When does a trustee need court approval to pay its attorneys?

J.P. Morgan Trust Co., N.A. v. Siegel, --- So.2d ----, 2007 WL 2710957 (Fla. 4th DCA Sep 19, 2007)

Anytime trust beneficiaries object to a trust accounting or any aspect of a trust's administration the trustee is potentially subject to claims for damages.  This theoretical risk of damages arguably places the trustee's individual interests in conflict with those of the trust's beneficiaries, thus requiring the trustee to seek court approval under F.S. § 736.0802(10) prior to using trust funds to pay its attorney's fees.  Here's the text of the statute:

(10) Payment of costs or attorney's fees incurred in any trust proceeding from the assets of the trust may be made by the trustee without the approval of any person and without court authorization, except that court authorization shall be required if an action has been filed or defense asserted against the trustee based upon a breach of trust. Court authorization is not required if the action or defense is later withdrawn or dismissed by the party that is alleging a breach of trust or resolved without a determination by the court that the trustee has committed a breach of trust.

I recently wrote about this rule in the context of a 2006 case out of the 3d DCA [click here].

But how clear must the conflict of interest be before the trustee's obligation to seek court approval prior to paying legal fees is triggered?  In the linked-to case the trial court determined that answers to interrogatories filed by trust beneficiaries in the context of an accounting proceeding hinting at possible future breach-of-trust claims were enough.  The corporate trustee in this case, J.P. Morgan, cried foul, arguing that in the absence of a breach-of-trust action being filed, it shouldn't be obligated to seek court approval prior to paying its legal fees with trust funds.  The 4th DCA saw it differently, and upheld the trial court's ruling:

J.P. Morgan argues that under the trial court's ruling all trustees are placed in a position of uncertainty as to when to seek court approval before paying attorneys' fees from trust assets. However, we hold that in this case J.P. Morgan should have known from the Siegels' answers to interrogatories in the 2003 action that it would face an action based on the alleged breaches of fiduciary duty and trust mismanagement. At the very least, J.P. Morgan should have realized it was in a position of conflict at that point. Based on the foregoing, we affirm.

Lesson learned:

What's most important about the linked-to case is that it's a prime example of the type of ambiguity the legislature was seeking to avoid when it amended F.S. 737.403(2)(e) in 2005 (this was the predecessor statute incorporated verbatim into new F.S. § 736.0802(10)).  Here's how the new legislation was addressed in the linked-to case:

Section 737.403(2), Florida Statutes, was amended effective July 1, 2005. Section 737.403(2)(e) now provides, in pertinent part:

(2) If the duty of the trustee and the trustee's individual interest or his or her interest as trustee of another trust conflict in the exercise of a trust power, the power may be exercised only by court authorization.... Court authorization is not required for any of the following:
....

(e) Payment of costs or attorney's fees incurred in any trust proceeding from the assets of the trust unless an action has been filed or defense asserted against the trustee based upon a breach of trust. Court authorization is not required if the action or defense is later withdrawn or dismissed by the party that is alleging a breach of trust or resolved without a determination by the court that the trustee has committed a breach of trust.

§ 737.403(2)(e), Fla. Stat. (2005) (emphasis supplied).

The legislature has resolved the issue in favor of the interpretation urged by J.P. Morgan that requires a pleading be filed.
However, as J.P. Morgan acknowledges, the new statute was not in effect for the vast majority of the time period at issue.[FN1]

[FN1.] The Siegels' 2006 lawsuit against J.P. Morgan and Judith Novak asserted various causes of action relating to the time period of January 1, 2003 through September 1, 2005.

Are orders awarding trustee fees subject to appeal?

Greene v. Borsky, --- So.2d ----, 2007 WL 2119215 (Fla. 4th DCA Jul 25, 2007)

Whether a particular type of order is subject to appeal can have a huge impact on how a case is litigated.  In this case, the issue was whether a trial court's order permitting trustees to pay their legal fees with assets of the trust was subject to appeal.  The 4th DCA said YES.  Thankfully!

