PROBATE & TRUST LITIGATION COMMITTEE MEETING
Thursday, August 10, 2006
3:00 p.m. to 5:00 p.m.
Palm Beach, Florida
AGENDA (ITEM 1)
I. Call Meeting to Order
II. Administrative Matters and Announcements
A. Introduction of Persons Present
B. Approval of Minutes of May, 2006, meeting at Orlando, Florida [ITEM 2]
C. Time and Place of Next Meeting: September 2006 Kissimmee
D. Thanks to US Trust Company of Florida and Trent
Kiziah: First Annual Sponsor of Committee Meetings
III. Subcommittee Reports
A. Results of 2006 Probate and Trust Litigation Committee Seminar Chair, Jack A. Falk, Jr.
B. Status of Committee legislation:
1. Fiduciary Lawyer-Client Privilege [ITEM 3]. Chair
C. Proposed statute making arbitration clause in a Will or Trust enforceable. [ITEMS 4 AND 7]. Chair, Bob Goldman
D. Proposed statute on exclupatory clause in a Will [ITEM 5]. Barry Spivey, Eric Virgil
E. Use of trust assets to pay attorneys’ fees of the trustee in litigation against a beneficiary (Shriner) [ITEM 6] Peter Sachs, Tom Karr, John Cole and Harris Bonnette
F. Appealing Orders entered in a Probate Proceeding Peter Sachs, Sean Kelley and Tom Karr
G. Collateral Attack on the Validity of Marriage after Death Based Upon Undue Influence Laura Sundberg, Russ Snyder, Chris Wintter, and Larry Miller
IV. New Business
A. Revisions to Rule 1.525 concerning 30 day time limit for filing a motion for attorneys’ fees [ITEM 8] Angela Adams
B. A fee statute to impose fees against a creditor who exaggerates claim amount and prevents distribution of estate or trust assets
V. Adjourn
ITEM 2
[UNAPPROVED]
MINUTES
Probate & Trust Litigation Committee Meeting
Orlando, Florida May 25, 2006
Members in attendance (37):
Angela M. Adams, St. Petersburg
David J. Akins, Orlando
Phillip A. Baumann, Tampa
Wm. Fletcher Belcher, St. Petersburg
Harris L. Bonnette, Jr., Jacksonville
David Carlisle, Miami
Richard Caskey, Tampa
John P. Cole, Jacksonville
Stacy L. Cole, Orlando
Liz Consuegra, Miami
Sandra Diamond, Seminole
Jack A. Falk, Jr., Coral Gables (Chair)
Brian J. Felcoski, Coral Gables
David M. Garten, West Palm Beach
Robert W. Goldman, Naples
William T. Hennessey III, West Palm Beach (Vice Chair)
Tom Karr, Miami
Shane Kelley, Fort Lauderdale
Sean Kelley, St. Augustine
Andrea Kessler, Fort Lauderdale
Stewart A. Marshall, III Orlando
Glenn Mednick, Boca Raton
Mark Middlebrook, Clearwater
John C. Moran, West Palm Beach
Ronald H. Roby, Winter Park
Peter Sachs, West Palm Beach
Jon Scuderi, Naples
Joel H. Sharp, Jr., Orlando
Michael Simon, West Palm Beach
Barry F. Spivey, Sarasota
Laura P. Stephenson, Miami
Laura K. Sundberg, Orlando
Jerry Wells, Daytona Beach
Christopher Q. Wintter, Hollywood
Charles Wohlust, Winter Park
Robert C. Wilkins, Jr.
The Honorable Winifred J. Sharp, Daytona Beach
Call to Order. The meeting of the Committee was called to order at approximately 3:00 p.m.
Approval of Minutes. The Minutes of the meeting of the Committee held in January 13, 2006, were approved as presented without correction or amendment.
Preliminary Discussion. The Committee Roster was circulated and updated and accurate addresses, telephone and fax numbers and e-mail addresses from all members in attendance were requested.
Fiduciary Lawyer-Client Privilege. Fletch Belcher reported on the status of the proposed statute and its journey in the legislature and members made comments concerning the process.
Attorneys’ Fees in Surcharge Action. Peter Sachs and Tom Karr, joined by John Cole and Harris Bonnette, led a discussion concerning Shriner v. Dyer involving a trustee surcharged for using trust assets to pay attorneys’ fees to defend himself. They discussed alternative approaches to the problem. Several members of the Committee made comments on the problem and solutions. The Committee focused on a framework for decision making and predictability. The Committee will continue this discussion at the next meeting with proposed legislation.
