, see THE ETHICAL OREGON LAWYER §§9.2, 9.7–9.11, 9.20–9.21, 20.1–20.15(Oregon CLE 2003); RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS

§§121–122, 125, 130 (2003); and ABA Model Rules 1.0(b), (e), 1.6–1.7. See alsoWashington Informal Ethics Op Nos 943, 1568 (unpublished).

294

the meaning of Oregon RPC 1.7, at the time that the will would bedrafted. Cf. In re Johnson, supra.2

Approved by Board of Governors, August 2005.

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Bar Members // Ethics Advisory Opinions // Opinion View

Ethics Advisory Opinions

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE

HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED

CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED

SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 04-03

Facts

A Non-Profit Organization (“NPO”) wants to make Lawyer available to prospective donors to prepare

estate-related documents (wills, trusts) for those donors who have expressed a desire to make a gift to

the NPO, either now in trust or at the donor’s death by bequest. Lawyer would be responsible to meet with

donor and fully prepare all documents on donor’s behalf including the provision(s) leaving money to the

NPO. The NPO is willing to pay some or all of Lawyer’s fees on behalf of its new benefactor by paying

Lawyer a percentage of the amount left to the NPO by the donor.

Questions

1. Who is Lawyer’s client in this scenario?

2. Can the transaction be structured in a way such that Lawyer could properly interact with the donor and

the NPO, draft estate-related documents for the donor, and receive payment from the NPO?

Summary

The donor would be a client of the lawyer. Provided that the fee paid to Lawyer by NPO is not a percentage

of the amount of the gift made by the donor/client to the NPO and is reasonable under Rule 1.5(a), Lawyer

could handle the transaction provided that the lawyer makes full disclosure to the donor/client of the

relationship with the NPO (including the fee payment structure with the NPO), obtains the donor/client’s

written permission to proceed, and fully protects the donor/client’s confidentiality. Rule 1.8(f).

Discussion

Who is the client?

Whether the NPO refers a potential donor to Lawyer or the NPO has Lawyer contact the potential donor

directly, if Lawyer undertakes estate planning or the drafting of testamentary documents on behalf of the

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prospective donor, the potential donor becomes a client of the lawyer.

It is unclear from the facts presented whether the NPO would be a client of the lawyer because it does not

appear that Lawyer is providing any legal services or preparing any legal documents for the NPO. In any

event, there is a sufficient relationship between the lawyer and the NPO such that Rule 1.7(b)(2) is

invoked. Under that rule, Lawyer would have to reasonably believe that the representation will not be

adversely affected and Lawyer would have to obtain the donor/client’s consent after Lawyer fully discloses

his relationship with NPO to the donor/client.

How can the transaction be properly structured?

Under the facts presented, any arrangement whereby Lawyer receives payment in the form of a

percentage of the amount gifted to the NPO by the donor/client would be prohibited. Rule 1.5(a) provides

that “a lawyer’s fee shall be reasonable” and identifies nonexclusive factors which must be considered. A

percentage fee arrangement under these circumstances, when the percentage may not satisfy the factors

delineated in Rule 1.5(a)(1) through (8), is not permitted. It is likely that donors referred to the attorney

by the NPO are contemplating sufficiently large gifts to justify the NPO’s involvement. Furthermore, if such

a percentage arrangement did exist, Rule 1.7(b) would prevent Lawyer from representing client. Rule

1.7(b) provides in pertinent part that

A lawyer shall not represent a client if the representation of that client

may be materially limited by . . . the lawyer’s own interests, unless:

(1) the lawyer reasonably believes the representation will not be

adversely affected....

A lawyer may have tremendous influence over his client in the often-complicated realm of estate planning,

probate, and taxation. Where the payment received by the lawyer is directly tied to the amount of the gift

made by the donor/client, the Committee believes that it is per se unreasonable for a lawyer to believe

that the representation will not be adversely affected.

To structure the transaction in a way that it would not be prohibited, Lawyer should be mindful of the

following rules:

Rule 1.5(a) - Whatever method for determining the amount of payment Lawyer is to receive from NPO,

ultimately the payment must be reasonable.

