T&E Litigation Update – Ajemian v. Yahoo!, Inc.

Author:

Mark E. Swirbalus, Esq., Goulston & Storrs, P.C.

Ajemian v. Yahoo!, Inc.

Last week, the Appeals Court issued a much-anticipated decision in Ajemian v. Yahoo!, Inc., No. 12-P-178 (May 7, 2013), which concerns the question of whether the decedent’s e-mails in his Yahoo! account are property of his estate.

Without ruling on this question, the Probate Court had dismissed the administrators’ complaint, holding that their suit to gain access to the e-mails must be brought in California pursuant to the forum selection clause in the Terms of Service and Privacy Policy (“TOS”) for the Yahoo! account.  The Probate Court had also held that res judicata barred the administrators’ suit in Massachusetts, where they had already obtained an unopposed order against Yahoo! permitting them to obtain the headers to the e-mails, but not the contents of the e-mails themselves. 

The Appeals Court reversed and remanded, holding that res judicata did not bar the present suit in Massachusetts, and that neither the forum selection clause nor the one-year limitations period stated in the TOS barred the present suit in Massachusetts.   The Appeals Court explained that the TOS, which was in the form of a  “browsewrap” agreement (where terms and conditions are posted as a hyperlink on the website), had not been reasonably communicated to the decedent or accepted by him.  The Appeals Court also explained that it would be unreasonable to enforce the TOS against the administrators, who were not parties to the agreement, and that Massachusetts is the proper jurisdiction to hear the dispute because the decedent was domiciled in Massachusetts and the administrators are residents of Massachusetts.

The Appeals Court declined to address the question of whether the decedent’s e-mails in his Yahoo! account are property of his estate, and thus whether the administrators can access those e-mails.  “In these circumstances, the question is best addressed on remand after full briefing and such further proceedings as the probate judge deems appropriate.”  So, for the answer to this question, it would seem that we must stay tuned.

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.

T&E Litigation Update – Yeomans v. Stackpole; Asfawossen v. Stahlin

Author:

Mark E. Swirbalus, Esq., Goulston & Storrs, P.C.

Yeomans v. Stackpole

In Yeomans v. Stackpole, Docket No. MICV2011-01702-F, 2013 Mass. LEXIS 237 (April 13, 2013), the Middlesex Superior Court addressed the question of whether a law firm could be held vicariously liable for legal malpractice based on the alleged breach of fiduciary duty of one of its lawyers as a trustee.

Attorney John Roche served as a trustee of a trust since 1999. In 2001, Attorney Roche joined a law firm (“TG&P”) as a “contract partner.” Under the terms of his contract, Attorney Roche was entitled to keep the trustee fees he earned on trusts that pre-dated his association with TG&P. After Attorney Roche died in 2007, a successor trustee was appointed, and he and a beneficiary then brought suit against Attorney Roche’s estate, TG&P and another law firm with which he had been associated for his allegedly imprudent management of the trust.

The claim against TG&P was that it should be held vicariously liable for Attorney Roche’s alleged negligence. The plaintiffs based this claim on their argument that the beneficiaries had an attorney-client relationship with Attorney Roche. TG&P moved for summary judgment, arguing in part that the firm cannot be held vicariously liable because a viable claim for legal malpractice against Attorney Roche as a partner in the firm does not exist.

The Court granted TG&P’s motion. The Court explained that for a viable legal malpractice claim to exist, there must be an attorney-client relationship, either express or implied, between one of the plaintiffs and Attorney Roche, and that this relationship must exist in the context of his allegedly improper investment and disbursement decisions. The Court held that there was no evidence of such a relationship. All of the interactions with Attorney Roche were as a trustee, not as an attorney. There were no bills for “legal” services, and there was no correspondence on TG&P letterhead that purported to show Attorney Roche giving “legal” advice.

The Court also noted that the trust was not a client of TG&P and that Attorney Roche did not bill for his trustee fees on TG&P letterhead. The only connections between Attorney Roche and TG&P were letters relating to trust management on TG&P letterhead and a meeting at TG&P between Attorney Roche and the beneficiaries. As the Court found, these connections were simply not enough to create an attorney-client relationship between TG&P and the trust.

“Ultimately, there is no record evidence that the law firm . . . had an attorney-client relationship with either plaintiff. Because no attorney-client relationship existed . . . , no duty ran between the law firm and the plaintiffs. Without a duty, the plaintiffs’ legal malpractice claim against [TG&P] must be dismissed.”

