Skip to main content

Michigan’s New Discovery Rules Part 5

Conclusions and Impressions

1.  Upping Your Game

The impact of these new rules can hardly be overstated. Those who dabble in litigation will need to think seriously about whether they want to put in the effort to stay in the game.  Relying on your paralegal to catch all this?  Good luck.

2.  Types of probate cases that will be impacted

Some types of probate proceedings will be unaffected by these changes. These would presumably include things like:

  • Uncontested petitions to formally open or close a decedent’s estate.
  • Uncontested petitions to allow an accounting.
  • Uncontested petitions to appoint a guardian or conservator.
  • Uncontested petitions for protective orders, including protective orders related to Medicaid planning. (It will be interesting to see if the attorney general’s office demands initial disclosures, and what local courts make of those if they are demanded.)

On the other hand, we can anticipate that these new rules will routinely impact the following types of probate proceedings:

  • Contested petitions to appoint or modify a guardianship or conservatorship.
  • Fiduciary litigation, including petitions to remove and/or surcharge a Trustee or Personal Representative.
  • Contests regarding the validity of a Will or Trust (codicil or amendment).
  • Petitions to recover assets (in which context we will have to remind ourselves that if we include a count of conversion or other traditional circuit court action, doing so will trigger the required initial disclosure).

3.  Multiple Parties

Unlike traditional civil litigation, probate cases often involve many parties, each with their own counsel. Some of the discovery rule limits previously discussed will play out differently in these cases. For instance, a seven hour deposition cap may be problematic where four lawyers are asking questions for four different parties.  I suspect in those cases, the courts will either routinely grant extensions or the multiple litigants will schedule multiple depositions of the same deponent.

4.  The Court Reporter Employment Act of 2020

The obvious solution to the limits on interrogatories is to take more depositions.  I’m ok with that.  I’ve always believed that allowing people to think about their response and have their attorney assist them in framing the response is much less useful than putting the question to them, and probing their response with follow up questions.  But depositions are more expensive.

5.  Cost and Prejudice

These new rules will require more cost to get a case started, particularly the preparation of the required initial disclosure. Our firm, for instance, which has historically attempted to handle both high end will and trust contests along with cases involving the protection of vulnerable adults, will find it harder to take on the low-recovery exploitation cases.  In low dollar exploitation cases, we might anticipate being challenged by motions seeking to contain our discovery efforts based on the limited amount of assets at issue. In other words, I see these rules as harmful to the types of people we often represent, particularly cases involving the exploitation of vulnerable adults of modest means.

6.  Fishing Expeditions

What is and isn’t a “fishing expedition” is often subjective. We initiate litigation at times in which the primary basis for the action is the (what we think is reasonable) belief of our client that there was no way this older person would have done what they are claimed to have done but for the overreaching of a close friend or family member, often combined with that person’s declining capacity.  These are often difficult case to litigate, and the evidence that ultimately carries the day, or at least gets us through summary disposition and to a settlement, is only available after extensive discovery is completed.  Under this new regime, I worry that we will we be unable to put provide sufficient detail in an initial disclosure to survive that long.

7.  Getting Homered

These changes give the trial courts greater power to conclude that discovery requests are unjustified, too expensive, or intrusive. Call me cynical, but that kind of discretion can be used to favor certain firms and lawyers over others.

8.  More Harm than Good

While I am glad to have new tools to beat back the civil litigators who play in probate court with their abusive discovery techniques, in the end, for reasons stated above, I fear these changes will ultimately do more harm than good to the clients we commonly represent.

Michigan’s New Discovery Rules Part 4

In addition to the limitations imposed by the definition of the scope of discovery, the new rules specifically limit certain discovery tools, and more thoroughly address the discoverability of electronically stored information (“ESI”).

Specific Limitations

The new MCR 2.306(A)(3) and 2.306(3) place a seven hour limit on the deposition of a party.

The new MCR 2.309(A)(2) limits the number of interrogatories allowed (without court order) to 20. Each substantive subpart of an interrogatory will be counted separately.

Electronically Stored Information

The term “ESI” is defined at the new MCR 2.310(A)(2) as “electronically stored information, regardless of format, system, or properties. The new MCR 2.310(A)(1) includes ESI in the definition of “documents.”