Here's how the 4th DCA explained it's ruling:

The orders in this case are appealable non-final orders under Florida Rule of Appellate Procedure 9.130(a)(3)(C)(ii). Rule 9.130(a)(3)(C)(ii) provides that appealable non-final orders include those that determine “the right to immediate possession of property .” This Court has previously held that a sum of money is property to which Rule 9.130(a)(3)(C)(ii) can apply. In Florida Discount Properties, Inc. v. Windermere Condominium, Inc., 763 So.2d 1084 (Fla. 4th DCA 1999), a lessor filed a motion to have disputed rent paid into the registry of the court. Id. at 1084. The trial court denied the motion, and the lessor appealed. Id. On appeal, this Court concluded that the order was an appealable non-final order under Florida Rule of Appellate Procedure 9.130(a)(3)(C)(ii), because it determined “the right to immediate possession of property, i.e., the rent payments.” Id. Likewise, in the present case, the trial court orders determined the right to immediate possession of property, here trust assets to be used by trustees to pay for attorney's fees and witness fees expended in defense of the trust. As such, we conclude that this Court possesses jurisdiction over this appeal under Florida Rule of Appellate Procedure 9.130(a)(3)(C)(ii) and affirm in all respects without further comment.

Careful readers of this blog will recognize the name of one of the attorneys on the winning side of the linked-to case: Amy B. Beller of Miller & O'Neill, P.L.  (see here for prior post).  Well done Amy.

Attorney Retaining Liens

As reported in Politician's Heirs Snare Thelen Reid in Complex Estate Battle, a New York firm successfully opposed a subpoena to turn over its files in connection with contested probate proceedings in Texas because the estate hadn't paid its bills.  The basis of the New York firm's retaining lien was described as follows in the linked-to piece:

In a Feb. 9 decision, Manhattan Supreme Court Justice Carol Robinson Edmead said Thelen Reid was entitled to a retaining lien allowing it to keep documents relating to Martinez's estate pending payment of outstanding legal bills. She quashed Gonzalez's deposition subpoenas on the same grounds.

The judge noted that, while all the firm's bills had been paid while Martinez was alive, Gonzalez had retained the firm after his death. Justice Edmead ruled that Gonzalez had retained Thelen Reid on behalf of Martinez's estate, not in her individual capacity.

"Since the Law Firm's rendition of services at the request of Ms. Gonzalez was made on behalf of the Estate of Dr. Martinez, such services entitle the Law Firm to a common-law retaining lien on any of the Estate's books, papers, money and securities which are in the attorney's possession," the judge wrote in In the Matter of the Application of Letizia Martinez de Gonzalez, 114877/06.

Florida Law: Ethics Opinion 88-11

Florida law also recognizes an attorney's right to a retaining lien over client files when bills go unpaid.  Here's how Florida Bar Ethics Opinion 88-11 summarized Florida law on this point:

Many attorneys are unaware that in Florida a case file is considered to be the property of the attorney rather than the client. Dowda and Fields, P.A. v. Cobb , 452 So.2d 1140, 1142 (Fla. 5th DCA 1984); Florida Ethics Opinion 71-37 [since withdrawn]. Under normal circumstances, an attorney should make available to the client, at the client's expense, copies of information in the file where such information would serve a useful purpose to the client. Opinion 71-37 [since withdrawn].


*     *     *     *     *

Florida common law recognizes two types of attorney's liens: the charging lien and the retaining lien. The charging lien may be asserted when a client owes the attorney for fees or costs in connection with a specific matter in which a suit has been filed. To impose a charging lien, the attorney must show: (1) a contract between attorney and client; (2) an understanding for payment of attorney's fees out of the recovery; (3) either an avoidance of payment or a dispute regarding the amount of fees; and (4) timely notice. Daniel Mones, P.A. v. Smith, 486 So.2d 559, 561 (Fla. 1986). The attorney should give timely notice of the asserted charging lien by either filing a notice of lien or otherwise pursuing the lien in the underlying suit. The latter approach is preferred.