Asfawossen v. Stahlin

In a separate decision pursuant to Rule 1:28 that warrants only passing mention, Asfawossen v. Stahlin, Case No. 12-P-645, 2013 Mass. App. Unpub. LEXIS 464 (April 23, 2013), the Appeals Court held that a party cannot collaterally attack a Probate Court judgment by suing the Probate Court judge in Superior Court. Needless to say, even if the Probate Court judge were not judicially immune from such a suit, the Superior Court lacks subject matter jurisdiction to hear this kind of pseudo-appeal from a Probate Court judgment. Let the world take notice.

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.

BBA Trusts & Estates Section Program Recap – November 2012 through March 2013

Over this past winter, the Boston Bar Association’s Trusts & Estates Section offered several educational programs on timely topics and developments in trusts and estates law. Below is a summary of the programs.

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Tax Issues for the Elder Law Attorney

March 19, 2013

This presentation focused on the basic tax issues of which practicing elder law attorneys should have a basic knowledge.

Sponsoring Section/Committee: Tax Section; Elder Law and Disability Planning Committee

______________________________________________________________________________

First Wednesday Fundamentals: Preparing Estate Tax Returns

March 6, 2013

This brown bag lunch presentation provided an overview of how to prepare the federal Form 706 and Massachusetts M-706 for the practitioner who wants a practical and fundamental review of preparing these estate tax returns.  The speakers focused on the filing thresholds for the estate tax returns, the domicile of the decedent, ancillary probate, the estate tax return schedules, and how the preparation of the estate tax returns often are coordinated with the estate administration process.

Sponsoring Committee: Practice Fundamentals Committee

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Undoing Gifts: How to Counsel a Client with Donor's Remorse

February 22, 2013

In the aftermath of the "gifting frenzy" at the close of 2012, some clients may now be re-evaluating the transfers made at year end and wondering whether such transfers can and should be undone.  Focusing on both popular and emerging gifting techniques (such as the Spousal Lifetime Access Trust), this brown bag explored the issues clients should address before deciding to undo a gift and what options might be available to a client who wants to reverse a transfer.  

Sponsoring Committee: Estate Planning Committee

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CLE - Understanding the American Taxpayer Relief Act of 2012

February 13, 2013

This program provided an overview of ATRA, including changes to capital gain, dividend, ordinary income taxes, and employment taxes.  It also reviewed changes to the transfer taxes (estate, gift and GST), and deduction and credit changes.

Sponsoring Sections: Trusts and Estates Section; Tax Section

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A Practical Guide to Estate Administration

February 12, 2013

This brown bag lunch presentation provided an overview of estate administration topics in Massachusetts for the practitioner who wants a practical and fundamental review of Massachusetts estate administration.  The speakers focused on estate administration under the Massachusetts Uniform Probate Code, administration of non-probate assets, trust administration, estate taxes, income taxes, and disclaimer planning.

Sponsoring Committee: Practice Fundamentals Committee

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Trusts & Estates Spousal Elective Share

January 30, 2013

The spousal elective share statute proposed by the Ad Hoc Committee on the Spousal Elective Share is being considered for approval by the BBA.  To ensure that all interested Trusts & Estates Section members had an opportunity to consider and comment on the proposal, the Section held open discussions.  Members of the Ad Hoc Committee and members of the Trusts & Estates Section Steering Committee were in attendance, and a short overview of the proposed statute was provided before the discussion was opened up to participants.  This was the final forum at the BBA for discussion of the proposed statute before the Trusts & Estates Section provides its recommendation to the BBA’s Executive Committee and Council.  Please find the Ad Hoc Committee's report here.

Sponsoring Sections: Trusts & Estates Section

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Wearing Two Hats: Ethical and Malpractice Considerations When A Lawyer Acts As A Fiduciary

January 29, 2013

Lawyers are often asked by clients or family members to serve as trustee, executor, guardian or in some other fiduciary capacity.  The request may be flattering, and accepting can seem tempting - but what are the risks?  How might such risks be mitigated?  Richard Zielinski and Gary Ronan of the Professional Liability Practice at Goulston & Storrs provided some guidance.  They led an interactive roundtable discussion about the ethical and malpractice issues that arise when a lawyer acts as an executor, trustee or other fiduciary.  Among the topics discussed were terms of retention (e.g., exculpatory clauses, indemnification clauses and releases), conflicts of interest, and delegation of duties. 

Sponsoring Committee: Fiduciary Litigation Committee

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The Intersection of Elder Law & VA Benefits

January 15, 2013

The presentation focused on how elder law attorneys can use information on VA benefits to assist their clients in being able to remain in the community, rather than a nursing home.

