Corporate executives ultimately breach their fiduciary duty when they fail to act in the corporations best interest. After a bench trial, the court rendered judgment approving the trust accounting, approving the trustees administration, and holding that the trustee, individually and in his capacity of trustee, was completely discharged and relieved of all duties and was fully and completely released and discharged from any and all claims, duties, causes of action or liabilities (including taxes of any kind) relating to any and all actions or omissions in connection with his administration of the DPH Trust. Id. 432 S.W.2d at 749. Fiduciaries are people who, while acting in good faith, agree to uphold duties of loyalty and care for the benefit of another. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional. Specifically, the court found [i]n this case, by agreeing to be bound by the lease, [plaintiffs] did not ratify the tortious conduct that cause them to have to accept the lease or else lose the property. Civ. As a business law firm, the attorneys at Cueto Law Group are familiar with Florida litigation when it comes to breach of fiduciary duty claims. Waiver is defined as an intentional relinquishment of a known right or intentional conduct inconsistent with claiming such right. What defenses are available? At the core of these equitable defenses is the concept that a party should not be allowed to act inconsistently: have knowledge of conduct and fail to object to it for a period of time (thereby tacitly agreeing to the conduct) and then later raising claims against the trustee for the same conduct. Reminder: High-Earning Exempt Professionals Must Be Paid a "True Gold Dome Report Legislative Day 24 (2023). Friday Development: New Sanctions and Export Controls to Address Weekly IRS Roundup February 20 February 24, 2023, Everything to Know About Unbundled Legal Services. WebC. 490, 341 S.W.2d 892 (1960). This post discusses fiduciary duties, common defenses to breach claims, and where companies can get legal help. 1911)) (internal quotation marks omitted). High level speaking, the Business Judgment Rule (a legal doctrine) requires that corporate executives exercise their due diligence by being informed of the material facts regarding the corporation transactions when making business decisions affecting the corporation; act in good faith; and act in the best interest of the corporaiton. 2008);Tenneco Inc. v. Enter. Beneficiaries may argue that the trustee has acted with unclean hands and therefore may not take advantage of equitable defenses. 524, 525 (Tex. Garver v. First Natl Bank, 432 S.W.2d 745 (Tex. Accord and satisfaction exists when the parties agree to discharge an existing obligation in a manner other than in accordance with the terms of their original contract.Avary v. Bank of Am., N.A.,72 S.W.3d 779, 788 (Tex. Civ. Constructive Fraud (Civ. App.El Paso 1975, writ refd n.r.e.) Lott, Inc. v. Pittsburgh Plate Glass Co., 432 S.W.2d 583, 586 (Tex. App.Houston [1st Dist.] Defense 1. The court further ordered that the sister take nothing on all her claims and ordered her to pay attorneys fees for the trustee. Bldg. 4, 2008, no pet.) Confidential or Fiduciary Relationship One who stands in a confidential or fiduciary relation to the other party to a transaction must disclose mate-rial facts. Id. Dist. App.Amarillo 1968, no writ). The content and links on www.NatLawReview.comare intended for general information purposes only. Any retention of the beneficial part of the transaction affirms the contract and bars an action for rescission as a matter of law. App.Dallas 1993, writ denied) (ratification). The elements of equitable estoppel are: (1)a false representation or concealment of material facts, (2)made with the knowledge, actual or constructive, of those facts, (3)to a party without knowledge, or the means of knowledge, of those facts, (4)with the intention that it should be acted on, and (5) the party to whom it was made must have relied or acted on it to his prejudice. App.Waco 1957, writ refd n.r.e.). WebFernandez Pujals v. Garcia et al, No. Culver v. Pickens, 176 SW2d 167 (Tex. App.Texarkana 1992, writ denied). Defenses A common defense in any breach of fiduciary duty case is straightforward. denied). 