Tenth Annual Probate Administration

Transcription

1 Tenth Annual Probate Administration November 13, 2014 Chapter 11 2:30-3:00pm Ethics: Billing Practices and Standards Eric E. Brunstrom, Reed Longyear Malnati & Ahrens PLLC PowerPoint distributed at the program and also available for download in electronic format: 1. TEDRA Agreements Electronic format only: 1. Sample CR 2A Agreement

2

3 TENTH ANNUAL PROBATE ADMINISTRATION Ethics: Billing Practices and Standards Eric E. Brunstrom T ARUTIS & BRUNSTROM, P.S THIRD AVENUE NE S UITE 375 S EATTLE, WA (206) EBRUNSTROM@TANDBLAWYERS. COM COM PERSONAL REPRESENTATIVE'S RESPONSIBILITIES Fiduciary Relationship With Heirs/Beneficiaries The Personal Representative of a decedent's estate is an officer of the court, who stands in a fiduciary relationship to those beneficially interested in the estate and is obligated to exercise the utmost good faith and to utilize the skill, judgment and diligence that would be employed by ordinarily cautious and prudent persons in the management of their own trust affairs. The Personal Representative is liable for a breach of these responsibilities causing loss to another. Hesthagen v. Harby, 78 Wn.2d 934, 481 P.2d 438 (1971). 1

4 POWERS AND DUTIES RCW General powers and duties It shall be the duty of every personal representative to settle the estate, including the administration of any nonprobate assets within control of the personal representative under RCW , in his or her hands as rapidly and as quickly as possible, without sacrifice to the probate or nonprobate estate. The personal representative shall collect all debts due the deceased and pay all debts as hereinafter provided. The personal representative shall be authorized in his or her own name to maintain and prosecute such actions as pertain to the management and settlement of the estate, and may institute suit to collect any debts due the estate or to recover any property, real or personal, or for trespass of any kind or character. POWERS AND DUTIES He must perform his duties not only for the benefit of the legatees but must also protect the estate from invalid and doubtful claims, In re Estate of Shea's Estate, 69 Wash.2d 899, 421 P.2d 356 (1966), while protecting the rights of valid creditors. Kerns v. Pickett, 49 Wash.2d 770, 306 P.2d 1112 (1957). It is his duty to settle an estate as quickly as possible but without sacrifice to the estate, National Bank of Commerce v. Peterson, 179 Wash. 638, 644, 38 P.2d 361 (1934), and he is liable for any breach of his responsibility which causes loss to another. Hesthagen v. Harby, Supra. His trust must be fulfilled with conscientious fidelity whether his charge is large or small. Estate of Wilson v. Livingston 8 Wash.App. 519, 507 P.2d 902 (1973) 2

5 RELATIONSHIP BETWEEN THE ATTORNEY AND PERSONAL REPRESENTATIVE The attorney owes the Personal Representative a duty of fidelity and good faith. The Personal Representative, in his or her representative capacity, is the client of the attorney. Preservation of client confidences is of great importance in the attorney-client relationship. Communications between the attorney and the Personal Representative are protected by the attorney-client privilege. However, if the Personal Representative engages in misconduct or improprieties in carrying out the duties as Personal Representative, the attorney may be required to reveal information concerning the misconduct or improprieties (including client confidences and secrets) to the court. RPC 1.6(c). RELATIONSHIP BETWEEN THE ATTORNEY AND THE BENEFICIARIES The attorney also has responsibilities to all the beneficiaries. Matter of Estate of Larson, 103 Wn.2d 517,694 P.2d 1051 (1985). In a legal malpractice action, whether an estate attorney owes a duty of care to a beneficiary of the estate, depends on whether the subject transaction was intended to benefit the beneficiary. Trask v. Butler, 123 Wn.2d 835, 872 P.2d 1080 (1994). The estate attorney may be disciplined by the Bar for failure to expeditiously probate an estate. In re Discipline of Jamieson, 98 Wn.2d 865,658 P.2d 1244 (1983) 3

6 ACTIONS AND POWERS BY AND OF THE PR RCW Right to possession and management of estate Every personal representative shall, after having qualified, by giving bond as hereinbefore provided, have a right to the immediate possession of all the real as well as personal estate of the deceased, and may receive the rents and profits of the real estate until the estate shall be settled or delivered over, by order of the court, to the heirs or devisees, and shall keep in tenantable repair all houses, buildings and fixtures thereon, which are under his control. This is related to RCW Continuation of decedent's business; See Davenport v. Elliott Bay Plywood Machines Co. 30 Wash.App. 152, 632 P.2d 76 (1981) FEES INCURRED IN DEFENDING REASONABLENESS MAY NOT BE AWARDED In Larson, 103 Wn.2d at 533, the court held that attorneys in probate are not entitled to additional attorneys or experts fees in defending the reasonableness of the requested fees; The Larson Court would allow the fees incurred to prepare the Petition for the fees, but disallowed the time on attorney spent defending the fees. Id. The defense of attorneys fees serves only the interest of the attorneys and provides no benefit to the estate. Id. 4