Sponsoring Committee: Elder Law and Disability Planning Committee

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Gift Planning Basics II: Gift Tax Return Preparation

January 9, 2013

The presenter provided an overview of the federal gift tax return (Form 709).  This form is used to report and pay tax on lifetime gifts and is an integral part of the estate planning process.  The presentation covered the general purposes and structure of the form, as well as provided tips for preparing it.

Sponsoring Section/Committees: Practice Fundamentals Committee; New Lawyers Practical Skills Committee; Solo & Small Firm Section.

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Trusts & Estates Mid-Year Review

December 13, 2012

The Trusts and Estates Section Mid-Year Review covered recent federal and state case law, legislation and tax law matters. The Mid-Year review touched on federal tax cases, Massachusetts case law, and legislative updates

Sponsoring Committee: Estate Planning Committee

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First Wednesday Fundamentals: Gift Planning Basics I: Taxable Gifts - Definitions, Opportunities and Potential Pitfalls

December 5, 2012

The speakers reviewed the general tax rules applicable to taxable gifts, explored benefits of lifetime gifting from the estate planning perspective, and identified potential pitfalls for the practitioner to try to avoid.

Sponsoring Section/Committees: Practice Fundamentals Committee; New Lawyers Practical Skills Committee; Solo & Small Firm Section

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Year-End Gift Tax Planning for 2012

November 16, 2012

With the prospect of a substantial decrease in the available federal gift and GST tax exemptions and a sharp increase in federal gift and GST tax rates becoming effective on January 1, 2013, a window of opportunity had existed to make gifts during the last few weeks of 2012.  With the few weeks that remained last year, the speakers discussed what planning steps could have been taken.  This program set forth the last minute gift and GST tax planning ideas for 2012 and pitfalls to avoid.

Sponsoring Committee: Estate Planning Committee

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Cocktail Reception and Fall Kickoff: Introducing Opportunities within the Trusts & Estates Practice

November 8, 2012

A panel composed of an in-house trust company professional, planned giving director, non-profit attorney, solo practitioner, and elder law attorney shared their experiences, struggles, and successes in a round table format. There was time to network with the panelists and attendees after the presentation.

Sponsoring Sections: New Lawyers Section; Solo & Small Firm Section; Tax Exempt Organizations Section; Trusts & Estates Section

______________________________________________________________________________

First Wednesday Fundamentals: Basic Estate Plan Documents

November 7, 2012

This was the second part in a year-long series of monthly discussions designed to provide new and transitioning practitioners a core set of tools necessary to practice in the areas of estate planning and probate administration.  This second session provided an overview of documents found in many basic estate plans.  The speaker discussed the general operation of wills, revocable trusts, durable powers of attorney and health care proxies and the important provisions found in these documents, with a special focus on marital deduction formulas. 

Sponsoring Committees: Practice Fundamentals Committee; New Lawyers Practical Skills Committee

For a schedule of upcoming programs, visit the Boston Bar Association’s online calendar.

T&E Litigation Update – Guardianship of Kenneth E. Simon

Author:

Mark E. Swirbalus, Esq., Goulston & Storrs, P.C.

After more than a month with no summary-worthy decisions reported in this area (in your author’s opinion), the Appeals Court has issued two Rule 1:28 decisions in the same case.

In Guardianship of Kenneth E. Simon, Sr. No. 1, Case No. 12-P-630, 2013 Mass. App. Unpub. LEXIS 400 (April 8, 2013), the Appeals Court affirmed a decision by the single justice denying the guardian’s motion for an enlargement of time to file a notice of appeal from a Probate Court decree. In that decree, the Probate Court ordered the guardian to pay legal fees and costs to the ward’s children.

The guardian argued that (1) the clerk of the Probate Court never provided him with notice that his motion under Rule 63 had been denied, (2) he did not check the docket until after the usual appeal period had already expired, and (3) there was good cause to allow his late filing because there was a meritorious basis for appeal. The Appeals Court disagreed, explaining that an attorney’s oversight or lack of notice of entry of a judgment – the guardian is an attorney – is neither excusable neglect nor good cause to extend the time for filing a notice of appeal. The Court further explained that an attorney cannot simply rely on a clerk’s duty to send notice of orders, because the attorney has an obligation to check docket entries periodically. “The petitioner [guardian] has not shown good cause for failing to check the docket entries . . . Nor does the suggestion of a clerk’s error, without more, create ‘unique and extraordinary’ circumstances.”

