Risk Update

Family Conflicts of Interest — Multiple Representations, Trusts & Beneficiaries & More

In $100M Suit, a Moody Alleges Galveston Firm Used ‘Parasitic Relationship’ to Get Rich at His Family’s Expense” —

  • “A member of Galveston’s prominent Moody family has sued Greer, Herz & Adams, alleging that the boutique law firm represented the Moodys in too many different interests, making so much money off his family that it wouldn’t exist in its current form without that work.”
  • “Moody Jr.’s allegations raise questions about conflicts of interest that may arise when a firm or lawyer represents numerous related business entities and family members at the same time. He is seeking more than $100 million in damages, and he is represented by Houston trial lawyer Anthony Buzbee.”
  • “‘This is an egregious case of a trustee and lawyer taking advantage of his position to exponentially enrich himself, his law firm and his family,’ Moody Jr. alleged in a petition filed May 21 in state district court in Harris County. In a footnote, the suit referred to the ties between the firm and the family as a ‘parasitic relationship’ that existed for more than 35 years.”
  • “But, Moody Jr. alleged, after his father stepped down from numerous business and charitable boards that control billions of dollars worth of Moody family interests, Herz and Ross Moody used that power of attorney as an opportunity to enrich themselves and their law firm.”
  • “In a 35-page petition, Moody Jr. alleged that Greer Herz “simply would not exist” in its present form without Moody Sr. and the ‘sprawling’ Moody interests as clients. He alleged that members of the firm are routinely appointed to boards that manage Moody business interests, and most of the legal work is provided without a formal fee agreement that would include a waiver to the ‘innumerable conflicts of interest inherent in the multiple representations.'”
  • “According to the petition, Herz simultaneously is legal counsel to the testator of the Moody trust; legal counsel to multiple beneficiaries of the trust; general counsel to two major competing publicly traded corporate entities controlled directly or indirectly by the trust; and legal counsel to every corporate entity within the trust, among other Moody-related representations.”

Pa. Justices Ask If Trust Conflicts Warrant Separate Attys” —

  • “When conflicts arise between the people running a trust and its beneficiaries, Pennsylvania’s Supreme Court justices wondered Wednesday why the parties wouldn’t all retain and pay for their own lawyers rather than fight over whether the beneficiaries get to see legal bills paid for by the trust or if they’re protected by attorney-client privilege.”
  • “In arguments held via videoconference, members of Pennsylvania’s highest court probed what made trust attorneys special in a conflict where a deceased Allegheny County man’s two stepsons accused the trustee of his estate — the man’s biological son and a co-beneficiary of the trust — of overspending the trust’s money on attorney fees to resolve their other disputes.”
  • “The trustee claimed that much of the legal billing his stepbrothers demanded was protected by attorney-client privilege, but two of the justices asked why the trustee and the beneficiaries hadn’t all retained new, separate attorneys. Justice Sallie Mundy compared it to a criminal case, where the same attorney could represent more than one defendant up until the point that some conflict arises.”
  • “Del Sole replied that trustees need to be able to consult their attorneys on matters of running the trust without worrying about disclosures to beneficiaries or other parties, so there is an attorney-client relationship and privilege between them. He urged the court not to create a so-called fiduciary exception that would require otherwise-protected information to be turned over to beneficiaries when a client was acting in a fiduciary capacity.”