BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
SB 156 (Beall)
As Amended April 8, 2013
Hearing Date: April 23, 2013
Fiscal: No
Urgency: No
TW
SUBJECT
Conservatorships and Guardianships: Attorney's Fees
DESCRIPTION
Existing law provides that, if a conservator or guardian is
unsuccessful in prevailing on a petition for fees for services
rendered, the conservator/guardian shall not be compensated from
the estate for any costs or fees that were incurred in
unsuccessfully defending the fee petition unless the court
determines that the conservator/guardian's defense was made in
good faith, based on the best interests of the ward or
conservatee.
This bill would delete that provision and instead provide a
two-way fee shifting provision as follows:
if the conservator/guardian's fees are reduced because of
opposition to the fee petition, the objector is deemed the
prevailing party and may be awarded his/her costs, including
attorney's fees, and this amount is charged against the
compensation of the conservator/guardian, who is then
personally liable for any unsatisfied amounts; and
if the conservator/guardian successfully defends the fee
petition, the objector may be ordered to pay the compensation
and costs of the conservator/guardian and costs of litigation,
including attorney's fees, and the objector is personally
liable for the amount ordered.
BACKGROUND
In California, if an adult is unable to manage his or her
financial matters, a conservator of the estate may be appointed
(more)
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by a court to manage the adult's (conservatee) financial
matters. If the adult is unable to manage his or her medical
and personal decisions, a conservator of the person may be
appointed. Similarly, a guardian of the estate or person may be
appointed for a minor child (ward).
A conservator or guardian is authorized to charge the
conservatee's or ward's estate for services rendered in
connection with managing the conservatee's or ward's financial
or personal matters. The conservator or guardian is required to
file a petition for fees for services rendered with the court.
If the fee petition is challenged (filed as an objection to the
fee petition), presumably by an individual acting on behalf of
the conservatee or ward, and the conservator or guardian does
not prevail on the fee petition, the guardian or conservator is
prohibited from receiving compensation from the estate for any
costs or fees that the guardian or conservator incurred in
litigating the fee petition, unless the court determines that
the conservator's or guardian's opposition to the fee petition
objection was made in good faith, based on the interests of the
ward or conservatee.
A recent Mercury News article exposed a problem with the
difficulty of conservatees and wards in challenging exorbitant
fee petitions. The article reported that "a six-month
investigation by this newspaper found a small group of [Santa
Clara] [C]ounty's court-appointed personal and estate managers
are handing out costly and questionable bills -- and charging
even more if they are challenged. The troubling trend is
enriching these private professionals -- working as conservators
and trustees -- and their attorneys, with eye-popping rates that
threaten to force their vulnerable clients onto government
assistance to survive." (de Sá, Santa Clara County's
court-appointed personal and estate managers are handing out
costly and questionable bills, Mercury News (June 30, 2012)
[as of Apr. 14, 2013].) Conservatees and wards,
under existing law, may be required to pay the litigation costs
of the conservator and guardian, but existing law does not
similarly allow a conservatee or ward to recover their
litigation costs, even if he or she is successful in challenging
the fee petition.
This bill would alter the existing one-way fee shifting
provision and provide a two-way fee shifting provision to
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authorize an award of attorney's fees and costs to the
prevailing objector to a fee petition.
CHANGES TO EXISTING LAW
Existing law requires that a conservator or guardian be allowed
payment for reasonable expenses incurred in the exercise of the
powers and performance of his or her duties (including costs of
surety bonds furnished, reasonable attorney's fees, and other
just and reasonable compensation for services rendered to the
conservatee or ward) and for other reasonable expenses, as
specified. (Prob. Code Sec. 2623.)
Existing law provides that, at any time after the filing of the
inventory and appraisal, but not before the expiration of 90
days from the issuance of letters or any other period of time as
the court for good cause orders, the guardian or conservator of
the estate may petition the court for an order fixing and
allowing compensation to the guardian or conservator of the
estate or person for services rendered at that time or to the
guardian's or conservator's attorney for services rendered to
that time. (Prob. Code Sec. 2640(a).)
Existing law requires, upon the hearing, the court to make an
order allowing (1) any compensation requested in the petition
the court determines is just and reasonable to the guardian or
conservator of the estate and/or person for services rendered,
and (2) any compensation requested in the petition the court
determines is reasonable to the guardian's or conservator's
attorney for services rendered. The compensation allowed to the
guardian or conservator of the person or estate, and to the
attorney, may, in the discretion of the court, include
compensation for services rendered before the date of the order
appointing the guardian or conservator. The compensation
allowed shall thereupon be charged to the estate. (Prob. Code
Sec. 2640(c).)