Moreover, the Court held that the denial of the guardian’s motion under Rule 63 did not toll the time for filing a notice of appeal in any event. Rather, the denial of the guardian’s motion for a new trial under Rule 59 is what triggered the running of the appeal period, and the guardian did not dispute having received notice of that denial.

In addition to affirming the decree ordering the guardian to pay legal fees and costs to the ward’s children, the Court also ordered the guardian to pay their legal fees and costs on appeal pursuant to G.L. c. 215, § 45.

On the same day, but in a separate decision, Guardianship of Kenneth E. Simon, Sr. No. 2, Case No. 12-P-1510, 2013 Mass. App. Unpub. LEXIS 404 (April 8, 2013), the Appeals Court affirmed a judgment of the Probate Court with respect to the guardian’s first and final account. The issue in dispute was the nearly $330,000 in fees and costs that the guardian and his attorney were ordered to return to the ward’s estate. The Probate Court found that “during the eighty-three days of guardianship prior to the ward’s death, the guardian and his attorney acted in concert, and in their own interest rather than that of the ward, to generate outrageous, excessive, and improper guardian’s and attorney’s fees.”

The Appeals Court held there was no merit to the attorney’s argument that, because he was not a named party to the proceedings, the Probate Court lacked authority and subject matter jurisdiction to enter a disgorgement order against him. The Appeals Court reasoned that the reasonableness of the attorney’s fees and costs had been identified in the pretrial order, and that “it was well within the judge’s broad equitable discretion to order the guardian and his attorney, who acted in concert, to return fees taken that were in excess of those to which they were lawfully entitled.” Their acting in concert “rendered them both fiduciaries who could be required to return to the estate the monies beyond which they were lawfully entitled.”

The Appeals Court rejected the attorney’s argument that he had not been given proper notice and an opportunity to be heard on the question of disgorgement. “The attorney examined the witnesses, reviewed the exhibits, and argued extensively at trial. . . [T]he attorney was well aware that what was at stake during the trial was the reasonableness of the fees charged during the guardianship, as to which the attorney had already received payment (and had assured himself by constantly replenishing his retainer). At no point in the proceedings did the attorney request to testify or present his other evidence as to the reasonableness or necessity of the fees charged or the propriety of an order of disgorgement.”

The Appeals Court also rejected the attorney’s argument that the Probate Court committed error in denying a motion to strike the testimony of the opposing side’s expert witness, who was permitted to testify regarding his survey of attorney rates within Barnstable County. The Appeals Court described this kind of survey as a “historically accepted method of determining local rates.” Moreover, both the expert and the Probate Court had properly relied on the lode-star method of calculating a reasonable fee by multiplying hours reasonably incurred by a reasonable hourly rate. The Appeals Court did not address the attorney’s related argument that the expert’s testimony stifled competition in violation of the interstate commerce clause, other than to find that this argument was waived because it had not been raised below.

Finally, the Court rejected the attorney’s arguments that the judge should have recused himself based on an alleged ex parte communication (bar counsel spoke with the judge’s case manager by telephone to request a copy of the trial transcript) and the judge’s alleged bias, and that the Probate Court improperly denied the attorney’s motion for a new trial pursuant to Rule 63. “Rule 63 does not entitle litigants to a new trial, and the judge did not err in so ruling.”

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.

The New 3.8% Surtax on Investment Income

Author:

Joshua Caswell, Esq., Dennis Sullivan & Associates

 

The Health Care and Education Reconciliation Act of 2010, signed into law by President Obama on March 30, 2010, created a 3.8 percent surtax on certain net investment income.  The application of the surtax began on January 1, 2013.

Net Investment Income (NII) is defined as:

(1)   gross income from interest, dividends, annuities, royalties, rents, substitute interest payments and substitute dividend payments unless such income is derived in the ordinary course of a trade or business that is neither a passive activity with regard to the taxpayer nor a financial instrument or commodities business;

(2)   other gross income derived from a trade or business that is either a passive activity with respect to the taxpayer or a financial instrument or commodities business; and

(3)   net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property except to the extent the gain is from the sale of property held in an active trade or business other than a financial instrument or commodities business.

Self-employment income, active trade or business income, gain on the sale of an active interest in a partnership or S-Corp, IRA or qualified plan distributions, trusts for charity (except CLTs) and non-resident alien’s income are all excluded from NII.

Application of the Tax on Individuals

The 3.8 percent tax applies to all individuals who have adjusted gross incomes over the threshold amounts and receive net investment income as defined in the Act (see above).  The amount subject to the surtax will be the lesser of (1) the net investment income; or (2) the amount of the taxpayer’s adjusted gross income that exceeds an applicable threshold amount.  The threshold amount for a single taxpayer is $200,000.  The threshold amount for a married taxpayer filing jointly is $250,000 ($125,000 if filing married separate).

