Review the rules in Chapter 5 about accepting gifts from clients and determine if either the lawyer or the paralegal in this case violated those rules. What should they have done to protect against a lawsuit like this one?

Chapter 5: Gifts from Clients A longstanding rule strongly disfavors gifts made from clients to their lawyers. This rule is especially pertinent when a lawyer drafts a document under which they receive a gift, such as in a will or trust. This scenario is rife with potential for undue influence, fraud, and overreaching, especially because clients in such cases are frequently elderly and may be more vulnerable to overreaching by their attorneys. Courts frequently void both inter vivos and testamentary gifts in such cases, even without an affirmative showing of undue influence. Some courts allow the lawyer-beneficiary to present evidence showing the legitimacy of the gift. To do so, the lawyer must show that the gift was fair and fully intended by the client, who had the requisite capacity and was not subject to undue influence by the lawyer. One serious additional problem sometimes results from such a gift: It may raise the question of the client's testamentary capacity, potentially voiding the entire estate plan, including the gift. In addition to the court voiding a gift, a lawyer may be subject to discipline under the state's ethics rules. ABA Model Rule 1.8 prohibits a lawyer from soliciting a substantial gift from a client or preparing a document in which the lawyer or a person related to the lawyer is given a gift, unless the lawyer is related to the client. "Simple gifts" from clients, such as holiday presents or tokens of appreciation, are excepted. (See Comment [6].) One potential area for abuse arises if a lawyer drafts documents that appoint him or her to perform additional services, such as those of executor or trustee. Although this practice is common, more questionable is the lawyer's drafting of the document nominating him or her to serve as executor or trustee and as counsel. Some states prohibit this arrangement unless the court approves it upon a finding that it is in the best interests of the estate. Comment 8 to Rule 1.8 indicates that a conflict will be found if the lawyer cannot exercise independent professional judgment in the dual role. In these cases, the basic conflict rule (in Model Rule 1.7) would apply, and the lawyer would need to inform the client of the potential conflict and alternatives and to obtain the client's informed consent. Gifts from Clients to Paralegals Paralegals also have a potential conflict when a client gives them a gift, especially a valuable gift. As with business transactions, there is less risk of the appearance of undue influence when a gift is bestowed on a paralegal than on a lawyer, but the appearance of impropriety may be present nonetheless. In the case of a substantial gift, especially from an elderly or otherwise vulnerable client, it is advisable for the paralegal's supervising lawyer to recommend that the client consult with independent counsel and for the paralegal to refrain from working on the gift document in any way. For example, see the In re Estate of Divine case.

In re Estate of Divine 263 Ill. App.3d 799, 635 N.E.2d 581 (1994) Beginning in approximately 1979, Giancola was employed in Chicago by attorney Samuel Poznanovich as a part-time secretary in his law office. Eventually, she became his full-time secretary. Giancola received a paralegal certificate from Roosevelt University in 1980, and took an H & R Block tax course in 1970. Poznanovich employed one other secretary in addition to Giancola. In 1981, Richard and his wife, Lila, came to Poznanovich's office for income tax services. The Divines did not have any children and both were retired. Giancola estimated that they were in their "early seventies" in 1981. Giancola interviewed the Divines, took tax information from them such as W-2 forms and copies of their previous tax returns, and introduced them to Poznanovich. After this initial meeting, Poznanovich prepared the Divines' tax returns every year until 1986. Each year, Giancola would interview the Divines and gather their tax information. She never prepared their taxes, but simply gathered information for Poznanovich's use. In 1985, Poznanovich also represented Richard in a personal injury case. Giancola was not involved in that case. Additionally, Richard called Poznanovich occasionally for legal advice on other matters. Before 1986, Giancola and Poznanovich saw the Divines only at the law office, although, according to Poznanovich, the relationship became "more and more friendly" each year. p. 53 In December 1986, Lila died. Richard called Giancola at the office to tell her about Lila's death. Giancola stated that Richard had "depended on Lila for