Unlike a charging lien, a retaining lien may be asserted with respect to amounts owed by a client for all legal work done on the client's behalf regardless of whether the materials upon which the retaining lien is asserted are related to the matter in which the outstanding charges were incurred. A retaining lien may be asserted on file materials as well as client funds or property in the attorney's possession, and may be asserted whether or not a suit has been filed. Mones, 486 So.2d at 561.

You can't sue someone else's personal representative for breach of fiduciary duty or get fees for thwarting someone else's testamentary intent

Harding v. Rosoff, --- So.2d ----, 2007 WL 461381(Fla. 4th DCA Feb 14, 2007)

This is the second appellate opinion arising out of this piece of probate litigation.  I wrote about the first appeal here.  In this sad case a 95 year old woman inadvertently failed to comply with the technical  requirements necessary to effectively exercise a power of appointment she had under a trust created by her brother over 30 years ago.

The default beneficiary under brother's trust sued the probate estate over the attempted exercise of the power of appointment and won.  Rather than being content with this win, default trust beneficiary then sued the personal representative of sister's estate for attorneys' fees.  The trial court said NO WAY, and the 4th DCA agreed as follows:

  • Court: You can't sue someone else's personal representative for breach of fiduciary duty:

The personal representatives argue that there can be no surcharge, which is a charge against a fiduciary to compensate a beneficiary for the breach of fiduciary duty, Merkel v. Guardianship of Jacoby, 862 So.2d 906 (Fla. 2d DCA 2003), because there was no fiduciary duty to Harding. They point out that they are fiduciaries only of the Teresa Rosoff estate and that Harding is not a beneficiary of that estate. Harding is a beneficiary of the Molinari Trust, but the personal representatives are not fiduciaries of the trust. We are not persuaded by Harding that there is a fiduciary duty to her, but we need not decide that issue because the pursuance of the litigation by the personal representatives was consistent with the testator's intent. Although they lost and we affirmed, we noted that “Teresa's apparent intent has been thwarted.” Rosoff, 901 So.2d at 1010. The trial court was correct in finding no impropriety by the personal representatives.

  • Court: You don't get fees for thwarting the testatrix's intent:

Harding also contends that she should have been awarded attorney's fees and costs for prevailing in the litigation under section 733.106, Florida Statutes (2005), because the litigation benefited the estate. In re Estate of Udell, 501 So.2d 1286 (Fla. 4th DCA 1986). Harding has cited no cases, however, which would support her theory that there was a benefit to the estate under these specific facts. She relies on In re Estate of McCune, 223 So.2d 787 (Fla. 4th DCA 1969), in which we stated that services which carry out the intent of the testator as expressed in the will are compensable from the estate. As we previously noted, however, this litigation thwarted the testator's intent. Harding also cites Robinson v. Robinson, 805 So.2d 94 (Fla. 4th DCA 2002), in which this court affirmed an award of attorney's fees to a beneficiary who successfully reformed a trust. In Robinson, however, the fees were awarded from the trust, not the estate. Under these facts, in which the litigation determined only who would be the beneficiary of the Molinari Trust, the trial court did not err in finding that there was no benefit to the estate.

Brooke Astor Guardianship Litigation Part 2: Fees

I previously wrote here about the very public litigation involving guardianship proceedings for legendary New York socialite Brooke AstorWell, it's almost inevitable that part 2 of any guardianship case will be a fight over fees (see generally), and this case is no exception.  The following is an excerpt from In Aftermath of the Astor Case, How the Final Fees Piled Up, a New York Times piece reporting on the case:

The legal drama over the health care and finances of Brooke Astor, New York’s legendary socialite and philanthropist, played out for nearly three months amid allegations and recriminations of financial duplicity, greed and outright forgery.