By definition, your adjusted gross income includes wages from work, net investment income, qualified distributions from a retirement plan such as a traditional IRA, 401(k), or 403(b), and any foreign earned income exclusion you may have earned during the tax year.

How Does the Tax Affect Trusts & Estates?

The general rule is that the surtax applies to all trusts and estates described in Subtitle A, Chapter J, Part 1 (IRC §§ 641 – 685) that earn income over the threshold amount.  That amount is $11,950 for 2013.  There are however, the following exceptions:

1.     A trust under which all the unexpired interests are devoted to one or more of the charitable purposes described in IRC § 170(c)(2)(B);

2.     A grantor trust or § 678 trust;

a.     Since income in a grantor trust or a § 678 trust is reported on an individual’s income tax returns, the NII will be added to the individual’s 1040 and the surtax will be calculated according to the rules for individuals;

3.     A trust exempt from tax under IRC § 501(c);

4.     A charitable remainder trust;

5.     Most foreign trusts;

a.     The Treasury Department has indicated that they will take the position that NII accumulated in a foreign trust for the benefit of a domestic beneficiary should be subject to the surtax;

6.     Business trusts;

7.     Common trust funds; and

8.     Pooled income funds.

The 3.8 percent tax will be imposed on the lesser of: (1) the total undistributed net investment income for the taxable year; or (2) the excess of the entity’s AGI for the taxable year over the highest trust and estate tax bracket ($11,950 for 2013).

The surtax will not affect everyone but its effect could be steep. Taxpayers, including trusts and estates, in the highest marginal income tax rate, which is currently 39.6 percent, will pay 43.4 percent with the surtax in 2013.

Boston Bar Files Amicus Brief Urging SJC to Say It's OK for Trustee to Distribute Property From One Trust to Another

In a case with significant ramifications for trusts and estates practitioners and the clients they serve, the Boston Bar Association today filed an amicus brief urging the Supreme Judicial Court (SJC) to recognize that the power of a trustee to distribute trust property to beneficiaries also includes the power to distribute that property to another trust for the benefit of the beneficiary under Massachusetts law. The case before the court, Richard Morse, Trustee v. Jonathan A. Kraft, et al. was brought as a non-adversarial proceeding by a trustee of a trust for the purpose of having the SJC answer the question: Does a trustee have the power to make distributions in further trust for any beneficiary's benefit without the consent or approval of any beneficiary or court?

In its amicus brief the BBA makes the case that a trustee's broad discretion to distribute property outright to a beneficiary includes the authority to distribute property to a new trust for the benefit of the same beneficiary, subject to fiduciary limitations based upon the nature and purposes of the trust and the beneficiary's best interests.

The BBA's amicus brief was drafted by a committee formed by the Trusts and Estates Section and comprised of the following individuals:

Andrew D. Rothstein of Goulston & Storrs, P.C.
Allison M. McCarthy of Riemer & Braunstein LLP
Marc J. Bloostein of Ropes & Gray LLP
George L. Cushing of McLane, Graf, Raulerson & Middleton P.A.
Joan B. Di Cola of Boston, Massachusetts
Michelle B. Kalas of Riemer & Braunstein LLP
Robert G. Stewart of Robert G. Stewart, P.C.
Brian P. Thurber of Goulston & Storrs, P.C.

The Boston Bar Association is a non-profit, voluntary membership organization of 10,000 attorneys drawn from private practice, corporations, government agencies, legal aid organizations, the courts, and law schools. It traces its origins to meetings convened by John Adams, the lawyer who provided pro bono representation to the British soldiers prosecuted for the Boston Massacre and went on to become the second president of the United States.

Please click here to access the News Release on the Boston Bar Association website.

T&E Litigation Update - Fortier v. Sullivan; Pierce v. Spalding; Nystedt v. Nigro; Liporto v. Liporto; Staten v. O’Neill; Masciari v. Fenichel; Kraft Power Corporation v. Merrill; Estate of Steven Gavin v. Tewksbury State Hospital; Fowler v. Kulhowvick; Fiumara v. Fiumara

Author:

Mark E. Swirbalus, Esq., Goulston & Storrs, P.C.

The T&E Litigation Update is a recurring column summarizing recent trusts and estates case law. If you have question about this update or about T&E litigation generally, please feel free to e-mail the author by clicking on his name above.

