Counsel Concerns

Attorney as Trustee

The Supreme Court of Kentucky found a New York attorney subject to personal jurisdiction in Kentucky for his role as trustee of the literary property of the widow of songwriter Jerome Kern. Cummings v. Pitman, 2005-SC-000861-DG. Betty Kern Miller, who lived in Kentucky, signed for a trust to handle the copyrights and royalties of the works of her late husband. Miller and her New York attorney Andrew Boose served as co-trustees.

The authority of the trustees included:

'Power to deal with Literary Property (as herein defined), with the same freedom and to the same full extent as if they were the sole and absolute owners thereof in their own right, and without limitation, make any and all agreements, contracts or arrangements which they, in their discretion, shall determine, and employ and compensate any attorneys, managers and/or agents (including any person who is serving as Trustee), for or in connection with the sale, lease, licensing, exploitation, utilization, turning to account, or other disposition of, or dealing with, Literary Property; and the Trustees shall be under no liability or obligation to any person interested in the Trust for any action taken by them pursuant to this power.'

A codicil to Betty Kern Miller's will bequeathed 'all my right, title and interest in and to any Literary Property ' to the Trustees of a trust created by Agreement executed the 28th day of April, 1995 between myself as Grantor, and myself and R. Andrew Boose, as Trustees.'

Miller died in 1996. In 1998, her daughter and trust beneficiary, Linda Kern Cummings, filed suit in a Kentucky court alleging undue influence on Miller by Boose to execute the codicil. The suit also alleged unauthorized practice of law, conflict of interest and violation of fiduciary duties. Boose conceded the court had jurisdiction over him for claims arising from his services as a lawyer, but not as trustee. The state supreme court noted: 'Boose analogizes himself to one with two hats and posits that in Kentucky he wore only his 'attorney hat' but never donned his trustee hat except for one brief moment.'

The trial court agreed with Boose, but the supreme court reversed, explaining: 'Mr. Boose alleges that he is not subject to service of process pursuant to Kentucky's long-arm statute in his role as trustee because his only contact with Kentucky in that regard was the brief moment when he signed the trust instrument in Danville[, KY]. ' This argument is flawed for two reasons. First, the fiduciary duties owed by Mr. Boose, as trustee, to Ms. Miller began upon the execution of the trust agreement and continued thereafter. Thus, even if we were to accept Mr. Boose's splitting-of-the-person theory, he continuously wore his so-called 'trustee hat' from the inception of the trust agreement. The second flaw in Mr. Boose's argument is that the appropriate personal jurisdiction analysis in Kentucky does not consider the role in which a person perceives himself as acting so long as the long-arm statute is satisfied and the contacts shown pass constitutional muster.'

The supreme court continued: 'Not only did Mr. Boose deliver the trust agreement and codicil to Ms. Miller in Kentucky, his representation spanned several years and required routine communication with Ms. Miller and later her Kentucky beneficiary and executor. Mr. Boose received substantial payment for his legal work and for his services as trustee. ' The facts alleged by Ms. Cummings show a course of conduct by Mr. Boose beginning with his representation of Ms. Miller, continuing with his planning of her estate and trust, through his appointment as trustee of the Miller trust and culminating in alleged conflicts of interest and claims of 'a scheme for acquisition of ownership' of the decedent's property. This course of conduct established the requisite minimum contacts with the Commonwealth of Kentucky.'

Attorney Disqualification

The U.S. District Court for the Central District of California denied a motion by UMG Recordings to disqualify the national law firm O'Melveny & Myers (OMM) from representing social-networking Web site MySpace in a copyright-infringement suit by UMG. UMG Recordings Inc. v. MySpace Inc., CV 06-7361 AHM (AJWx). OMM had previously represented UMG in litigation brought against investors in the Napster file-sharing service. In that case, defendant Hummer Winblad Venture Partners raised a copyright-misuse defense. The district judge had ordered UMG to produce documents the record company filed during an inquiry by the Antitrust Division of the Department of Justice (DOJ) into whether UMG began the now-defunct 'pressplay' online music service with Sony Music to restrict the Internet distribution of music. OMM represented UMG in a successful appeal of the judge's order in the Hummer Winblad litigation and in a renewed DOJ inquiry.