The new MCR 2.302(B)(6) provides rules regarding the right to demand electronically stored information, rules that again balance the cost and accessibility of such records against their potential value and the reasonableness with which they can be recovered. In the new rule MCR 2.313(D), penalties can arise for the failure of a party or their counsel to take reasonable steps to preserve ESI that might be relevant to a case, which penalties can include jury instructions which direct that the jury presume the missing information was unfavorable to the offending party.

In addition, in cases involving significant ESI discovery issues, a court can require (or party can request) and ESI status conference and discovery plan. MCR 2.401(J).  Pursuant to the new MCR 2.401(J)(3), the attorney who attends this conference must be “sufficiently versed in matters relating to their clients’ technological systems” or have an outside expert present as well.

Tighter Reins

In addition to discovery changes discussed above, additional rule changes are designed to impose tighter controls on litigation and to provide courts with greater oversight. The new tools include more detailed scheduling conference and pretrial conference orders, as well as a rule requiring parties to work together on discovery plans.

A revised MCR 2.401(B) provides trial courts with an extensive 18 point checklist of issues to be addressed at the initial scheduling conference. A similarly detailed checklist is provided for courts’ to use when conducting the final pretrial conference.

In addition, a court can order, or a party can request, that the parties work together and stipulate to a discovery plan. MCR 2.401(C).  Such a plan must address “all disclosure and discovery matters.”

Other Notable Changes

The new MCR 2.301(B) clarifies that discovery requests must be issued so that the responding party has the time allowed for a response to pass before the close of discovery. That means, it isn’t good enough to issue a discovery request before the close of discovery.  This issue comes up often.

Obligations to supplement discovery, including the initial required disclosure are detailed in the new MCR 2.302(E)(1)(a), and penalties for failing to supplement are addressed in a new MCR 2.313(C).

New rules have been inserted that provide a process to non-parties who receive subpoenas to challenge the reasonableness of those requests. MCR 2.305

A new rule MCR 2.411 provides a process for mediation of discovery disputes.

Michigan’s New Discovery Rules Part 3

Required Disclosure

The changes to the scope of discovery are dramatic; but the impact of those changes pales in comparison to the new rules regarding required disclosures.

What

Under these new rules, specifically MCR 2.302(A)(1), in every civil action that is filed, the party filing the action (or a counterclaim) must also serve a “Required Initial Disclosure” which provides the opposing party with:

(a) the factual basis of the party’s claims and defenses;

(b)  the legal theories on which the party’s claims and defenses are based, including, if necessary for a reasonable understanding of the claim or defense, citations to relevant legal authorities;

(c)  the name and, if known, the address and telephone number of each individual likely to have discoverable information—along with the subjects of that information—that the disclosing party may use to support its claims or defenses, unless the use would be solely for impeachment;

(d) a copy—or a description by category and location—of all documents, ESI, and tangible things that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses, unless the use would be solely for impeachment;

(e)  a description by category and location of all documents, ESI, and tangible things that are not in the disclosing party’s possession, custody, or control that the disclosing party may use to support its claims or defenses, unless the use would be solely for impeachment. The description must include the name and, if known, the address and telephone number of the person who has possession, custody, or control of the material;

(f)  a computation of each category of damages claimed by the disclosing party, who must also make available for inspection and copying as under MCR 2.310 the documents or other evidentiary material, unless privileged or protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of injuries suffered;

(g) a copy (or an opportunity to inspect a copy) of pertinent portions of any insurance, indemnity, security equivalent, or suretyship agreement under which another person may be liable to satisfy all or part of a possible judgment in the action or to indemnify or reimburse for payments made to satisfy the judgment, including self-insured retention and limitations on coverage, indemnity, or reimbursement for amounts available to satisfy a judgment; and

(h)  the anticipated subject areas of expert testimony.

The new MCR 2.302(A)(2) and (3), place additional requirements on attorneys initiating No-Fault and Personal Injury actions.

When

In a civil action, pursuant to the new MCR 2.302(A)(5), this disclosure must be filed within 14 days from the date that the opposing party answers or 14 days after they appear, if a party files an appearance after an initial answer is filed.

Who

In a civil action, pursuant to the new MCR 2.302(A)(5), this disclosure must be served on all parties who appear.