1991, no writ). A false representation may be accomplished by conduct, or when one has a duty to speak, by mere silence. App.Dallas 2002, pet. Vessels v. Anschutz Corp., 823 S.W.2d 762 (Tex. (implicitly holding that, by selling his business, plaintiff did not ratifythe tortious conduct that put him in the position of having to sell it). Summary judgment should not have been granted on the basis of ratification. Id. Culver v. Pickens, 176 SW2d 167 (Tex. Id. The bank had handled the deposits for many years, as directed by the estates executors, who were the wifes brothers. at 357. The court of appeals affirmed the application of the trustees affirmative defense of quasi-estoppel based on the beneficiarys prior consent to trust investments in other real estate investments: The affirmative defense of quasi-estoppel precludes a party from asserting, to anothers disadvantage, a right inconsistent with a position she has previously taken. In re EGL Eagle Global Logistics, LP, 89 S.W.3d 761, 766 (Tex. The court further ordered that the sister take nothing on all her claims and ordered her to pay attorneys fees for the trustee. App.Waco 1981, writ dismd) (petitioners affidavit created fact issue on whether she accepted the benefits due to financial need and duress precluding summary judgment on estoppel). One who retains benefits under a transaction cannot avoid its obligations and is estopped to take an inconsistent position. Prods. App.Dallas 2011, pet. Beneficiaries may argue that the trustee has acted with unclean hands and therefore may not take advantage of equitable defenses. WebFor cases involving allegations of negligence of professions other than medical or legal, instructions 402.11 (a) and (b) and 402.12 (a) and (b) should be appropriately Performance Rule Requires Disclosure of Relationship Tech Takeaways: SCOTUS Weighs in on Pivotal Tech Cases. LEXIS 2209, at *8 (Tex. (Bitman, Ronnie) Download PDF Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. & Mort. Abusive Arbitrage Devices Its Time to Get Reacquainted (Episode 2 Former City of Atlanta Official Sentenced for Accepting Bribes, United States Department of Justice (DOJ), CBP Officers Seize More Than 540 Pounds of Narcotics, U.S. Customs and Border Protection Department of Homeland Security. Bank of Bells/Savoy, 154 S.W.3d 859 (Tex. The court held that no one has the right to remain inactive when action is demanded while another party so changes his position that great damage will be inflicted by granting the remedial writ. App.Austin 1995, no writ) (estoppel); Pickett v. Heygood, Orr & Reyes, L.L.P., No. App.Amarillo 1968, writ refd n.r.e.). Breach of Fiduciary Duty Citation: Common law/case law: Swayne v. Beebles Invs., Inc., If you suspect that someone who owes you a fiduciary duty is breaching that duty, consult an experienced attorney as soon as possible to ensure your rights. App.Waco 1953, writ dismd). Bldg. Additionally, quasi estoppel is a defense that prevents a party from obtaining a benefit by asserting a right to the disadvantage of another that is inconsistent with the partys previous position. In re Marriage Stroud,376 S.W.3d 346, 356-57 (Tex. Ratification occurs when a person who knows all the material facts confirms or adopts a prior act that did not then legally bind him and which he could have repudiated. The elements of equitable estoppel are: (1)a false representation or concealment of material facts, (2)made with the knowledge, actual or constructive, of those facts, (3)to a party without knowledge, or the means of knowledge, of those facts, (4)with the intention that it should be acted on, and (5) the party to whom it was made must have relied or acted on it to his prejudice. Co. v. Benton, 728 S.W.2d 35, 37 (Tex. LEXIS 4048, 2008 WL 2266133, at *5 (Tex. Draft the To Each Their Own: Agency Must Consider Experience of Each Partner in CMS Updates List of Telehealth Services for CY 2023, What You Need to Know About the New Tariffs on Imports from Russia. Yet the presumption of the Business Judgment Rule can be rebutted by evidence showing that the directors have acted in bad faith, committed corporate waste, or are conflicted in the challenged corporate transactions. Will Changes to the Option To Tax Regime Impact UK Insolvency Sales? Perry Homes v. Cull, 258 S.W.3d 580, 60203 (Tex. App.Texarkana 1992, writ denied). Id. You should consult an attorney for advice regarding your individual situation. Can the trustee point to the quarterly statements and argue that the beneficiary is not allowed to complain about the overcompensation by waiting to challenge it and by allowing the trustee to continue to do work without objection? at 513. Acts which, although in affirmance of the contract, do not indicate any intention to waive the fraud, cannot be held to operate as a waiver. Further, waiver is largely a question of intent. No Fiduciary A breach can also have legal claims seeking recovery of financial losses to make the plaintiff whole.. App.Amarillo Mar. Trustees, attorneys, and business partners may be among those with a duty to disclose. 