“Did Patrick demand a Rolls Royce defense when a prudent trustee could have arrived at the same destination in a Buick, Chrysler or Taurus?” A California Appeals Court has reversed fee awards in excess of $5 million requested by successor trustee Patrick Donahue to defend against breach of trust claims made by his sister-in-law, Michelle Donahue.
In the Appellate Court’s view, the trustee chose the Rolls Royce and not one of those other plebian vehicles to drive to his destination. The Rolls Royce was the trustee’s employment of 3 separate high-end law firms whose combined 45 member legal team ran up separate billing records totaling more than 800 pages. One lawyer billed 3,661 hours totaling $1.5 million. With so many lawyers sitting on one side of the court room, I wonder if the bailiff had to bring in folding chairs?
In trying to understand the reasonableness of the attorneys’ fees involved, the 3-member appellate panel wanted to know,“When multiple law firms are involved in concurrently providing legal representation to a single client, what procedures appropriately guard against duplicative or excessive fee requests?”
On remand, the Court asked the trial court“to fashion appropriate discovery regarding proper and reasonable levels of legal services for the benefit of the trust.”
“Bet the farm.”
Michelle Donahue challenged the way her brother-in-law administered the trust and then the way he mounted his defense. The approach was characterized by the trustee’s own counsel as a “bet the farm” defense. He used this “bet the farm” rationale to explain the full court-press of hiring multiple sets of lawyers in the litigation. “This was a ‘bet the farm’ case where [the beneficiaries] were seeking $20 to $25 million from our client—his entire stake would be wiped out if he lost the case.”
The court didn’t buy the argument, especially when it distinguished that the “farm” at stake wasn’t the trust’s but Patrick’s. “Faced with the prospects of ruinous exposure, Patrick may have decided to leave no field unfurrowed and to act without regard to cost in protecting his own personal interests.”
The easiest money to spend is somebody else’s.
Rubber stamps not wanted.
The Appellate Court questioned whether or not the trial court was too deferential to the fee request. “A trial court may not rubber stamp a request for attorney fees, but must determine the number of hours reasonably expended.” Citing In re Cendant Corp. Litigation (D.N.J. 1998) 182 F.R.D. 144, 150, the Court also said, “It is no insult to the judiciary to admit that a court’s expertise is rarely at its most formidable in the evaluation of counsel fees.”
Buicks and bovines aside, the court’s holding comes down to this: “The fee award must be reasonable in amount and reasonably necessary to the conduct of the litigation, but it also must be reasonable and appropriate for the benefit of the trust.”
To read the full opinion go to Filed 2/24/10 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF …
Credits: “Peninsula Hong Kong RR Phantom,” by Ajtnkvia Wikipedia Commons in the public domain;