Required Disclosures in Probate Proceedings

In probate proceedings, the initial required disclosure is not mandatory. Rather, it becomes mandatory if one of two things occur:  (1) an interested person files and serves a demand for it, or (2) a court orders it after someone objects or contests the petition that has been filed.  MCR 5.131(2).  In other words, it is not always required, but it is readily available and will presumably be called for in most contested probate proceedings.

In terms of “who,” pursuant to the new MCR 5.131(B)(1), all interested persons are considered parties to a probate proceeding. And then, pursuant to our new MCR 5.131(B)(2)(a)(ii), when required, the disclosure must be served on all interested persons who object or contest the petition.  When the initial disclosure is a product of a Court order, as opposed to a party demand, the Court itself may define the parties entitled to receive them.

Timing for initial disclosures in probate proceedings are defined in the new MCR 5.131(B)(2)(c). Essentially the disclosure must be served within 14 days after the first hearing, or 21 days after the Court orders them in those cases where the disclosure is a product of a Court order.  In addition, in probate proceedings, an objecting party and respondent must serve disclosures within 14 days after the petitioner’s disclosures are due, or 28 days after a demand or objection is filed.

Michigan’s New Discovery Rules Part 2

Proceeding or Civil Action

The distinction between a “probate proceeding” versus a “civil action” which happens to be initiated in a probate court, remains unaltered. MCR 5.101.

For the uninitiated, a probate proceeding is initiated by filing a petition. A civil action is initiated by filing a complaint.  Whether and when it is proper to file a civil action in probate court depends on a variety of factors, a discussion of which is outside the scope of this article.  Suffice to say, such instances occur regularly, and experienced probate litigators often file both types of actions in the same matter.  While probate litigators have always needed to be mindful of where they stand in terms of a proceeding or civil action, these rules make that distinction even more critical in the context of conducting discovery.

Proportional Discovery

Technically, there continues to be a difference between the “scope of discovery” available in a probate proceeding vis a vis a civil action. I say “technically” because in practice the distinction is rarely given any significance.

In a probate proceeding, the scope of discovery remains: “limited to matters raised in any petition or objections pending before the court.” Currently found at MCR 5.131(B). As of 1/1/20, to be found at MCR 5.131(B)(3).

The real change comes from the rewrite of MCR 2.302(B)(1) which defines the scope of discovery in civil actions. The shorthand version of that rule has long been: anything not privileged that is “reasonably calculated to lead to the discovery of admissible evidence.”  It now says:

… any non-privileged matter that is relevant to any party’s claims or defenses and proportional to the needs of the case, taking into account all pertinent factors, including whether the burden or expense of the proposed discovery outweighs its  likely benefit,  the complexity of the case, the importance of the issues at stake in the action, the amount in controversy, and the parties’ resources and access to relevant information.   Information within the scope of discovery  need not  be admissible in evidence to be discoverable.

The new rules also provide a process for parties to have a court address whether particular discovery requests are, or are not, justified by the factors laid out above.

This change essentially shifts the burden of proving the necessity or appropriateness of a discovery request from the party (or non-party) receiving it, onto the party issuing it. The practice for many litigators now is to flood the opposing party with extensive requests and let them file a motion for protective order, from which platform they can argue that the requests are overly broad or unduly burdensome.

FOOTNOTE: While one could suggest that these new proportional balance rules are not applicable to discovery in probate proceedings, I believe, as a practical matter, this is not the case. Although the above-cited language comes from the definition of the “scope of discovery” in civil actions, and, as indicated above, the scope of discovery for probate proceedings is separately defined by its own rule, the new probate rules also state that all the discovery rules for civil actions apply to probate proceedings except for the rules regarding required disclosures. MCR 5.131(B)(1). Accordingly, it seems unlikely that a trial judge would entertain the argument that discovery requests in a probate proceedings can continue to operate outside the bounds of proportionate justification that the Supreme Court has seen fit to place on all other forms of discovery.

Michigan’s New Discovery Rules Part 1

Litigation of all types will soon be more complicated and more expensive, probate litigation included. This development comes about because of the extensive revisions to the Michigan Court Rules relating to civil discovery which take effect January 1, 2020.  For those who litigate primarily, these changes will require you to up your game.  For those who litigate less frequently, these changes will invite you to consider whether to stay in the game at all.

