Arizona Court of Appeals Orders Review of Fees in Guardianship

DECEMBER 13, 2010 VOLUME 17 NUMBER 38
Arizona’s probate court system — and particularly the guardianship and conservatorship arenas — have been embroiled in public controversy for the past year. A series of essays by a prominent Phoenix newspaper columnist has taken the entire system to task over allegations of excessive fees being paid to guardians, conservators and attorneys. A few cases have made particularly compelling reading, with total fees of hundreds of thousands of dollars being charged to individuals caught up in the system.

One of those stories involved R.B. Sleeth of Phoenix. One of his two sons initiated a guardianship and conservatorship proceeding in late 2007. Of particular concern was the possibility that Mr. Sleeth might marry, and his son doubted both his capacity to enter into a marriage and the motivations of the woman with whom his father lived.

Whatever the merits of those arguments, the ensuing proceedings were bitter and protracted. The son seeking guardianship had a lawyer, Mr. Sleeth had a lawyer, and his future wife also retained an attorney. In the heat of the proceedings the probate court appointed another lawyer as Mr. Sleeth’s guardian ad litem, and she reported to the court on what she thought ought to be done.

Contested hearings were held in March and April, 2008, but even after the probate court appointed Mr. Sleeth’s son as his guardian, conservator and trustee the lawyers continued to spar over his proper care, the possibility of his marriage and the management of his estate. Another round of hearings was held in October of that year, and in December, 2008, the judge removed Mr. Sleeth’s son as guardian (leaving him as conservator and trustee) and appointed an independent, professional fiduciary.

By October, 2009, Mr. Sleeth had married, the court had appointed a new conservator and trustee, and Mr. Sleeth’s son had submitted his attorney’s billings for approval by the court. Fees and costs for the nineteen months totaled $270,213.36. The probate judge ultimately approved the billings (though reduced by $5,515.00), over the vigorous objections of Mr. Sleeth and his new wife.

In addition to the fees charged by Mr. Sleeth’s son’s lawyers, fees of $142,499.69 were requested (and approved) by Mr. Sleeth’s own lawyer, and another $38,508.67 (also approved) by the court-appointed guardian ad litem. In total, Mr. Sleeth’s estate was subjected to bills for attorney’s fees and costs of $445,706.72. Since his estate had been valued at about $1.4 million, this meant that about one-third of his entire estate would be paid to lawyers.

The Arizona Court of Appeals reviewed the approval of the fees of lawyers for Mr. Sleeth’s son. The court noted that no one had appealed the other two attorney’s fees, so they were not before the appellate judges. With regard to the fees charged to the guardian/conservator/trustee, though, the appellate court was clear: the trial judge needed to review them more closely.

Arizona’s probate code governs guardianship, conservatorship and trust administration proceedings as well as decedent’s estates. That code and the rules adopted by the courts to implement it are clear: the fees charged by lawyers in probate proceedings must be “reasonable.” What is less clear is what “reasonable” might mean in particular circumstances.

Although the probate judge had ruled that the fees charged to the guardian were reasonable, the appellate judges ordered him to reconsider, and to particularly pay attention to at least these concerns:

1. One important element of determining reasonableness, according to the appellate court, is whether the representation ultimately benefits the ward. It is not enough to show that the lawyer was “successful” in the proceedings. Even though his son prevailed (at least temporarily), the probate judge was directed to consider whether the proceedings were “excessive or unproductive.” Both the fiduciary and his attorney have a duty to make a cost-benefit analysis, and to review it regularly, to determine whether it is appropriate to continue the legal proceedings.
2. The time records included a number of instances of what the appellate judges thought looked like “block billing” which required further review. Although most time records are kept in tenths of an hour, and many lawyers impose a minimum of .1 or .2 hours for most time entries, the appellate judges were troubled by the large number of time records listing a string of activities and posting a .5 or 1.0 hour bill. The failure to separate out multiple activities into individual listings makes it difficult to determine whether those time entries should be approved, according to the court.
3. Although the court did not find that improper entries were included in the time records, it did direct the probate judge to consider whether charges for such items as copying, faxing, emailing and file maintenance were appropriate for billing, or were really clerical work that would normally be part of the lawyer’s overhead.

Sleeth v. Sleeth, December 9, 2010.

Much has been written about problems with legal fees in court proceedings involving guardianship, conservatorship and trust administration. The Arizona Supreme Court has created a committee to review (among other things) billing practices and rules. Three judges of the Arizona Court of Appeals demonstrated this past week that they don’t need a committee to tell them how to determine the reasonableness of fees — existing probate law gives them (and the probate courts) the tools to regulate fees in contentious probate proceedings.