BILL ANALYSIS Ó
SB 156
Page 1
Date of Hearing: June 18, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
SB 156 (Beall) - As Amended: June 11, 2013
As Proposed to be Amended
SENATE VOTE : 37-0
SUBJECT : Conservatorships and Guardianships: Attorney's Fees
KEY ISSUE : IN ORDER TO BETTER PROTECT WARDS AND CONSERVATEES,
SHOULD GUARDIANS AND CONSERVATORS, WHO LOSE DISPUTES OVER THEIR
FEES, BE PROHIBITED, EXCEPT IN VERY LIMITED CASES, FROM
COLLECTING "FEES ON FEES," THAT IS, FEES AND COSTS FOR
UNSUCCESSFULLY DEFENDING THEIR INITIAL FEE PETITION?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
A guardian or conservator may be appointed to manage the affairs
of a child or an adult who is unable to do so for himself or
herself. The guardian or conservator generally charges the
ward's or conservatee's estate for services rendered in
connection with managing their financial or personal matters.
Under current law, if the fee petition is challenged and the
conservator or guardian does not prevail, then he or she is
prohibited from receiving compensation from the estate for any
costs or fees incurred in the litigation, unless the court finds
that the conservator's or guardian's opposition to the challenge
was made in good faith, based on the best interests of the ward
or conservatee.
An in-depth investigation by the Mercury News revealed that, at
least in Santa Clara County, courts have awarded exorbitant fees
to fiduciaries who had lost the underlying challenge to their
fee petition, even though such awards were clearly not in the
best interest of those they represented. This bill, sponsored
by the California Senior Legislature, very significantly limits
the ability of guardians and conservators to be paid for
unsuccessfully opposing their wards or conservatees' fee
SB 156
Page 2
challenges. The author believes that the bill "provides judges
with greater discretion to protect estates from exorbitant
billing and fees [and] . . . give unscrupulous executors
pause."
This bill is supported by the California Public Defenders
Association, who believes that the bill will serve as a
deterrent to overbilling, and the Santa Clara County Board of
Supervisors, who argues that it is necessary to protect some of
their county's most vulnerable residents - elderly and dependent
adults who lack the capacity to care for themselves or manage
their financial affairs - from unreasonable charges. With the
amendments proposed in this analysis, the Professional
Fiduciaries Association of California is now neutral on the
bill.
SUMMARY : Substantially limits a guardian or conservator from
collecting "fees on fees." Specifically, this bill :
1)Provides that a guardian or conservator may not be compensated
from the ward's or conservatee's estate for any costs or fees,
including attorney's fees, that the guardian or conservator
incurred in defending the compensation in the petition, which
compensation the court reduced or denied.
2)Provides, however, if the guardian or conservator proves to
the satisfaction of the court all of the following, then the
court has the discretion to grant or deny, in whole or in
part, an additional fee request:
a) The guardian or conservator made a reasonable and good
faith attempt at an informal resolution of each issue
presented by the objection to the compensation in the
petition;
b) The guardian or conservator acted in good faith and with
substantial justification in defending the petition, taking
into consideration the objections thereto, if any; and
c) It is in the best interest of the ward or conservatee to
make such an award.
EXISTING LAW :
1)Requires that a conservator or guardian be allowed payment for
reasonable expenses incurred in the exercise of the powers and
SB 156
Page 3
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, as specified. (Probate Code Section
2623. Unless stated otherwise, all further statutory
references are to that code.)
2)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 to that time or to the
guardian's or conservator's attorney for services rendered to
that time. (Section 2640(a).)
3)Requires the court, at a hearing on the fee petition, to make
an order allowing (a) any compensation requested that the
court determines is just and reasonable to the guardian or
conservator for services rendered, and (b) any compensation
requested that the court determines is reasonable to the
guardian's or conservator's attorney for services rendered.
Allows the compensation to the guardian or conservator, and to
the attorney, in the discretion of the court, to include
compensation for services rendered before the date of the
order appointing the guardian or conservator. Provides that
the compensation allowed be charged to the estate. (Section
2640(c).)
4)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, including a fee petition, unless the
court determines that the opposition was made in good faith,
based on the best interests of the ward or conservatee.
(Sections 2623(b), 2640(d), 2641(c).)
COMMENTS : A guardian or conservator may be appointed to manage
the affairs of a child or an adult who is unable to do so for
himself or herself. The guardian or conservator is authorized
to charge the ward's or conservatee's estate for services
rendered in connection with managing their financial or personal
matters. If a fee petition is challenged today, the guardian or
SB 156
Page 4
conservator can charge the estate fees for opposing the
challenge to the fee petition, even in some cases if they lose,
provided they acted in good faith and in the best interest of
the ward or conservatee. This bill seeks to limit those "fees
on fees."