It would not be wrong to say that, as a practical matter, the new “required initial disclosure” rules will convert Michigan from a notice pleading state to a something arguably more onerous than code pleading state. At the same time, the availability of discovery tools are being reined in, both by specific limitations on their use, and by a new concepts of proportionality.

I have a lot to say about this topic. I’ve divided my thoughts into five parts (this being the first) and will post these parts over the course of this week. In those five parts I will attempt to provide a broad overview of these new rules, with a focus on the manner in which these rules apply to actions arising in probate courts.

To read the new rules, click here.

If you are especially interested in this topic, I will be leading a discussion on it as part of my annual “Litigation Update” at the ELDRS conference in Crystal Mountain, which takes place October 2-4. Click here for information on the conference, and to register.

Drafting Trap Proves Litigator’s Life Line

The Michigan Trust Code provides for a fairly strict statute of limitations to contest the validity of a trust agreement that “was revocable at the settlor’s death.”  Most estate planning lawyers presumably operate on the assumption that this protection applies to the revocable trust agreements they routinely draft for their clients. But as this (unfortunately) unpublished Court of Appeals decision explains, whether or not a trust was revocable at the settlor’s death may depend on what the trust says about the incapacity of the settlor while alive.

MCL 700.7604 says that a trust contest must be started within two years from the date of the death of the settlor, if the trust was revocable when they died. The statute also provides a six month statute of limitations if the trustee provides sufficient notice, the requirements of which notice are defined in the law.  Click here to read MCL 700.7604.

In Linda Dice v Esther G. Bennett Revocable Trust (click on the name to read the case) a trust was contested two years and nine months after the death of the settlor.  The trustee moved for summary disposition based on the statute of limitations for such contests as provided for in MCL 700.7604.  The trial court granted that motion.  But the litigants appealed and the COA reversed.  The decision of the COA exposes a litigation opportunity that I expect few trust drafters or probate litigators have considered.

The Esther G. Bennett Revocable trust agreement included a settlor incapacity provision that said:

In the event two  registered  physicians, one of whom should be the Grantor’s  personal physician,  deliver an instrument  to  the  Successor  Trustee certifying that the Grantor during her lifetime has become incapable of managing her own affairs, the Grantor shall cease to be the Trustee, and the successor trustee shall, upon giving its acceptance of trust, become sole Trustee without requiring action or permission of any nature or kind whatsoever from the Grantor, and shall possess and be subject to those rights, duties and obligations which it would assume if it had been named as the initial trustee hereunder. Until two registered  physicians shall  certify that  Grantor has  again become  capable of managing Grantor’s own affairs, any attempt by Grantor to exercise any reserved rights and powers under this Trust, including but not by way of limitation, the right  of modification,  revocation, amendment, withdrawal or  principal and/or receipt or direction of income, or the sale of principles of this trust estate, or change of beneficiary of any insurance policy subject to this Trust, shall be void and during such period of time this Trust shall be irrevocable and not amendable.

In analyzing this case, he COA notes that the definition of revocability in the MTC is a default definition, and can be overridden by the terms of the trust itself. Here the Court concluded that the facts of this case, and the language of this trust agreement, caused this trust to have become irrevocable upon the settlor’s incapacity and, accordingly, the statute of limitations set forth in MCL 700.7604 did not apply.

Interestingly, in this case, a fact issue remains as to whether the medical reports obtained through discovery were sufficient to meet the requirement that two doctors certified the settlor’s incapacity. But that’s an issue for another day.  For the purposes of this blog post, it is enough to say to our readers who draft trust agreements:  It’s probably a good idea to look at the language you include in your settlor incapacity provisions and consider whether a modification may be warranted.  And to the litigators who handled this case: Bravo.  I doubt that many of your colleagues would have recognized this opportunity or pursued it was well.

Published Opinion Clarifies Joint Account Rights

This case was handled by our firm:  Chalgian and Tripp.  We represented the Appellant at trial an in the Court of Appeals.

This case clarifies a heretofore confusing issue involving joint accounts and the rights of joint account owners pre-death.

Most importantly, this case is published.

While many cases address the issue of survivorship rights in joint accounts, this case deals with the question of what happens when one joint account owner removes assets from a joint account before the other account owner dies.

Our client made his accounts joint with a person with whom he had a long relationship, but to whom he was not married. He got sick.  When it was evident that his condition was rapidly depleting his savings, the non-client co-owner went to the bank and removed essentially all the money she could get.

