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Questions raised about lawyer in dispute over Scaife estate

| Saturday, Dec. 13, 2014, 10:10 p.m.
David and Jennie Scaife are the children of Richard Scaife.
David and Jennie Scaife are the children of Richard Scaife.

A court filing Friday in a dispute over the estate of late Tribune-Review owner Dick Scaife raises questions about the activities of one of the lawyers.

Attorney Charles Avalli, who represents Scaife's daughter, once advised that administrators of a 1935 trust created by Sarah Mellon Scaife had broad authority to distribute its funds to her son, the newspaper publisher and philanthropist who died in July. But a legal petition Avalli filed Nov. 3 on behalf of Jennie Scaife, 51, of Palm Beach, Fla., claims those trustees exceeded their authority when they did so.

Legal experts contacted by the Trib spoke generally about conflicts of interest, and not on this specific case.

Situations such as this can be “dangerous” for lawyers, said Stephen Gillers, legal ethics expert and the Elihu Root Professor of Law at New York University.

“You paid me to get something done, and I can't seek to undo what I achieved for you. Lawyers don't do that, because they're creating the opportunity for malpractice claims,” Gillers said. “It's dangerous to challenge the validity of your own prior work.”

Avalli did not return a message left in his voicemail. A receptionist at Avalli's firm, Gentile, Horoho & Avalli, said he declined to comment.

Avalli used to work with the lawyers he's arguing against. In 1997, he resigned from the Downtown law firm Strassburger McKenna Gutnick and Gefsky.

Lawyer H. Yale Gutnick, a longtime friend of Scaife's and a trustee, is chairman of the Trib's board of directors.

Scaife's son, David, 48, of Shadyside, joined his sister's petition to get a court-ordered accounting of the trust.

The petition Avalli filed for Jennie Scaife says the trustees — Gutnick, James M. Walton and PNC Bank — allowed Scaife to use the trust as “his own personal bank account” to subsidize the Trib and his other media holdings.

But in a Feb. 13, 1997, memo to the trustees, Avalli wrote that money from the trust “may be distributed as the trustees deem to be for the ‘best interests' of Richard M. Scaife.”

“It is important to note that under these trusts, the trustees are given the broadest possible discretion” to disburse money, Avalli wrote. The memo was part of the court filing on Friday.

The language setting up the trust said trustees were to distribute the money in Scaife's “best interest.”

“Ultimately, it is up to each trustee to determine what is in the best interest of Richard M. Scaife,” Avalli concluded in another memo.

Such situations can fall into the category of a “successive conflict of interest,” said legal ethics expert John Burkoff, a University of Pittsburgh law professor.

“Someone represented ‘X' in the past and now is involved in something where ‘X' is on the other side. That is normally not permitted, (although) there are a number of exceptions,” Burkoff said. “The easiest one is if the other side consented to having the attorney there.”

That didn't happen in this case, said attorney E.J. Strassburger, who represents Gutnick.

There's nothing inherently unethical about representing one client against a former client, but the matter can't be “substantially related” to the lawyer's previous work, according to Pennsylvania's rules of professional conduct for lawyers.

“They want to make sure that the lawyer is not in a position to use the former client's confidential information,” Gillers said.

Lawyers can argue positions that are opposite of a previous argument they made, but it opens them up to some uncomfortable questions, Gillers said.

“Arguing against your legal opinion might weaken your credibility with the court, but if it's only that, it's not a problem,” Gillers said. “... If a lawyer is doing that, he has to expect the second time around that the adversary will say, ‘Mr. Jones is saying “black,” and he was saying “white.” ' ”

But that might not be what Avalli is arguing.

“Maybe this lawyer is claiming, ‘I'm not challenging the validity of my advice,' ” Gillers said. “This stuff is very fact-intensive.”

Scaife's children — who each receives $12 million a year from a separate trust, and who have estimated net worths of between $350 million and $500 million — said they didn't know the 1935 trust was depleted until their father died.

Gutnick's response on Friday, however, quotes a 2008 email from one of their lawyers stating that both knew they had “no right to current distributions from the trust,” though they had a claim to whatever might be left in the trust after Scaife died.

The email came from lawyer Sanford Ferguson, written six years before Scaife died. Ferguson ran into his own legal troubles recently when he and his firm, K&L Gates, settled a malpractice suit in January involving the financial collapse of LeNature's Inc. for $23.7 million. The firm admitted no wrongdoing.

Mike Wereschagin is a staff writer for Trib Total Media. He can be reached at 412-320-7900 or mwereschagin@tribweb.com.

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