Magistrate judge recommends ethics probe of Northwestern law prof, who sees 'crock of nonsense'

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A professor at the Northwestern University Pritzker School of Law is firing back after a federal magistrate judge said he should be referred to disciplinary authorities for his “shameful” conduct in a probate dispute with his mentally ill sister.

Law360 has the story on the recommendation by U.S. Magistrate Judge N. Reid Neureiter of Colorado.

The law professor, Bernard Black, told Law 360 that “this whole thing is a crock of nonsense.”

He also denied doing anything wrong in an interview with the ABA Journal.

“There’s been no finding of fraud,” Black says. “There’s been no shameful conduct.”

Part of the case was before Neureiter because Black had sought to remove to federal court a motion filed in the case. The motion sought to remove Black as trustee and require him to pay attorney fees incurred by his sister, Joanne Black.

Black had argued that he could remove a motion, rather than an entire case, to federal court because it named new people and made new claims, essentially constituting a new lawsuit. He also said a 30-day window to object to the removal had passed.

In his Feb. 14 report and recommendation, Neureiter recommended that the motion be remanded to the probate court, and that Black be ordered to pay attorney fees and expenses “for his bad faith attempt to remove an ongoing state probate matter.”

Neureiter also said the underlying matter should be referred to disciplinary authorities in New York, where Black is licensed to practice law.

“His conduct, as described in the underlying state probate case, is shameful,” Neureiter wrote. “That conduct, coupled with his ongoing attempts to interfere with efforts by Joanne’s guardian to recoup money ($1.5 million-plus) that he stole from Joanne, are unbecoming of a lawyer admitted to practice law in any jurisdiction.”

Neureiter provided background on the probate judge’s findings in his recommendation.

The probate case stemmed from the 2012 death of Joanne and Black’s mother, Renata, who had about $3.5 million in her brokerage accounts when she died. The mother had created a special needs trust to care for Joanne and gave two-thirds of her estate to the trust in her will. The other third was devised to a trust for the benefit of Black and his children.

Inconsistent with the terms of the will, however, the mother had made payable-on-death beneficiary designations on her brokerage accounts, which directed that almost all her funds pass directly to Joanne upon her death. The designation meant that nearly all the brokerage funds bypassed the trusts and went directly to Joanne, including the one-third designated in the will for Black.

Black was executor of the mother’s estate. Unhappy with the payable-on-death designations, he “formulated a scheme to gain control of Joanne’s finances as her court-appointed conservator,” Neureiter said.

He allowed the probate court “to believe he would deposit” the payable-on-death funds directly into Joanne’s special needs trust, Neureiter said. Instead, he redirected one-third of the funds, which was more than $1 million, to the trust established for him and his children.

At the time that Black initiated the conservatorship proceeding, his sister was homeless in Denver and “in a deteriorated state.” Black had redirected one-third of the money to his trust by disclaiming the payable-on-death money while acting as Joanne’s conservator, Neureiter said. He also moved a $300,000 Roth individual retirement account designated for Joanne into new accounts in the name of his children, according to the opinion.

Joanne’s guardian ad litem challenged the disclaimer transaction. The probate judge said Black’s actions were “deceptive and undertaken in bad faith,” and his conduct constituted civil theft. The probate court removed Black as conservator; ordered Black to reimburse Joanne $1.5 million; and trebled the damages, which required Black to come up with an additional $3 million.

An appeals court ordered a new hearing on issues that included whether the disclaimers were valid, the return of assets and the removal of Black as trustee.

Black and other family members filed several suits in other jurisdictions that have held up distribution of the money in the trust accounts, Neureiter said. Also involved in the litigation is Black’s wife, Katherine Litvak, who’s also a professor at the Northwestern University law school and who loaned money for legal fees to defend the trusts.

Neureiter concluded that the removal attempt was in bad faith and done for the purpose of forum shopping.

“Mr. Black’s arguments are all the more egregious because he is both a lawyer and a law professor,” Neureiter said. “There is no justification for the kinds of procedural and rhetorical games Mr. Black is playing. He should, and in the court’s view, does, know better. He is using his myriad legal skills to file cases across the country, engage in procedural gymnastics to avoid legitimate court judgments, impose undue and unnecessary legal costs on Joanne’s conservator, and inappropriately pressure for settlement. He has imposed significant burdens on multiple courts for no legitimate or justified reason. The victims of this chicanery are his disabled sister and the state and federal court systems that he is abusing.”

Black says he disagrees with Neureiter on the question of removal.

“In no way was this a frivolous motion,” Black says.

Black also says there was no basis for recommending sanctions, and Neureiter should have confined his opinion to the removal issue.

“I think that most of what is in Judge Neureiter’s opinion is irrelevant to the issue before him,” Black says.

Black says he disclosed his plans as conservator to send two-thirds of the money in his mother’s account to his sister’s trust, although the disclosure in hindsight could have been worded better. He came up with the plan with his relatives and on the advice of counsel. Joanne’s counsel and guardian ad litem did not object at the time.

Black says his sister has plenty of money. Her special needs trust has grown from about $3 million to about $5 million, but it is currently frozen. She also receives Social Security disability. And she should receive about $65,000 per year from workers’ compensation benefits that Black was able to transfer to his sister after his mother’s death at work.

Currently, however, the new Colorado conservator spends half of the workers’ compensation money and gives the other half to Black’s sister, he alleges. Black’s sister is currently living in a subsidized halfway house in New York.

Black says he has offered to settle the case by transferring all the money into his sister’s special needs trust, but the offer was turned down. He thinks that it was rejected because Joanne and a relative who is a minority co-trustee want to spend the money as they please.

Defunding the special needs trust allows the relative and his sister to “grab the money for personal gain,” Black says. “I am defending the trust.”

“I proposed to settle by turning over all of the money to the SNT,” Black said, referring to his sister’s special needs trust. “Who could want more?”

In 2013, Joanne moved to New York. A court in that state decided in 2016 that she no longer needs a conservator, Black said. But keeping the conservatorship intact allows more money to be spent on legal fees. His sister’s allies “are all feeding at her trough when she hasn’t been in Colorado in 10 years, and the Denver probate court has no jurisdiction over her,” Black alleges.

Black plans to file objections to Neureiter’s report and recommendation and hopes for a positive ruling by U.S. District Judge Daniel D. Domenico of the District of Colorado.

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