The case against her son, Anthony D. Marshall, came to a halt on Oct. 13 when the parties in the feud reached a settlement, averting what could have been an expensive and sensational trial scheduled to begin less than a week later.

But everything comes with a price. In the seven weeks since the agreement, those involved in the case have filed bills with Justice John E. H. Stackhouse of State Supreme Court in Manhattan for fees totaling about $3 million for the services of 56 lawyers, 65 legal assistants, 6 accountants, 5 bankers, 6 doctors, 2 public relations firms and a law school professor. Under state law, such payments would come out of Mrs. Astor’s assets, valued at over $120 million.

But yesterday, Justice Stackhouse issued an order that approved a smaller amount, $2.22 million, calling the original figure “staggering” and saying that some charges were for work that was not in the best interest of Mrs. Astor, who is 104. The justice denied payments for the public relations firms, the time lawyers spent talking with reporters and the hours logged preparing the fee applications themselves.

Yikes!!  According to my math the court refused payment of close to $800,000 in fees.  Unless these professionals have fee agreements in place requiring the litigants/their clients to pay their fees, they just did a whole lot of free work for a $120 million+ guardianship estate.

Lesson learned:

In a guardianship case, either you need to be ready to work on a pro bono basis or you need to have an engagement agreement in place requiring whomever hires you to personally pay your fees if the court wont authorize payment of your fees from the guardianship estate.  The risk of the court refusing payment of fees will be borne by someone, just make sure that if it's going to be you the decision is a conscious one.

Source: Death and Taxes - The Blog

Greenberg Traurig Drawn Into Estate Case

In almost all estate litigation cases attorneys' fees become an issue.  This law.com article shines the spot light on one case in particular because Greenberg Traurig, one of the country's largest and well known law firms, is involved.  But the issues in dispute are part and parcel of almost all such litigation -- which means parties need to anticipate them and plan accordingly.

Here are excerpts from the linked-to story:

Greenberg Traurig has become enmeshed in a bitter family feud between two sisters, one of whom is married to a senior partner at the law firm.

The estranged sisters, Linda J. Spector and Barbara Berlin, had both been named beneficiaries of a trust created in November 2003 by their mother, Eleanor Spector. Eleanor and Linda served as co-trustees until Eleanor's death in January 2004.

Shortly after her mother's death, Linda sought to have her then-fiancé, Albert Jacobs, the senior chair of Greenberg Traurig's national intellectual property practice, appointed co-trustee, arguing that the successor designated in trust, attorney Joel Sankel, had told her over dinner he would step aside.

*     *     *     *     *

Greenberg Traurig billed the estate almost $130,000, which is now at issue in a pending contempt motion. Sankel claims the amount should be repaid to the trust since Greenberg Traurig's services were retained for the personal benefit of Linda Spector and Jacobs, whom she eventually married.

In the contempt motion, Sankel also noted the disparity between the fees paid to Greenberg Traurig and his own firm in the course of the dispute. He noted that his firm had billed the trust $22,000 in the same time period. He is requesting invoices from Greenberg Traurig to back up charges, some of which he claims were "wholly frivolous."

Trustee Sued for Breach of Trust Must Pay Back All Attorneys Fees to Trust

Brigham v. Brigham, __ So.2d __ (Fla. 3d DCA May 31, 2006)

This case should be printed out and kept in the desk drawer of every probate litigator in Florida. Whether you find yourself defending a trustee being sued for breach of trust or prosecuting this type of claim on behalf of trust beneficiaries, you will need to be aware of this case and its profound implications.

The law in Florida is clear: a trustee defending himself in litigation involving any form of breach of trust cannot pay his legal defense fees with trust funds in the absence of a prior authorizing court order. That was Miami-Dade Judge Rothenberg's ruling at the trial court level, and here's how the Third DCA summed up this rule when it affirmed his order:

Appellees brought suit against Appellants in their trust roles and as individuals for trust mismanagement. Because Appellants defended against individual liability, their personal interests conflicted with their position as trustees. See Shriner v. Dyer, 462 So.2d 1122, 1124 (Fla. 4th DCA 1984). When a trustee's individual interests conflict with his or her duties to a trust, court approval is necessary before a trustee can use trust funds to pay his or her own attorneys' fees. § 737.403, Fla. Stat. (2003).