Rule 1.8(f) - Lawyer must fully inform the client that some or all of his fee is being paid by the NPO and

receive client’s consent to that arrangement and must assure the client that the receipt of such payment

from NPO will not interfere with Lawyer’s independent judgment (See also Rule 2.1) or with the client-

lawyer relationship and that Lawyer will protect the confidentiality of client’s information (See also Rule

1.6).

Rule 5.4(c) - Lawyer must take all necessary precautions to ensure that he does not permit the NPO to

direct or regulate Lawyer’s professional judgment in rendering legal services to the donor/client.

Rule 7.2(c) - Lawyer may not give anything of value to the NPO for recommending Lawyer’s services to

potential donors. Lawyer should take all necessary precautions to ensure that gifts to the NPO by the

lawyer, if any, are not confused as payment for referrals.


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In Ethics Advisory Opinion 80-01, we concluded that it would be

improper for an attorney to enter into a relationship with a funeral

home and accept fees for the preparation of wills for the funeral

home’s customers or potential customers. However, in that opinion,

the lawyer was on retainer with the funeral home and received a

monthly set fee for collections, legal opinions, and other legal work.

The only fee received by the attorney would be the monthly retainer.

Clearly, there was an attorney-client relationship. Additionally, the

funeral home was charging a fee to its customers for the service

provided by the attorney. Under DR-2-103(b), which preceded the

current Rules of Professional Conduct, the Committee concluded that

the attorney was, in essence, turning the fees over to the funeral

home in exchange for its referrals. We believe Opinion 80-01 is

distinguishable on its facts and does not apply to this inquiry.

We conclude that provided the fee paid to Lawyer by NPO is not a percentage of the amount of the gift

made by the donor/client to the NPO and is reasonable under Rule 1.5(a), Lawyer could handle the

transaction provided that Lawyer makes full disclosure to the donor/client of the relationship with the NPO

(including the fee payment structure with the NPO), obtains the donor/client’s written permission to

proceed, and fully protects the donor/client’s confidentiality.

See also Ethics Advisory Opinions 00-01, 00-17, 02-04.

INDEX: Conflict of Interest

Client

Fees - Reasonableness

Fees - Third Party Payment

Independent Judgment

Return

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3/10/2016 Opinion 1568

http://mcle.mywsba.org/IO/print.aspx?ID=649 1/1

Advisory Opinion: 1568Year Issued: 1994RPC(s): RPC 1.4; 1.7Subject: Conflict of interest; lawyer for charity representing potential donors

I have been instructed by the Rules of Professional Conduct Committee to respond to yourrecent ethics inquiry regarding the provision of legal services for members of charitableorganizations. Specifically, the issue presented is whether a law firm can enter into abusiness arrangement with a charitable organization to represent church members wishing tomake charitable donations to the church. The charity want to recommend the firm tomembers who ask for recommendations for an attorney to prepare the documents fordonating to the church. The charity would pay for the prospective donor to have the attorneyreview the documents. In addition, the law firm may be asked to do legal work on generalcharity matters unrelated to the giving department. The Committee was of the opinion thatthe proposed arrangement for representation was impermissible on three grounds: 1) It would be a conflict of interest under RPC 1.7(b) if the firm represents the charity ongeneral matters because under the plan, the lawyer's duty to the client/donor competes withthe lawyer's duty to the church. 2) It would violate RPC 1.7(b)(2) because the plan does not allow for consultation and fulldisclosure to the client; and 3) The communication between the client/donor and the lawyer is violated under RPC1.4(b).

In addition, there is a potential danger that the lawyer's professional independence would becompromised because of the third party employer relationship with the church.

Advisory Opinions are provided for the education of the Bar and reflect the opinion of theCommittee on Professional Ethics (CPE) or its predecessor, the Rules of ProfessionalConduct Committee. Advisory Opinions issued by the CPE are distinguished from earlierRPC Committee opinions by a numbering format which includes the year followed by asequential number. Advisory Opinions are provided pursuant to the authorization granted bythe Board of Governors, but are not individually approved by the Board and do not reflectthe official position of the Bar association. Laws other than the Washington State Rules ofProfessional Conduct may apply to the inquiry. The Committee's answer does not include oropine about any other applicable law other than the meaning of the Rules of ProfessionalConduct.

David E. Lieberman

Ethical Warnings for Attorneys Working with Charitable Gifts: One if by Land,

Two if by Sea, ABA Section of Real Property Trust & Estate Law, 2016 Spring

Symposia, Boston MA.