7 FEES INCURRED IN DEFENDING REASONABLENESS MAY NOT BE AWARDED The area of probate is particularly subject to attorney fee abuse when the estate involved is substantial and the lawyer is reasonably assured of favorable results and payment. See Brown, Some Observations on Legal Fees, 24 Sw.L.J. 565 (1970). An estate attorney must assume the burden of proving that the hours charged to the estate were reasonable and necessary. We also hold that an attorney in probate is not entitled to an additional fee in proving the reasonableness of his fee in the final report. Finally, we hold that if the objectors here can demonstrate an overall benefit to the estate, they are entitled to reasonable attorney fees pursuant to RCW Matter of Estate of Larson, 103 Wash. 2d 517, 534, 694 P.2d 1051, 1060 (1985) FEES INCURRED IN DEFENDING REASONABLENESS MAY NOT BE AWARDED In passing, we wish to observe that our probate statute makes it the duty of every administrator to settle the estate in his hands as rapidly and as quickly as possible without sacrifice to the estate. Nat'l Bank of Commerce of Seattle v. Peterson, 179 Wash. 638, 644, 38 P.2d 361, 363 (1934) 5

8 PERSONAL REPRESENTATIVE FEES AND ATTORNEY FEES ARE HELD TO THE SAME STANDARD RCW [cf. Rem.Rev.Stat. 1528] requires the trial court to allow an administrator and attorney such compensation as to the court shall seem just and reasonable. In fixing the amount of such fee or fees, the court is to consider In re Merlino's Estate, 48 Wash. 2d 494, 498, 294 P.2d 941, 943 (1956) RELEVANT STATUTES FOR PROBATE ADMINISTRATION FEES RCW ; SPR 98.12W: General compensation for attorneys fees. RCW (2): Requirements for statement of fees when closing the estate with a final decree. RCW : Requirements for notifying the court of fees upon discharge. RCW : Notice of intent to pay fees to an attorney or PR. RCW 11.96A.150: Disputes; The court may order the costs, including reasonable attorneys' fees, to be paid in such amount and in such manner as the court determines to be equitable. 6

9 RELEVANT STATUTES FOR PROBATE ADMINISTRATION FEES In General. The court will allow such compensation as the court deems just and reasonable. RCW The Personal Representative should be prepared to justify the requested fee, which justification may include a detailed statement of the time spent and services performed. Will Provision. If the Will makes provision for compensation for the 'Personal Representative, then unless the Personal Representative files a written renunciation of all claim' to the compensation provided in the Will before qualifying as Personal Representative, the amount provided by such provision shall be considered full compensation. RCW FACTORS FROM RELEVANT CASE LAW In determining the amount to be allowed as a fee for the attorney of a decedent s personal representative, the court will consider: The amount and nature of the services rendered, The time required in performing them, The diligence with which they have been executed, The value of the Estate, The novelty and difficulty of the legal questions involved, The skill and training required in handling them, Good faith in which the various legal steps in connection with the administration were taken, and All other matters which would aid the court in arriving at a fair and just allowance. In re Peterson s Estate, 12 Wn.2d 686 (1942). 7

10 RULES OF PROFESSIONAL CONDUCT AT RPC 1.5 REFERENCED The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; The fee customarily charged in the locality for similar legal services; The amount involved and the results obtained; The time limitations imposed by the client or by the circumstances; The nature and length of the professional relationship with the client; The experience, reputation and ability of the lawyer or lawyers performing the services APPELLATE STANDARD OF REVIEW A decision will not be overturned except for the abuse of discretion. Estate of Eubank, 50 Wn. App. 611 (1988). The court s discretion to award attorney fees, however, is not absolute. Allard v. Pacific Nat l Bank, 99 Wn.2d 394, 407 (1983). 8

11 BURDEN OF ESTABLISHING REASONABLENESS OF FEES The party requesting the fees has the burden of demonstrating the need for and the reasonableness of its attorneys fees. Matter of Estate of Morris, 89 Wn. App. 431, 434 (1998); Scott Fetzer Co. v. Weeks, 122 Wn.2d 141, 151 (1993). (1) AMOUNT & NATURE OF SERVICES See Generally, In re Peterson s Estate, 12 Wn.2d 686 (1942); In re Merlino's Estate, 48 Wash. 2d 494, 294 P.2d 941 (1956) Held that attorney for wife's estate who also served as administrator and who succeeded in discovering $80,000 in community assets which husband was forced to turn over to wife's estate was entitled to an $8,000 fee which included $4,000 for his routine services in probating the estate, $150 a day for time spent in court in litigation in securing said $80,000, $20 an hour for office time and $1250 to $1750 for, inter alia, diligence exercised in the case. RCW

