The Investors’ Control of Their Investment Advisers. Who Has the Final Word?

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel discusses an emerging issue affecting financial advisers—when a client may exercise control over the actions of the adviser. Frankel relates the story of an investment adviser that did not follow the client’s orders to cease certain investments, at a cost of almost $5 million to the client. As Frankel explains, the Securities and Exchange Commission (SEC) got involved, resulting in the investment adviser’s settlement for a significant payment to the client and other conditions.

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Warner W. Wiggins v. Warren Averett, LLC

Court: Supreme Court of Alabama

Docket: 1170943

Opinion Date: February 7, 2020

Judge: Greg Shaw

Areas of Law: Arbitration & Mediation, Business Law, Contracts, Professional Malpractice & Ethics

Plaintiff Warner Wiggins appeals a circuit court's order compelling him to arbitrate his claims against Warren Averett, LLC. Warren Averett was an accounting firm. Eastern Shore Children's Clinic, P.C. ("Eastern Shore"), a pediatric medical practice, was a client of Warren Averett. In September 2010, while Wiggins, who was a medical doctor, was a shareholder and employee of Eastern Shore, Warren Averett and Eastern Shore entered an agreement pursuant to which Warren Averett was to provide accounting services to Eastern Shore ("the contract"). The contract contained an arbitration clause. Thereafter, Wiggins and Warren Averett became involved in a billing dispute related to the preparation of Wiggins's personal income-tax returns. In 2017, Wiggins filed a single-count complaint alleging "accounting malpractice" against Warren Averett. Warren Averett filed an answer to Wiggins's complaint, asserting, among other things, that Wiggins's claims were based on the contract and were thus subject to the arbitration clause. A majority of the Alabama Supreme Court concluded the determination of whether Wiggins' claims were covered under the terms of the arbitration clause was delegated to an arbitrator to decide. Therefore, it affirmed the trial court's order.

Shubert v. Ada County

Court: Idaho Supreme Court - Civil

Docket: 46403

Opinion Date: February 12, 2020

Judge: Brody

Areas of Law: Civil Procedure, Government & Administrative Law, Legal Ethics, Personal Injury, Professional Malpractice & Ethics

Natalie Shubert filed a negligence claim against her former public defender, Michael Lojek, former Ada County chief public defender Alan Trimming, and Ada County (collectively, “Ada County Defendants”). In 2008, Shubert was charged with two felonies and pleaded guilty to both charges. Her sentences were suspended in each case, and she was placed on probation. After a probation violation in 2011, the Ada County district court entered an order extending Shubert’s probation beyond the time period allowed by law, and the mistake was not caught. After Shubert’s probation should have ended in both cases, she was charged and incarcerated for a subsequent probation violation in 2014. Thereafter, in 2016, Shubert was charged with a new probation violation. Shubert was assigned a new public defender, who discovered the error that unlawfully kept Shubert on probation. Shubert’s new public defender filed a motion to correct the illegal sentence, raising the error that had improperly extended her probation. The district court granted Shubert’s motion to correct the illegal sentence and released Shubert from custody. Shubert then sued her original public defender, the Ada County Public Defender’s Officer, and other unknown Ada County employees alleging false imprisonment, intentional infliction of emotional distress, negligence per se, negligence, and state and federal constitutional violations. The district court dismissed all of Shubert’s claims except for negligence. In denying the Ada County Defendants’ motion for summary judgment on Shubert’s negligence claim, the district court held that public defenders were not entitled to common law quasi-judicial immunity from civil malpractice liability, and two provisions of the Idaho Tort Claims Act (ITCA) did not exempt public defenders from civil malpractice liability. The Ada County Defendants petitioned the Idaho Supreme Court, but the Supreme Court affirmed, finding the district court did not err in its finding that the public defenders and the County were not entitled to immunity. The case was remanded for further proceedings.

Sheehy v. Commissioner of Political Practices

Court: Montana Supreme Court

Citation: 2020 MT 37

Opinion Date: February 12, 2020

Judge: Mike McGrath

Areas of Law: Education Law, Government & Administrative Law, Professional Malpractice & Ethics

The Supreme Court affirmed in part and reversed in part the judgment of the district court reversing the Montana Commissioner of Political Practices' summary decision of complaint without informal contested case hearing against Montana Board of Regents of Higher Education member Martha Sheehy, holding that Sheehy did not violate the Montana Code of Ethics, that the Commissioner lacks enforcement authority over regents, and that regents are public employees subject to the Ethics Code. The Commissioner concluded that Regents are public employees subject to the Commissioner's Ethics Code enforcement authority and that Sheehy violated the Ethics Code by soliciting support for a ballot issue while suing public time, facilities, and equipment. The district court overruled the Commissioner's summary decision, concluding that the Ethics Code does not apply to regents, that the Commissioner lacked enforcement authority over regents, and that Sheehy's statements did not violate the Ethics Code. The Supreme Court reversed in part, holding (1) the Ethics Code applies to the Board of Regents of the Montana University System; (2) Sheehy did not violate the Ethics Code; and (3) the Commissioner does not have authority to enforce the Ethics Code against members of a state administrative board, like the Board of Regents.