Attorney Battles To Keep Millions He Left Himself In Client’s Will

Attorney Battles For Millions He Left Himself In Client's Will

Editor’s note: this post was originally published on 03/24/2016. It has been updated to reflect a recent development.

The Michigan Supreme Court will decide if an attorney who was retained to plan the estate of his dying friend, and left $14 million of his friend’s $17 million estate to himself and his children, must give up his windfall.

Background

The Detroit Free Press reported that Attorney Mark Papazian prepared a will and trust that named himself as Bobby Mardigian’s personal representative, awarded Papazian all of Mardigian’s personal property, created a $5-million trust for each of Papazian’s two children, and left Papazian the residual value of the estate, after expenses and gifts to other beneficiaries[1].

Mardigian died of lung cancer in January, 2012, at age 59. He was divorced and had no children.

Heirs Sue To Overturn the Will and Trust

When Papazian tried to introduce the will and trust he had prepared into probate, along with a petition to be appointed as Bobby Mardigian’s personal representative, Mardig-ian’s brother Ed Mardigian, Ed’s two sons, and Bobby’s girlfriend and two of his nieces, sued in county probate court to disallow the will and trust.

Ed Mardigian and his sons claimed they were Bobby Mardigian’s lawful heirs, and con-tended that a letter Bobby wrote after he had executed the will and trust prepared by Papazian, should instead be submitted into probate as his will and an amendment to his trust.

After discovery, Ed Mardigian moved for partial summary disposition, and asked the probate court to void all gifts to Papazian and his children contained in Bobby Mardig-ian’s will and trust, because they violated public policy, and were thus unenforceable.

Mardigian cited Michigan Rules of Professional Conduct 1.8(c): “A lawyer shall not pre-pare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where the client is related to the donee.” His attorney argued, “for over 100 years, the Supreme Court has ‘bluntly warned’ lawyers not to receive gifts from clients under wills they themselves have drafted…Mark Papazian did it anyway…in flagrant disregard of his ethical duties…[2].

The probate court denied Ed Mardigian’s motion.

Attorney Defends His Actions

Papazian claims that if the Michigan Legislature wanted to prohibit attorneys who draft wills from leaving bequests to themselves, it would pass a statute to that effect, as some states have done.

Further, Papazian said that even if he committed misconduct, he and his children shouldn’t be prevented from receiving bequests from a client he says was also his dear friend for 30 years.

He claims the will should be nullified only if he exerted “undue influence” on Bobby Mar-digian, but there’s no evidence of that.

As proof, Papazian claims “Bobby consulted repeatedly with both an independent attor-ney and Comerica Bank wealth management officials, about his estate documents in the six months after he executed the contested will and trust…Even after consulting these independent professionals, Bobby made no changes to the documents which Mr. Papazian had participated in drafting.[3]

However, Papazian also first asserted that Roy Luttman, his then law partner, had drafted the trust documents, but when deposed, Luttman testified: “absolutely not, une-quivocally no, never, did not do it…[4]

Probate Court Ruling 

In November, 2013, days before the case was to be tried in probate court, Papazian ad-mitted he had prepared both the will and trust. The judge ruled that this violated public policy, and declared both documents unenforceable. He also approved Ed Mardigian’s motion for summary disposition, reversing his earlier denial.[5]

On the scheduled trial date, the judge denied Papazian’s motion for a stay. He chose not to participate in the proceedings. The other parties – Ed Mardigian and his two sons, Bobby Mardigian’s girlfriend and two nieces, and J.P. Morgan bank – reached a settle-ment regarding the distribution of funds, and the jury was excused. The judge denied Papazian’s motion for reconsideration.

Appeal

Papazian then appealed the probate court’s approval of Ed Mardigian’s motion for sum-mary disposition to the Court of Appeals, which overturned it in a 2-1 decision last Octo-ber.[6]

The Court based its ruling on In re Powers Estate, 375 Mich 150, 156, 176, 179; 134 NW2d 148 (1965): “our Supreme Court held that a will, (leaving) the bulk of the estate to a member of the family of the attorney who drafted the will, and also naming the attorney as an additional beneficiary, was not necessarily invalid. Rather… a question of undue influence exists…undue influence arising from the relationship is presumed to have been exerted as the means to secure the testamentary gift…Powers is directly on point to the facts presented in the instant case, and as such is binding on this Court.[7]

The court concluded that Papazian “benefited from the transaction,” and “as the drafter of the documents, he had an opportunity to influence (Bobby Mardigian’s) decision…It is presumed he exerted undue influence,” but “case law and existing statutes afford (Papazian) the opportunity to attempt to prove by competent evidence that the presump-tion of undue influence should be set aside… we reverse and remand to the…Probate Court for (further) proceedings.”[8]

Supreme Court

Ed Mardigian and the other plaintiffs apparently appealed the Court of Appeals ruling to the Michigan Supreme Court, which heard arguments in the case on 01/10/2017.