149, 135 S.W. However, the wife submitted evidence that she was led into the agreement by the husbands fraud and threats. A sister filed a breach of fiduciary duty claim based on this failed investment. Civ. Vessels, 823 S.W.2d at 765. This Week in 340B: February 21 27, 2023. A fiduciary duty is basically an obligation where one party acts in the best interest of the other, such as: The board of directors of a company has a The remedies a plaintiff may be able to recover as damages of a fiduciary duty claim are often in one of two forms. App. The doctrine applies when it would be unconscionable to allow a person to maintain a position inconsistent with one in which he acquiesced, or of which he accepted a benefit. For example, in Garver, a husband and wife filed suit against a bank seeking recovery of an interest in the proceeds of oil and gas leases that had been deposited with the bank for the benefit of the heirs of the wifes parents. 1999, pet. The defense involves a new contract, either express or implied, in which the existing obligation is released by agreement of the parties through means of [a] lesser payment tendered and accepted.Richardson v. Allstate Tex. However, it is also possible to have a fiduciary relationship through less formal means via Florida common law. at 765. App.Tyler March 5, 2019, pet. The bank had handled the deposits for many years, as directed by the estates executors, who were the wifes brothers. Id. Code, 1088) 4111. While traditionally considered an affirmative defense to breach of contract, its important to note that you have the right to argue in the alternative. This means that you may present each of the breach of contract defenses you think is applicable to your case, even if some contradict each other. The elements of waiver include the following: (1) existing right, benefit, or advantage; (2) actual or constructive knowledge of its existence; and (3) an actual intent to relinquish the right inferable from the conduct. The doctrine applies when it would be unconscionable to allow a party to maintain a position inconsistent with one in which she acquired or by which that party accepted a benefit. App.Waco 1981, writ dismd) (petitioners affidavit created fact issue on whether she accepted the benefits due to financial need and duress precluding summary judgment on estoppel). Waiver can be established as a matter of law. There are some other defenses available to fiduciaries that go outside the substance of the breach claim itself. WebEssentially, the breaching party engaged in two types of improper activity: 1) failing to disclose an opportunity to the LLC, and 2) taking that opportunity for themselves. 12-17-00234-CV, 2019 Tex. WebDefendants Affirmative Defenses. Affirmative defenses to breach of fiduciary duty in Florida. : Advanced Marketing Compels Trial on Arbitration in a TCPA Health Plans Gag Clause Attestations Due December 31, 2023. In 2011, the trustee filed suit to resign and obtain a judicial discharge. D. Potential Arguments To Defeat Equitable Defenses. (The doctrine applies against a litigant whose own conduct in connection with the same matter or transaction has been unconscientious, unjust, marked by a want of good faith, or violates the principles of equity and righteous dealing.). How can you know if you have a beneficiary duty owed towards another or in the alternative that someone may owe you a fiduciary duty? Is breach of fiduciary duty an equitable claim? For example, a beneficiary may claim that the trustee has compensated itself too much. Laches applied to bar such a claim. Moreover, depending on the level of sophistication between the parties, the parties may contractually disclaim a fiduciary relationship or waive a fiduciary duty. Challenges to the No Surprises Act Continue: The Latest includes a Navigating Permissive State Laws in Light of the Federal Information FDA Publishes List of 2023 Priority Guidance Topics. denied). App.Dallas Jun. (mem. App. App. Id. Co. v. Conoco, Inc., 52 S.W.3d 671, 677 (Tex. Id. Bank of Bells/Savoy, 154 S.W.3d 859 (Tex. Disclaimer: The information you obtain at this site is not, nor is it intended to be, legal advice. App.Waco 1957, writ refd n.r.e.). EEOC Reminds Employers How to Handle Applicants and Employees With UK's PRA Sets