Private professional fiduciaries in California are entitled to charge a reasonable fee for their services, but their fees for acting as conservators are subject to close court scrutiny.

A recent California Court of Appeal case, In re Conservatorship of Presha (2018) 26 Cal.App.5th 487, shows how closely probate judges and their staffs may examine the billing entries of conservators.  A conservator who cannot justify his or her time entries may leave the courthouse with an unwanted haircut.

Conservator’s Fee Request Cut by 45 Percent

Christine Davidson, a private professional fiduciary, served as court-appointed conservator of Lorraine Presha’s person and estate from 2009 to 2015.  When Presha died in 2015, Davidson petitioned for approval of her sixth and final accounting.  Davidson also requested conservator’s fees for a ten-month period of service in the amount of $12,621.60.

A conservator’s fees are subject to the probate court’s preapproval.

At the initial hearing in Riverside County Superior Court, on September 24, 2015, the probate judge expressed concerns about some of Davidson’s time entries, but she was not present at the hearing.  The judge took the fee request under submission, then set the matter for further hearing on December 15, 2015.

At that hearing, the judge explained that he (or his staff) had reviewed 15 other cases of Davidson in San Bernardino and Riverside Counties and found what might be overlapping and duplicative billing entries.  The judge ordered Davidson to respond by written declaration to his concerns.

Davidson responded and the court set another hearing for January 27, 2016, at which the judge asked further questions.

In March 2016, the judge issued a tentative ruling in which he reduced the requested conservator fees from $12,621.60 to $7,000 on the basis of time entries that were duplicative of those in other cases, observing that Davidson’s “practice of billing multiple clients for the same task was no accident, but rather a true business habit.”  The judge also observed that ambiguities in Davidson’s bills would be construed against her because she was responsible for the ambiguity.

Davidson responded to the tentative ruling, asserting that the judge had relied on an inapplicable Probate Code section to review her requested compensation.  She also contended that the judge misunderstood her billing practices – for example, her entries did not specifically describe all related follow-up activity.  The judge found her response unpersuasive and confirmed the fee reduction to $7,000.

All in all, the proceedings on Davidson’s fee request, at the trial court level, spanned three hearings conducted over a six-month period.  Davidson no doubt spent many hours defending her fee request as did the lawyer representing her.

Appellate Court Confirms Fee Reduction

While most fiduciaries would accept a $5,621.60 fee reduction rather than challenging it, Davidson doubled down with an appeal.

In a published opinion issued almost three years after the first hearing in the probate court, three justices from the Fourth Appellate District agreed with Davidson that the trial judge had relied on the wrong statute (California Probate Code section 2620) to review and reduce her fees.  But the Court applied the harmless error doctrine, noting that a conservator is a court-appointed officer who operates under the continuing jurisdiction of the court.  Accordingly, on its own motion, a probate judge can intervene to prevent or rectify fiduciary abuse.

The appellate court found that the judge could investigate a suspicion that Davidson breached her fiduciary duty to the conservatee by seeking to overcharge for services rendered – indeed, the judge had a duty to “regulate and control” Davidson’s conduct as a fiduciary under Probate Code section 2102.

As to the amount of the conservator’s compensation, the role of the probate judge is to determine what is “just and reasonable.”  Rule 7.756 of the California Rules of Court provides nine factors for courts to consider.

The appellate court concluded that Davidson had inaccurately reported the time she spent on various tasks, performed unnecessary services, and billed for tasks that could have been performed by an office assistant, warranting a fee reduction under three of the Rule 7.756 factors.

Fiduciaries Take Note – Bill Carefully and Accurately

Conservatorship of Presha reminds fiduciaries, whether acting as conservators or in another capacity, to bill accurately, clearly and fairly, without duplication among case files.  A probate judge, on his or her own initiative, may scrutinize and reduce the requested fees, and may go so far as to examine the fiduciary’s billings submitted to courts in other cases.  As long as the judge has a reasonable basis for reducing fees, and has given the fiduciary a fair opportunity to be heard, the fee reduction will be confirmed on appeal.