Mardigian’s attorney again argued that Papazian violated a rule of professional conduct by drafting the will and benefiting from it, and the gifts he left to himself and his children should thus be set aside, while Papazian’s attorney again relied on In re Powers Estate to argue that Papazian should be allowed to prove that he didn’t unduly influence Bobby Mardigian.

Lessons

Law Practice Risk Management

If Bobby Mardigian’s “unfettered and uninfluenced intent”[9] was to leave most of his es-tate to Papazian and his children, then Papazian should’ve let another attorney draft the will and trust, in which case he’d get the money, without having to overcome the pre-sumption that he exerted undue influence.

Instead, he will have to overcome that presumption. He’ll likely try to do that by reiter-ating his claim that Bobby Mardigian consulted with an independent attorney and wealth management officials after signing the will and trust Papazian drafted, but didn’t change them.

However, Ed Mardigian, et al, will likely challenge the substance of those consultations, especially those with the independent attorney. Alternatively, they may claim that Bobby Mardigian didn’t have “sufficient mental capacity”, as defined by the Michigan Legis-lature, to make a will[10], due to the effects of his terminal lung cancer and treatment. If they prove that, the probate court will void the will and trust Papazian drafted.

If the case is tried, plaintiffs will also likely count on the jury being disturbed by the “optics” of a lawyer drafting a will for a dying man that leaves nearly all of his estate to the lawyer and his children.

Even if Papazian prevails, he’ll be “subject to sanction by the State Bar for violating (Michigan Rules of Professional Conduct 1.8(c)). Possible sanctions include temporary or permanent disbarment.”[11]

Legal Malpractice

If Papazian and Ed Mardigian, etc., don’t settle the probate court litigation, and Mardig-ian loses the case and all appeals, will he have any other options?

One option is to sue Papazian for legal malpractice. It’s unclear if he has already done so. If he did, the lawsuit was likely either stayed or dismissed without prejudice, pending the outcome of the probate court litigation, or dismissed with prejudice, either because the statute of limitations had tolled, or Mardigian was unable to maintain a cause of action.

Michigan’s statute of limitations for legal malpractice claims is two-years from the last date of service,[12] with a six-month “discovery rule” exception for errors discovered after the two-year period has expired. The will was executed in June, 2011 (after the trust), and Bobby Mardigian died in January, 2012, so two years after the last date that Papazian could have provided estate planning services to him would have been between June 2013 and January 2014.

Therefore, Ed Mardigian would have had to sue Papazian by the appropriate date within that timeframe for his suit not to be time-barred. The six-month discovery rule doesn’t apply, because he discovered the “error” in the will and trust before his brother’s death, i.e., within two years from the last date that Papazian provided services.

If Ed Mardigian did sue Papazian for malpractice, could he maintain a cause of action?

In Mieras v DeBona, 452 Mich 278, 299; 550 NW2d 202 (1996), the Michigan Supreme Court ruled that a will’s intended beneficiaries are third-party beneficiaries of the rela-tionship between the testator and the attorney contracted to draft his/her will. That at-torney thus owes the beneficiaries a tort-based duty to draft the will with the “requisite standard of care”[13], which means they can maintain a cause of action for legal mal-practice against the attorney for breaching that duty.

If Ed Mardigian was named as a beneficiary in his brother’s will – the news article stated that Papazian left himself “the residual value of the estate after…gifts to other benefic-iaries” – then he would have standing to sue Papazian.

However, in Mieras v DeBona, the Court also ruled that a will-drafting attorney’s duty is limited to fulfilling the testator’s intent, as expressed in the will.[14] Thus, a party alleging legal malpractice by the drafting attorney is prohibited from using “extrinsic evidence to prove that the testator’s intent is other than that set forth in the will.[15]

Ed Mardigian would thus be unable to use the letter Bobby Mardigian wrote after ex-ecuting the will and trust prepared by Papazian, to prove that Bobby’s intent was other than what his will stated. As a result, it’s unlikely that Ed Mardigian would prevail, if he sued Papazian for malpractice.

If Ed Mardigian wasn’t named as a beneficiary in his brother’s will, then he wouldn’t have standing to sue Papazian, but he could claim that happened only because Papazian ex-erted undue influence on Bobby Mardigian.

Legal Malpractice Insurance

If Papazian faces a bar grievance for violating Rule 1.8(c), he’ll benefit if he has legal malpractice insurance, because most policies cover an attorney’s defense costs for responding to such proceedings.

