New York Law Review

Tag: Greene v. Greene

  • Greene v. Greene, 56 N.Y.2d 96 (1982): Attorney’s Fiduciary Duty and Continuous Representation Tolling Statute of Limitations

    Greene v. Greene, 56 N.Y.2d 96 (1982)

    An attorney entering into a contract with a client, especially concerning the management of the client’s assets, must demonstrate that the client fully understood the agreement’s terms and that the attorney did not exploit the client’s confidence; the statute of limitations for challenging such an agreement may be tolled under the continuous representation doctrine.

    Summary

    Plaintiff sued her former attorneys seeking rescission of a trust agreement and an accounting for mismanagement of funds. The attorneys had drafted a trust agreement naming one of them as co-trustee and granting them broad investment powers. Plaintiff argued she didn’t understand the agreement and that the attorneys breached their fiduciary duty. The Court of Appeals held that the plaintiff stated a valid cause of action for rescission, as attorneys must prove contracts with clients are fair and fully understood. The court also found the statute of limitations was tolled under the continuous representation doctrine because the attorneys continued to represent her in matters related to the trust’s administration.

    Facts

    In 1964, Plaintiff was treated for mental illness. In 1965, while institutionalized, she signed a trust agreement giving substantial control of her inheritance to a family lawyer. In 1967, after release, Plaintiff hired the Defendant law firm to rescind the 1965 agreement, which they successfully did in 1969, with the court finding overreaching by the original attorney. In 1969, the Defendant law firm then drafted a new trust agreement for Plaintiff, naming Defendant Theodore Greene as co-trustee. This agreement gave Greene broad investment powers and limited his liability. In 1977, Plaintiff sought to terminate the 1969 trust and sued the Defendants.

    Procedural History

    Plaintiff sued seeking rescission of the 1969 trust and an accounting. The trial court dismissed the rescission claim as time-barred. The Appellate Division reversed, reinstating the rescission claim, finding the cause of action accrued when the plaintiff became aware of the breach and terminated the trust. The defendants appealed to the Court of Appeals by leave of the Appellate Division.

    Issue(s)

    1. Whether the plaintiff stated a cause of action for rescission of the 1969 trust agreement based on the attorney-client relationship.
    2. Whether the cause of action for rescission is barred by the statute of limitations.

    Holding

    1. Yes, because an attorney must affirmatively establish that a contract with a client was made with full knowledge of all material circumstances and free from fraud or misconception.
    2. No, because the continuous representation doctrine applies, tolling the statute of limitations until the attorney-client relationship terminated.

    Court’s Reasoning

    The Court emphasized the fiduciary nature of the attorney-client relationship, stating that “an attorney who seeks to avail himself of a contract made with his client, is bound to establish affirmatively that it was made by the client with full knowledge of all the material circumstances known to the attorney, and was in every respect free from fraud on his part, or misconception on the part of the client, and that a reasonable use was made by the attorney of the confidence reposed in him”. The Court found Plaintiff’s allegations of the Defendants taking unfair advantage of the relationship sufficient to state a cause of action for rescission. Regarding the statute of limitations, the Court applied the continuous representation doctrine, noting that a client “has a right to repose confidence in the professional’s ability and good faith, and realistically cannot be expected to question and assess the techniques employed or the manner in which the services are rendered”. The Court rejected the argument that the creation of the trust and its management were discrete acts, finding that the defendants performed legal services on the plaintiff’s behalf by creating the trust and continued to act as her attorney in all legal matters relating to its administration; therefore, the statute of limitations was tolled until the termination of the relationship. The court clarified that its holding does not guarantee rescission, but only that the plaintiff has presented a viable claim not barred by the statute of limitations.

  • Greene v. Greene, 47 N.Y.2d 447 (1979): Disqualification of Counsel Due to Prior Fiduciary Relationship

    Greene v. Greene, 47 N.Y.2d 447 (1979)

    An attorney is disqualified from representing a client if the attorney’s firm includes members who formerly held a fiduciary relationship (such as partner) with the opposing party’s firm, especially when those members may have gained confidential information relevant to the current litigation.

    Summary

    Helen Greene sued Finley, Kumble, Wagner, Heine & Underberg, alleging breach of fiduciary duty related to a trust. Her counsel was Eaton, Van Winkle, Greenspoon & Grutman. Two Eaton firm members, Grutman and Bjork, were former partners at Finley, Kumble. The court addressed whether the Eaton firm should be disqualified due to conflict of interest, given Grutman and Bjork’s prior fiduciary duties to Finley, Kumble. The court held that the Eaton firm was disqualified because Grutman and Bjork’s prior access to confidential information at Finley, Kumble created an unacceptable conflict of interest.

    Facts

    Helen Greene established an inter vivos trust in 1969 and later sued Finley, Kumble (her former lawyers) for breach of fiduciary duty in managing the trust.
    Grutman and Bjork were partners at Finley, Kumble from 1970-1976 and 1974-1976, respectively, before joining the Eaton firm.
    Greene retained the Eaton firm in 1977, knowing Grutman and Bjork’s past affiliation with Finley, Kumble and the potential conflict.

    Procedural History

    Finley, Kumble moved to disqualify the Eaton firm.
    Special Term denied the motion.
    The Appellate Division affirmed.
    The New York Court of Appeals granted leave to appeal and modified the Appellate Division order, granting the disqualification motion.

    Issue(s)

    Whether a law firm should be disqualified from representing a client when two of its members were formerly partners in the opposing party’s law firm and may have gained confidential information during their tenure there.

    Holding

    Yes, because the former partners’ fiduciary duty to their old firm, combined with the potential access to confidential information relevant to the litigation, creates an unacceptable conflict of interest that warrants disqualification of the entire firm.

    Court’s Reasoning

    The court emphasized the attorney’s duty of loyalty to a client and the prohibition against representing conflicting interests. “It is a long-standing precept of the legal profession that an attorney is duty bound to pursue his client’s interests diligently and vigorously within the limits of the law”.
    The court noted that attorneys are forbidden from placing themselves in positions where they must advance, or appear to advance, conflicting interests. This prohibition is “designed to safeguard against not only violation of the duty of loyalty owed the client, but also against abuse of the adversary system and resulting harm to the public at large.”
    The court reasoned that Grutman and Bjork, as former partners at Finley, Kumble, owed a fiduciary duty to the firm, similar to that owed by an attorney to a client.
    Finley, Kumble alleged that Grutman and Bjork gained confidential information regarding the firm’s potential liability concerning the plaintiff’s trust.
    The court found that it could not discount the possibility that information obtained by Grutman and Bjork in their role as fiduciaries would be used in the lawsuit. The court stated that “[a]n attorney traditionally has been prohibited from representing a party in a lawsuit where an opposing party is the lawyer’s former client”.
    Although a party may generally select an attorney of their choosing, this right is not limitless and cannot violate fiduciary relationships. The court concluded that the Eaton firm should be disqualified to maintain the integrity of the adversary system.