May law firm that represented now-deceased spouses in preparing their wills and trusts represent trustees against wife's personal representative?
Rulings on motions to disqualify opposing counsel have in recent months and years regularly found their way into the appellate courts. Some of these reviews have been by way of appeal as appealable injunctive orders. Others have taken the petition for writ of mandate route. The latter route was taken in Fiduciary Trust International of California v. Superior Court (filed 7/31/13) 2013 DJDAR 10119. And again, as was the case in the last disqualification case that appeared in this blog (June 26, 2013), the appellate court disagreed with the trial court. But this time it determined that disqualification should have been granted, rather than not.
Sandler & Rosen (S&R) drafted wills and trusts for Willet and Betty Brown concerning a joint estate worth more than $200 million. In short, the trusts generated substantial income and Betty became the marital trust income beneficiary for life upon Willet's death; upon Betty's death, the principal of the trust went into an Exemption Equivalent Trust that benefitted the parties' four adult children. But after Willet died, Betty revoked her will that had previously benefitted all four of the children, and transferred the large majority of her assets to a trust that benefitted her daughter, the only of the four children that was hers by blood.
After Betty's death, her personal representative, Fiduciary, and the marital trust trustees disputed who was required to pay the $27 million in estate and inheritance taxes due on Betty's assets. The Brown's estate plan indicated that upon the latter of the couple's death the Marital Trust would pay the estate and inheritance taxes. After Willet's death, Betty established a new trust that would, upon her death, distribute a significant majority of the trust assets to the one daughter mostly to the exclusion of the other children. Yet taxes due on her estate still were directed to be paid by the Marital Trust. In light of Betty's changes, the Marital Trust trustees argued that it would be unfair to pay the full amount of taxes owed on the assets of Betty's trust as the other 3 children would pay death taxes on funds they will never receive.
S&R represented the Marital Trust in this tax dispute. Fiduciary moved the court to disqualify S&R. The trial court determined that any communication that occurred at the time S&R prepared the estate plan (about 20 years earlier) were unlikely to be used in the current dispute and denied the motion to disqualify. The Court of Appeal, Second Appellate District, Division Seven, disagreed, finding that based upon the undisputed substantial relationship of the subject matter involved in both representations, and because the previous representation was "direct and personal" rather than "peripheral or attenuated," disqualification was virtually automatic not allowing the trial court to inquire into any actual breach of confidentiality that would affect the present dispute.