Accounting by Heino, 1999-4868
Cite as: Accounting by Heino, 1999-4868, NYLJ 1202639807252, at *1 (Surr., KI, Decided January 10, 2014)
Surrogate Margarita Lopez Torres
Decided: January 10, 2014
The trial of this contested accounting proceeding, held on eight non-consecutive days from April through June 2012, was the culmination of years of bitterly contested proceedings between Harvey Heino (Harvey), Jay Heino (Jay) and George Heino (George, and, together with Jay, the objectants), the three co-fiduciaries and sole distributees of their father, Andre Heino (the decedent).1 By its Decision After Trial dated July 3, 2013 (the 2013 decision after trial), this court resolved the numerous objections interposed by the objectants to the accounting filed by Harvey, with the sole exception of a determination of attorneys' fees. The court now determines the reasonableness of attorneys' fees paid by the estate through April 30, 2006,2 as reflected in Harvey's accounting, and also fixes fees to date i) for Katlowitz & Associates (Katlowitz), counsel to Harvey, for their representation since April 2006, ii) for Gallet Dreyer & Berkey, LLP (Gallet Dreyer), counsel to Jay since August 2002, and iii) for Seth Rubenstein, P.C. (Rubenstein), counsel to George since July 2011.
Each counsel to the three co-executors was directed to submit an affirmation of legal services for a determination of legal fees by the court, which affirmations have been submitted. No party has objected to the submissions of the others; however, the objectants averred in their objections to the accounting that the payments to Katlowitz must be disallowed, asserting that the services rendered inured not to the benefit of the estate but rather solely to the benefit of Harvey.
In the alternative, the objectants sought a determination of the reasonableness of the legal fees already paid to Katlowitz. In addition, Jay individually asserted that the fees of his counsel, Gallet Dreyer, should have been included in the accounting as an expense of administration.
The facts of the instant proceeding have been amply set forth in the 2013 decision after trial. Upon the decedent's death, in or about 1997, the parties retained the services of the firm of Meltzer, Lippe & Goldstein to handle the probate of the decedent's will. Shortly after admission of the decedent's will to probate and issuance of co-letters testamentary to the parties herein, hostilities commenced. By August 2002, Jay had separately retained Gallet Dreyer. In April 2004, Harvey retained Katlowitz, while George intermittently was represented by separate counsel or appeared pro se until July 2011. At that time, George retained Rubenstein to represent him at trial of the contested accounting. The accounting establishes the gross value of decedent's estate as $1,851,276.14; however, this amount is subject to recalculation of various schedules, including certain distributions and administrative expenses incurred, as required pursuant to the 2013 decision after trial, as well as the bringing-down-to-date of the accounting.
Reasonable Attorneys' Fees
Counsel representing the fiduciary of an estate is allowed "such compensation for [their] legal services as appear to the court to be just and reasonable." SCPA §2307(1). The Surrogate has broad authority to inquire into, and indeed "bears the ultimate responsibility to decide," the reasonableness of compensation for legal services rendered to an estate. Matter of Verplanck, 151 A.D. 2d 767 (2d Dep't 1989). See also Stortecky v. Mazzone, 85 N.Y. 2d 518, 525-26 (1995); Matter of McCann, 236 A.D.2d 405 (2d Dep't 1997). The burden of proof of the reasonableness of such compensation lies with counsel. In re Lanyi, 147 A.D. 2d 644 (2d Dep't 1989).
While the accounting reflects payment of legal fees to Katlowitz in the amount of $37,000.00, the affirmation of legal services, dated August 1, 2013, submitted by Katlowitz indicates that in fact the firm has been paid a total of $583,335.53 to date. Further, Katlowitz seeks payment of additional legal fees in the amount of $594,577.61, for a total payment of $1,177,913.14. In their respective affirmations of legal services, Gallet Dreyer seeks payment of fees in the amount of $890,000.00, while Rubenstein seeks payment of $89,100.00. The total
sum of the legal fees requested to be approved for this estate is an astonishing $2,157,013.14, a sum equal to almost 117 percent of the (albeit unadjusted) gross value of the estate.
There is "no hard and fast rule" which may be applied in determining reasonable legal fees, and a Surrogate must exercise her discretion "with reason, proper discretion and not arbitrarily." In re Rappaport, 150 A.D. 2d 779, 780 (2d Dep't 1989) (citing Matter of Brehm, 37 A.D. 2d 95 [4th Dep't 1971]). The guidelines to which the Surrogate must refer in determining appropriate legal fees are set forth on Matter of Freeman (34 N.Y.2d 1 ) and Matter of Potts (213 App. Div. 59 , aff'd 241 N.Y. 593 ). These factors include consideration of
time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented; the lawyers experience, ability and reputation; the amount involved and the benefit resulting to the client from the services; the customary fee charged by the Bar for similar services; the contingency or certainty of compensation; the results obtained; and the responsibility involved.
