Attorney for Trust Owes No Fiduciary Duty to Beneficiaries

The United States Court of Appeals for the Eleventh Circuit has ruled that the attorney for the trustee of a trust owes no fiduciary duty to the beneficiaries of the trust.

In Bain v. McIntosh, 2015 U.S. App. LEXIS 3116 (11th Cir. 2015), the beneficiaries of a life insurance trust sued the attorney for the trustee for breach of fiduciary duty.  The Court rejected that there was a fiduciary duty between the lawyer for the trustee and the beneficiaries of the trust, relying on the following Florida authorities:

Florida Evidence Code

The Florida Evidence Code, at Section 90.5021, codifies that fiduciary lawyer-client privilege, stating that, for purposes of applying the attorney-client privilege “only the person or entity acting as a fiduciary is considered a client of the lawyer.”

Florida Rules of Professional Conduct

Under the Conflict of Interest Rules, the Rules of Professional Conduct state in the comments, at Rule 4-1.7, that: “In Florida, the personal representative is the client rather than the estate or the beneficiaries.”

The beneficiaries cited to two cases that support the existence of a fiduciary duty between the lawyer for the fiduciary and the beneficiaries, McCormick and Gory.

In McCormick v. Cox, The beneficiaries of a trust sued the trustee for a number of breach items, resulting in a large judgment against the trustee, who was also the attorney for the trustee.  The opinion does not discuss the differences in duties owed by the attorney for the trust in his capacity as trustee vs. his capacity as attorney.  The Eleventh Circuit distinguished McCormick by noting that “The court never decided whether an attorney representing a trustee owes a fiduciary duty to the beneficiaries.  The trustee and the lawyer were the same person.”

In In re Estate of Gory, 570 So.2d 1381 (4th DCA 1990), the beneficiary of an estate attempted to disqualify the attorney for the personal representative because of an alleged conflict between the beneficiaries and the personal representative.  The Court distinguished between whether a fiduciary duty is owed vs. application of the conflict rules, as follows:

We have no quarrel with the view that counsel for the personal representative of an estate owes fiduciary duties not only to the personal representative but also to the beneficiaries of the estate. See Matter of Estate of Larson, 103 Wash. 2d 517, 694 P.2d 1051 (Wash. 1985). This does not mean, however, that counsel and the beneficiaries occupy an attorney-client relationship. They do not. “In Florida, the personal representative is the client rather than the estate or the beneficiaries.” Rule 4-1.7, Rules Regulating the Florida Bar (comment).

Lawyer for Trust Owes No Duty to Beneficiaries

The Eleventh Circuit distinguished Gory on two grounds, first, that the statement in Gory is dicta, and second, that Gory does not extend the existence of a fiduciary duty to a trust setting (presumably meaning that the duty might very well exist between the beneficiaries of an estate and the lawyer for the personal representative).

Curiously, the Eleventh Circuit’s opinion ends with the following footnote:

“Because the Walthers failed to plainly and prominently argue in their initial brief that they were intended third-party beneficiaries of the legal services contract between Kane and the Trustee, they have abandoned this argument.”

Does this mean that there really is a fiduciary duty between the trustee of a trust and the beneficiaries of the trust, but only if a litigant advances the proper theory of liability?

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