 

Fortier v. Sullivan

In Fortier v. Sullivan, Case No. 12-P-231, 2012 Mass. App. Unpub. LEXIS 1258 (Dec. 11, 2012), a decision issued pursuant to Rule 1:28, a beneficiary of a will sued the testator’s estate planning attorney for professional negligence and breach of contract. The Superior Court dismissed the claims. The Appeals Court affirmed the dismissal of the professional negligence claim, holding that no duty of care runs from a testator’s attorney to the testator’s intended beneficiary. The Appeals Court reversed the dismissal of the breach of contract claim, however, holding that it is not barred by the Statute of Frauds, despite the lack of a written contract between the attorney and the testator. The Court highlighted the attorney’s admission that plaintiff was the intended beneficiary of the services that the attorney contracted to provide to the testator.

 

Pierce v. Spalding

In Pierce v. Spalding, Case No. 11-P-1373, 2012 Mass. App. Unpub. LEXIS 1200 (Nov. 26, 2012), another decision issued pursuant to Rule 1:28, the Appeals Court affirmed the Probate Court’s denial of legal fees and costs in the underlying trust dispute pursuant to G.L. c. 215, § 45. In affirming the denial of fees, the Court quoted the SJC’s decision in Matter of Estate of King, reiterating that “[a] Probate Court judge has broad discretion to award fees and costs under G. L. c. 215, § 45, and such a decision is ‘presumed to be right and ordinarily ought not to be disturbed.’”

Nystedt v. Nigro

In Nystedt v. Nigro, Case No. 12-1245, 2012 U.S. App. LEXIS 23947 (1^stCir. Nov. 20, 2012), the First Circuit affirmed the dismissal of claims against a Probate Court-appointed special discovery master in a will contest. The plaintiff prevailed in the will contest, but, because of the litigation’s expense, the value of the estate had been greatly diminished and he was “left holding a nearly empty bag.” The plaintiff’s response was to sue a “phalanx of will-contest participants,” including the special discovery master, who was alleged to have been delinquent in his duties, causing the estate assets to plummet. The claims against the special discovery master were dismissed under the doctrine of quasi-judicial immunity, which provides absolute immunity to those who perform tasks that are inextricably intertwined with the judicial function

Liporto v. Liporto

In Liporto v. Liporto, Case No. 12 MISC 462221, 2012 Mass. LCR LEXIS 118 (Nov. 13, 2012), the Land Court heard a dispute between four brothers, who are the four trustees and beneficiaries of a trust established by their father, regarding whether the trust is to terminate by its terms. The plaintiff brothers argued in a motion for summary judgment that, pursuant to the plain language of the trust, its assets “shall be distributed outright equally to the Grantor’s children” following the Grantor’s death, provided that he is predeceased by the parties’ mother. The defendant brothers argued in a cross-motion for summary judgment that although both parents are deceased, the date of outright distribution is not specified in the trust (there is no“definitive end date”) and thus the trust should continue to provide income to the four brothers during their lifetimes. The Court held for the plaintiff brothers, finding that nothing in the trust provides for its continuation during the brothers’ lifetimes and ordering the distribution of the trust’s real property to them as tenants in common. Based on this order, the Court stated that it could proceed to the second question presented in the case, i.e., the absolute right of the co-tenants to seek partition of the property. On this point, the Court noted the well-established principle, now inapplicable to this case in light of the ordered termination of the trust and distribution of the property to the brothers as co-tenants, that property owned by a trust is not subject to partition.

Staten v. O’Neill

InStaten v. O’Neill, Case No. 11-P-23, 2013 Mass. App. Unpub. LEXIS 3 (Jan. 3, 2013), a decision issued pursuant to Rule 1:28, the Appeals Court affirmed the dismissal of claims against a lawyer by his former clients, the successor trustees of a trust he had represented.

The defendant lawyer (“Attorney O’Neill”) drafted the trust and served as the trust’s lawyer until 2005. In 2006, a third party wished to pursue a case against the trustees, and Attorney O’Neill referred the third party to his own personal lawyer and allegedly spent four hours on the telephone with that lawyer as he drafted a complaint, which ultimately resulted in a judgment of approximately $300,000 against the trustees in their individual and fiduciary capacities.