Existing law provides that the guardian or conservator shall not
be compensated from the estate for any costs or fees that the
guardian or conservator incurred in unsuccessfully opposing a
petition, or other request or action, made by or on behalf of
the ward or conservatee, unless the court determines that the
opposition was made in good faith, based on the interests of the
ward or conservatee. (Prob. Code Secs. 2623(b), 2640(d).)
This bill would delete this provision and instead provide that,
if the court, upon an objection to the petition, reduces the
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compensation requested in the petition, the objector shall be
deemed the prevailing party and the court may award the objector
his or her costs and other expenses and costs of litigation,
including attorney's fees, incurred to contest the petition.
The amount charged is a charge against the compensation of the
guardian or conservator, and the guardian or conservator is
liable personally and on the bond, if any, for any amount that
remains unsatisfied.
This bill would provide that, if the court, upon an objection to
the petition, does not reduce the compensation requested in the
petition, the guardian or conservator shall be deemed the
prevailing party and the court may order the objector to pay the
compensation and costs of the guardian or conservator and other
expenses and costs of litigation, including attorney's fees,
incurred to defend the petition. The objector shall be
personally liable to the guardianship or conservatorship estate
for the amount ordered.
COMMENT
1. Stated need for the bill
The author writes:
Conserved adults who are being overcharged by estate managers
face a dilemma when they go to court to contest questionable
costs: They must pay the conservator's legal fees - even if a
judge ultimately finds the conservators had filed unjustified
or exorbitant bills. Many times, this gap in the law has
placed California's elderly and disabled adults in the
untenable position of choosing to accept the overcharges
solely because it will cost more to challenge them in court,
win or lose.
SB 156 provides judges with greater discretion to protect
estates from exorbitant billing and fees. The bill also
balances the scales by creating a "loser pays'' scenario in
which both sides risk paying their opponent's legal fees if
they lose. . . . SB 156 will act as a deterrent to any unfair
padding of costs, thereby reducing incidences of contested
cases. And for the conservatees or their families who do file
frivolous objections, they may still be required to pay
"fees-on-fees.''
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2. New provisions for two-way attorney's fee shifting
Existing law provides that, if a conservator or guardian is
unsuccessful in prevailing on his/her petition for fees for
services rendered, the conservator/guardian shall not be
compensated from the estate for any costs or fees that were
incurred in unsuccessfully defending the fee petition unless the
court determines that the conservator/guardian's defense was
made in good faith, based on the best interests of the ward or
conservatee. (Prob. Code Sec. 2640.) Existing law does not
provide for an opponent of the fee petition to recover
attorney's fees from the conservator/guardian.
This bill would delete this provision and instead provide that,
if the conservator or guardian successfully defends the fee
petition, the objector may be ordered to pay the compensation
and costs of the conservator/guardian and costs of litigation,
including attorney's fees, and the objector is personally liable
for the amount ordered. Further, this bill would provide that,
if the conservator/guardian's fees are reduced because of
opposition to the fee petition, the objector is deemed the
prevailing party and may be awarded his/her costs, including
attorney's fees. This amount would be charged against the
compensation of the conservator/guardian, who is then personally
liable for any unsatisfied amounts. In this way, the bill would
revise existing law, a one-way attorney's fee shifting provision
in sole favor of the prevailing conservator/guardian, and
instead provide for a two-way fee shifting provision, that would
allow either the prevailing opponent or the prevailing
conservator/guardian to recover attorney's fees and costs.
In support of this bill, the author states:
In one notable case, a San Jose man contested his estate
manager's $108,000 fee for four months of work and was able to
get that fee lowered by a judge. But citing a statute, the
judge said he had no choice but to require the trust pay out
nearly $150,000 in fees to the conservator's attorney.
As a newspaper investigation pointed out: "Under California
law, challenging an excessive bill presents an astounding
damned-if-you-do dilemma: A private estate manager can bill
the cost to defend his charges right back to the person who
protested the bill in the first place.'' Within the legal
community, this situation is often referred to as
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"fees-on-fees'' and it is the author's strong belief that
"fees-on-fees'' can exploit victims who are legitimately
challenging the overbilling of their estates.
It is unconscionable to use elderly and disabled adults'
limited financial resources to pay their trustees to fight
against themselves.
It is important to note that the example described by the author
involved a professional fiduciary who was appointed as trustee,
not a conservator or guardian. Accordingly, since this bill
would only affect fee petitions filed by conservators and
guardians, this bill would not have bearing on a trustee's fee
petition.
The Mercury News article noted additional examples of the
one-way attorney fee shifting problem: "In one case reviewed by
this newspaper, a conservator charged a Belmont dementia patient
$1,062 to help celebrate her birthday. Another billed an
incapacitated Sunnyvale couple $26,946, including attorneys'
fees, for the 12 days she spent sorting through mail and
orchestrating a cleanup of their roach-infested home. . . .
