In re D.M.B.

979 A.2d 15, 2009 D.C. App. LEXIS 357
CourtDistrict of Columbia Court of Appeals
DecidedAugust 20, 2009
DocketNos. 06-PR-1064, 06-PR-1379, 07-PR-207
StatusPublished
Cited by3 cases

This text of 979 A.2d 15 (In re D.M.B.) is published on Counsel Stack Legal Research, covering District of Columbia Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re D.M.B., 979 A.2d 15, 2009 D.C. App. LEXIS 357 (D.C. 2009).

Opinion

KRAMER, Associate Judge:

Appellant Evan J. Krame is the trustee for two special needs trusts, the D.M.B. Special Needs Trust and the Dion Baker Special Needs Trust. He argues that in each case the trial judge erred in denying his requests for compensation expressed as a percentage of the assets of the trust being administered and failed adequately to consider the evidence offered in support of the requested fees. He further argues that Judge Wolf abused his discretion in sanctioning him and in amending the D.M.B. Special Needs Trust. We affirm.

I. Facts

A. The D.M.B. Special Needs Trust

The D.M.B. Special Needs Trust (“D.M.B.Trust”) was created as a result of a settlement from a mother’s lawsuit against a hospital on behalf of her minor son. It was created in lieu of a guardianship for the proceeds as provided in D.C.Code § 21-120(b) (2001).1 Judge [17]*17Joan Zeldon approved the proposed trust, which had been drafted by appellant, on the conditions that a guardian be appointed; that the trustee file annual accounts with the court; and that the trustee’s compensation “be reasonable, which may be established with the assistance of standards of local trustee practice, subject to approval by the court.” Appellant was made the trustee for the D.M.B. Trust.

The D.M.B. Trust provides that the trustee’s compensation shall be calculated as follows:

A Trustee shall be entitled to reasonable compensation for his or her services as a Trustee hereunder, consistent with industry standards, which may be expressed as a percentage of Trust assets. All trustee compensation is subject to review by the Superior Court, to be approved if reasonable and modified if unreasonable. In considering the reasonableness of fees reported in the accounting of the Trustee, the Court may consider the industry practice and any other factors.

1. The First D.M.B. Trust Accounting

Appellant’s first account reflected compensation calculated as 1% of the Trust’s assets ($3,396.39). The accounting also reflected quarterly fees paid to the Trustee’s investment advisor, “Choice.” The accounting was approved on March 2, 2005, by Judge Wertheim. No issue is presented as to this compensation award.

2. The Second D.M.B.

Trust Accounting (06-PR-1064)

Appellant’s second account, filed on December 5, 2005, reflected compensation again calculated as 1% of the Trust’s assets ($6,737.88). Judge Wolf rejected the account because he found that appellant had not supported his request for fees with appropriate documentation delineating the services performed on behalf of the trust, thus preventing the judge from determining the reasonableness of the fees requested. Accordingly, Judge Wolf ordered appellant to file a “thorough explanation” of his fees “so that the court may determine their reasonableness.”

In response, appellant conceded that courts “have the inherent power to review the compensation paid trustees from trust assets” for “reasonableness,” but argued that his flat 1% fee was reasonable because institutional trustees charge 1%. Noting also that Special Needs Trusts require specialized knowledge regarding governmental benefits, he asserted his own considerable skill and experience as a trustee or guardian. He did not, however, explain how his fee was reasonable in relation to the work performed for the D.M.B Trust, nor how a percentage-based fee is superior to an hourly-based fee in fairly compensating the attorney consistently [18]*18with the needs of the Trust.2 Instead, he asserted only that an hourly charge might cause the family of the beneficiary to “hesitate to call upon the Trustee for assistance if concerned that the hours expended by the Trustee would increase the fees charged” — without acknowledging concerns that a flat 1% fee based on trust assets might engender. Judge Wolf again ordered him to file a “thorough explanation” of his fees “so that the court may determine their reasonableness.” In response, appellant likened his practice to “the trust department of any bank or institutional trustee, albeit on a somewhat smaller scale,” and noted that his $6,737.88 request would work out to some 22.5 hours if charged at his normal $300 per hour rate. He then valued the estate at $774,413.81 as of September 30, 2005,3 and described his activities for the trust such as managing and maintaining a van for the child and working to facilitate the construction of a home for the child, which had been purchased with the trust’s funds. He conceded, though, that he had “not kept time for specific services as trustee in this case.”4

Judge Wolf deemed appellant’s response to be “essentially a motion for reconsideration requesting the court to authorize a commission form of payment for services rather [than] one based upon time expended (and documented).” He reiterated and incorporated reasoning for rejecting a “commission” form of compensation in “this or any other special needs trust” that had been expressed in similar cases.5 The judge found himself in “a quandary ... because ... the total lack of information supplied by the trustee” would create “some appearance of arbitrariness” no matter what the court decided. Nonetheless, he allowed appellant fees totaling 1% of the trust’s assets as described in appellant’s most recent response ($7,744.14), less the funds paid to the outside investment consultant ($2,313.73) and less the fees paid to the certified public accountant for the trust’s tax returns ($1,110.00) plus $1,000 of additional fees, for a total of $5,320.41. He allowed $1,000 of additional fees to keep his assessment from being [19]*19“too harsh” in light of appellant’s failure to keep time records, which had deprived the court of “any other method of determining reasonableness.” But because appellant had already paid himself a greater amount from the trust ($6,737.88), appellant was ordered to reimburse the trust the $1,417.47 difference. Appellant appeals this order in case No. 06-PR-1064.

3. The Third D.M.B. Trust Accounting (07-PR-207)

On November 22, 2006, in accordance with the court’s previous orders, appellant filed a petition for compensation with the court as part of the trust’s third accounting, seeking attorney’s fees in the amount of $17,943.58 based on an hourly-rate schedule and including time sheets for 73.4 hours of work performed by appellant and his staff.

Judge Wolf reviewed the petition and found that between 24.5 and 29 hours of the time charged appeared to represent charges to the Trust for the time appellant had spent working on his challenges to the court’s rulings on his earlier fee petitions, including time spent consulting with his appellate counsel regarding case No. 06-PR-1064 (regarding the Second D.M.B. Trust accounting). At $300 per hour, such charges constituted up to 48.5% of the total fees requested, or $8,700.00. The judge found appellant’s request for compensation regarding these matters to be an inappropriate request for compensation because it was “for time spent solely to benefit himself and not the trust beneficiary,” and therefore unfair to the trust beneficiary.6

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Bluebook (online)
979 A.2d 15, 2009 D.C. App. LEXIS 357, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-dmb-dc-2009.