The trustees sued Attorney O’Neill for negligence, fraud, breach of fiduciary duty and conflict of interest. The claims rested on the premise that Attorney O’Neill employed knowledge gained during his representation of the trustees and transmitted that knowledge to the lawyer to whom he referred the case against them, which contributed to the judgment against them. The Court affirmed the dismissal of the claims against Attorney O’Neill, which the Court characterized as speculative because they failed to show plausible causation of the eventual judgment by reason of the referral. Most significantly, the Court explained that “[t]he mere referral of a claim against the trustees by [Attorney O’Neill] to separate counsel would not by itself constitute a breach of fiduciary duty or a betrayal. Equally plausibly, the referral could represent compliance with a duty not to undertake a matter against a present or former client.” The Court also noted, however, that the course of maximum prudence would be for a lawyer to abstain completely from contact with a claim against a present or former client.

Masciari v. Fenichel

In Masciari v. Fenichel, Case No. 12-02757 (Middlesex Sup. Ct. Nov. 30, 2012), the Middlesex Superior Court denied a motion to dismiss a legal malpractice action against an attorney who drafted a will that was the subject of a will contest. The executor of the estate, which incurred a $44,000 payment to settle the will contest, claimed in a nutshell that the attorney had failed to take appropriate steps to ensure that the testator possessed testamentary capacity and was free from undue influence.

The Court explained that “[a]n attorney owes to a client, or a potential client, for whom the drafting of a will is contemplated, a duty to be reasonably alert to indications that the client is incompetent or is subject to undue influence and, where indicated, to make reasonable inquiry and a reasonable determination in that regard[,]” and that “[a]n attorney should not prepare or process the will unless the attorney reasonably believes the testator is competent and free from undue influence.” (Citation omitted.)

Although the Court also explained that an attorney’s duty of care to a testator does not extend to the testator’s heirs and beneficiaries, the Court nevertheless denied the attorney’s motion to dismiss because the claims against him were brought by the executor of the estate, rather than by an individual heir or beneficiary. “Massachusetts courts have allowed an administrator of an estate to file an action for legal malpractice against an attorney who had prepared the will of the deceased.” (Citation omitted.) The relief, however, must be limited to the damages sustained by the estate as a result of the attorney’s alleged malpractice.

Kraft Power Corporation v. Merrill and Estate of Steven Gavin v. Tewksbury State Hospital

In two recent decisions, the courts discussed the viability of certain claims against and on behalf of estates.

First, in Kraft Power Corporation v. Merrill, Case No. SJC-11063, 2013 Mass. LEXIS 8 (Jan. 14, 2013), the Supreme Judicial Court addressed whether an estate can be held liable for certain claims against the decedent as a principal of a corporation under the doctrine of corporate disregard, i.e., whether such claims against the decedent survive his death and can be asserted against his estate.

The doctrine of corporate disregard applies as a matter of equity, and the corporate veil can be pierced, in order to disregard a corporation’s existence and impose liability on individual principals for the purpose of defeating some fraud or wrong or remedying some injury.

The decedent was the sole shareholder and officer of Power Wiring. Kraft Power sold equipment to Power Wiring, for which Power Wiring did not pay. Kraft Power obtained a default judgment against Power Wiring for breach of contract in the approximate amount of $260,000, but Power Wiring had no assets to satisfy the judgment. Prior to entry of the default judgment, the decedent died, and Kraft Power subsequently brought claims against the decedent’s estate. Kraft Power alleged that the decedent was personally responsible for Power Wiring’s contractual obligations because he had abused the corporate form by causing Power Wiring, over which he exercised pervasive control, to become insolvent by transferring its assets to another company under his control, and that both companies were operated by the decedent as shams for his personal benefit. Kraft Power asserted claims against the decedent’s estate for breach of contract, fraudulent transfers in violation of the Uniform Fraudulent Transfer Act, G.L. c. 109A, violations of Section 11 of Chapter 93A, unjust enrichment and fraud.

The trial court dismissed the claims. The SJC reversed in large part and affirmed in small part.

The Court explained that claims which survive a defendant’s death pursuant to the survival statute, G.L. c. 228, § 1, include certain enumerated tort claims and common law claims, and that the common law claims that survive include claims based on contract.

With this explanation, the Court held that the breach of contract claim against the decedent’s estate survives, and similarly that the fraudulent transfer claim survives because it is premised on a contractual obligation owed by the decedent’s company. Therefore, neither of these claims should have been dismissed.

With respect to the Chapter 93A claim, which presented a question of first impression, the Court held that the claim itself survives because it is contract-based (some Chapter 93A claims can be tort-based, and some can be mixed in nature), and thus should not have been dismissed, but that the multiple damages available under Chapter 93A, which are intended to be punitive, do not survive. “Like punitive damages in tort actions, multiple damages under G.L. c. 93A can no longer achieve the goals of punishing a defendant or deterring him from future misconduct when the wrongdoer has died[.]”