By the way, this rule is retained under Florida's new trust code as new F.S. § 736.802(10) (see here).

Although every case is different, this opinion provides one possible road map for getting to a final ruling on this issue. Here is an extended excerpt from the opinion tracking the procedural steps and time-line in this case:

The settlor died in 2002. In June 2003, Appellees filed a multi-count complaint against Appellants alleging, among other things, undue influence, breach of fiduciary duty, self-dealing, conversion of trust assets, mismanagement of trust assets, intentional interference, fraud, and conspiracy. Appellants were sued in their individual capacities as well as their capacities as trustee and successor trustee.


After receiving an accounting, Appellees discovered that Appellants were using trust funds to pay their legal fees in the underlying litigation. In November 2004, Appellees filed a Motion to Restrict Payment of Attorneys' Fees, arguing that Appellants were prohibited from paying their individual attorneys' fees with the trust funds and without prior Court approval.

On January 18, 2005, the trial court, after a hearing, granted Appellees' motion in part, finding that Appellants were prohibited from paying their individual attorneys' fees with trust funds, and concluding that court approval was necessary to pay litigation expenses out of the trust, as a personal conflict may exist since Appellants were sued in their individual capacities as well as in their trustee roles.

In March 2005, upon motion by Appellants, the trial court appointed a Special Master to assist the court in determining which of the attorneys' fees and costs, already paid by the trust, were for the benefit of Appellants as trustee and successor trustee rather than as individuals.

In June 2005, the Special Master issued his Report and Recommendation, noting that he "does not believe that any of the fees incurred to date can be separated into [Dana Brigham's] individual defense as opposed to [Dana Brigham's] defense as trustee," and recommending that Appellants personally pay all attorneys' fees necessary to defend themselves against the litigation, and return all monies taken out of the trust for payment of attorneys' fees in the underlying litigation.

After a hearing on Appellants' Objection to the Report and Recommendation, the trial court adopted the Report and Recommendation and held that Appellants must pay the attorneys' fees back to the trust and refrain from paying further attorneys' fees and costs with trust assets without court approval.

57.105 Attorney's Fee Sanctions in Probate

McMonigle v. McMonigle, __ So.2d __ (Fla. 2d DCA Feb 17, 2006)

Note: on its own motion the Second DCA withdrew its February 17, 2006, opinion and substituted the following in its place: McMonigle v. McMonigle, __ So.2d __ (Fla. 2d DCA Mar 29, 2006)

POP QUIZ: What do you do if you're the beneficiary of an estate and you think the personal representative owes the estate a debt he's not paying up on?

[A.] File a statement of claim in the estate.


[B.] File a separate cause of action seeking declaratory relief in the form of a determination of what interests the estate has in the funds allegedly owed by the personal representative to the estate.

[C.] File a petition seeking removal of the personal representative on conflict of interest grounds and appointment of a successor personal representative to file an action to recover the alleged debt.

[D.] All of the above.

If you picked any answer other than [C.], not only would you be wrong, but according to Pasco County Judge Stanley R. Mills, you'd be liable for the other side's attorney's fees under F.S. § 57.105. The grounds for such sanctions would be that because claims pursued under options [A.] and [B.] were dismissed on lack-of-standing grounds, they lacked "justiciable issues of law or fact."

Not so says the Second DCA, which reversed the trial court's sanctions order. The beneficiary in this case was legitimately attempting to protect the interests of the estate. The fact that he initially went about it the wrong way doesn't mean his actions rise to the level of warranting attorneys-fees sanctions.

