My last post discussed the facts of the Diller v. Richardson No. A162139 (Cal. Ct. App. Mar. 17, 2022) case. As you will recall, the Estate Planning attorney who helped the Dillers draft their plan during life subsequently helped the surviving spouse, Sanford Diller, dismantle that plan shortly before Sanford’s death. Thomas Richardson served as the Estate Planning attorney for the Dillers during their lives. After Helen Diller died, Richardson penned a letter to Sanford Diller explaining how Sanford could achieve his Estate Planning goal of disinheriting his sons completely, notwithstanding that Sanford’s then-deceased wife’s plan was irrevocable. You may be wondering how the attorney could make such a promise. Interestingly, as the attorney who drafted the Estate Plan, he was aware of an escape hatch that he had built into the plan. He used that escape hatch to his client’s benefit. Neither of these acts on their own indicates any wrongdoing; however, as this second part of a two-part series will demonstrate, Richardson’s acts breached his fiduciary duties and ethical duties owed to his various clients.
Smartly, Richardson included a provision designed to allow extraordinary distributions of principal from the Marital Trust for Sanford’s benefit. In addition, Richardson included provisions in the Marital Trust that prohibited Sanford from making these distributions to himself. Notably, Sanford was serving as a co-Trustee of the Marital Trust. Instead, the trust agreement required a disinterested Trustee to make these additional principal distributions from the Marital Trust. In this situation, that made sense. Remember that the Marital Trust contained the vast majority of Helen’s $1.2 billion and although Helen and Sanford had marital strife, none of the facts suggest that Helen ever considered disinheriting Sanford. Until this point, Richardson behaved appropriately and exercised good judgment on behalf of his clients.
Not so smart was Richardson’s decision not only to serve as the “disinterested trustee” but also to fail to act in a disinterested manner. Richardson delivered a plan to Sanford whereby he would help Sanford deplete the principal of the Marital Trust by exercising the power of the disinterested trustee to make extraordinary distributions of principal. When a trust agreement gives the Trustee sole or absolute discretion, beneficiaries have a difficult time convincing a judge to compel a Trustee to make distributions because judges give great deference to the Trustee’s discretion. Richardson breached his various duties by exercising his discretion in such a way that disregarded the fiduciary duty that he owed to the remainder beneficiaries of the Marital Trust: Ronald and Bradley Diller. As a disinterested Trustee, he distributed all the principal of the Marital Trust to Sanford. Richardson knew that Sanford planned to disinherit his sons and acted as the instrumentality to allow him to do it. Ordinarily, that would not be enough to cause anyone to bat an eye, after all, attorneys help their clients disinherit their children every day. What makes Richardson’s acts egregious, however, is that as soon as Richardson agreed to serve as co-Trustee of the Marital Trust, he owed fiduciary duties to those same children he helped Sanford disinherit. Those fiduciary duties changed things and meant that Richardson had to consider not only Sanford but also Ronald and Bradley. Richardson could have resigned as co-Trustee or made smaller extraordinary distributions and arguably avoided this result. He chose neither of those options.
Richardson needn’t have done anything further to breach his duties as co-Trustee and his duty of loyalty to Helen as a former client. As you may have guessed, though, that’s not where the story ends. Richardson not only was instrumental in depriving Ronald and Bradley of their inheritance by depleting the Marital Trust, but after doing so, thwarted Ronald’s attempts to obtain information about the Marital Trust, Survivor’s Trust, and Family Trust and used the threat of a no-contest clause to deter Ronald from suing him. In fact, Richardson and his law firm took on nine conflicting roles ranging from serving as Helen and Sanford’s long-time Estate Planning attorneys, to serving as counsel for both Helen’s estate and Sanford’s estate, to acting as litigation attorneys to defendants in Ronald’s action. Thankfully, the judges in this and the related cases removed both Richardson and his firm from their fiduciary roles and barred them from serving as attorneys in the conflict.
As these articles demonstrate, Richardson behaved badly. Stories like this undermine the public trust in attorneys. Richardson breached the duties that he agreed to undertake both as a Trustee and as an attorney. Richardson gives all attorneys a bad name and he and his ilk contribute to the proliferation of lawyer jokes. They do little for the profession. Even more unfortunate for Richardson, regardless of his behavior before or after, most of his professional contacts will remember him for this. If you have doubts about your attorneys’ loyalty or the advice that they have provided, it’s time to talk to an experienced Estate Planning attorney who understands what it means to be a compassionate counselor and advisor. Guess who that Estate Planning attorney is. Me, Bob.