Legal fee disputes in probate, trust, and guardian cases have special demands and legal doctrines not found in a civil litigator's routine lawsuits. When the legal fees bill for the representative of a probate estate or a personal trust or a guardianship is involved, there are two special problems regarding attorney fee determinations.
"[i]t is the law of guardianships, anciently and well established, that at all times, the court must be guided by what is in the best interest of the ward." In re Farson's Estate, 77 Ariz. 196, 201, 269 P.2d 600, 603 (1954)
(Note: for simplicity, in this article A guardian is used to refer to any representative of an estate, whether he/she is denominated executor, administrator, trustee, guardian, or some other title).
Point 1. Almost always, the beginning and ending point in a court's determination of a reasonable fee to be paid out of the estate to the guardian's attorney simply is a determination of what is the contracted fee agreement.
The contract rate is the beginning point in the probate court's real world of legal practice and court decisions. That beginning point is not necessarily the best legal practice for the court, nor necessarily in accordance with sound legal precedent.
This "beginning point" is distinguished from the normal measure used in fee awards outside the probate courts (e.g., civil-rights litigation), where the normal starting point is the reasonable hourly rate prevailing in the community for similar work. Probate judges seem to feel (wrongly) that there is no need to determine the reasonable hourly rate prevailing in the community for similar work and take the view that the contractual hourly rate agreed upon between lawyer and guardian is the best indication of what is a reasonable hourly rate for the particular case. While the court is not bound by the fee rate state in the fee agreement, in practical effect, it is the probate court= s both starting and also ending point of what is the reasonable rate of legal work done for the guardian. In the everyday world of probate administration, it is extremely unlikely that the court will adjust the hourly rate upward because the legal community generally charges more per hour; and highly unlikely that the court will adjust the hourly rate downward because the average attorney, for the average sort of work involved, charges less.
The basis for the probate judge's A in practice@ starting point is the predilection by a judge to assume that he/she has previously exercised wise judgment in appointing a an ethical guardian of excellent intelligence in business matters and, ergo, the guardian negotiated an economically sound hourly rate with the attorney. The judges forget that the guardian has no personal financial obligation for payment of the attorney's fees, thus, no real effort is made to bargain for a low contractual hourly fee rate as the condition of employment of the specific attorney chosen.
Point 2. An attorney is not entitled to fees (from the estate) for work reasonably necessary to defend the guardian, or reasonably necessary to perform tasks directed by the guardian, but which does harm to the ward or his/her estate.
"When an attorney undertakes to represent the guardian of an incompetent, he assumes a relationship not only with the guardian but also with the ward,' the intended beneficiary. ...The ward's interests overshadow those of the guardian' and ... an attorney who fails to act to preserve > the ward's property for ...[the ward= s] own use, as distinguished from the benefit of others,'... cannot escape liability for wrongful conduct on the ground of lack of privity. In re Matter of Guardianship of Sleeth, 1 CA-CV 10-0093 (Ariz: Court of Appeals, 1st Div., Dept. E, 9 December 2010).
A guardian is the A representative@ of the estate, in the same sense that a corporate president is the representative of the company. An estate is a legal concept, not a live person. If you are the attorney representing the guardian as the guardian of the estate, you are representing the estate B not the guardian. Where their interests separate, you as the attorney must choose the interests of the estate.
Therefore, when the guardian first appears in your attorney's office, before the fee contract is signed, you should clarify with the prospective client (so both you and he/she understand it):
If you represent the individual as the guardian of the estate, the fee contract should show that you are to be paid by the estate. If you represent the individual personally, the fee contract should show that person is to pay you.
Present day lawyers, fiduciaries, and courts, in the work-a-day world in which they think they live, tend to forget that the rights of the protected person to have his/her estate protected are superior to the rights of guardians (and their attorneys) to be paid for a reasonable fee for services.
Probate and guardianship courts have their historical roots in the equitable courts of England, which were staffed by the church under the charge to do A equity in protecting the rights of those unable to do so for themselves. The rights of the protected person were to be paramount, and that is still good legal theory.
It is thus refreshing to see the Arizona Court of Appeals take an active step toward the goal of reducing the financial gain sought by fiduciaries and their attorneys at the expense of the ward. In re Matter of Guardianship of Sleeth, 1 CA-CV 10-0093 (Ariz: Court of Appeals, 1st Div., Dept. E, 9 December 2010) is a case in which the court destroyed the argument of fee-petitioning attorneys that they should be paid for whatever reasonable legal work they did at the request of the of the fiduciary. protecting the ward and his estate.
The following quotations, taken from widely scattered places in the Sleeth opinion, should be emblazoned on the minds of attorneys hired to represent guardians and other representatives of estates.
When an attorney undertakes to represent the guardian of an incompetent, he assumes a relationship not only with the guardian but also with the ward, the intended beneficiary. ... the ward's interests overshadow those of the guardian and ... an attorney who fails to act to preserve the ward's property for his own use, as distinguished from the benefit of others, ... cannot escape liability for wrongful conduct on the ground of lack of privity.....The principle that attorneys' obligations go beyond the representation of a guardian, conservator, and trustee will require attorneys to remain keenly aware that they also serve the protected person and the trust beneficiary.
Both counsel and the fiduciary have a duty to undertake a cost-benefit analysis at the outset and throughout their representation to ensure that they provide needed services that further the protected person's best interests and do not waste funds or engage in excessive or unproductive activities. ..at all times, the court [in awarding attorney's fees] must be guided by what is in the best interest of the ward.
If an attorney has performed services [at the request of the guardian, or to protect the guardian from petitions to remove the guardian] that are not needed or of corresponding value to the protected person, that cannot constitute "reasonable" conduct deserving of "reasonable" compensation. Therefore, we conclude that whether the attorney's efforts were successful and whether the services provided any benefit or attempted to advance the protected person's best interests are important factors for the superior court to consider when evaluating a fee request from counsel for a guardian or conservator.
When a guardian or conservator has no personal financial obligation for attorney's fees and no concern over whether his expenditures will be fully approved, he may lack incentive to avoid financial improvidence. In a case in which the protected person's estate suffers significant and harmful losses, the superior court must exercise its independent judgment to determine what portion of the attorney's fees were reasonably incurred. Otherwise, there is no motivation for attorneys to judiciously weigh the cost of their actions against the risks and potential harm to the protected person's estate." [Emphasis supplied.]
It is sad that the Arizona court felt it necessary to state its judgment that attorneys for guardians normally have "no motivation...to weigh the cost of their actions against the risks and potential harm to the protected person's estate. Whatever happened to lawyers being expected to utilize the motivation provided by common morality?
It is also sad that the Arizona court felt it necessary to state its judgment that loss of fees is the only motivation for attorneys to act morally and ethically.
However, on the bright side, the Arizona court followed correct legal principles when stating the principle that denial of fees would be used to enforce the attorney's ethical obligations. If you want to read a newspaper columnist's hallelujah on the court's recognition of that concept, read what columnist Laurie Roberts wrote in the Phoenix newspaper. Laurie Roberts, Some rare good news about probate, Vol. 121, Number 207, Arizona Republic p. B1 (11 Dec. 2010).