Trust’s attorney not liable under RICO

HNWElder Law, Estate Administration and Probate

A federal appeals court upholds the dismissal of a trust beneficiary’s lawsuit claiming that an attorney who worked for the trustee violated the Racketeer Influenced and Corrupt Organizations (RICO) Act, because there was no evidence that the attorney directed any of the alleged misconduct. Walter v. Drayson (9th Cir., No. 07-16284, August 18, 2008).

Patricia Walter died in 2005, leaving most of her assets in trust for the benefit of her four children. One of the children, Robert Walter, filed a complaint against several of the trustees and the attorney who worked for them, alleging that they removed property from the trust after his mother’s death and that they failed to rent the real property held in the trust.

As part of his suit, Mr. Walter contended that the parties violated the RICO Act by acting as an associated-in-fact criminal enterprise looking to take control of the trust and its assets. The trial court dismissed the suit, finding that the attorney for the trust was acting in her capacity as counsel for the trust and not as a partner who directed any of the alleged illegal conduct. Mr. Walter appealed, arguing that the attorney’s participation was essential to and contributed towards the operation of the alleged scheme to steal funds from the trust.

The 9th Circuit Court of Appeals upheld the trial court’s dismissal. The court explains that in order to have a case under the RICO Act, there must be evidence that a party had some part in directing the affairs of the organization. The court finds that “one can be ‘part’ of an enterprise without having a role in its management and operation. Simply performing services for the enterprise does not rise to the level of direction, whether one is ‘inside’ or ‘outside.’ Accordingly, neither reasonable inferences, nor triable issues, exist sufficient to subject [the attorney] or her firm to liability”.

For the full text of this decision, click here.

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