The Second DCA explained its ruling as follows:

Although [Tiedeman v. City of Miami, 529 So.2d 1266 (Fla. 3d DCA 1988)] does suggest that the lack of standing may be the basis of an award of section 57.105 fees, it does not require that the fees be awarded. Clearly, Robert did not have standing to bring the separate civil action. However, the factual issues raised in the civil action were the same factual issues litigated in the probate action seeking the removal of Ronald as Personal Representative. To award fees under section 57.105, the trial court must conclude there is a total absence of a justiciable issue of either fact or law. Haas v. Roe, 696 So.2d 1254 (Fla. 2d DCA 1997); Fernandez v. Chiro Risk Mgmt., Inc., 700 So.2d 65 (Fla. 2d DCA 1997). Since the factual issues here were actionable, the trial court abused its discretion by finding a total lack of justiciable issue of fact. Because we conclude there was a justiciable issue of fact, fees should not have been awarded under section 57.105.


Furthermore, we find the facts of this case to be similar to those in O'Brien v. Sarka, 613 So.2d 47 (Fla. 2d DCA 1993). In O'Brien, Sarka, who was serving as the guardian of the deceased at the time of the deceased's death, filed an independent action against the estate to collect guardianship fees allegedly owed by the estate. O'Brien was a beneficiary of the estate and concluded that the personal representative had a conflict due to her business relationship with the guardian. Accordingly, O'Brien moved to intervene in the independent action, and the motion was granted. The guardian, Sarka, then moved for a judgment on the pleadings, which was granted. She then moved for section 57.105 fees against O'Brien, arguing that O'Brien should not have been allowed to intervene in the action as the estate already was represented and O'Brien's interest was but a claim under the estate. The trial court awarded the fees, but this court reversed. "As a beneficiary, [O'Brien] was attempting to protect the assets of the estate. Although her intervention was invalid, the action was not so frivolous as to require that she and her attorney be punished for attempting it." Id. at 48.

Getting Paid for Appellate Work

In re Estate of Wejanowski, __ So.2d __ (Fla. 2d DCA February 15, 2006)

It's not unusual for a personal representative to seek explicit prior approval from the probate judge when contemplating some sort of litigation involving the estate - even is such authority is not required. This type of pre-approval is sought pursuant to F.S. § 733.602(2), which removes liability for any act of administration of the state if the act was "authorized" at the time.

This case is an example of what can go wrong when asking a probate judge for prior approval. You may not like the answer you get. Here the personal representative filed a motion with the probate court seeking approval of costs and fees associated with prosecuting an appeal of a wrongful-death judgment pending against the estate.

The trial court denied the personal representative's motion without prejudice to resubmit the request at the conclusion of the appeal upon a showing of monetary benefit to the estate and ordered him not to expend estate funds for prosecution of the appeal, to include attorney's fees and costs.

The Second DCA reversed, essentially holding that a monetary benefit (i.e., prevailing party) standard was too high a bar for approval of fees and costs associated with an appeal, stating as follows:

Requiring [the personal representative] to show a monetary benefit to the estate before he is entitled to reimbursement for appellate expenses narrows the definition of "benefit to the estate" to an unworkable level in this appellate context. An appellate attorney has an ethical duty not to prosecute a baseless or frivolous appeal. Payment of appellate fees and costs cannot be contingent upon prevailing on appeal because neither party can guarantee the outcome. The true benefit to an estate provided by an appellate attorney is the presentation of a good-faith appeal and its ultimate resolution. Our system affords litigants the right to resolve disputes with due process, safeguarded by appellate review of the trial court's decisions. Cf. Brake v. Murphy, 693 So.2d 663 (Fla. 3d DCA 1997) (reversing an order that required the personal representative and her husband to post a bond in order to file further pleadings in a surcharge proceeding because the order violated the access to the courts provision and due process clause of the state constitution).

