PUBLIC CORRUPTION, REALLY?

            Socrates was famously charged, convicted, and sentenced to death for the crime of “public corruption.” Specifically, he was charged with corrupting the youth of Athens.  It was believed by the jury that Socrates had encouraged students to follow his chosen path, which was in conflict with the Athenian form of democracy and the powers at be.  In other words, Socrates ruffled the wrong people’s feathers. 

             Attorneys can also ruffle people’s feathers in the aggressive pursuit of a client’s cause and will often pay a personal price doing so.  Years ago I represented a small business owner that was wrongfully sued by an individual.  I pursued the matter with my usual attention to detail and aggressive-style litigation.  After  a few months of litigation with David Derringer, the plaintiff, it became clear that he was so caught up in his self-righteousness that he would never give up on the cause. 

After winning the action for the business owner, the disgruntled Derringer sued me, my client, my client’s employees and a number of other individuals.  In fact, he sued me not less than three times — two federal court actions and one state court action.  He took his matter all the way to the Ninth Circuit Court of Appeals and the Arizona Court of Appeals.  In fact, he even made a writ of certiorari to the United States Supreme Court.  Obviously, the actions were defeated because they were baseless.  

            So, how does this relate to Socrates?  I was accused of, among other things, public corruption.  Derringer has created a website dedicated to the bogus claims of public corruption allegedly committed by me, Robert Sewell.    

             David Derringer, wherever you are, I view your relentless pursuit of me as a badge of honor.  I may not be Socrates, but I certainly pursued a cause in which I believed and successfully defended against your claims.  Moreover, I will continue to aggressively pursue my clients’ causes, even if it results in more ridiculous defamation against my character.

OFFERS OF SETTLEMENT – AN IMPROVED LITIGATION WEAPON

I once represented a client who was sued for over $400,000.  My objective analysis showed that my client actually owed somewhere between zero and $100,000.  So, my client offered in writing $100,000 to settle the case.  That offer, which was rejected, put the opposing side “on the ropes,” as case became more about beating the $100,000 offer than winning $400,000.  A settlement offer can act as a weapon in litigation and turn a losing case into a winning case.  As you see, rather than being a sign of weakness, an early settlement offer can actually turn the tide for a defendant in a difficult spot. 

A new law supports early settlement offers even more strongly. As of January 1, 2013, the Arizona Legislature changed A.R.S. 12‑341.01, regarding attorneys’ fees in a contract action, to allow the court to consider written offers of settlement in determining the reasonableness of attorneys’ fees for the party who is granted judgment.  Under this statute, if a party that makes an offer of settlement that is equal to or more favorable than the ultimate award, then the offeror may be deemed the successful party and, therefore, may be awarded attorneys’ fees.   The exact language of the statute reads like this:

In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees. If a written settlement offer is rejected and the judgment finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle any contested action arising out of a contract, the offeror is deemed to be the successful party from the date of the offer and the court may award the successful party reasonable attorney fees. This section shall not be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees. 

In other words, settlement offers can make a losing party the successful party. 

Therefore, as a strategy, a defendant with a difficult case should honestly analyze the case early in the action and determine what the defendant may owe.  Thereafter, the defendant should make a settlement offer to reflect what the plaintiff may win at the end of the litigation. If the defendant’s guess is ultimately correct, but the plaintiff rejected the offer, the defendant can lose the case but still collect attorney’s fees.  At the end, the defendant’s award of attorneys’ fees could potentially be used to offset the final award.

A recent case styled Hall v. Reed Development, Inc., analyzes this very strategy.  In that matter, the defendant made numerous settlement offers.  However, each time the defendant offered settlement, the settlement offer was significantly less than the attorneys’ fees plaintiff had incurred at that stage in the litigation.  The court of appeals reasoned that “we conclude that comparing the ‘judgment finally obtained’ under Section 12‑341.01(A) to a settlement offer should involve only those reasonable fees and costs incurred as of the date the offer was made.” The takeaway from this case is that a defendant should make a reasonable offer of settlement early and include the current attorneys’ fees and cost to that point.     