At trial, the non-client co-owner argued that she had the same rights to the money as our client, and therefore that she did nothing wrong by defunding these accounts.  This was her position even though evidence at trial showed that she contributed nothing to the accounts, and that any significant withdrawals from the account had to be made with the approval of our client.

The trial judge accepted their argument, and ruled in favor of the non-client owner largely based on the application of cases related to survivorship rights in joint accounts. We appealed.

The appellate court reverses and remands to the trial court, holding that our client’s claims of conversion were wrongly dismissed, and also that our client’s claims of breach of fiduciary duty and constructive trust may likewise be revived. On remand, the trial court is tasked with determining damages for the conversion.

Click here to read: In Re Estate of Robert G. Lewis.

Thanks to Phil Harter of our office for his excellent research on the issue, and for taking the lead with the appellate brief.

Expressions of Intent: Admissible but Insufficient

Dad holds family meeting before he dies, and says he wants everything to go equally to his six children. He specifically indicates that this includes all assets controlled by beneficiary designation.  His will likewise provides for equal division.  But when he dies, the beneficiary on one IRA is to one of his children, individually.

The other children go to great lengths to show that there were defects in the way the financial institution tracked the paperwork associated with the beneficiary designation on this IRA, which defects, they claim, opens to the door to extrinsic evidence and ambiguity. But their case falls short, particularly because the financial advisor who managed the accounts testified that he had a conversation with the decedent when the account needed to be updated, and the decedent reaffirmed that he wanted to retain the single child as beneficiary.

The case, In re Estate of William Patrick McNeight (click on the name to read the case), offers a good discussion of admissible evidence of intent [hearsay exception 803(3)]; as well as the difference between a contest over a joint account (in which there is merely a presumption of ownership in the survivor) versus a beneficiary designation (which is conclusive subject to being set aside by evidence sufficient to invoke a legal or equitable theory for relief). The case is unpublished.

The trial court decided the case on summary disposition, which was affirmed by a majority of the COA panel. The dissenting COA judge writes that, in light of the amount of paperwork, the number of accounts held by the institution, and the institution’s seemingly imperfect ability to track their own forms, the case should not have been disposed of on summary disposition.  To read the dissent, click here.

A lot of potential litigation matters start with the proposition that: “Our parents always said everything would be divided equally.”  The Appellants in this case did a good job trying to make something of these statements.  But in the end, as with most such matters, that expression simply isn’t enough to overcome a written testamentary document that indicates otherwise.

A Corktown Hotch Potch

UPDATE:  The case of In Re Monier Khalil Living Trust was first published March 12, 2019.  For reasons I do not fully understand, the Court of Appeals granted a motion for reconsideration, vacated its original opinion and issued a new opinion on May 14, 2019, also published.  Click here to read on the newer and final opinion.  The outcome seems to be the same, and my analysis below is not altered.

 

This is a published Court of Appeals probate case which looks at the limits of a trial court’s authority to dismiss an action on its own initiative.

The case is called In Re Monier Khalil Living Trust (click on the name to read the case).

Spouse died leaving property in trust for the surviving spouse, Evelyn. Evelyn was given the right to all income, an unlimited power to invade principal, and the power to redirect or distribute trust property to others, during her life and upon death.  Further, Evelyn’s decisions with respect to all matters were expressly not subject to review.

Among other things, the trusts contained business and real estate interests in Detroit’s trendy Corktown neighborhood.

Evelyn began exercising her powers to distribute trust property among her children, and did so unequally as the document allowed. After several years, the children who felt they were getting shorted sued, claiming that, among other things, Evelyn was being unduly influenced.

The trial judge held several in-chambers conferences with the lawyers, but did almost nothing on the record in the courtroom, and ultimately dismissed petitioner’s case sua sponte. The petitioners appealed.

Baldwin’s Foil

I think the reason this case was published is because the COA had to rely on an unpublished opinion to get to the result it wanted.

Appellees relied on In Re Baldwin Trust 274 Mich App 387 (2007), a published case in which the COA upheld a trial court after it had dismissed a matter sua sponte when the trial judge had essentially heard enough.  Appellants, however, had to rely on an unpublished decision: In Re Clemence Trust (COA docket 332099, October 31, 2017), in which the trial court was reversed after doing the same thing. Click on those case names if you want to read those cases.