History of Conservatorships and Guardianships in California :
California adopted its first conservatorship statute in 1957.
Prior to that time, the court appointed a "guardian" for any
person, child or adult, who was deemed "incompetent" to manage
his or her daily affairs. After 1957, the law distinguished
between a "guardianship," created for a minor, and a
"conservatorship," created for an adult. There are also
specific types of conservatorships for persons who are
considered "gravely disabled" by reason of mental illness or
chronic alcoholism and subject to confinement in a locked
psychiatric facility under the Lanterman-Petris-Short Act and
for "developmentally disabled adults." California law provides
for the appointment of a Public Guardian for any person "who
requires a guardian or conservator and there is no one else who
is qualified and willing to act."
Guardians and conservators may be licensed professionals or
family or friends. It has been estimated that professional
conservators oversee $1.5 billion in assets for at least 4,600
adults. Most conservators are non-professionals, usually family
members, such as a spouse or a child. Likewise, guardians are
typically family members.
In November, 2005, the Los Angeles Times published an in-depth
investigatory series, called "Guardians for Profit," which
dramatically exposed the failings of California's
conservatorship system for elderly and dependent adults. (Robin
Fields, Evelyn Larrubia, and Jack Leonard, Guardians for Profit
series, Los Angeles Times, November 13-17, 2005.) The Times'
articles included stories of private conservators who misused
the system and got themselves appointed inappropriately and then
either stole or mismanaged the money their conservatees spent a
lifetime earning; public guardians who did not have the
resources to help truly needy individuals, leaving them - poor,
alone and at risk of severe harm - to try and fend for
themselves; probate courts which did not have sufficient
resources to provide adequate oversight to catch the abuses; and
a system that provided no place for those in need to turn to for
help. The Times editorial which ran at the end of the series,
SB 156
Page 5
called on both the courts and elected officials to "turn this
abusive system into the honest guardianship it was meant to be."
(Deserving of Care, Los Angeles Times, November 17, 2005.)
The Times series included scores of examples of the failings of
the current conservatorship system, two of which exemplify many
of the problems identified. As a child, Helen Jones helped her
family survive the Great Depression by collecting coal along
railroad tracks in Nebraska and, during World War II, she was a
real-life "Rosie the Riveter." At 87, she was controlled by a
court-appointed conservator who she never wanted. Her neighbors
and her legal services attorney claimed that Helen was alert,
responsible, and "self-sufficient." Yet the conservator had
reportedly spent $200,000 of Helen's $560,000 estate - at a rate
of about $84,000 per year - mostly on things Helen never wanted.
Emmeline Frey was 93 and suffering from dementia by the time
that a San Diego probate court appointed a professional
conservator to manage her $1 million estate. The
court-appointed conservator hired her own son, a former car
salesman, as a financial advisor. She gave him $500,000 of
Emmeline's estate to invest. He collected his commissions, paid
for by the estate, even though his investments squandered
$100,000 of Emmeline's money. Although court staff informed the
presiding probate judge about the son's questionable
investments, the judge reportedly did nothing. When asked later
about his inaction, the judge claimed that he did not remember
the case given that he handled as many as 100 cases per day.
In response to the shocking reports of abuse, the Legislature
passed the Omnibus Conservatorship and Guardianship Reform
Act of 2006, a landmark package of bills to overhaul
California's troubled conservatorship system. That
legislation was designed to remedy alarming deficiencies in
California's conservatorship system that had resulted in the
abuses of California's elderly and most vulnerable. The
package of bill included:
AB 1363 (Jones), Chap 493, Stats. 2006, which required much
stronger review and responsibility by the state's judges of
conservators, along with uniform standards of conduct that
conservators must follow, brand new and aggressive training
rules for all professionals involved in the system, and a new
requirement that Public Guardians take the cases of all those
SB 156
Page 6
at imminent risk of harm.
SB 1550 (Figueroa), Chap 491, Stats. 2006, which created the
Professional Fiduciaries Bureau within the Department of
Consumer Affairs to license and regulate professional
fiduciaries, including conservators, guardians and trustees.
SB 1716 (Bowen), Chap 492, Stats. 2006, which allowed the
court to take action when it receives informal reports of
abuse and neglect from concerned friends or family members;
gave the court the ability to order a review of a
conservatorship at any time; and required that court
investigators more fully examine conservatees.
Unfortunately, while the Professional Fiduciaries Bureau within
the Department of Consumer Affairs now licenses and regulates
professional fiduciaries, the important new court oversights
were never funded and, as a result, are not mandated today.
