A Strong Offense
A Stronger Defense
Keeping with our recent coverage of the intersection between fiduciary litigation and Bernie Madoff and other Ponzi schemes, we again turn to Pennsylvania where last month a prominent Philadelphia couple sued their estate planning attorneys at Duane Morris over money that ended up in the hands of Bernie Madoff.
In Keating v. Duane Morris, Daniel J. Keating III and his wife, Sarah, sued Duane Morris and two of its attorneys for breach of contract, professional liability, and quantum meruit. According media reports, the Keatings went to Duane Morris for help in crafting an asset protection plan and advice on long-term investment options. The firm established one trust for the Keatings in 2005 with a trustee, trust protector, investment manager and custodian. The problems allegedly arose from a second trust established in 2007.
According to the Keatings, a Duane Morris attorney “compelled” them to establish a second trust using the cash position in the first trust. This second trust had two investment managers. The estate planning attorney allegedly recommended Notz Stucki & Cie (“Notz”) as one of the two managers for the second trust. Notz allegedly invested nearly half of the funds under its control in feeder funds of Bernard L. Madoff Investment Securities.
Estate planning attorneys are always recommending to their clients persons or entities to serve as trustees, executors, and other fiduciaries, as well as investment managers. The dispute between the Keatings and their estate planners reminds estate planning attorneys to be careful about and to be confident in the entities and people they are recommending to their clients. The Keatings claim that their attorneys suggested the investement advisor, but it is not clear whether they were given multiple suggestions or options from which to choose, which would be the better practice. If clients are given a choice among several options, it puts the ultimate decision in their hands.