12 (2) TIME & LABOR REQUIRED IN PERFORMING THE SERVICES The time required, rather than the time actually expended, is a factor in determining the reasonableness of fees. Matter of Estate of Larson, 103 Wn.2d 517, (1985). Rather than rely on Counsel s billing records, the trial court should make an independent decision as to what constitutes a reasonable award of attorney s fees. Scott Fetzer Co., 122 Wn.2d at 151. A probate attorney may charge the estate only for those hours that are reasonable and necessary in probating the estate. Matter of Estate of Larson, 103 Wn.2d 517, (1985). (3) VALUE OF THE ESTATE In considering the value of an estate, the court should look to the actual value, and not merely to the appraised value. In re Johnston's Estate, 107 Wash. 25, 181 P If the value of the estate has changed during the course of administration, that prevailing at the time of final settlement controls the fixing of fees. Horton v. Barto, 17 Wash. 675, 50 P. 587; In re Hagerty's Estate, 97 Wash. 491, 166 P However, it would not be improper for the court to take into consideration the original value of the estate as affecting the attorney's responsibilities at that stage of the proceedings. In re Peterson's Estate, 12 Wash. 2d 686, 729, 123 P.2d 733, 752 (1942) 10

13 (4) NOVELTY & DIFFICULTY OF THE LEGAL QUESTION INVOLVED In relatively simple case, court had difficultly not finding fees charged excessive, regardless of the hourly rate. An attorney must use judgment and discretion in rendering a bill. This includes recognizing the limits of one's own capacity and one's own inefficiencies. There is no reason or excuse for charging a client, particularly a guardianship estate under the protection and supervision of the court, for one's own inefficiencies. An award of fees is not simply payment for work actually performed. A substantive analysis must also be made; first, by the attorney to determine what fees to charge; and second, by the court to determine what to award. Included in that analysis is the necessity of the given work that is charged. See Larson, 103 Wash.2d at , , 694 P.2d 1051 In re Guardianship of Hallauer, 44 Wn. App. 795, 800 (1986) (5) SKILL, TRAINING & DILIGENCE REQUIRED FOR LEGAL ISSUES Clients should not be expected to pay for the education of a lawyer when he spends excessive amounts of time on tasks that, with reasonable experience, become matters of routine. Matter of Estate of Larson, 103 Wn.2d 517, (1985). 11

14 (6) RESULTS ACHIEVED An allowance based on time or diligence is not necessarily an adequate guide to a determination of a reasonable allowance if an allowance for time and diligence fails to properly reflect the benefit to the client. Results achieved must clearly be considered. In re Coffin s Estate, 7 Wn. App. 256, 268 (1972). FACTORS THAT SHOULD NOT BE USED 1) A reasonable fee involves more than simply multiplying the number of hours spent on a given case times a specific rate. 2) There is no reason or excuse for charging a client, particularly a guardianship estate under the protection and supervision of the court, for one s own inefficiencies. In re Guardianship of Hallauer, 44 Wn. App. 795, 800 (1986). 12

15 FACTORS THAT SHOULD NOT BE USED 3) Fees awarded need not be reduced in proportion to the amount the damages sought were reduced. (Although, this may be a factor considered by the court.) 4) Proportion of fees awarded need not correspond to the proportion of time spent on given issues at trial. (Again, this may be a factor considered by the court.) In re Guardianship of Hallauer, 44 Wn. App. 795, 800 (1986). FACTORS THAT SHOULD NOT BE USED 5) Fees should be disallowed for duplicative work, services that did not result in a benefit to the estate and fees in excess of the amount necessary to bring the matter to court. In re Guardianship of Hallauer, 44 Wn. App. 795, 800 (1986). 6) Failure to fulfill a duty may result in a denial of fees. Marriage of Swanson, 88 Wn. App.128, 944 P.2d 6 (1997). 13

16 DETERMINING APPROVAL OF FEES Timing of Parties Approval of Fees When a party waives objection to proposed fees in the Notice of Intent to Pay Interim Fees and Costs of Administration, he creates a deemed approval of those fees before the probate is closed. Per RCW OR Regardless of a waived approval of the proposed fees in the Notice, the Court retains the right to determine reasonableness of attorney fees at a hearing to close the estate if any beneficiary objects to the fees and requests a Court determination. Per RCW PRACTICAL TIPS Evidence Required: For Uncontested Fee Applications, you should have detailed Time and Billing Records For Contested Fee Applications, you should be able to demonstrate how each entry caused a benefit to the estate. The pleadings must speak to this. 14

17 PRACTICAL TIPS Arrange fee application by project/task as: Draft pleadings Attend Court hearings Searches and Notice to heirs or others Securing property TEDRA proceedings Property Sale Creditors Inventory Real Estate Litigation Declaration of Completion or Petition for Decree of Distribution PRACTICAL TIPS Anticipate Objections Was your time productive? Could the time have been incurred at a lower rate? Was time duplicated by others in your office? Was time expended to educate yourself about the basics or was it the time needed on novel issues? Have you included your time to justify your fees in the application? Was time incurred to clean up a mess that should have been avoided? Is there a claim that a duty was not fulfilled timely or at all? Is the hourly rate fair? Are the rates differentiated? 15