 
Therefore, in a difficult fight, make realistic offers, make them early, and fight hard if those offers are rejected – even if you “lose” you can still win!

TOO SMALL FOR PROBATE

I frequently have people ask me this question:  Do I need to probate the estate when my loved one had nearly nothing? 

The answer is—like in nearly all legal questions—it depends.  When an estate is small, Arizona will allow for mini-probates accomplished by affidavit called a “Small Estate Affidavit.”   To qualify for probate by Small Estate Affidavit the estate and the person signing the affidavit (“affiant”) must meet certain qualifications. There are two types of small estate affidavits:  (1) Real property, and (2) Personal property. 

Real Property Small Estate Affidavit

 To transfer real property by Small Estate Affidavit the estate and affiant must meet these qualifications:

 

1.      The affiant must be legally entitled to the property.

2.      The value of all real property, less liens and encumbrances, cannot exceed $75,000.00.

3.      There must be no probate application pending, or it must be over one year from the closing of an estate or discharge of the personal representative, or no personal representative has been appointed in the past year.

4.      Six months must have passed from the decedent’s death.

5.      All funeral expenses, unsecured debt, and taxes must be paid.    

 

Personal Property Small Estate Affidavit 

To transfer personal property by Small Estate Affidavit the estate and affiant must meet these qualifications:  

1.      The affiant must be legally entitled to the property. 

2.      The value of all personal property, less liens and encumbrances, cannot exceed $50,000.00.

3.      There must be no probate application pending, or it must be over one year from the closing of an estate or discharge of the personal representative, or that no personal representative has been appointed in the past year.

4.      Thirty days must have passed from the decedent’s death.   

If you meet the above requirements, a full probate may not be necessary.  The best way to determine whether you qualify to avoid probate is to discuss the estate with a qualified attorney. 

 

                       

YOU’RE OUT!—HOW TO DISINHERIT YOUR FAMILY AFTER YOU’RE DEAD

Every family has that special family member who causes all the problems—the bad seed—the redheaded step child—the sponge—etc.   When mom and dad die, this bad seed wants to argue about everything, including why he/she receives a smaller portion of the estate than others.   The bad seed just cannot understand why mom or dad would give less to him/her than the other children.    

To defend against the bad seed and to protect the other people receiving bequests from the estate, attorneys place poisonous pills in the will or trust to disinherit the bad seed if he/she files a lawsuit to protest the estate plan or the administration of the estate.   These clauses are called “in terrorem” clauses.  These clauses are designed to “frighten” or cause “terror” in the bad seed so as to dissuade the bad seed from filing the lawsuit.  The reason this is so important is that lawsuits frequently deplete the estate for every other beneficiary of the estate. 

 

In Stewart v. Stewart, et al., a case decided on September 27, 2012, the Arizona Court of Appeals reversed a trial court that ruled against a particularly harsh in terrorem clause. The clause was so harsh that a beneficiary who “cooperates or aids” another in contesting the will or trust was disinherited.  The trial court ruled that such a broad clause violated the public policy of Arizona because Arizona Revised Statute 14-2517, along with case law interpreting it, allows for good faith attacks on wills or trusts, even if unsuccessful. 

 

In reversing the decision, the Court of Appeals reasoned that the clause only applied to beneficiaries who “voluntarily cooperate or aid a party to contest” the will or trust.  The Court of Appeals further reasoned that a party that brings the lawsuit with probable cause and in good faith has no reason to fear the in terrorem clause as current Arizona law supports those attacks.  The Court explained that if a reasonable person at the time of the challenge would have believed there was a substantial likelihood of success for a contest or attack, then the in terrorem clause will have no force. 

 

In making this decision, the Court of Appeals provided significant support to in terrorem clauses and, therefore, increased ammunition against bad seeds.  So, do you have a bad seed in your family?  If so, a properly drafted in terrorem clause will aid in limiting the damage from a lawsuit after you die.