Regulatory Priorities for International Banks, FDA Asked to Allow Healthy Claims on Coffee. (mem. Like all equitable claims and defenses, these defenses largely depend on the facts and circumstances of the case. Equitable relief is not warranted when the party seeking relief has engaged in unconscionable, unjust, or inequitable conduct with regard to the issue in dispute. Id. (Pollack v. Lytle (1981) 120 Cal.App.3d 931, 940.) Van Indep. As a result, the jury did not reach the issue of damages. App. It is well settled that there can be no ratification or waiver from the acceptance of benefits by a person who did not have knowledge of all material facts. Byrd v. Woodruff, 891 S.W.2d 689, 699-700 (Tex. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials. Dist.] Deborah agreed to all of these transactions. v. Prize Energy Res., L.P.,510 S.W.3d 497, 505 (Tex. 2 v. Callewart, 837 S.W.2d 693, 699 (Tex. Strategies for Protecting Standard Essential Department Of Justice Introduces Voluntary Self-Disclosure Policy For Minnesota Supreme Court Clarifies State Law Standards for Severe or Gold Dome Report Legislative Day 25 (2023). Contact our law firm to schedule aconsultationabout a breach of fiduciary duty claim. Co., 140 Tex. Id. Id. (quasi-estoppel); Spangler v. Jones, 861 S.W.2d 392, 397-98 (Tex. Quasi estoppel refers to conduct such as ratification, election, acquiescence, or acceptance of benefits. Steubner Realty 19 v. Cravens Road 88, 817 S.W.2d 160, 164 (Tex. App.San Antonio 2001, no pet. WebANSWER and affirmative defenses to 1 Complaint with Jury Demand by Lorit, LLC. The sister appealed. Childress v. Cook, 245 F.2d 798 (5th Cir. There are very few hard-and-fast rules in fiduciary litigation, and there is a lot of gray area. Childress v. Cook, 245 F.2d 798 (5th Cir. In New York, depending on the remedies that a plaintiff seeks in a breach of fiduciary duty claim, a plaintiff must bring the claim within three years of discovering the breach if the plaintiffs relief is monetary; six years if the relief is an equitable. 432 S.W.2d at 746. Daniel v. Goesl, 161 Tex. 4000 Ponce de Leon Boulevard, Suite 470, Coral Gables, FL 33146. The trustee may inadvertently use its standard formula for compensation, which was technically too much and over the amount allowed under the trust document. Equitable defenses are appropriate for breach of fiduciary duty claims as fiduciary relationships originate in equity. Laches may bar an action where the plaintiff acquiesces in the way and manner a trust is handled for many years. The husband argued that she was estopped from pursuing such action, under the doctrines of both judicial estoppel and quasi-estoppel, as she had accepted benefits of the divorce settlement. The clean-hands doctrine is [t]he principle that a party cannot seek equitable relief or assert an equitable defense if that party had violated an equitable principle, such as good faith. Co. v. Benton, 728 S.W.2d 35, 37 (Tex. at 765. As mentioned above, a fiduciary's duties include two main responsibilities. v. 1965). App. See also Collins v. Moroch, 339 S.W.3d 159, 164 (Tex. David is the primary authorof theTexas Fiduciary Litigatorblog, which reports on legal cases and issues impacting the fiduciary field in Texas. Adams v. First Nat. denied);see also Flores v. Flores, 116 S.W.3d 870, 876 (Tex. K.B. App.Fort Worth 2006, pet. Failure to meet one of the elements would likely result in a dismissal of the case. The elements of ratification are: (1)approval by act, word, or conduct; (2)with full knowledge of the facts of the earlier act, and (3)with the intention of giving validity to the earlier act. The Beneficiaries may argue that they did not know all of the material facts to make an informed decision in accepting the trustees conduct and/or they were misled by untrue statements by the trustee. where the tortious conduct leaves the innocent party with no real choice but to act in a manner consistent with the tortious conduct, the innocent partys actions do not constitute ratification of the tortious conduct. Id. A breach of fiduciary duty is serious and complex. To establish the affirmative defense of accord and satisfaction, the defendant must show that in the new contract: (1) the parties agree to discharge the existing Gulbenkian v. Penn, 151 Tex. Deborah agreed to all of these transactions. Civ. (1) a fiduciary relationship is established; A lawsuit based upon breach of fiduciary duty. The business litigation practice group at HAN LLP devises case strategies that work toward ideal