SEPTEMBER 7, 2015 VOLUME 22 NUMBER 32
How much can an attorney charge in a probate proceeding? In Arizona, at least, the principal rule is one that is difficult to determine: attorney’s fees must be “reasonable”. But what does that actually mean?
A recent Arizona Court of Appeals decision approving the fees charged by the attorney for an estate’s personal representative may give the answer for that case, but may leave lawyers (and heirs) scratching their heads. It involved a relatively small estate, and what looks at first glance like an unremarkable set of legal issues.
Angela Teran (not her real name) died in 2010. Her will was easily admitted to the probate process in Maricopa County (Phoenix) courts. A personal representative was appointed, and she hired Phoenix-area attorney Robert Kelly Gorman to represent her.
Angela’s will directed that $2,000 should be given to her church, and the rest of her estate divided among four named individuals. It was not clear from the will whether the division of the remainder should be in equal shares or by some other arrangement. Her estate consisted of a single $35,000 bank account and another $3,000 in trust.
Once the probate was filed, the attorney began communicating with the four beneficiaries to figure out how to make the distribution. He proposed that the remaining estate balance should be divided equally, and he prepared an agreement to that effect for all the beneficiaries to sign.
Two beneficiaries quickly signed, but the other two did not. For two years nothing developed, though there were apparently numerous contacts among the attorney, the personal representative and one of the beneficiaries about how to treat all four beneficiaries fairly. Finally, the beneficiary who disagreed with the proposed distribution filed a request with the court to remove the personal representative.
At a hearing in 2012, the court directed attorney Gorman to prepare a proposed plan for distribution of the estate and a petition for approval of his fees incurred in representing the personal representative. He did just that, proposing to give the church its $2,000 and just $1,000 to each of the four other beneficiaries. He claimed fees and costs totaling $33,620.90, of which $22,650 had already been paid.
At about this time, the personal representative herself died, and the contesting beneficiary was next in line to administer the estate. Upon her appointment she objected to the proposed (and already collected) attorney’s fees, alleging that they were unreasonable. After a hearing, the probate court denied approval for Gorman to collect any additional fees, but did not order him to return any of the $22,650 he had already received. The new personal representative appealed, urging the court to order him to return some or all of his fees.
The Court of Appeals, in a split opinion, approved the probate court’s determination on the reasonableness of Gorman’s fees. While the two judges voting to uphold the fee award found it “concerning that the amount of fees awarded is very large given the size of the Estate,” they did not find any basis on which to reverse the probate judge’s determination. Of particular note to the majority judges was the fact that the contesting heir did not point to particular items on Gorman’s bills that should be disallowed, but instead relied on her assertions that he treated her unfairly and that his fees deprived the beneficiaries of their inheritances. That, said the judges, was not enough of a challenge to force reduction of his fees. Kurowski v. Gorman, August 25, 2015.
The one dissenting judge wrote a strongly-worded opinion. He noted that the approved fees ended up being 59% of the entire estate — an amount he called “strikingly unreasonable.” While the lawyer’s early actions were unobjectionable, wrote the dissenting judge, he should have moved the dispute to the court for resolution much more quickly; had he done so, far less time (and money) would have been spent to “field communications that were completely unproductive.”
Under earlier Arizona appellate decisions, lawyers involved in probate, guardianship, conservatorship and trust disputes are required to make an analysis of the cost and benefit of legal actions, and to balance those considerations when determining fees. The probate court, argued the dissenting judge, should have undertaken that same analysis when reviewing the fees — including those already collected.
What does the Kurowski opinion mean for attorney’s fees in other cases? Not much, actually. The opinion is a “memorandum” decision, which means it is not supposed to be used as precedent in other cases. The fact that it is a divided decision also calls into question its value for other cases. But it does demonstrate that one probate judge, and two appellate judges, were persuaded that, at least in a single case with difficult beneficiaries and its own peculiar facts, a fee of almost two-thirds of the estate could be justified.