Arbitration in Estate and Trust Disputes. The Chair discussed the problem with enforceability of arbitration clauses and the comprehensive legislative solution that ACTEC has been developing. The Committee will move forward with this project while monitoring ACTEC task force work product.
Enforceability of exculpatory clause in Wills. Barry Spivey discussed the law in Florida related to the enforceability of exculpatory clauses in a Will set forth in the white paper he prepared. The Committee discussed a proposed statute and Barry will have a proposed statute for the next Committee meeting.
Appealability of Orders in Probate. Deferred. Tom Karr, Peter Sachs
Collateral attack on validity of a marriage based upon undue influence. DEFERRED. Subcommittee members Lawrence Miller, Laura Sundberg, Russ Snyder and Christopher Wintter.
Next Committee Meeting. The Chair announced that the next meeting of the Committee would be held in Palm Beach in August, 2006, in connection with the next Executive Council meeting.
Adjournment. The meeting was adjourned at 5:00 p.m..
ITEM 3
HB 1341
H 1341Last Action:
View Bill Info / Fiduciary Lawyer-client Privilege
05/05/2006 Died on Calendar
hb134100.html (Confidence: 79.67%)
Senate Bill 2190.
Last Action:View Bill Info / Fiduciary Lawyer-client Privilege
05/05/2006 Died in Committee on Judiciary
sb2190.html (Confidence: 85.1%)
Senate Bill sb2190
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 2006 SB 2190
By Senator Campbell
32-1420-06
1 A bill to be entitled
2 An act relating to the fiduciary lawyer-client
3 privilege; creating s. 90.5021, F.S.; providing
4 that a client acts as a fiduciary when serving
5 in certain positions; providing that a
6 communication between a lawyer and a client
7 acting as a fiduciary is privileged and
8 protected from disclosure; providing an
9 effective date.
11 Be It Enacted by the Legislature of the State of Florida:
12
13 Section 1. Section 90.5021, Florida Statutes, is
14 created to read:
15 90.5021 Fiduciary lawyer-client privilege.--
16 (1) For the purpose of this section, a client acts as
17 a fiduciary when serving as a personal representative or a
18 trustee as defined in s. 731.201, an administrator ad litem as
19 described in s. 733.308, a curator as described in s. 733.501,
20 a guardian or guardian ad litem as defined in s. 744.102, a
21 conservator as defined in s. 710.102, or an attorney in fact
22 as described in chapter 709.
23 (2) A communication between a lawyer and a client
24 acting as a fiduciary is privileged and protected from
25 disclosure under s. 90.502 to the same extent as if the client
26 were not acting as a fiduciary. In applying s. 90.502 to a
27 communication under this section, only the person or entity
28 acting as a fiduciary is considered a client of the lawyer.
29 Section 2. This act shall take effect July 1, 2006.
30
Florida Senate - 2006 SB 2190
32-1420-06
1 *****************************************
2 SENATE SUMMARY
3 Provides that a client acts as a fiduciary when serving
in certain positions. Provides that a communication
4 between a lawyer and a client acting as a fiduciary is
privileged and protected from disclosure.
5
HB 13411 / A bill to be entitled
2 / An act relating to the fiduciary lawyer-client privilege;
3 / creating s. 90.5021, F.S.; providing that a client acts as
4 / a fiduciary when serving in certain positions; providing
5 / that a communication between a lawyer and a client acting
6 / as a fiduciary is privileged and protected from
7 / disclosure; providing construction in application;
8 / providing an effective date.
9
10 / Be It Enacted by the Legislature of the State of Florida:
11
12 / Section 1.Section 90.5021, Florida Statutes, is created
13 / to read:
14 / 90.5021Fiduciary lawyer-client privilege.--
15 / (1)For the purpose of this section, a client acts as a
16 / fiduciary when serving as a personal representative or a trustee
17 / as defined in s. 731.201, an administrator ad litem as described
18 / in s. 733.308, a curator as described in s. 733.501, a guardian
19 / or guardian ad litem as defined in s. 744.102, a conservator as
20 / defined in s. 710.102, or an attorney in fact as described in
21 / chapter 709.
22 / (2)A communication between a lawyer and a client acting
23 / as a fiduciary is privileged and protected from disclosure under
24 / s. 90.502 to the same extent as if the client were not acting as
25 / a fiduciary. In applying s. 90.502 to a communication under this
26 / section, the person or entity acting as a fiduciary is
27 / considered the only, real client of the lawyer.