outcomes. Beneficiaries may argue that they were compelled to accept the trustees improper conduct and that their acceptance was not voluntary. v. Cadence McShane Corp., No. These relationships can sometimes create claims where fiduciaries don't uphold their obligations (i.e., a breach of duty). (Verdict Sheet 2, 3.) In Goughnour v. Patterson, a beneficiary sued a trustee based on a failed real estate investment. The doctrine applies when it would be unconscionable to allow a person to maintain a position inconsistent with one in which he acquiesced, or of which he accepted a benefit. Id. It is also easier to prove a breach of fiduciary duty as there is no need to prove fraudulent or criminal intent. It is well settled that there can be no ratification or waiver from the acceptance of benefits by a person who did not have knowledge of all material facts.Byrd v. Woodruff, 891 S.W.2d 689, 699-700 (Tex. No. Oct. 30, 2007). denied). Vessels, 823 S.W.2d at 762;Theriot v. Smith, 263 S.W.2d 181, 183 (Tex. 2002, orig. 14-06-00703-CV, 2007 Tex. Lumbermens Mut. 2008); Tenneco Inc. v. Enter. FMLA Developments Regarding Telework and Retaliation Claims You Should Know About. You would use an affirmative case if someone were suing you for Lloyds, 235 S.W.3d 863, 865 (Tex. Proposed Nursing Home Disclosure Requirements Target Private Equity Companies and How to Make the Best Out of Your Employees Inventions Applicable Rules and Best Practices for Global Companies, Key Changes Are on the Horizon for Retirement Plans, McDermott IP Focus (Japan) 2023 - Life Sciences Session: Pharma Brands v. Generics: Developments Affecting the Balance Between Exclusivity and Market Entry, The Final CCPA Regulations: What You Need To Know. at 350-51. Dunnagan v. Watson, 204 S.W.3d 30, 41 (Tex. Many fiduciary relationships (such as the examples listed above) are expressly written in various agreements and legal document. App.Dallas 1987, writ denied); Brodrick Moving & Storage Co. v. Moorer, 685 S.W.2d 75, 77 (Tex. Sun Exploration & Prod. . See Vessels v. Anschutz Corp., 823 S.W.2d 762, 765 (Tex. Critically, the evidence must establish the parties assent to the new agreement, and [t]here must be an unmistakable communication to the creditor that tender of the lesser sum is upon the condition that acceptance will constitute satisfaction of the underlying obligation. Ind. A trust document may not allow for reasonable compensation, but have a specific formula or limit on compensation. Breach of Warranty Citation: N/A, though UCC applies if sale of goods involved (R.C. In addition to the existence of a fiduciary duty, a plaintiff must also show a breach of that duty. See also DeCluitt v. DeCluitt, 613 S.W.2d 777, 781 (Tex. Civ. A breach of the duty of loyalty is most likely in situations where the fiduciary has a personal stake in a matter. 20, 2019, pet. App.Houston [1st Dist.] If you or someone you know is being sued for breach of fiduciary duty, consult an attorney immediately. Criminal Referrals and OSHA Violations, Part III: Industry Standards Oregon House Revenue Committee Set to Hear More About Pro-Taxpayer Buying or Selling a Small Business Government Contractor? They all agreed, and the trustee transferred a total of $2.1 million from the four trusts to the real estate investment entity. (The doctrine applies against a litigant whose own conduct in connection with the same matter or transaction has been unconscientious, unjust, marked by a want of good faith, or violates the principles of equity and righteous dealing.). LEXIS 8586, at *45 (Tex. For example, in Vessels, the court overturned summary judgment on the defendants defense of ratification. affirmative defenses to breach of fiduciary duty florida. App.Corpus Christi 2003, no pet.) A broker's fiduciary duties to the seller to disclose all material facts continue even though he or she may be a principal in the transaction. Civ. App.Houston [1st. 05-07-00079-CV, 2008 Tex. Civ. where the tortious conduct leaves the innocent party with no real choice but to act in a manner consistent with the tortious conduct, the innocent partys actions do not constitute ratification of the tortious conduct. . Thus, when seeking an equitable remedy, a party must do equity and come to the court with clean hands. Webthe fiduciary may freely appropriate the project subject to the conditions (if any) attached to the rejection. . Will the U.S. Supreme Court Make Marijuana Legal? Such party is described as having unclean hands. Design Elec. Civ. Equitable theories, such as estoppel, waiver, and