UMG moved to disqualify OMM as counsel to MySpace after MySpace raised a copyright-misuse defense in the current inducing-infringement suit. The Central District looked at Rule 3-310 of the California Rules of Professional Conduct. The rule states in part that an attorney 'shall not, without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the [attorney] has obtained confidential information material to the employment.' The court noted Rule 3-310 requires that the written consent follow disclosure of 'relevant circumstances and of the actual and reasonably foreseeable adverse consequences to the client or former client.'

OMM attorneys who worked on the Hummer Winblad case weren't working on the MySpace case. Still, the district court found 'that the two engagements of OMM were 'substantially related' ordinarily would result in the disqualification of OMM.' But MySpace abandoned the copyright-misuse defense, which the court noted was really 'collateral to what this case is about.'

The court added: 'Nor has OMM otherwise displayed dubious conduct in its relationship with UMG. Indeed, right from the beginning, OMM made it crystal clear that it would not agree to represent UMG unless the latter agreed 'to waive any conflict or rule that would prevent [OMM] from representing a party whose interests are adverse to UMG in pending or future cases that concern infringement of intellectual property rights on the Internet ' Thus, OMM put UMG on notice that OMM might represent a social networking Web site such as MySpace if UMG were to sue such an entity. UMG agreed that OMM could do so, even if UMG were still an active, ongoing client of OMM. (That would not entitle OMM to pursue 'substantially related' claims against UMG, however.) To disqualify OMM now would lead to a harsh result, given the minor nature of the conflict and ' most importantly ' the fact that OMM [on behalf of MySpace] has agreed to abandon the claims and efforts that gave rise to its conflict.'

But the court required OMM to pay the fees UMG incurred in the disqualification motion, including because 'OMM's interpretation of the meaning and scope of the waiver that OMM obtained from UMG was flatly unreasonable and inconsistent with its duty of loyalty to its former client.'

Attorney as Trustee

The Supreme Court of Kentucky found a New York attorney subject to personal jurisdiction in Kentucky for his role as trustee of the literary property of the widow of songwriter Jerome Kern. Cummings v. Pitman, 2005-SC-000861-DG. Betty Kern Miller, who lived in Kentucky, signed for a trust to handle the copyrights and royalties of the works of her late husband. Miller and her New York attorney Andrew Boose served as co-trustees.

The authority of the trustees included:

'Power to deal with Literary Property (as herein defined), with the same freedom and to the same full extent as if they were the sole and absolute owners thereof in their own right, and without limitation, make any and all agreements, contracts or arrangements which they, in their discretion, shall determine, and employ and compensate any attorneys, managers and/or agents (including any person who is serving as Trustee), for or in connection with the sale, lease, licensing, exploitation, utilization, turning to account, or other disposition of, or dealing with, Literary Property; and the Trustees shall be under no liability or obligation to any person interested in the Trust for any action taken by them pursuant to this power.'

A codicil to Betty Kern Miller's will bequeathed 'all my right, title and interest in and to any Literary Property ' to the Trustees of a trust created by Agreement executed the 28th day of April, 1995 between myself as Grantor, and myself and R. Andrew Boose, as Trustees.'

Miller died in 1996. In 1998, her daughter and trust beneficiary, Linda Kern Cummings, filed suit in a Kentucky court alleging undue influence on Miller by Boose to execute the codicil. The suit also alleged unauthorized practice of law, conflict of interest and violation of fiduciary duties. Boose conceded the court had jurisdiction over him for claims arising from his services as a lawyer, but not as trustee. The state supreme court noted: 'Boose analogizes himself to one with two hats and posits that in Kentucky he wore only his 'attorney hat' but never donned his trustee hat except for one brief moment.'