Judicial Decisions Considering Wills And Trusts Drafted By Attorneys Associated With

Organizations Benefiting Under The Instrument.

1. Adams v. First Methodist Episcopal Church of Irving Park, 96 N.E. 253 (Ill. 1911)

The Illinois Supreme Court rejected the legal premise that a presumption of undue influence

applies where a fiduciary to a testator procures an instrument that confers no benefit on the

fiduciary, but benefits a charitable organization the fiduciary also serves. The court considered a

pastor’s actions to procure a will that benefited his church, id. at 255, but the court refused to

hold that the pastor’s fiduciary relationship with his parishioner was imputed to the church or its

trustees, or gave rise to a presumption that the decedent’s gift to the church resulted from undue

influence. The court stated:

It is argued that there was a confidential relation existing between the testatrix and the

pastor and trustees of the church. Such a relation exists between a priest or spiritual

adviser and his parishioner, and, if the priest or spiritual adviser receives a gift from the

parishioner, the burden is upon him to show the absence of undue influence, but the

pastor has no financial interest in the church or the church property, and in this case the

will conferred no benefit upon the pastor.

Id. at 256 (internal citations omitted).

2. Daugherty v. State Savings, Loan & Trust Co., 126 N.E. 545, 547 (Ill. 1920)

The Illinois Supreme Court reviewed a jury verdict setting aside a will after a will contest

alleging that the testator was not of sound mind and memory and was subject to undue influence

when he executed a will leaving all of his estate to be controlled, managed and invested by the

defendant trust company with the income to be divided in equal one-third portions among his

David E. Lieberman

two sons and Blessing Hospital as long as the sons lived, and Blessing Hospital the residuary

beneficiary.

The Illinois Supreme Court reversed, finding insufficient evidence of undue influence. The

court found that that although the draftsman of the will was an officer and board president of the

beneficiary charitable organization, as well as a stockholder and officer of the banking institution

made trustee and executor, there was no proof that he ever advised or suggested the making of

the will or any of its provisions, and the “mere fact that institutions in which [the draftsman] was

interested received substantial benefits from the will, under all the authorities, does not support

the claim of undue influence.”

3. In re Estate of Edel, 182 Misc. 2d 878, 882-85 (N.Y. Sur. Ct. 1999)

The New York Surrogate’s Court considered whether summary judgment was proper in an

action for fraud and undue influence where the attorney prepared a will that left the bulk of the

testator’s estate to a charity that the attorney represented in legal matters and on whose board of

directors he sat as chairman. The court held that, despite the drafting attorney’s “representation

of both the hospital” that was principal beneficiary under the will and of the testator, and the

attorney’s additional role as “Chairman of [hospital’s] Board of Directors,” the attorney was “not

deemed a beneficiary [and] no presumption of undue arises” because “the will [did] not make a

bequest directly to the attorney draftsman.”

4. Alden v. Lewis, 160 So. 2d 181, 182 (Miss. 1964)

The Mississippi Supreme Court affirmed a directed verdict upholding the validity of a will

and codicil executed by a 90-year-old executrix leaving the bulk of her estate in trust to benefit a

museum, and naming her attorney and good friend to serve as trustee to manage the trust,

David E. Lieberman

without compensation. The court found no substantial direct evidence bearing on the issue of

undue influence, and reasoned that “[t]he fact that the person who draws the will is . . . an officer

of a charitable corporation which is a beneficiary under the will, or a member of a church which

is a beneficiary, does not raise a presumption of undue influence.”

5. Mackie v. McKenzie, 900 S.W.2d 445, 449-51 (Tex. App. 2000)

The Texas Court of Appeals affirmed summary judgment dismissing a malpractice claim

arising out of the plaintiffs’ will contest in the underlying probate proceedings alleging that

decedent’s bequest of 75% of his residuary estate to the Baylor University Medical Center

Foundation resulted from undue influence on the part of the Foundation, specifically having its

fundraising director meet with the decedent, discuss estate tax consequences of a charitable

donation, and securing an estate and gift tax attorney for the testator to help draft the will at

issue.

The appellate court found no evidence as to any deceit or fraud on the part of the Foundation,

and held that a will cannot be set aside on proof of facts which at most do no more than show an

opportunity to exercise undue influence.