The Court also reversed the dismissal of the unjust enrichment claim, which is based on the allegation against the executrix of the estate that she is holding assets that properly belong to Kraft Power, and so the doctrine of corporate disregard and the survival statute do not even apply.

The Court affirmed the dismissal of the fraud claim, however, which was based on the allegation that the decedent had fraudulently induced Kraft Power to enter into the contract. This claim was properly dismissed because a claim of fraudulent inducement does not survive under the survival statute or at common law.

Second, in Estate of Steven Gavin v. Tewksbury State Hospital, Case No. 12-P-62, 2013 Mass. App. LEXIS 6 (Jan. 18, 2013), the Appeals Court addressed the dismissal of a claim for wrongful death under the Massachusetts Tort Claim Act, G.L. c. 258, § 4, because the claim had not been presented or filed by the duly appointed executor or administrator of the decedent’s estate.

The decedent died on August 11, 2008, allegedly because of Tewksbury State Hospital’s negligence. The Massachusetts Tort Claim Act (the “Act”) provides that a claim against a governmental entity must be “presented” within two years. Although the executors named in the decedent’s will (his parents) sent a“presentment” letter to the Hospital and to the Attorney General within the two-year window, on July 21, 2010, they had not been appointed as executors at that time. Then, on March 24, 2011, after the six-month waiting period required under the Act had expired, the named executors filed the wrongful death action on behalf of the estate against the Hospital and the Commonwealth of Massachusetts. After being appointed as temporary executors, they then moved to amend the complaint.

The defendants moved to dismiss, arguing that the presentment and the suit were deficient in that they were brought by someone other than a duly appointed executor or administrator of the estate. The trial court granted the motion, and the Appeals Court affirmed. The Court held that because the “claimants” had not been duly appointed at the time of presentment, a condition precedent to suit under the Act was not met, and that their subsequent appointment did not cure this defect. The Court reasoned that the presentment requirement reflects a legislative choice to permit the public employer to investigate any claim in full and to negotiate, arbitrate, compromise or settle any such claim. Accordingly, the claimant must have the power to negotiate, arbitrate, compromise or settle the claim. Because they had not been duly appointed, the named executors (even in their later capacities as the appointed temporary executors) did not have this power.

Justice Agnes dissented, writing that the meaning the majority assigned to the term “claimant” is too technical and contrary to legislative intent.

 

Fowler v. Kulhowvick

In Fowler v. Kulhowvick, Case No. 12-P-277, 2013 Mass. App. Unpub. LEXIS 168 (Feb. 8, 2013), a decision issued pursuant to Rule 1:28, the Appeals Court affirmed the denial of a petition to vacate a decree allowing a will.

Fowler, an interested party, was not given notice of the petition to probate the will, and did not learn about it until after the will had already been allowed. He then filed a petition to vacate the allowance of the will and for leave to file objections. The probate court determined that notice to Fowler was defective and ordered a hearing on whether Fowler could substantiate his claims of lack of capacity and undue influence. In itself, defective service is not enough to vacate a decree allowing a will. "[A] probate judge has discretion to vacate a decree only after ascertaining whether the party seeking revocation can present 'substantial and meritorious grounds' against allowance of the will. Here, after finding that notice was defective, the probate judge ordered a hearing to evaluate whether Fowler had substantial and meritorious grounds against allowing the will. This was the proper procedure under our precedents." (Internal citations omitted.)

After hearing, the probate court denied Fowler's petition to vacate the allowance of the will, holding that he could not substantiate his claims of lack of capacity and undue influence. The Appeals Court affirmed because it found no error in the probate court's ruling.

 

Fiumara v. Fiumara

In Fiumara v. Fiumara, Case No. 12-P-133, 2013 Mass. App. Unpub. LEXIS 130 (Feb. 4, 2013), another decision issued pursuant to Rule 1:28, the Appeals Court affirmed a superior court ruling that the trust at issue was a "sham" because the decedent never intended to relinquish control over the properties placed in the trust or to vest meaningful title in the trustee.

"In order for a trust to be valid in the Commonwealth, it must unequivocally show an intention that the legal estate be vested in one person to be held in some manner or for some purpose on behalf of another." (Internal citation omitted.) Here, the Appeals Court held that the superior court properly relied on the decedent's conduct after executing the trust in finding that he did not intend to part with control of the property or divest himself of ownership. The decision does not recite all of the evidence, but the Appeals Court noted that the decedent never informed the trustee of her responsibilities or of the identities of the beneficiaries, which was characterized as "robust" evidence that no valid trust was ever intended.

 

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