Third DCA Enforces Waiver of Homestead Rights to Pay Attorney's Fees

Demayo v. Chames, 2005 WL 3180187, 30 Fla. L. Weekly D2692 (Fla. 3d DCA Nov 30, 2005)

In December 2002 Henry DeMayo retained Deborah Chames and her law firm, Heller and Chames, P.A., to represent him in a post-dissolution proceeding to modify his child support and alimony obligations. The retainer agreement included the following clause:

It is specifically agreed that Heller & Chames, P.A. shall have and is hereby granted all general, possessory and retaining liens and all equitable, special and attorney's charging liens upon the client's interests in any and all real and personal property within the jurisdiction of the court for any balance due, owing and unpaid as well as a lien in any recovery whether by settlement or trial; and such lien or liens shall be superior to any other lien subsequent to the date hereof and that the client hereby knowingly, voluntarily and intelligently waives his rights to assert his homestead exemption in the event a charging lien is obtained to secure the balance of attorney's fees and costs. (Emphasis added.)

In October 2003 Miami-Dade Judge Robert N. Scola, Jr. granted Heller and Chames' request to withdraw from representing Mr. DeMayo and shortly thereafter entered a final judgment in the sum of $33,207.76 in favor of the law firm. The trial court expressly enforced the waiver provision of the retainer agreement.

On appeal, the Third DCA upheld the trial court's ruling on the following grounds:

[W]e see no reason why an owner of homestead property should not be able to waive [his constitutional right under Article X, Section 4 of the Florida Constitution against divestment of homestead property via a forced sale] if he so desires. As the Florida Supreme Court stated in Caggiano, 605 So.2d at 59,"the homestead exemption ··· was intended simply to guarantee that the homestead would be preserved against any involuntary divestiture by the courts····" See also Havoco, 790 So.2d at 1022 ("The homestead guarantee uses broad language protecting the homestead from involuntary divestiture····"). Absent a plain and unambiguous statement in the Florida Constitution to the contrary, we decline to imply a prohibition against a voluntary divestiture of one's constitutional right to homestead protection.

Warning: see this post: on is own motion Third DCA reconsidered this case en banc and then completely reversed itself!

Gannett Newspaper Fortune: Probate Administration Malpractice Update #2

As I previously reported here, two heirs to the Gannett newspaper sued West Palm Beach, Fla.-based Gunster Yoakley & Stewart alleging that the firm colluded with its client JPMorgan Trust Co., a subsidiary of New York City-based JPMorgan Chase & Co., in running up fees for planning and administering the estate of their father, Charles McAdam Jr., a Wellington resident who was worth more than $57 million when he died in 2003.

Well, as reported in this Palm Beach Post article, the suit has not gone well for Gunster Yoakley. In a move that sent Circuit Judge Jonathan Gerber back to the books to do legal research, the jury awarded the brothers $1.2 million -- $331,496 more than the heirs requested as damages for this portion of the case. The jury found that the firm breached its fiduciary responsibility and committed legal malpractice in its handling of the estate.

And there may be more bad news to come. In a related upcoming trial the Gannett heirs will be claiming another $7 million that they had to pay in taxes and fees because of other oversights made by Gunster Yoakley. "I'm confident that we will be successful," said attorney Steven Katzman, who represented the heirs. Calling the verdict "an aberration," Donald Beuttenmuller, the managing shareholder of Gunster Yoakley, said it will be appealed.

Lesson Learned:

Estate planning and probate administrations can be complex, high-stakes affairs that even the largest and most well respected law firms get burned by on occasion. This is no place for amateurs.

"Maxcy rule" strikes again: Fort Lauderdale attorney ordered to return $1.6 million in fees in probate case

On September 23, 2005 the Daily Business Review reported that Broward County probate judge Mel Grossman ordered Fort Lauderdale attorney Stephen Rakusin to return $1.6 million in fees and costs that were challenged by Holy Trinity Orthodox Seminary, a Russian Orthodox monastery. The Monastery was represented by Robert Judd, a partner at Gunster Yoakley in Fort Lauderdale, in connection with the fee dispute.

