Attorney-Fiduciary Relationships

A new published circuit court case addresses the often confused issue of who an attorney hired by a fiduciary represents and is accountable to. This is technical stuff, so if you’re not in the mood or you don’t do this type or work, spare yourself and read no further.

In Estate of Tyler Jacob Maki (click on the name to read the case); the Court of Appeals affirms the trial court, and in doing so, holds that an attorney who is hired by a conservator cannot be sued for negligence by a subsequently appointed conservator. This is true because there is no attorney-client relationship between the subsequent conservator and the attorney, and also because the ward is not a third-party beneficiary of the contract between the first conservator and the attorney.

This issue comes up periodically. It is not unimportant.  At times appellate courts generate decisions that feed into the confusion.  However, this Court reaches the conclusion that I think most probate practitioners believe is the right result, and the result intended by MCR 5.117(A).  Presumably, this decision can be extended to cases in which other types of fiduciaries retain lawyers.

A lot more could be said about this issue and this case. I will limit my thoughts to these few additional points:

In a footnote the COA recognizes the apparent injustice in the result – the result being that if a person who is under the protection of the court has a fiduciary, and that vulnerable person is injured as a result of the bad acts of their court-appointed fiduciary, and that harm could have been avoided if the lawyer representing the fiduciary (and being paid by the ward) had taken steps to protect the ward, a subsequent fiduciary appointed to clean up the mess can’t seek recovery from the lawyer even if they could show that the lawyer’s conduct was negligent. The COA says, that may not be good public policy, but public policy is not their job.  Take it up with the legislature.

Second point, the COA glosses over the fact that the conservator, who stole money from the ward, was apparently not sufficiently bonded. I don’t know the facts and there is very little in the opinion to go on.  But when you read this opinion you can’t help but wonder: How did this ever turn into a malpractice action against the lawyer? Or, said another way: Why didn’t the bonding company make the ward whole?  As best I can make out from the opinion, the reason that the conservator was apparently not sufficiently bonded is because the lawyer didn’t report the money from a personal injury settlement paid to the ward on the inventory or accountings because the lawyer, knowing that the settlement was subject to a confidentiality provision, didn’t think he had to.  Well, if that is what happened, there’s something very wrong with this picture.  Clearly the Trial Court would have been informed of the settlement, and clearly there are ways to set a sufficient bond without putting the amount of the settlement in the record.

Finally, in its decision, this Court spends time distinguishing between “standing” and the “real party in interest” rule which, for litigators, may be worth a read.