The Supreme Court of Utah holds that legal counsel representing sanctioned trustees could continue to advocate for them in an appeal because they had not previously represented the trust. In the Matter of the Estate of Goldberg (Utah No. 20220372, June 6, 2024).
Siblings Stanley and Sandra Goldberg established two trusts in their names and listed dozens of beneficiaries. After the siblings died, two beneficiaries, C. Leon Nelson and Marilynn Tetrick, became co-trustees and hired an attorney, Thomas Nelson, to represent them as trustees. They also retained the services of a law firm, Kesler & Rust, which represented them as trustees.
When the beneficiaries sued the Goldberg siblings for breach of fiduciary duty, Mr. Nelson and Kesler & Rust worked as co-counsel to defend them, including at trial. The siblings lost. After the jury found them liable, the court ordered them to pay over $1.8 million in a personal judgment and removed them as trustees.
Still represented by Mr. Nelson and Kesler & Rust, the Goldberg siblings sought to reduce the judgment, which the beneficiaries opposed.
The newly appointed successor trustees moved to disqualify the sibling’s counsel. They relied on Rule 1.9(a) of the Utah Rules of Professional Conduct. This rule states that a lawyer may not represent a client with interests materially adverse to a former client in a similar matter. Only with the written consent of the former client could the lawyer represent the new client. Citing Lindberg, the successor trustees claimed that the trustees’ attorneys had an attorney-client relationship with the trust, not just the former trustees. They argued the trust was a former client with interests materially adverse to reducing the judgment since the judgment against the former trustees would benefit the trust.
Finding a Rule 1.9(a) violation, the district court relied on Lindberg to conclude that an attorney also represents a trust when representing its trustees and disqualified the siblings’ counsel. The district court reasoned an attorney-client relationship existed between the counsel and the trust itself because no other counsel had represented the trust and because the attorneys repeatedly argued on behalf of the trusts. The siblings appealed.
Rule 1.9(a) has three prongs. First, the attorneys must have formerly represented the trusts. Second, the representation must have been for the same or a substantially related matter. Third, the former trustees’ interests must be materially adverse to the trusts.
Relating to the first prong, Lindberg opens the door for an attorney-client relationship to exist with a trust. However, the relationship is not automatic and depends on context.
In this case, the context shows no relationship. The attorneys never formerly represented the trusts. The retainer agreements stated that the counsel agreed to represent the attorneys in their capacity as trustees and did not refer to trust representation.
The district court’s reasoning was flawed. The lack of independent representation for the trusts was insignificant because the trusts were not a party to the litigation. The attorneys did not advocate for the trust, as the litigation pitted the beneficiaries against the trustees.
On appeal, the successor trustees presented an alternative argument: that an attorney represents a trust when the attorney is “retained to assist in trust administration” and “paid with trust funds.” This conflicts with the second prong of Rule 1.9(a). It does not matter whether the attorneys ever represented the trust. Rather, the representation must have been for the same or a substantially related matter. Even if the sibling’s legal counsel received trust funds as payment, this is not enough to trigger Rule 1.9(a).
The Supreme Court of Utah finds no attorney-client relationship with the trust; therefore, Rule 1.9(a) does not apply. The district court erred in granting the successor trustees’ motion to disqualify.
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