According to the Daily Business Review, judge Grossman ruled that under the "Maxcy rule" (see Maxcy v. Citizens National Bank of Orlando, 240 So.2d 93 (Fla. 2d DCA 1970)), after four years of work on the case attorneys Stephen Rakusin and Craig Donoff (both of whom were engaged by the personal representative of the estate) would have to contend themselves with a $151,500 flat-fee originally negotiated by Donoff. Judge Grossman ruled that Rakusin's billing was a violation of the Maxcy rule because he was contracted to perform the same legal services on an hourly basis that Donoff had agreed to do for a flat fee.

Lesson learned: In probate, winning is only half the battle. Getting paid for your work is often just as difficult and hotly contested as the underlying litigation.

The "Mother" of all probate-litigation fee disputes: widow seeks return of $50 million in "excessive" fees and gifts

As reported in this New York Law Journal article, Manhattan law firm Graubard Miller has been hit with a suit claiming some of its partners tried to extract almost $50 million in "gifts" and unearned fees from a longtime client, the 80-year-old widow of one of New York City's largest real estate developers, Sylvan Lawrence, who died in 1981. Mr. Lawrence's estate has been embroiled in litigation ever since. Mark Zauderer of DLA Piper Rudnick Gray Cary, who represents Graubard Miller, said Ms. Lawrence's suit against the firm is aimed at avoiding paying a "well-earned fee." Ms. Lawrence, who is represented by Leslie D. Corwin of Greenberg Traurig, is seeking rescission of her retainer agreement and the return of all fees previously paid to the firm and all gifts paid to the partners. The complaint also requests punitive damages and attorney fees.

Former attorney for personal representative entitled to compensation for services benefitting estate after date he withdrew as counsel

Foreman v. Northern Trust Bank of Florida, N.A., 2005 WL 1553963 (Fla. 2d DCA July 6, 2005) (Trial Court Reversed)

For obvious reasons, compensation cases are always of interest to practitioners. In this latest Second DCA opinion addressing claims for attorneys fees by former counsel for a personal representative (see here for the prior Second DCA case this year involving a compensation dispute), the court reversed Sarasota County Judge Nancy K. Donnellan and held as follows:

  • Former counsel for personal representative is entitled to fees for services he performed if they benefitted the estate . . . even if those services were rendered after the date he withdrew as counsel.
  • Former counsel for personal representative is entitled to fees for the time he spent trying to obtain payment for services he rendered to the estate.
  • Former counsel for personal representative is entitled to an award of reasonable expert witness fees. The Second DCA also noted that F.S. § 733.6175(4) "makes such an award mandatory if expert testimony is offered."

Court Says No to Attorney's Fees for Litigation over Whom Will Be Appointed Guardian

Butler v. Guardianship of Peacock, 30 Fla. L. Weekly D889 (Fla. 5 DCA April 1, 2005) (Compensation Disputes)

Marion County Circuit Court Judge Brian D. Lambert ruled that under F.S. § 744.108(1) a petitioner seeking an order to determine the incapacity of her mother was entitled to an award of attorney's fees and costs incurred in the guardianship proceedings up to the date the petitioner's siblings objected to her being appointed guardian . . . fees and costs incurred thereafter were not for "services rendered on [the ward's] behalf."

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When the statute says the personal representative's attorney "shall" be paid for services rendered, that's what it means, and it's reversible error for a court to rule otherwise

Baumann v. Estate of Blum, 30 Fla. L. Weekly D842 (Fla. 2 DCA March 30, 2005) (Trial Court Reversed)

Getting paid fairly for the work you do is sometimes merely an "aspirational" goal for attorneys. It doesn't have to be that way . . . especially when the law says you're entitled to payment. In this case, the personal representative objected to the fees his own attorney petitioned for. Hillsborough County Circuit Court Judge Susan Sexton referred the matter to a general master and then simply adopted the general master's report and recommendations wholesale without conducting a hearing.

In the course of reversing the trial court, the Second DCA provides very valuable guidance for any attorney trying to make sure he or she gets paid for services rendered.

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