just about everything" and was very lonely without Lila. Also, he was "unable to do for himself." Giancola went to visit Richard in his apartment on Coles Avenue "within a day or two" of Lila's death. Richard was afraid to leave the apartment alone and could not walk long distances because "his legs were bad." Richard's relatives and Poznanovich also testified that Richard had physical problems with his legs. Giancola stated that for "the most part," Richard was confined to his apartment. After Giancola's first visit, Richard frequently called her, and she visited his apartment once or twice a week. Richard asked her to assist him in getting his groceries and other necessities. Richard gave Giancola money for the groceries and supplies. She testified that he did not give her a "fee" for her services, but admitted that sometimes he gave her "something for [her]self." He did his own cooking while living in the Coles Avenue apartment. Giancola believed that the neighborhood around Coles Avenue was too dangerous for Richard, and she did not like going there to visit him. She suggested that he move to a safer area; she also mentioned to Poznanovich that Richard's neighborhood was unsafe. Poznanovich's office is located in a building he and his sister own. There are four residential apartments in that building which are rented by Poznanovich and his sister. Giancola occasionally takes the rent checks from tenants for Poznanovich. When an apartment became vacant in Poznanovich's building, Giancola told Richard it "would be easier" if he moved into that apartment. She did not know that Richard's relatives wanted him to move to Michigan City, Indiana. . . . In addition to getting his supplies and cooking his meals, Giancola cashed checks for Richard and made bank deposits for him. She wrote out the checks for all his bills. She explained that she would write the checks, he would sign them, and she would mail them. All these transactions involved only Richard's personal checking account. Richard would discuss "personal problems" with Giancola, but did not talk to her about legal matters. . . . In November 1987, Richard called Poznanovich and asked him to come to his apartment. In the apartment, Richard told Poznanovich that he wanted to "put his affairs in order." First, he handed two bank account passbooks to Poznanovich and said "I want this for my sweetheart." Richard told Poznanovich that his "sweetheart" was Giancola, and that he wanted her to have the two accounts. These two accounts were separate from Richard's personal checking account which Giancola used for his finances. Richard told Poznanovich he did not want to leave the accounts to Giancola in his will because he wanted her "to have them now." Richard explained: "As far as I'm concerned, if it were not for her, I would be dead now." Poznanovich suggested that the accounts be made joint accounts, like the accounts Richard had shared with Lila. Whenp. 54 Poznanovich assured Richard that a joint tenancy would allow Giancola to have the money immediately, Richard told Poznanovich to change the two accounts to joint accounts. Giancola was not present during this discussion. Poznanovich testified that he did not receive any direct or indirect financial benefit from this transaction. Next, Richard asked Poznanovich to draft a will for him. The will made Poznanovich executor of the estate and gave $3,000 each to Giancola and Poznanovich. Poznanovich testified: "I had a problem with [Richard] inserting me as a beneficiary under the will...[and] we agreed that if I were to remain in the will as a beneficiary, I would waive my executor's fee, which I did." The will made one other specific bequest of $2,000, then left one half of the residuary estate to the petitioners and one half to four other family members. After his death, the value of Richard's estate, in addition to the joint accounts, was approximately $150,000. Poznanovich obtained two signature cards from the bank and had the accounts changed to joint accounts. On November 14, 1987, he asked Giancola to sign these signature cards. Neither Richard nor Poznanovich ever discussed the accounts with Giancola before presenting her with the cards. They also did not discuss the transactions with any members of Richard's family. . . . At the hearing in the trial court and in this court the petitioners argued that the actions of Poznanovich and Giancola are inextricably intertwined and that because Giancola was a paralegal and an employee of the lawyer, Poznanovich, who was a fiduciary as a matter of law, so also is Giancola a fiduciary as a matter of law. They also repeatedly assert that Poznanovich gained financially from the transactions which benefitted Giancola. Nonetheless, they never requested that Poznanovich or Giancola return the $3,000 bequests