Matter of Freeman, supra, at 9. Determination of reasonable counsel fees relies on careful review and balance of many factors. While "[t]he size of an estate is a permissible factor in calculation of fees," it is only one of a number of factors to be considered in a determination of reasonable legal fees. Matter of Kopec, 25 Misc.3d 901, 912 (Surr. Ct. Monroe County 2009). In uncomplicated estates of modest size, the general rule holds that reasonable compensation lies between 5 percent of the gross estate and a single executor's commission. Estate of Maddaloni, NYLJ, June 12, 1997, at 31 (col.6) (Surr. Ct. Kings County). However, where an estate is particularly complicated or bitterly contested, substantial legal fees have been found to be appropriate. See, e.g. In re Tobias, 232 A.D. 2d 341 (1st Dep't 1996); Sabatino v. Kelly, 66 A.D. 2d 937 (3d Dep't 1978).
Further, it is well-settled that time spent on estate matters is the least important factor to be considered in fixing legal compensation. Matter of Snell, 17 A.D.2d 490 (3d Dep't 1962). Nonetheless, contemporaneous time records are important to the court's determination of whether the time spent was reasonable for the various tasks performed. Matter of Phelan, 173 A.D. 2d 621 (2d Dep't 1991). Each counsel has submitted contemporaneous time records with
their affirmations, which the court has thoroughly reviewed. The Court notes that each of the co-executors was within his right to hire separate counsel. In re Mergentime, 155 Misc. 2d 502, 507 (Surr. Ct. Westchester County 1992). However, where the practice of retaining separate counsel leads to duplication of legal services and excessive fees, it is appropriate for the court to limit the fees awarded to an amount which might reasonably be paid to a single attorney. Id. See also Estate of Rubin, 147 Misc. 2d 981, 982 (Surr. Ct. Nassau County 1990). "[I]t is generally held that if services rendered by counsel separately employed were of benefit to the estate as a whole, his legal fees are usually justified as a charge against the estate…Conversely, where the services performed on behalf of a fiduciary are beneficial to him in his individual capacity only, payment must be made by the fiduciary personally or out of his share of the estate." Rubin, at 984-5 (citations omitted). Nonetheless, courts have made an exception to the "single fee" rule where the adversarial positions taken by the co-fiduciaries necessitate separate counsel and additional fees. See, e.g., Matter of Pollack, NYLJ, Jan. 5, 1993, p.22 (col.6) (Surr. Ct. Bronx County).
Here, the course of the proceedings in this estate have been relentlessly hostile and protracted, a situation destined to generate significant legal fees. Each of Harvey, Jay and George, the co-fiduciaries and sole distributees of the estate, chose to each be separately represented by counsel of their choice in the early stages of the estate's administration. The voluminous time records submitted by counsel make it clear that the parties were quick to avail themselves of access to counsel and to the resources of the court. Despite participating in numerous conferences, the parties were unable, indeed unwilling, to reach consensus on the issues before them, whether mundane or significant. The record of administration of this estate is a wide-ranging catalogue of proceedings, including the probate of the decedent's will, a proceeding to compel an account, a miscellaneous proceeding to revoke co-letters testamentary issued to Harvey, the instant contested accounting by Harvey,3 the motion and cross-motion for summary judgment and various motions in limine, all of which culminated in an eight-day accounting trial. Additional legal services included proceedings to obtain ancillary letters,
securing tax waivers, administration of several properties located in New York, Florida and Puerto Rico, innumerable conferences, appeal of this court's decision on the motion and cross-motion for summary judgment, conduct of extensive discovery, pre-trial preparation, post-trial compliance and the appeal of the 2013 decision after trial.
The affirmation of legal services submitted by Katlowitz indicates that the firm has spent 3,688.72 hours over the course of almost ten years representing Harvey, the sole co-executor to file an accounting.4 The Katlowitz affirmation reflects the expenditure of significant time spent in review of the work of various attorneys employed with the firm, resulting in duplication and overlap of activities. The affirmation also reflects charges for time spent copying, faxing, and creating and pulling redwells and file folders. Such services are secretarial in nature and are properly part of office overhead. The affirmation of legal services submitted by Gallet Dreyer indicates that the firm has spent 2,095.70 hours over the course of approximately eleven years representing Jay. Their affirmation also indicates a significant amount of time spent overseeing and reviewing the work of other lawyers at the firm, again resulting in extensive overlap of activities. Furthermore, the fees sought by both Katlowitz and Gallet Dreyer which relate to the preparation of their affirmations of legal services are not compensable, and are thus disallowed. See Matter of Gallagher, NYLJ, Feb. 2, 1993, at 26, col. 3 (Surr. Ct. Bronx County). The affirmation of legal services submitted by counsel from Rubenstein indicates that 178.07 hours over the course of almost two years has been spent representing George. Said affirmation reflects charges for time spent reviewing voluminous files, participation in comprehensive pre-trial discovery, and participation in the eight-day trial.