In this matter, the COA spent several pages explaining how the facts between the two cases differed, and how the facts of this case were more like Clemence than Baldwin.  One clear point of irritation to this panel of the COA was that this trial judge did everything, or nearly everything, in chambers, and left the COA with almost no record to review.  As a result of this analysis, the COA reversed the trial court’s decision and remanded the matter for further proceedings “on the record.”

With this decision there is now a published decision to rely upon as a foil for Baldwin.  The law seems to be that while probate trial courts may at times dismiss cases sua sponte, the decision to do so is subject to review.  Among the factors to be considered in deciding whether the trial court acted properly, is the extent to which the trial court allowed the aggrieved party to create a record.

The Whimpiness Factor

Another point made by the COA is that the petitioners never actually formally requested a hearing on the record, and never actually initiated discovery as they are empowered to do. In most cases, the COA would say that they therefore had abandoned their right of appeal on these issues.  But here, the COA allows those issues to serve as the basis for their decision – but not without some heat:

The attorneys also deserve a share of the blame for our inability to properly review this case. It is incumbent on counsel to insist on a record of critically important proceedings, even in the face of judicial disapproval or disagreement. A written motion to create a record might have avoided the need for this appeal.

[I recognize that some litigators who practice regularly in Wayne County (and perhaps other courts) might suggest that this behavior is not whimpiness at all, but rather a matter of survival.]

[When and how to challenge a controlling trial judge is a topic for another day.]

A Hotch Potch B’Gosh

So finally: What is a Hotch Potch?

This case was started with a “Petition for …. return of property to hotch potch…”

This opinion informs us that hotch potch (aka “hotch pot”) is a legal term of art, albeit an “antiquated” one.  Basically, it means: squaring things up before distributing the estate when numerous advancements have been made to the greedy kids.  Nice to have a label for it, or I should say, a label that can be used in polite company.

 

Reflections from a Costly Goose Chase

The crux of this unpublished opinion is whether the cost of litigation initiated by a conservator that turns out to be a big waste of money, should be paid out of the estate.

In In Re Conservatorship of Marilyn Burhop the probate court appointed a local lawyer (“Jones”) as conservator over a vulnerable adult (click on the name to read the case).  Jones learned that prior to her appointment, the ward, Marilyn, transferred nearly $500,000 to certain acquaintances (the “Sirchias”).  In addition, Marilyn changed her estate plan to benefit the Sirchias exclusively.

After some preliminary investigation, Jones decided to sue the Sirchias to recover the funds and to initiate litigation to set aside the estate planning changes. After incurring about $175,000 in legal and fiduciary fees, Jones settles. Curiously, perhaps conveniently, the COA fails to share the details of the settlement – such as whether the conservator recovered anything. But reading between the lines, it seems that Jones simply dropped the case.  The issue then became whether the massive fees that Jones and her attorneys charged to pursue this litigation should be allowed as expenses of the estate, when, in the end, the estate received no benefit.  The trial court allowed the fees in their entirety, and the order allowing those fees is what was appealed and affirmed.

Here’s what I think:

Seek Instruction

The way this case begins is all too common. These days, conservators are often appointed to protect a vulnerable adult from financial exploitation, which exploitation may have already begun.  Accordingly the question of whether the conservator should simply protect what’s left or pursue recovery of what may have been improperly removed is typical.  In this case, Jones apparently did some preliminary investigation before initiating litigation, but what Jones did not do, and what I think was her initial mistake, was to ask the probate court for instruction.

In our firm, when handling these matters, we commonly to seek court instruction at the outset. We ask the court to authorize the conservator to pursue litigation and also to enter into an engagement with our firm.  In that process we present the court with the proposed engagement letter.  We don’t do this in every case, but I am thinking we will start doing it more often.

Certainly, it seems to me that, before Jones was $175,000 into the litigation, she should have gone before the court and asked whether this matter should continue to be pursued and at what cost. Perhaps the court would have told her not to pursue the litigation at all, perhaps the court would have found that a contingency fee arrangement would have been more appropriate, or perhaps the decision to drop the matter would have been made at an earlier date?  We won’t know, because court instruction was apparently never requested.

Asset Recovery v Estate Plan Changes

In this opinion, the COA fails to address what I think is a critical distinction. The appropriateness of a conservator seeking to recover misappropriated funds is one thing, challenging estate planning documents is quite another.