and they do not challenge the validity of the will. Additionally, they have never made Poznanovich a party to these proceedings. Essentially, the petitioners argue that Poznanovich's questionable action of drafting a will which gave him a gift and his status as an attorney should be imputed to Giancola and that she should be liable because of his actions. Under certain circumstances, one person will be charged with liability for the actions of or knowledge given to another person. For example, actions by one partner will be imputed to another partner. [Citation omitted.] Also, an employer will be held liable for certain actions of his employee. [Citation omitted.] There is no case law holding an employee liable for the acts of his employer, however, and the petitioners cite no law to support their position that Giancola should be accountable for Poznanovich's actions. Unfortunately, there also is no case law in Illinois involving the narrower question of a paralegal's fiduciary duty to his employer's client, making this a case of first impression. In fact, we have found no reported case in the United States involving a paralegal's fiduciary responsibility, as a paralegal, to his attorney's client. p. 55 Moreover, there is very little case law from Illinois or any jurisdiction generally discussing paralegals. Two cases address the somewhat analogous issue of a paralegal's possible liability for legal malpractice. A divided Nevada Supreme Court, in Busch v. Flangas (1992), 108 Nev. 821, 837 P.2d 438, held that an attorney's law clerk or paralegal who attempts to provide legal services can be liable for malpractice to the client. On the other hand, the Busch dissent argued that a law clerk or paralegal, as an employee of an attorney, owes no duty to the attorney's client, but is liable only to the attorney. (Busch, 837 P.2d at 441 (Springer, J., dissenting).) The Court of Appeals of Ohio, without extensive discussion, determined that a paralegal could not be sued for legal malpractice because she was not an attorney. Palmer v. Westmeyer (1988), 48 Ohio App. 3d 296, 549 N.E.2d 1202, 1209. On the other hand, the idea that an attorney is liable, in malpractice or as an ethical violation, for his paralegal's acts is well-supported in Illinois. . . . Several Illinois cases support the idea that paralegals are an extension of their employing attorney. For example, the presence of an attorney's employee, such as a secretary or law clerk, does not destroy the attorney-client privilege for material disclosed to the attorney in the employee's presence. [Citations omitted.] Also, in the majority of Illinois cases discussing paralegals, which involve disputed attorney fee petitions, the courts have held that an attorney may recover reasonable fees for time properly spent by his paralegal. . . . Based on these cases, we refuse to treat Poznanovich and Giancola as a unit for purposes of Giancola's liability. It is clear that Poznanovich, as a licensed attorney and as an employer, could be held liable for Giancola's actions. Nonetheless, holding Giancola liable as if she were an attorney is not consistent with general respondeat superior law or with the decisions discussed above treating paralegals as subordinate employees of attorneys. The theme running through all these cases is that paralegals do not independently practice law, but simply serve as assistants to lawyers. They are not equal or autonomous partners. Thus, while supervisors properly are held liable for paralegals' actions, the subordinate paralegals should not be liable for the actions of these supervisors. Therefore, we refuse to find that Giancola owed Richard a fiduciary duty simply because she worked for Richard's attorney, and we refuse to hold that paralegals are fiduciaries to their employers' clients as a matter of law. . . . We also wish to make it clear that we are not saying that the evidence shows that Poznanovich did anything improper. We have discussed his "actions" only in the general sense to illustrate that, while he was a fiduciary to Richard as a matter of law and if he had been the recipient of the joint account funds, the burden of proof would have been on him to show that the transaction was proper, his fiduciary obligations may not be imposed upon Giancola. Nor are we saying that an improper transfer may never be shown under circumstances like those present inp. 56 this case. If the petitioners had offered evidence from which it could be inferred that collusion existed between Poznanovich and Giancola or that Poznanovich gained financially in any way from the transfer, our holding would be different. But neither the trial judge nor this court may decide a case on speculation, guess, conjecture, or suspicion. For these reasons, the judgment of the circuit court is affirmed.