The trial court agreed with Boose, but the supreme court reversed, explaining: 'Mr. Boose alleges that he is not subject to service of process pursuant to Kentucky's long-arm statute in his role as trustee because his only contact with Kentucky in that regard was the brief moment when he signed the trust instrument in Danville[, KY]. ' This argument is flawed for two reasons. First, the fiduciary duties owed by Mr. Boose, as trustee, to Ms. Miller began upon the execution of the trust agreement and continued thereafter. Thus, even if we were to accept Mr. Boose's splitting-of-the-person theory, he continuously wore his so-called 'trustee hat' from the inception of the trust agreement. The second flaw in Mr. Boose's argument is that the appropriate personal jurisdiction analysis in Kentucky does not consider the role in which a person perceives himself as acting so long as the long-arm statute is satisfied and the contacts shown pass constitutional muster.'

The supreme court continued: 'Not only did Mr. Boose deliver the trust agreement and codicil to Ms. Miller in Kentucky, his representation spanned several years and required routine communication with Ms. Miller and later her Kentucky beneficiary and executor. Mr. Boose received substantial payment for his legal work and for his services as trustee. ' The facts alleged by Ms. Cummings show a course of conduct by Mr. Boose beginning with his representation of Ms. Miller, continuing with his planning of her estate and trust, through his appointment as trustee of the Miller trust and culminating in alleged conflicts of interest and claims of 'a scheme for acquisition of ownership' of the decedent's property. This course of conduct established the requisite minimum contacts with the Commonwealth of Kentucky.'

Attorney Disqualification

The U.S. District Court for the Central District of California denied a motion by UMG Recordings to disqualify the national law firm O'Melveny & Myers (OMM) from representing social-networking Web site MySpace in a copyright-infringement suit by UMG. UMG Recordings Inc. v. MySpace Inc., CV 06-7361 AHM (AJWx). OMM had previously represented UMG in litigation brought against investors in the Napster file-sharing service. In that case, defendant Hummer Winblad Venture Partners raised a copyright-misuse defense. The district judge had ordered UMG to produce documents the record company filed during an inquiry by the Antitrust Division of the Department of Justice (DOJ) into whether UMG began the now-defunct 'pressplay' online music service with Sony Music to restrict the Internet distribution of music. OMM represented UMG in a successful appeal of the judge's order in the Hummer Winblad litigation and in a renewed DOJ inquiry.

UMG moved to disqualify OMM as counsel to MySpace after MySpace raised a copyright-misuse defense in the current inducing-infringement suit. The Central District looked at Rule 3-310 of the California Rules of Professional Conduct. The rule states in part that an attorney 'shall not, without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the [attorney] has obtained confidential information material to the employment.' The court noted Rule 3-310 requires that the written consent follow disclosure of 'relevant circumstances and of the actual and reasonably foreseeable adverse consequences to the client or former client.'

OMM attorneys who worked on the Hummer Winblad case weren't working on the MySpace case. Still, the district court found 'that the two engagements of OMM were 'substantially related' ordinarily would result in the disqualification of OMM.' But MySpace abandoned the copyright-misuse defense, which the court noted was really 'collateral to what this case is about.'

The court added: 'Nor has OMM otherwise displayed dubious conduct in its relationship with UMG. Indeed, right from the beginning, OMM made it crystal clear that it would not agree to represent UMG unless the latter agreed 'to waive any conflict or rule that would prevent [OMM] from representing a party whose interests are adverse to UMG in pending or future cases that concern infringement of intellectual property rights on the Internet ' Thus, OMM put UMG on notice that OMM might represent a social networking Web site such as MySpace if UMG were to sue such an entity. UMG agreed that OMM could do so, even if UMG were still an active, ongoing client of OMM. (That would not entitle OMM to pursue 'substantially related' claims against UMG, however.) To disqualify OMM now would lead to a harsh result, given the minor nature of the conflict and ' most importantly ' the fact that OMM [on behalf of MySpace] has agreed to abandon the claims and efforts that gave rise to its conflict.'

But the court required OMM to pay the fees UMG incurred in the disqualification motion, including because 'OMM's interpretation of the meaning and scope of the waiver that OMM obtained from UMG was flatly unreasonable and inconsistent with its duty of loyalty to its former client.'