With respect to misappropriated funds, such funds would become property of the conservator, would provide additional resources to benefit the ward during her remaining life, and failure to pursue recovery in a timely manner would present the possibility that a statute of limitations would be missed or that the funds would be dissipated and become unrecoverable.

Challenging the estate planning documents is different. Assuming the changes are strictly with respect to testamentary disposition, setting them aside would not increase the resources available to provide for the ward’s needs, and in most cases there would be no statute of limitations to worry about.  In fact, our laws are structured so that such changes are disclosed to the real parties in interest upon death (or in the case of a trust, upon incapacity) and the real parties in interest are empowered to protect their own interests at their own cost.  If there is any argument that a conservator would have a reason to engage in litigation over the validity of estate planning documents, it would be with respect to MCL 700.5428 which imposes duties on the conservator to manage resources in manner that does not disrupt the known estate plan.  Accordingly, for instance, if there are specific gifts, beneficiary designations or joint accounts, in deciding what resources to dissipate on the needs of the ward, the conservator must take into account the impact of those decisions on the overall estate plan of the ward.  But this issue was not raised in this case, and if it were, the appropriate approach would seemingly be to seek court instruction regarding the use of resources.

To my thinking, the decision of this conservator to spend money litigating the validity of the estate planning documents in this case is highly questionable.

Disregarding Valentino

There is an old rule that says a fiduciary is entitled to fees when what they have done has benefitted the estate. The 1983 Michigan Court of Appeals case In Re Valentino Estate, 128 Mich App 87 (1983) is often cited for this rule.  This opinion holds that Valentino was superseded by EPIC.  Well, that’s news to me.  First, I would be interested in knowing whether there is any published authority for that conclusion, I know of none and they cite none.  Further, it is worth noting that as recently as 2010, with the adoption of the Michigan Trust Code, the concept of a benefit to the estate being a basis for allowing fees was seemingly recognized in MCL 700.7904.  While that law relates to a non-fiduciary’s claim for recovery of fees from a trust, the commentary cites cases much older than Valentino for this rule.

Outspent

A common litigation strategy is to simply outspend your opponent until they wilt. In this case, the COA asserts that the Sirchias did just that.  The COA says the Sirchias engaged in a “scorched earth” litigation strategy, noting that no less than sixteen motions for summary disposition were filed (and denied).  The suggestion is that Jones may have had a case, but only relented because she was running out of money to spend on the litigation.  Seems plausible.  But where in the law does it say that in deciding whether to initiate litigation the conservator should assume that the opposing party will play nice? Rather, I think, this is all the more reason that Jones should have sought court instruction before starting this fight, should have limited the scope of litigation to asset recovery, or retained counsel on a contingency basis.

A Duty to Litigate

In passing the COA in this opinion says that Jones would have been negligent “under the circumstances” not to have pursued this litigation. Um.  Not a published decision so I guess I will leave that conclusion alone.

The Specter of Bleak House

Let’s step outside our bubble for a minute and look at this from the perspective of the Sirchias. The estate of someone they apparently had a close relationship with is diminished by $175,000.  Their inheritance is diminished by $175,000.  They presumably had to spend a similar amount defending themselves against claims that, in the end, were dropped.

Many people (who are not probate lawyers) perceive the probate court as a place where the property of the dead and dying is consumed by a hungry pack of lawyers and court officials. It’s an unflattering image that dates back centuries. Without passing judgment on anyone involved in this sordid affair, you can’t help but acknowledge, I think, that this case sort of feeds into that perception.

Conclusion

I’ve gone on long enough.

Many many conservatorship cases arise where something is amiss and prior conduct may give rise to the possibility of financial exploitation of the ward. Whether the conservator tries to remedy those wrongs and recover the missing assets, or to simply move forward and do their best with what they have control over, is often a decision they need to make.

I don’t mean to beat up on the conservator in this case, or to suggest that she didn’t act in good faith. Jones may well have been justifiably outraged by the actions of the Sirchias in the period prior to her appointment as conservator. But even giving this conservator the benefit of every doubt, in the end, it is hard to say that the ridiculously unfavorable outcome of this case could not have been ameliorated, perhaps avoided, had other reasonable decisions been made along the way.