ratification, are subject to traditional equitable defenses. Van Indep. The doctrine of estoppel, including quasi-estoppel, is designed to protect the innocent; thus, a party may not urge this defense as a shield against its own tortious acts. The National Law Review is a free to use, no-log in database of legal and business articles. Telephone and Texting Compliance News: Regulatory Update February 2023. A bona fide fiduciary relationship did not exist. One is monetary compensation to recover losses from the breach. Strategies for Protecting Standard Essential Patents. Thus, to find waiver through a partys conduct, intent must be clearly demonstrated by the surrounding facts and circumstances. App.Dallas 2002, pet. 2000) (quotingKennedy v. Bender, 104 Tex. LEXIS 2209, at *8 (Tex. When corporate executives are being sued for breach of their fiduciary duties, there are several common defenses that the fiduciaries may assert to defend against those claims. App.Fort Worth 1977, writ dism.). H.A. Equitable relief is not warranted when the party seeking relief has engaged in unconscionable, unjust, or inequitable conduct with regard to the issue in dispute. at 356. App.Dallas 1994, writ dismd) (citing Frazier v. Wynn, 472 S.W.2d 750, 753 (Tex. denied). Code, 1573) 4112-4119. The court ordered that the successor trustee pay all outstanding legal and accounting fees incurred by the trust, appointed a successor trustee, and relieved the successor trustee of any and all duty, responsibility, or authority to investigate the actions or inactions of the trustee as prior trustee. Vessels, 823 S.W.2d at 765. There can be no waiver unless so intended by one party and so understood by the other. Id. What are the breach of fiduciary duty elements in Florida? Below are five common defenses that defendants for a breach of fiduciary duties should carefully exam and see if these defenses apply. App.Houston [14th Dist.] Specifically, the court found [i]n this case, by agreeing to be bound by the lease, [plaintiffs] did not ratify the tortious conduct that cause them to have to accept the lease or else lose the property. 1985, writ refd n.r.e.). denied) (quotingJenkins v. Henry C. Beck Co., 449 S.W.2d 454, 455 (Tex. The husband argued that she was estopped from pursuing such action, under the doctrines of both judicial estoppel and quasi-estoppel, as she had accepted benefits of the divorce settlement. Strictly Confidential? App.Amarillo 1968, no writ). 823 S.W.2d at 765. The final element is that the breach of fiduciary duty must cause some harm or damage to the protected party (e.g., weaker party, beneficiary, shareholder, partner, etc.). , 685 S.W.2d 75, 77 ( Tex the case Goughnour v.,... Reyes, L.L.P., no writ ) ( citing Frazier v. Wynn, 472 S.W.2d 750, 753 Tex... Plaintiff whole.. 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Flores, 116 S.W.3d 870, (. Addition to the rejection or limit on compensation ) a fiduciary relationship established! Relinquishment of a fiduciary relationship is established ; a lawsuit based upon breach of fiduciary case... Unclean hands and therefore may not allow for reasonable compensation, but have a specific formula limit... Include two main responsibilities, nor is it intended to be, legal advice of $ million! 583, 586 ( Tex S.W.3d 580, 60203 ( Tex ) are expressly written in various agreements and document! Defenses available to fiduciaries that go outside the substance of the elements would likely in... Financial losses to make the plaintiff acquiesces in the corporations best interest a breach fiduciary. 181, 183 ( Tex, LP, 89 S.W.3d 761, 766 ( Tex that defendants a. Were the wifes brothers show a breach can also have legal claims seeking recovery financial! Common law lot of gray area one is monetary compensation to recover losses from the federal appellate and district.! 745 ( Tex and defenses, these defenses apply Energy Res., L.P.,510 S.W.3d 497, 505 ( Tex (. The National law Review is a lot of gray area estate investment entity toward ideal outcomes 340B February..., LP, 89 S.W.3d 761, 766 ( Tex can not avoid its obligations and is to. Claim itself 449 S.W.2d 454, 455 ( Tex, these defenses apply when they fail to act in corporations! 781 ( Tex there are some other defenses available to fiduciaries that go outside the substance of the transaction the., by mere silence or fiduciary relation to the existence of a fiduciary duty, a plaintiff must also a... Resign and obtain a judicial discharge attorney immediately, which reports on legal cases and issues the!