The disputes in most of my litigation cases arise from genuine disagreement over an issue of fact or law – e.g., factually, what happened, what didn’t happen, what should have happened, what was intended, and what laws, presumptions, burdens of proof, and rules of evidence apply?
Unfortunately, a growing number of cases in which I represent clients arise from an element of wrongful control, possession, or dominance by the other person or persons. The person who wrongfully controls, possesses, dominates or manipulates, i.e., the abuser, has power, at least temporarily, and sometimes seems to enjoy or relish having that position of power and control. The person who is not in control or possession, or who is being dominated, and possibly even threatened, gaslighted or lied to, i.e., the victim, is put to the difficult decision of what, if anything, to do about the situation. Typically, the abuser seeks to control the narrative. Often the victim is at a disadvantage which is being exploited, including, for example, a lack of money resources, mental or physical limitations, dependency or a feeling of dependency, being scared, coerced, intimidated or threatened, or perhaps feeling or being isolated or alone – in these situations, a trusted contact person, someone who the victim has designated (such as a trustee or an attorney in fact), family members and friends need to provide help and support to the victim. Unfortunately, sometimes the supposed trusted contact or designated person is the abuser. There is no limit to possible scenarios.
In California an estate planning attorney who represents joint clients owes a duty to each client – for example, important information that is communicated to the attorney by one of the joint clients should be, or at least might need to be, communicated by the attorney to the other joint client. Thus, although an estate planning attorney does not have an affirmative duty to evaluate or assess whether there exists wrongful or inappropriate control, possession, dominance or manipulation by one joint client against the other joint client, the attorney might well be in a position whereby she or he becomes aware of information that might indicate a wrongful or inappropriate relationship between the joint clients, and the likelihood of becoming aware of that information might increase depending on the particular questions that the attorney asks each of the joint clients, the information that the attorney gathers, and the attorney separately, independently meeting with each client.
The attorney is then put to a decision or choices depending on the circumstances. Certainly, yes, discuss the situation and the information with, and advise the possible disadvantaged or victim client. However, if the disadvantaged or victim client doesn’t authorize the attorney to help or to tell a trusted contact person of the disadvantaged for victim client, the attorney cannot do so. And, if the disadvantaged or victim client decides to not take protective action, or perhaps even decides to put or to keep the controlling or possessive client in control (although perhaps out of fear or a feeling of helplessness), the attorney will need to decide whether to continue representation or to withdraw from the representation and engagement.
FINRA’s recent heightened rulemaking relating to the possibility that a client is being subjected to a wrongful or inappropriate relationship is more focused on senior and adult financial exploitation and abuse – specifically applying to “specified adults”: customers who are age 65 or older or who are age 18 and older who the FINRA member reasonably believes has a mental or physical impairment that renders the customer unable to protect his or her own interests (see FINRA Rule 2165).
Recently enacted FINRA rules require a FINRA member to ask (perhaps even encourage) the customer to designate a trusted contact person who the FINRA member can contact when the member reasonably believes that financial exploitation of the specified adult customer has occurred, is occurring, has been attempted or will be attempted (see FINRA Rule 4512). However, the customer does not have to designate a trusted contact person, and, similar to the estate planning situation, the customer might in fact designate the abuser or might designate a person who later becomes an abuser, or might even name that person to be the customer’s agent to have control and to make decisions for the customer.
A FINRA member is required to know her or his customer (see FINRA Rule 2090 (“Know Your Customer”), Rule 2111 (“Suitability”), Rule 4512 (“Customer Account Information”), and perhaps Rule 2010 (“Standards of Commercial Honor and Principles of Trade”). SEC Regulation Best Interest (effective September 10, 2019) and related SEC Rules and interpretations also contain extensive broker-dealer compliance and diligence requirements, and also for those persons who are associated with the broker-dealer. Thus, similar to the estate planning attorney, broker-dealers and FINRA members might well be in a position whereby they become aware of information that might indicate a wrongful or inappropriate relationship between the joint clients, particularly in light of the questions that are asked of the clients, the information that is gathered, and broker-dealer and FINRA member/customer meetings. Also similar to the estate planning attorney, broker-dealers and FINRA members may then be put to having to make decisions or to different options and choices depending on the circumstances. However, contrary to the estate planning attorney, even absent customer consent, at least under FINRA Rule 2165 the FINRA member does or may have important temporary hold and reporting options. Note that the FINRA Rules and SEC Regulation Best Interest are detailed and extensive, and any specific discussion exceeds the scope of this post.
These obviously are developing and important issues and areas. More to follow.
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Best to you,
David Tate, Esq. (and inactive CPA)
- Litigation, Disputes and Trials – Business, Contract/Commercial, Owner, Founder, Shareholder and Investor; Trust, Estate, Probate, Elder/Dependent Abuse, Conservatorships, POA, Real Property, Health and Care, and Contentious Administrations, etc.
- Mediator and Dispute Resolution
- D&O, Governance, Workplace/Employment, Officers, Boards, Investigations, IP, Auditing and Internal Controls, Law, Legislation, Communications, Authority, Duties, Responsibilities, Rights and Liability, Risk and Success Management, and Dispute Resolution and Mediation, etc.
Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.
Also note – sometimes I include links to or comments about materials from other organizations or people – if I do so, it is because I believe that the materials are worthwhile reading or viewing; however, that doesn’t mean that I don’t or might not have a different view about some or even all of the subject matter or materials, or that I necessarily agree with, or agree with everything about or relating to, that organization or person, or those materials or the subject matter.
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David Tate, Esq. (and inactive California CPA) – practicing as an attorney in California only.