The estate of a woman whose special needs trust was drained under questionable circumstances prevailed Wednesday before the 7th Circuit Court of Appeals. The founder of the organization that took the money is a suspended Indiana attorney facing charges that he stole from other clients’ trusts. The organization must now repay the estate more than $200,000.
The court reversed Southern District Judge Tanya Walton Pratt and ordered the National Foundation for Special Needs Integrity Inc. to pay the estate of Missouri woman Theresa Givens $234,181.23 plus prejudgment interest.
“We respectfully disagree with our colleague on the district court,” Circuit Judge David Hamilton wrote for the panel in National Foundation for Special Needs Integrity, Inc. v. Devon Reese, as Personal Representative for the Estate of Theresa A. Givens, 17-1817. The 7th Circuit held that Pratt’s ruling that the estate’s claim against Special Needs Integrity were barred by the doctrine of laches “was based on clearly erroneous findings of fact.”
Further, Hamilton wrote, “We must note that the Foundation’s (former) counsel, (Kenneth) Shane Service, testified that he intentionally drafted (a section of Special Needs Integrity’s agreement dealing with distributions upon the death of a beneficiary) to confuse Missouri government officials.”
Givens had set up a special needs trust with about $255,000 in settlement proceeds from a lawsuit related to injuries she received from dialysis treatments. She died shortly after the trust was established, and her children were told by Special Needs Integrity that there would be no money left in Givens’ account. Hamilton, though, noted in the opinion that Service also had testified that Givens’ “main concern was always about her children.”
While the children received none of the roughly $234,000 that remained in Givens’ trust when she died in 2011, the foundation claimed the money after initially informing Givens’ children there would be no money because the proceeds most likely would be consumed by Medicaid refunds. After the children questioned distributions to the foundation, Special Needs Integrity filed a declaratory judgment action against the estate in April 2015, which Pratt awarded.
But the 7th Circuit found the contract Givens signed to be ambiguous and found no reason to believe Givens intended her money to go to the foundation rather than to her children. “The Foundation provided Givens with a service by managing her assets for what turned out to be just a few weeks before she died — a service for which Givens paid the Foundation” Hamilton wrote. “There is no plausible reason she would have intended to give it all the money that might be left upon her death.
“… We thus conclude that the agreement is best construed as providing that the remainder funds go to the Estate of Theresa Givens,” the panel held in reversing and ordering the foundation to pay the estate $234,181.23 plus prejudgment interest.
During oral arguments in September, Lewis & Kappes attorney David Gray, who represented Special Needs Integrity, faced tough questioning from Hamilton.
“You don’t even have records of a decision” by Service or by other foundation representatives to take the money, Hamilton said. “You just have money shifted from one account to another in 2013 and then again in 2014.
“… Why should we simply not decide it’s an ambiguous document that needs to be construed against the drafter and order distribution?” he asked Gray near the end of his presentation.
“If laches doesn’t work, nothing prevents you from doing it,” Gray responded.
Meanwhile, Service is awaiting trial on theft charges in Lawrence County, where he is accused of stealing more than $85,000 from two former clients’ special needs trusts. Authorities believe Service may have other victims in different states. An Indiana State Police investigator said in September officials were looking into the possibility of “numerous victims in multiple states.”
Service’s next court date on the Lawrence County charges is set for March 21.
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7th Circuit reverses, orders special needs trust group to pay estate