As previously noted, time spent is not the sole determinant of the fee. The reputation and experience of counsel is an additional factor to be considered by the court in setting fees. All three counsel are respected members of the legal community, in good standing and of long experience. Katlowitz has over thirty-three years of experience in the area of trust and estates, tax law and planning and business transactions, while Gallet Dreyer has over forty-six years
experience in similar areas of expertise. The counsel at Rubenstein has over thirty-three (33) years experience in the area of trust and estates and tax, and the Rubenstein firm, a highly respected trusts and estates firm, was established in 1956. Generally, it is expected that estate matters handled by experienced attorneys are more susceptible of quick and efficient resolution.
Resolution of the instant estate was complicated for years by the three co-executors who, fully supported by their counsel, remained intractable in their self-serving positions. Throughout, the posture of each co-executor has been in the main to preserve and increase his own interests.
After careful consideration of the record of the lengthy proceedings herein, the complexity of the issues, the numerous objections filed and their reasonableness, the contentious behavior of the parties, the reputation and experience of counsel herein, the size of the estate, the supporting information set forth in the affirmations of legal services, and the benefit derived by the estate, the legal fees for Katlowitz to be paid by the estate are fixed and determined in the sum of $310,000.00, inclusive of the $37,000.00 fee reflected in the accounting, together with disbursements in the reduced amount of $12,609.89. Disbursements sought for copies, postage, Fed Ex, travel and research are disallowed. See Matter of Diamond, NYLJ, July 14, 1993, at p.27 (col.3) (Surr. Ct. Westchester County), aff'd 219 A.D. 2d 717 (2d Dep't 1995).
With respect to the legal fees requested by counsel to the objectants, the court notes that the objectants were successful at trial of the accounting on two objections, which success inured to the benefit of the estate. Pursuant to the 2013 decision after trial, Harvey was directed to refund to the estate real estate commissions in the sum of $18,300.00, with interest at 6 percent per annum from the date of the filing of the accounting until repayment, as well as to repay certain loans made to himself totaling $35,000.00, with interest at 9 percent per annum from the date of the loan until repayment. In contrast, the objection interposed by Jay which alleged that Harvey failed to sell certain stocks, meriting surcharge, bordered on the frivolous.5 Likewise, the objection to the payment of $15,000.00 to a certified public accountant, which payment had been agreed to by the objectants in writing in 2004, was equally frivolous. Accordingly, the legal fees for Gallet Dreyer payable by the estate are fixed and determined in the sum of $200,000.00, plus
disbursements in the reduced amount of $15,322.26. Again, disbursements sought for transportation, mail fax, Fed Ex, parking, duplication, messenger services and research are disallowed. Matter of Diamond, supra.
The legal fees payable by the estate to Rubenstein is fixed and determined in the sum of $60,000.00, plus disbursements in the reduced amount of $65.00. Disbursements sought for fax, mail and xerox are disallowed. Matter of Diamond, supra.
In determining the fees of counsel, the court has taken into consideration a host of factors, including the results achieved, the nature of the contest which necessitated the services rendered, the size of the estate, and the skill of counsel (In re Tobias, 232 A.D.2d 341 [1st Dep't 1996]), and notes that although the fees awarded are significant, amounting to almost 31 percent of the unadjusted gross value of the decedent's estate, said fees are a direct consequence of the contentious course of action wholeheartedly purseud by each of the co-fiduciaries.
Settle decree consistent with this decision and the decision and order dated July 3, 2013.
Dated: January 10, 2014
Brooklyn, New York
1. The decedent died testate on July 26, 1997, survived by his three sons, Harvey, Jay and George. On December 22, 1999, the decedent's last will and testament, dated December 24, 1990, was admitted to probate, and co-letters testamentary were granted to Harvey, Jay and George as co-fiduciaries of their father's estate.
2. The accounting filed by Harvey accounts only through April 15, 2006, and states that $37,000.00 has been paid to Katlowitz from the estate. The accounting sought permission to pay an additional $30,000.00 to the firm. The objections interposed to certain professional fees paid to accountants and out-of-state counsel were resolved in the 2013 decision after trial.
3. In this contested accounting, no less than thirty-one objections were filed by Jay, while twenty-seven objections were filed by George.
4. The Katlowitz affirmation is separated into seven categories which delineate the legal services required for (i) the accounting/estate administration; (ii) discovery; (iii) the summary judgment motion, (iv) the appeal of this court's decision on the summary judgment motion, (v) pre-trial preparation, (vi) the trial, and (vii) post-trial services.
5. Jay's testimony at trial revealed that he had held the stocks himself, and had refused to sell them.