Now, court investigators and some attorneys . . . are fighting
back against these excesses, triggering a series of legal
confrontations. They're also taking aim at troubling local
practices and state law that they say have rigged the system
against the very people it's supposed to protect. Under
California law, challenging an excessive bill presents an
astounding damned-if-you-do dilemma: A private estate manager
can bill the cost to defend his charges right back to the person
who protested the bill in the first place." (de Sá, Santa Clara
County's court-appointed personal and estate managers are
handing out costly and questionable bills, Mercury News (June
30, 2012) [as of Apr. 14, 2013].)
In November 2005, following a series of articles published in
the Los Angeles Times highlighting numerous flaws in the
conservatorship system, the Senate and Assembly Judiciary
Committees held public informational hearings to further focus
on systemic problems and, thus, fashion proposals for effective
reforms. Complaints lodged by conservatees and their families,
who felt victimized by unscrupulous conservators, and by
advocates for the elderly and dependent adults, centered on a
couple of points, one of which is the inadequacy of court
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oversight on conservators and conservatorship activities. The
result of these hearings was AB 1363 (Jones, Ch. 493, Stats.
2006), which among other things, prohibited, in
conservator/guardian fee petition litigation, the
conservator/guardian from receiving compensation from the estate
for any costs or fees incurred in unsuccessfully opposing an
objection to the fee petition, as specified (the existing
one-way fee structure).
Arguably, the current one-way attorney fee structure for fee
petitions has not resulted in better conservator/guardian
oversight, and conservatees and wards continue to be victimized
due to their fear of challenging a fee petition and being faced
with paying for the conservator/guardian litigation expenses.
The provisions of this bill are structured similar to those
found under Probate Code Section 2622.5, which authorizes a
two-way attorney fee provision for accounts filed by the
conservator or guardian. However, when reviewing challenges
regarding a conservator or guardian account, the court is
required to determine whether the opposition or objection was
brought in bad faith. The author argues that, although this
bill does not require a bad faith determination, which for many
conservatees and wards would still be too great a standard to
overcome and continue to discourage fee petition challenges,
this bill would still provide appropriate judicial discretion
for attorney awards.
Indeed, the bill language does not require the court to award
the prevailing party attorney fees, but rather instructs the
court that it may award attorney's fees. Further, the author
notes that "[s]hould the court make no reduction [of fees
requested in the petition], the conservator is deemed the
prevailing party and the court may award the attorney costs that
were incurred in the defense of the charges. The charges and the
fees would be paid from the estate of the conservatee. . . . SB
156 recognizes that a 'one size fits all' solution does not
apply to every case. Under the bill, a court can decide to
reduce fees and not award the conservatee's costs related to the
litigation. If the reduction was small, a judge might rule no
reimbursement is awarded to the prevailing party." By
authorizing a two-way fee-shifting provision, the author
contends that professional conservators and their attorneys
would request more reasonable fees to avoid the potential
expense of paying for the objector's attorney's fees and costs.
3. Concerns raised
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Concern has been raised that this bill does not provide an
evidentiary standard, such as the reasonableness or bad faith of
the opposing party, for a court to determine whether to award
attorney's fees and costs to the prevailing party. Concern has
been raised that conservators and guardians will have a harder
time qualifying for a bond since, as proposed by this bill, the
prevailing objector's fee award would come out of the
conservator's compensation and thereafter from the bond. There
is also concern about the chilling effect this may have on a
conservator's willingness to serve in general. An example is if
a conservator's attorney's fees are objected to, and denied by
one dollar, a conservator risks having a judge, without any true
evidentiary standard, awarding fees to the objector which the
conservator will have to pay. Concern has also been raised that
this bill may increase fee litigation and potentially dissuade
family members who may otherwise act as conservator from
agreeing to be appointed. Lastly, there is concern that public
guardians, who are judicially appointed in the event no other
party has requested to be appointed, and corporate trustees will
have concern with this bill.
In response, the author argues that this bill does not require a
court to award attorney's fees and costs to the prevailing
objector. In the event the conservator's or guardian's fees are
reduced by one dollar, the court would have judicial discretion
to not make any award to the prevailing objector. This bill is
intended to give unscrupulous estate managers pause when
requesting fees for services rendered, and give the conservatee
or ward a better chance, without the fear of existing law that
would require the conservatee or ward to pay for the
conservator's, guardian's, or their attorneys' fees and costs as
long as the conservator or guardian can prove good faith in
litigating the opposition to a fee petition. Accordingly, "SB
156 will act as a deterrent to any unfair padding of costs,
thereby reducing incidences of contested cases. And for the
conservatees or their families who do file frivolous objections,
they may still be required to pay 'fees-on-fees.'''
Support : None Known
Opposition : None Known
HISTORY
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Source : California Senior Legislature
Related Pending Legislation : None Known
Prior Legislation : AB 1363 (Jones, Ch. 493, Stats. 2006) See
Comment 2.
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