6. Estate of Davis v. Cook, 9 S.W.3d 288, 293-94 (Tex. App. 1999)

The Texas Court of Appeals affirmed summary judgment rejecting a will contest challenging

a will executed by 99-year-old testator making certain specific bequests and leaving the

residuary estate of nearly $2 million to Schreiner College after visits from the college

development officer when the testator was 98 years old, lonely, isolated and plagued with

physical infirmities. The appellate court found that the evidence merely showed an opportunity

David E. Lieberman

to exert undue influence, stating that “it is not improper for charitable organizations to offer

estate planning advice, including plans for charitable donations.”

7. Rex v. Masonic Home of Missouri, 108 S.W.2d 72, 85-86 (Mo. 1937)

The Supreme Court of Missouri reviewed a will contest challenging a will executed by an

80-year-old testator leaving, after certain specific bequests, the residue to the Masonic Home of

Missouri, alleging testamentary incapacity and undue influence by “the agents, servants and

representatives of” the charity.

The jury found against the will after a trial that included testimony from 74 witnesses,

and a great deal of documents and exhibits. The Supreme Court reversed, finding that the trial

court improperly submitted the issue of incapacity to the jury because there was no substantial

evidence supporting the finding. As to the claim of undue influence, the Supreme Court found

that no fiduciary relationship between the testator and any of the officers, agents or servants of

the Masonic Home had been shown. Even if there were, moreover, the court added, that

relationship alone would not give rise to a presumption of undue influence of incapacity that

entitled the contestants to submit that issue to the jury. Rather, in addition to showing the

fiduciary relation and the gift by the will to the fiduciary beneficiary, there must be evidence

indicating that the beneficiary actively exercised an undue influence upon the testator in the

making of the will. The court found that evidence lacking in the trial record.

8. Brosgol v. Joy, 82 A.D.2d 260 (N.Y. App. Div. 1981)

The New York Supreme Court, Appellate Division, reviewed an order admitting to probate

the will of an 88-year-old, severely ill, dying widower, after trial over objections alleging undue

influence, lack of capacity and improper execution. The will, drafted by an attorney who met the

David E. Lieberman

testator for the first time when he prepared the will and under highly suspect circumstances, left

the residuary estate to the executor for distribution by the executor to one or more organizations

organized and operated exclusively for religious, charitable purposes to be used for the general

care, maintenance and welfare of aged persons.

The appellate court reversed, holding that it was error not to submit to the jury the question

whether the proprietor of the testator’s nursing home exerted undue influence yielding the

residuary and other gifts under the will. The court reaffirmed the principle that “where a will has

been prepared by an attorney associated with a beneficiary, an explanation is called for and it is a

question of fact for the jury as to whether the proffered explanation is adequate.” Id. at 274

(emphasis and internal citation omitted). It should have been left to the jury, the court

concluded, to consider whether there was a longstanding relationship of trust and confidence

between the deceased and his prior attorney, whether the nursing home proprietor was able to

separate them by uttering slanders about the attorney and separate them, whether there was a

close relationship between the proprietor and the decedent and whether she exploited the

decedent’s frailty for her own personal gain, and was instrumental in having the new attorney

selected to prepare the will.

9. Estate of Nelson, 232 So. 2d 222 (Fla. Dist. Ct. App. 1970)

Nelson involved attorneys who prepared, drafted and attended to the execution of a will,

which they then kept in their exclusive possession, under which their client bequeathed most of

his substantial estate in trust to the lawyers with unlimited discretion to distribute the income and

corpus for such religious, educational, scientific, charitable or literary purposes as they shall see

David E. Lieberman

fit. The will also named the drafting attorneys the executors under the will and trustees of the

residuary estate.

The Florida district court of appeal reviewed the probate judge’s order denying petitions to

revoke the will, finding that under the peculiar provisions of the will, the drafting lawyers were

in fact beneficiaries of the estate, receiving real and substantial tangible benefits, even though

they are not named in the will as legatees or devisees. The court indicated but did not find that a

presumption of undue influence applied. Rather, although it found a sharp conflict in the

evidence, the appellate court affirmed the finding of the probate court, based on the evidence in a

five-day trial, holding that even if the presumption arose, the lawyers had successfully rebutted

the presumption by a preponderance of the evidence.

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