When a court decides that a lawyer should return fees improperly collected, the usual term comes with powerful imagery. The lawyer is usually ordered to “disgorge” those fees.
Courts are very protective about the fees charged in probate, guardianship and trust administration matters. Lawyers often find themselves having to justify their fees. An order to disgorge fees may be uncommon, but not unheard of.
A guardianship, conservatorship and trust administration matter
Victor Johnson (not his real name) lives in Maine. He is an adult, but severely disabled by his mental illness. His father Kevin filed a petition for appointment as Victor’s guardian (of the person) and conservator (of the estate). Kevin was appointed by the Maine probate court in 2008.
A few years later, Kevin asked the court to approve creation of a “supplemental needs trust” for Victor’s benefit. The reason for the trust: Victor could qualify for health care and housing benefits with the trust in place. The court even agreed that the trust should be backdated to the beginning of the case.
When Kevin filed his court accounting the next year, it included payments of over $30,000 to the care facility where Victor lived. That raised the judge’s interest, since she had approved the trust in order to save having to use Victor’s money for those payments. She appointed an investigator to review the billing and status.
After the investigator’s report indicated that there were still questions about the payments to the facility, the court scheduled a hearing. During that hearing, the judge suggested that Kevin’s attorney must have misunderstood the billing system for long-term care, and might have caused Victor’s money to be spent on care that could have been provided by the state.
Victor’s attorney moved to have the judge disqualify herself over her statements in this and another, unrelated case, but the probate judge ruled that she had “acted even-handedly to date” and denied the request. At that point Kevin’s attorney moved to withdraw as counsel, writing that the judge’s personal antipathy toward her made it impossible for Kevin to get a just ruling.
Withdrawal of counsel
The general rule governing lawyers prohibits withdrawal as counsel when the change will compromise anyone’s interests. If a hearing is set, it is even harder to get withdrawal approved. Sometimes (and more than occasionally) lawyers end up staying in cases even though they think they might have conflicts or other problems that really should justify withdrawal.
In this case, though, the probate judge allowed Kevin’s lawyer to withdraw as counsel. That meant that Kevin’s accounting as conservator and trustee would be dealt with by the judge without any lawyer representing Kevin. Over the next six months, the probate judge scheduled five different hearings on the matter, and sent out ten notices of hearings to Kevin, Victor’s court-appointed attorney and the investigator.
At one of those hearings, the judge told the participants that she thought Kevin’s attorney had prepared the trust improperly, and had confused Medicare and Medicaid, the two government programs providing health care benefits to Victor. The judge also dissolved the trust she had approved two years before. In order to save Victor’s estate both additional fees and time, the judge decided to rewrite his trust herself; she prepared and approved the new trust.
In her flurry of filings, the probate judge ordered Kevin’s attorney to disgorge the $3,638.35 in legal fees she had collected from her earlier representation. To make her point even more sharply, the judge ordered that, for every day the attorney delayed, the disgorgement order would double — until it reached the $25,000 that the judge had decided would not have been paid if the trust had been drafted differently in the beginning.
The Maine Supreme Court partially reverses
Victor’s supplemental needs trust then made its way to the highest appellate court in the state — the Maine Supreme Court. Kevin argued that the probate judge was not permitted to prepare her own trust documents. His former lawyer argued that the probate judge did not have the power to order her to disgorge her fees.
The appellate judges split the difference. It decided that there was nothing in Maine law that prohibited a probate judge from preparing her own legal documents (including Victor’s new trust). But it set aside the order that Kevin’s attorney disgorge her fees.
As the Supreme Court notes, Kevin’s attorney was not involved in the proceedings by the time hearings were held on the accounting. The lawyer had not received notice of the hearings, or any indication that she might be ordered to return the fees she had collected. And ultimately she was not only ordered to disgorge her fees — she was penalized up to $25,000 if she did not acquiesce immediately.
Generally speaking, an individual has the right to know a court is considering taking action against him or her. The subject of such a proceeding has the right to review the evidence that will be used against them, and to cross examine witnesses and participate in the hearing. When the probate judge tore into Kevin’s lawyer without any notice or opportunity to be heard, she was acting beyond her judicial discretion. Guardianship of Jones, June 20, 2017.