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Heir Hunter Fee Agreement Violates Public Policy As Illegal Practice Of Law

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In Estate of Molino, a California appeals court ruled that an heir hunter fee agreement authorizing the heir hunter to select and pay for an attorney for beneficiaries was void as against public policy, because the agreement contained an element of legal representation in the contract.

What Is An Heir Hunter?

An heir hunter company locates heirs of intestate estates (estates where there is no valid will and therefore heirs at law inherit the decedent’s estate).  The heir hunters then contact the heirs and let them know that they have been identified as a beneficiary of an estate.  Typically, the heir hunters will give just enough information to peak your interest, but not enough information to enable you to locate the name of the decedent or the probate estate yourself.

What Is An Heir Hunter Fee Agreement?

The heir hunters do not locate missing heirs for sheer enjoyment – they want to earn a fee.  The heir hunters offer to secure your inheritance in exchange for a fee, usually a percentage of your inheritance.  The heir hunter fee agreement is between you and the heir hunter firm, wherein you agree to give the heir hunters a percentage of your inheritance.

The Facts of Molino

A heir hunter fee agreement came under the microscope in the California case of Estate of Molino.

Connie Boldt, Frank Hernandez, and Ignacio Hernandez (“Respondents”) were the half-siblings of Guadalupe Molino. Molino had a 1995 will that left $100,000 to a friend, Seymour Cohen, and split the residue between her 5 half-siblings, including Respondents (“1995 Will”). In 1997, Molino was hospitalized. Molino’s friend, Cohen, applied to become Molino’s conservator, and told the probate court that Molino had no living relatives. Cohen attached Molino’s 1990 will to the petition to become conservator. The 1990 will left 25% of Molino’s property to Cohen’s children and to various charities. A professional conservator, Jeffrey Siegel, also applied to be Molino’s conservator and represented to the probate court that Molino had no siblings or other close family.

O’Grady, the heir hunter, eventually located the Respondents. O’Grady told the Respondents that they needed to take immediate action to prevent Molino’s assets from being squandered by Cohen. O’Grady asked the Respondents to return a document to O’Grady nominating Siegel as conservator and to sign an agreement giving O’Grady 35% of any distribution that Respondents might receive from Molino’s estate.

In May 1997 each of the Respondents signed the assignment and agreement agreeing to pay O’Grady 35% of any assets to which they might be entitled (“May 1997 Agreements”). The May 1997 Agreements provided that:

Kevin O’Grady shall be compensated only if he is successful in recovering any assets for me. Kevin O’Grady will pay for all ordinary attorney fees, for the attorney of his choice, incurred in the recovery of the assets…If [Kevin O’Grady’s] efforts are successful I understand that I will receive a check in the amount that I am due, less the percentage stated above.

Siegel was appointed conservator. Molino died in 2005. O’Grady had the Respondents sign consents so that Siegel could be appointed as administrator of Decedent’s estate. In March 2006, Siegel distributed $280,000 to O’Grady, apparently representing 35% of four of the half-siblings shares. After the distribution to O’Grady, the probate court ordered a preliminary distribution to each Respondent in the amount of $200,000. Siegel wrote checks to each Respondent in the amount of $130,00 ($200,000 – $70,000 or 35%). O’Grady would not release the checks until each Respondent signed a receipt showing they had received $200,000. One of the Respondents, Connie, refused to sign the receipt, and O’Grady refused to give Connie her check.

Respondents hired counsel and sought to remove Siegel. Siegel asked the court to determine whether the May 1997 Agreements were valid. O’Grady responded to Siegel’s petition and urged to the probate court to find that the May 1997 Assignments were legitimate assignments obtained in his capacity as heir finder.

Siegel was ultimately suspended as administrator. The Respondents urged the probate court to find that O’Grady did not get a percentage of their shares of the estate, and filed for summary judgment that the May 1997 Assignments were invalid. The probate court granted Respondents’ summary judgment, holding that the:

[A]ssignments entered into between Kevin O’Grady and [respondents] and each of them, are void. [Respondents] are entitled to receive distribution of all of their shares of the estate; Kevin O’Grady is not entitled to any portion of the shares of [respondents].

Heir Hunter Fee Agreements That Contract to Obtain Counsel and Prosecute Claims Are Void

O’Grady appealed. The appellate court upheld the probate court’s ruling on summary judgment, holding that the May 1997 Agreements were void as against public policy and not enforceable. The appellate court explained that heirs are allowed to agree by contract to pay a percentage of their shares of an estate to an heir hunter who has located the heir. But these contracts are reviewable by the court, and are invalid if they violate statutes or public policy. When an heir hunter contracts to obtain counsel and to prosecute heirs’ claims, the contract constitutes the illegal practice of law and is void. Intervening for profit in the conduct of legal proceedings amounts to “commercial exploitation of the legal profession and is contrary to public policy.”

Here, O’Grady told respondents that he and Siegel would ‘begin the legal action,’ that it would be ‘involved and costly,’ and that ‘we will pay for all of the legal costs in challenging the will.’ The May 1997 Agreements gave O’Grady the power to retain counsel and control the litigation. Thus, the May 1997 Agreements were void as against public policy.

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