American courts (including our California state courts), in contrast to courts in England, do not typically award attorneys’ fees to a lawsuit’s “victor.” There are, of course, exceptions to this so-called “American Rule.” Among them is the “common fund” exception, which provides that one who incurs fees winning a lawsuit that creates a fund for others may require those passive beneficiaries to bear a fair share of the litigation costs. As the word “fund” suggests, the benefit must be a tangible, easily calculable sum of money. Courts have applied this exception to will and trust disputes where one beneficiary’s litigation causes other beneficiaries to receive a larger inheritance than they otherwise would have received.
But what happens when a trust beneficiary prevails in a lawsuit that doesn’t result in a tangible, monetary benefit but rather one such as removing an incompetent trustee or causing a trustee to prepare an accounting? May beneficiaries who receive such benefits, but who take no part in the litigation, be required to pay for a portion of the litigating beneficiary’s legal expenses? Last month the California Court of Appeal, in Smith v. Szeyller (2019) 31 Cal.App.5th 450, answered the question with a tantalizing “very possibly.”