Some insurers, such as CNA, offer this coverage on a reimbursement basis, i.e., the attorney must retain and direct defense counsel: “The Company will reimburse the Named Insured up to $20,000…for attorney fees and (costs), …resulting from any one Disciplinary Proceeding…”.

Other insurers, i.e., Catlin, both oversee and pay for the defense: “…the Insurer shall defend a proceeding…against (an) Insured by a bar association…or similar entity alleging…violation of the rules of professional conduct…”

Firms should consider the differences in coverage for disciplinary proceedings among policies when choosing an insurer, especially if they practice personal injury, family, or trusts-estates law, which are leading sources of bar grievances.

Similarly, if Ed Mardigian sued Papazian for malpractice, it would be in Papazian’s best interests to have had a malpractice policy with sufficient limits in place from at least the time he began planning Bobby Mardigian’s estate, which was likely in 2010, until Ed Mardigian filed his malpractice claim, which he would had to have done by January, 2014, for it to not be time-barred.

However, it’s doubtful Papazian could time it that precisely. Attorneys can’t predict when they’ll commit an error or omission that will result in their being sued for malpractice, or when they’ll be notified of a malpractice suit, but they must be insured on both of those dates, and the date they report the claim to their insurer, to trigger their coverage. There-fore, the only way for attorneys to always be covered is to buy malpractice coverage when they first open their practice, and renew it every year their practice remains open.

As long as they do so, their coverage will be retroactive to the inception date of their first policy, i.e., with each renewal, they’ll get another year of Prior Acts coverage, which covers errors they committed before the inception date of their current policy. Then, if they’re sued for work they did on or after the inception date of their first policy, and be-fore the inception date of their current policy, their Prior Acts coverage will obligate their insurer to protect them (subject to the policy’s exclusions, etc.).

Conversely, attorneys who don’t renew their policy one year lose all of their Prior Acts coverage; the next policy they buy will provide coverage for any errors or omissions they commit only on or after the inception date.

End notes

  1. Egan, Paul, “Family Fights Attorney Getting Millions From Client’s Will”, DETROIT FREE PRESS, April 10, 2015, http://www.freep.com/story/news/local/michigan/2015/04/10/attorney-receiving-millions-will-drafted-wealthy-client/25611217/

 

  1. Ibid.

 

  1. Ibid

 

  1. Ibid

 

  1. See MARK S. PAPAZIAN, Executor for the Estate of ROBERT DOUGLAS MARDIGIAN, Appellant, v MELISSA GOLDBERG, SUSAN V. LUCKEN, NANCY VARBEDIAN, EDWARD MARDIGIAN, GRANT MARDIGIAN, MATTHEW MARDIGIAN, and JP MORGAN CHASE BANK, NA, Appellees, No. 319023, Charlevoix Probate Court, LC No. 12-011738-DE;12-011765-TV

http://publicdocs.courts.mi.gov:81/opinions/final/coa/20151008_c319023(137)_rptr_136o-319023-final.pdf

 

  1. Egan, Paul, “Court: Lawyer’s $14M Inheritance Unethical, Not Invalid”, DETROIT FREE PRESS, October 9, 2015, http://www.freep.com/story/news/local/michigan/2015/10/09/court-lawyers-14m-inheritance-unethical-not-invalid/73643866/

 

  1. See note 5 above.

 

  1. See note 5 above.

 

  1. See note 5 above.

 

  1. Michigan Compiled Laws, Section 700.2501, ESTATES AND PROTECTED INDIVIDUALS CODE (EXCERPT) Act 386 of 1998 http://www.legislature.mi.gov/(S(hzadsigjjkhdcnpfqlhveswx))/mileg.aspx?page=getObject&objectName=mcl-700-2501

 

  1. Silver, Kenneth, “Can Your Lawyer Inherit Your Assets?” Hertz Schram PC blog, January 11, 2016,

http://www.hertzschram.com/blog/2016/01/can-your-lawyer-inherit-your-assets.shtml

 

    1. Neuman, Kenneth, “Legal Malpractice Actions Now Subject to Six-Year Statute of Repose”, NEUMAN ANDERSON, P.C., Blog, April 24, 2013

 

      1. See RONALD B. CHARFOOS and CAROL CHARFOOS TATOR, Plaintiffs-Appellants, v JACK M. SCHULTZ, Defendant-Appellee, No. 283155, Oakland Circuit Court LC No. 2007-084125-NM, http://www.michbar.org/file/opinions/appeals/2009/110509/44224.pdf

 

      1. Ibid

 

      1. Ibid.

 

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About Curtis Cooper

Curtis Cooper is principal of Lawyers Insurance Group – Broker For Great Law Firms, which helps attorneys optimize their malpractice coverage. Contact him by phone: (202) 802-6415, or email: ccooper “at” lawyersinsurer.com.