In Re Estate of Feldman
443 P.3d 66
Colo.2019Background
- Stacy Feldman died in 2015; husband Robert Feldman received ~$751,910 as sole beneficiary of her life insurance.
- Nearly three years later Feldman was criminally charged with Stacy’s murder and retained Haddon, Morgan & Foreman; retainer deposited in the firm’s client trust account.
- Elizabeth Greenberg, guardian for the couple’s minor children, and a special administrator petitioned under Colorado’s slayer statute seeking recovery of the insurance proceeds and appointment of a special administrator to protect the estate.
- The probate court ordered the law firm to (1) deposit the funds from its client trust account into the court registry or a special trust and (2) produce fee agreements, billing records, and source-of-funds information, reasoning the funds derived from the life insurance and could be lost to defense fees.
- Feldman and the law firm filed an original C.A.R. 21 petition to the Colorado Supreme Court challenging the freeze and disclosure order as an abuse of discretion and an improper restraint on Feldman’s right to counsel.
- The Supreme Court concluded the probate court abused its discretion by freezing the funds without applying preliminary injunction standards and held the slayer statute protects the law firm as a third-party recipient of payment for a legally enforceable obligation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether probate court could preliminarily freeze funds in law firm client trust account derived from life insurance proceeds | Greenberg/special admin: freeze necessary to prevent dissipation of assets that would belong to children if Feldman is proven the killer | Feldman/firm: freeze prevents payment for legal services, risks withdrawal of counsel and deprives Feldman of counsel of choice | Court: probate court abused discretion by ordering freeze without applying preliminary-injunction balancing (including likelihood of success) |
| Whether Colorado’s slayer statute permits disgorgement or liability against a third party (law firm) who received insurance proceeds to satisfy a legally enforceable obligation | Greenberg: statute allows recovery; firm has not "received"/earned funds so protection inapplicable | Firm: when it accepted retainer it "received" funds and did so in satisfaction of a legally enforceable obligation (fee agreement), so § 15-11-803(9)(a) protects it | Court: slayer statute protects third parties who received payment to satisfy a legally enforceable obligation; firm cannot be compelled to return or be liable for those funds |
| Whether ordered disclosures (fee agreement, billing, source of funds) were required | Greenberg: disclosures needed to determine what portion, if any, was already earned and thus not subject to freeze | Firm: disclosures improper if freeze is impermissible; client confidentiality and unnecessary invasion | Court: because funds could not be frozen under the statute, the disclosures would not serve their intended purpose and were unnecessary |
Key Cases Cited
- Lunsford v. Western States Life Insurance, 908 P.2d 79 (Colo. 1995) (interpreting scope of Colorado slayer statute re: insurer liability)
- Rathke v. MacFarlane, 648 P.2d 648 (Colo. 1982) (preliminary injunction prerequisites, including likelihood of success)
- Beren v. Beren, 349 P.3d 233 (Colo. 2015) (scope of probate court equity jurisdiction under the Probate Code)
- In re Marriage of Allen, 724 P.2d 651 (Colo. 1986) (constructive trust cannot operate against bona fide third-party purchasers)
- Lyons v. Jefferson Bank & Trust, 781 F. Supp. 1525 (D. Colo. 1992) (applying preliminary-injunction test to freeze assets claimed under a constructive trust)
- Fognani v. Young, 115 P.3d 1268 (Colo. 2005) (original C.A.R. 21 jurisdiction discretionary)
- Wesp v. Everson, 33 P.3d 191 (Colo. 2001) (original proceedings under C.A.R. 21 are extraordinary and limited)
- Smith v. Jeppsen, 277 P.3d 224 (Colo. 2012) (interlocutory orders may warrant C.A.R. 21 when appellate review is inadequate)