Thus, it is possible that some of the same abuses which took
place prior to the 2006 Act could still be occurring today and
that courts simply lack the oversight resources to detect these
abuses.
Background on Fees : 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. Many family members serving in
the role do not charge fees, but professionals almost always
charge fees. The conservator or guardian is required to file a
petition for fees for services rendered with the court. The
Omnibus Conservatorship and Guardianship Reform Act
substantially limited when conservators could collect "fees on
fees." Under that Act, if a fee petition is challenged,
presumably by an individual acting on behalf of the conservatee
or ward, and the conservator or guardian lose, the guardian or
conservator is prohibited from receiving compensation from the
estate for any costs or fees that he or she incurred in
litigating the fee petition, unless the court determines that
the opposition to the fee petition objection was made in good
faith, based on the best interests of the ward or conservatee.
Thus to get "fees on fees" when the conservatee or guardian
loses a fee petition, that person must be able to show that he
or she acted in good faith and in the best interest of the
conservatee or ward.
Mercury News Series Uncovers Problems With Interpretation of
Current Law : Unfortunately, problems with some conservators
SB 156
Page 7
have continued. A recent Mercury News series exposed a problem
that conservatees and wards may have 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." (Karen de Sá, Santa Clara County's
court-appointed personal and estate managers are handing out
costly and questionable bills, Mercury News (June 30, 2012).)
The bill's author writes about the series:
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
"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 Mercury News example described
by the author involved a professional fiduciary who was
appointed as trustee of a special needs trust, not a conservator
or guardian. Accordingly, since this bill only affects fee
petitions filed by conservators and guardians, this bill would
have no bearing on a trustee's fee petition. It is also worth
noting that although the judge ordered that the fees be paid by
SB 156
Page 8
the trust beneficiary, the judge in a conservatorship or
guardianship case would not have been forced to do so, and could
only do so if the judge had found that the conservator or
guardian had acted in good faith and in the best interest of the
conservatee or ward.
The Mercury News article noted additional examples of
conservators charging inappropriate fees, but families being
reluctant to challenge those fees, based on the possibility of
being awarded "fess on fees": "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." (Karen
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 discussed above, current law permits
conservators and guardians to get their litigation costs paid
for by the conservatee's or ward's estates, but limits this if
they unsuccessfully opposed the ward or conservatee.
Bill Protects Against "Fees on Fees" When the Guardian or
Conservator Loses a Challenge to His or Her Fee Petition : This
bill very substantially reduces the risk that a ward or
conservatee who wins a challenge to a fee petition will have to
pay "fees on fees." In support of 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.
As discussed above, current law provides that, if a conservator
SB 156
Page 9
or guardian is unsuccessful in defending his or her fee
petition, the conservator or guardian is not to be compensated
for the fees incurred in the unsuccessful defense, unless the
court determines that the conservator's or guardian's defense
was made in good faith, based on the best interests of the
conservatee or ward.
This bill significantly tightens that provision by prohibiting
conservators and guardians from receiving any compensation for
unsuccessfully defending their fee petitions, unless the
guardian or conservator proves to the satisfaction of the court
all of the following: (1) The guardian or conservator made a
reasonable and good faith attempt at an informal resolution of
each issue presented by the objection to the compensation in the
petition; (2) the guardian or conservator acted in good faith
and with substantial justification in defending the petition,
taking into consideration the objections thereto, if any; and
(3) it is in the best interest of the ward or conservatee to
make an award of costs or fees. Even in that case, the court
may choose to award some or all of the fees, but certainly
retains the discretion to deny any "fees on fees."
ARGUMENTS IN SUPPORT : In support of the bill, the California
Public Defenders Association writes:
The most beneficial part of this legislation is that it
will serve as a determent to guardians or conservators of
an estate from overbilling for services, lest they be held
personally liable for costs and attorney's fees should
there be an objection to the request for fees and a court
[], after a hearing on the objection, finds the fees to be
excessive. Thereby, it will serve to protect conservatees,
and their estates, from excessive charges and the
diminution of their estates.
The California Senior Legislature adds that the bill will
provide "judges with a greater discretion than currently exists
to protect estates from exorbitant billing and fees. . . SB
156 will further protect California's elderly and disabled
adults and prevent them from having to choose to accept
overcharges solely because it will cost more to challenge them
in court."
REGISTERED SUPPORT / OPPOSITION :
SB 156
Page 10
Support
California Public Defenders Association
California Senior Legislature
Santa Clara County Board of Supervisors
Opposition (to a prior version)
Many individual fiduciaries and an attorney
Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334