PIERRE, S.D. — Rapid City attorney Linda Lea Viken says she's been on both sides of the South Dakota trust industry — working to keep trusts hermetically sealed, as well as probing them for financial data in divorce fights.
But even Viken was surprised in 2018 when South Dakota Trust Co. tried to continue a legal fight imposing a gag order on a Connecticut woman whose ex-husband had agreed to hand over the confidential information.
"I have to say that I was surprised when they appealed," Viken said in an interview with Forum News Service on Wednesday, Nov. 17. "I thought, 'What's going to be their basis for this appeal?'"
Since the Pandora Papers were released six weeks ago, there has been national and even international criticism for a secretive industry rooted in South Dakota, with media reports about the super-wealthy — some with ties to illegal activity — storing money in South Dakota.
Pat Goetzinger is an attorney with Gunderson, Palmer & Ashmore in Rapid City and a member of the Governor's Task Force on Trust Administration Review and Reform. In January 2020, Goetzinger told the Senate Judiciary committee that the money doesn't sit in a bank along Phillips Avenue in downtown Sioux Falls — just the receipts do.
But something else that sits in the Rushmore State is a legal system — wrenched by various court cases — that shows that when one of the 100-plus trusts in the state doesn't get what they want in court for their $360 billion industry, they rely on legislators to rewrite the law.
This legal end-around was first reported in early October by The Washington Post, who noted a 2019 case at the South Dakota Supreme Court involved Cleopatra Cameron, an oil heiress, who closeted financial information in a Lincoln County trust to prevent her ex-husband from higher alimony payments.
But an equally curious legal fight reached the hallowed halls of the Statehouse's second floor, where the Supreme Court conducts oral arguments, around the same time in 2019.
Netter v. Netter started out relatively innocuous, Viken said. Connecticut residents Stephanie Netter, in divorce proceedings with her husband, Donald Netter, sought financial information related to four trusts held in South Dakota. When his attorneys and South Dakota Trust Co. refused, Stephanie Netter hired Viken, who filed a subpoena request.
Public records show that by 2017 Stephanie Netter and their children had moved out of her shared residence with her husband, a wealthy hedge fund manager in Connecticut. But during divorce deliberations in Connecticut, the two legal teams struck a deal in which Donald Netter would turn over the requested information.
Back in Pennington County's 7th Judicial Circuit Court, Viken withdrew her subpoena. But attorneys for South Dakota Trust Co. still sought to impose their own nondisclosure order on Stephanie Netter and her legal team — even though her husband had agreed to hand over the financial documents without such strictures.
"Maybe this is an extreme example," South Dakota Trust Co. attorney Vince Roche told Pennington County Judge Matt Brown during a hearing on Nov. 14, 2018. "But if you can imagine if the CEO of Goldman Sachs is getting a divorce and the court says, 'I'm going to order you to produce all of Goldman Sachs' corporate information and see what their financial records look like,' you can bet that the counsel for Goldman Sachs is going to go into court in the state where Goldman Sachs is incorporated and their records are kept and seek protections."
In conversation with Forum News Service, University of South Dakota Law School Professor Tom Simmons — a member of the governor's trust task force — suggested it wouldn't be unusual for South Dakota Trust to seek these protections, noting that trusts often have various invisible beneficiaries, including "your unborn grandchild" that he says trusts are obligated to protect.
Ultimately, Judge Brown found his court in Rapid City had no personal jurisdiction over the Connecticut residents, siding with Viken and Stephanie Netter — but then South Dakota Trust appealed to the Supreme Court.
A review of Supreme Court files shows that every year a few trust cases make South Dakota's appellate court docket. In most cases, when trust law is applicable, the court sides with the trusts, such as in the case of Cameron, the oil heiress. But when the state's high court released its opinion on Nov. 6, 2019, they unanimously ruled against South Dakota Trust.
"As much as SDTC would still like to have the South Dakota courts impose a protective order, SDTC seeks protections for discovery that is no longer sought by Stephanie through the out-of-state subpoena," wrote then-Justice Steven R. Jensen, who is now the court's chief justice.
Multiple attorneys and law professors who spoke with Forum News Service for this story stress the ruling was a procedural question of mootness, not one of trust law.
Still, the victory would be short-lived. Two months later, attorney Goetzinger testified in favor of Senate Bill 65, the Legislature's annual trust tweak-up bill. Buried toward the back of a dense, 6,000-word bill was reference to an amendment upgrading trusts' protections against subpoenas.
"If trust information is sought through service of a subpoena on a fiduciary," read the amendment, "the fiduciary may petition the court for an order that makes disclosure of trust information contingent upon the receiving party being bound by reasonable conditions to ensure the protection of confidentiality of trust information by the receiving party."
The bill — and the amendment — passed both houses by wide, near unanimous margins. Reading the new language for the first time Wednesday, Viken laughed.
"Well, isn't that cute," said Viken. "[Our case] inspired a statute."
The language does qualify "reasonable" conditions, Viken noted, but she wonders if her Netter case — had Stephanie not withdrawn the subpoena — might have faced much stronger headwinds under current law.
"It's always been, whatever they [the trusts] want, they get," said Viken.
One way or another.