28 / Section 2.This act shall take effect July 1, 2006.
ITEM 4
PROPOSED SECTION 731.401
(1) A provision in a will or trust requiring the arbitration of disputes between or among the beneficiaries, a fiduciary under the will or trust, or any combination of them, is enforceable.
(2) Unless otherwise specified in the will or trust, a will or trust provision requiring arbitration shall be presumed to require binding arbitration under Chapter 682.
ITEM 5
EXCULPATION CLAUSES IN WILLS AND TRUST AGREEMENTS
PROPOSED SECTION 733.620
733.620 Exculpation of personal representative.--
(1) A term of a will relieving a personal representative of liability for breach of trust [fiduciary duty] is unenforceable to the extent that the term:
(a) Relieves the personal representative of liability for breach of trust [fiduciary duty] committed in bad faith or with reckless indifference to the purposes of the will or the interests of interested persons; or
(b) Was inserted into the will instrument as the result of an abuse by the personal representative of a fiduciary or confidential relationship with the testator.
[(c ) modifies or eliminates the fiduciary duties of a personal representative that are specified in section 736.0105 as duties of a trustee.]
(2) An exculpatory term drafted or caused to be drafted by the personal representative is invalid as an abuse of a fiduciary or confidential relationship unless the personal representative proves that the exculpatory term is fair under the circumstances and that the term's existence and contents were adequately communicated directly to the testator.
WHITE PAPER
EXCULPATION OF PERSONAL REPRESENTATIVE
Probate & Trust Litigation Committee
Although there is sparse authority in Florida case law, it is fairly clear that Florida courts have followed, or would follow, the rule of section 222 of the Restatement (Second) of Trusts. That section provides:
(1) Except as stated in Subsections (2) and (3), the trustee, by provisions in the terms of the trust, can be relieved of liability for breach of trust.
(2) A provision in the trust instrument is not effective to relieve the trustee of liability for breach of trust committed in bad faith or intentionally or with reckless indifference to the interest of the beneficiary, or of liability for any profit which the trustee has derived from a breach of trust.
(3) To the extent to which a provision relieving the trustee of liability for breaches of trust is inserted in the trust instrument as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor, such provision is ineffective.
Restatement (Second) of Trusts § 222 (1959).
The element of the rule expressed in subsection (2) of section 222 of the Restatement was recognized by the Florida Supreme Court in Smith v. Boyd, 161 So. 381 (Fla. 1935), in which the court said:
The trust agreement, which the bank accepted in its capacity as a trust company and undertook to carry out, provided that the trustee should not be answerable for neglects or defaults of its agents and employees, nor in any manner answerable or accountable whatsoever, except for bad faith. The provision just referred to was not designed to relieve the trustee of responsibility for the faithless performance of its trust in the particulars enumerated and specified in the trust instrument, nor can it be given any such interpretation consistent with the existence and enforceability of a lawful trust as such.
Both Smith v. Boyd and section 222 of the Restatement were cited in Jones v. First Nat. Bank in Ft. Lauderdale, 226 So.2d 834 (Fla. 4th DCA 1969), in support of the observation (in dicta) that:
…a trust instrument may contain exculpatory provisions whereby a trustee may, at least in circumstances involving ordinary negligence and honest errors of judgment, be relieved of liability for breach of trust.
Although the Jones case acknowledges the general rule of subsection (1) of section 222 of the Restatement as well as subsection (2), no reported case in Florida has considered the subject of subsection (3) – the effectiveness of an exculpation clause inserted in a trust instrument as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor. The rule embodied in subsection (3) of the Restatement provision can become crucial in litigation in which the trustee asserts an exculpation clause as a defense to liability for an act or a failure to act that is a breach of trust.
Subsection (3) is now codified as subsection (1)(b) of section 736.1011 of Florida’s new Trust Code. Subsection (2) of the statute places on the trustee the burden of proving that an exculpatory provision drafted or caused to be drafted by the trustee is fair under the circumstances and was communicated directly to the settlor. Subsection (2) creates, in effect, a presumption of abuse that must be rebutted by the trustee. Section 736.1011, which is section 1008 of the Uniform Trust Code, provides:
736.1011 Exculpation of trustee.--
(1) A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that the term:
(a) Relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries; or
(b) Was inserted into the trust instrument as the result of an abuse by the trustee of a fiduciary or confidential relationship with the settlor.
(2) An exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term is fair under the circumstances and that the term's existence and contents were adequately communicated directly to the settlor.