Florida Probate & Trust Litigation Blog

Florida Probate & Trust Litigation Blog

By Juan C. Antúnez of Stokes McMillan Antúnez P.A.

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3d DCA’s advice to settling parties: GET IT IN WRITING!

Posted in Mediation & Arbitration, Practice & Procedure

Sugar v. Estate of Stern, — So.3d —-, 2015 WL 5603469 (Fla. 3d DCA September 24, 2015)

fool-me-once-shame-on-you-fool-me-twice-shame-on-me-quote-1One of the big selling points for settling disputes is finality: you may not have gotten everything you wanted, but at least it’s over. Not so in this case. As noted by the 3d DCA, the four sisters involved in this “bitter, expensive, and divisive intra-family dispute” have been locked in heated litigation for four years after presumably settling their claims not once — but twice — in two related settlement agreements, both executed in 2011. Ever since then they’ve been litigating over exactly what it was they agreed to!

I first wrote about this case in 2013. Then the issue was whether a settlement agreement could be “reformed” to correct a mutual drafting mistake (as I reported here, the 3d DCA said “yes,” it can). This time around the key issue was whether a settlement agreement can be re-written after the fact based on one side’s alleged oral misrepresentations and/or lack of full disclosure during the settlement negotiations leading up to the written contract.

Case Study:

In 2005 the decedent transferred approximately $350,000 from her account in Bank Leumi in Israel to the appellants’ family. Now fast forward to 2011; the decedent has been adjudicated incapacitated and three of her daughters (the appellees) are locked in litigation with the decedent’s fourth daughter and her husband (the appellants). Both sides accused the other of misappropriating mom’s funds. These accusations lead to litigation and the two settlement agreements at issue in this case.

According to the appellees, during settlement negotiations one of the appellants denied knowing anything about any Israeli account. Based in part on that oral representation the parties settled their disputes in 2011, exchanging mutual global releases/waivers. Bank Leumi didn’t release information about the $350,000 transfer until 2013. When this information came to light, the appellees apparently went through the roof. The appellants were hauled back into court, where they were ordered to “disgorge” the $350,000 transfer back to the estate because “they did not make a full disclosure.” Not so fast said the 3d DCA, reversing the disgorgement order on several grounds. The two I found most interesting are great real-life examples of what NOT to do when settling a case. Both boil down to one simple rule: GET IT IN WRITING!

Oral representations = NO evidence:

The final written settlement contract in this case stated it was “based upon the representations of the parties as of the date of the settlement,” but did NOT (a) incorporate those specific representations into the written agreement or (b) attach them or refer to separate writings detailing those representations. According to the 3d DCA, if you don’t get the specific representations in writing (e.g., there are no accounts in Israel), they’re meaningless. Why? Because you can’t use oral statements made during settlement negotiations as evidence. They’re privileged. Which means for litigation purposes, they basically don’t exist. So saith the 3d DCA:

[Oral representations made during settlement negotiations have] no apparent evidentiary foundation in a later attempt to avoid the settlement terms because of alleged misrepresentation. Statements during settlement negotiations concerning liability, the absence of liability, or value, are privileged and inadmissible in subsequent proceedings in the same case. § 90.408, Fla. Stat. (2014); see also Bern v. Camejo, 168 So.3d 232, 236 (Fla. 3d DCA 2014); Agan v. Katzman & Korr, P.A., 328 F.Supp.2d 1363, 1372 (S.D.Fla.2004).[FN6]

[FN6]: The common way to bar the attempted resurrection of alleged representations during settlement negotiations is the use of a merger/integration provision in a written settlement agreement.

By the way, the 3d DCA’s advice about incorporating integration clauses into our settlement contracts is good, but it doesn’t go far enough in my opinion. I’m also a big fan of including anti-reliance and anti-sandbagging clauses, both of which are explained in a great ACC slide presentation entitled Avoiding and Resolving Contract Conflicts – Integration Clauses.

3d DCA: “Fool me once, shame on you; fool me twice, shame on me.”

There’s no excuse for lying during settlement negotiations, but then again there’s also no excuse for getting duped again by not documenting the lie in your written contract. “Fool me once, shame on you; fool me twice, shame on me.” So saith the 3d DCA:

[A]fter the assertion of claims involving dishonesty, the claimant in negotiations culminating in a settlement and release cannot rely on oral representations made by the party already asserted to have been dishonest. Finn v. Prudential–Bache Sec., Inc., 821 F.2d 581, 586 (11th Cir.1984); Sutton v. Crane, 101 So.2d 823 (Fla. 2d DCA 1958); Columbus Hotel Corp. v.. Hotel Mgmt. Co., 156 So. 893 (Fla.1934). This is as simple as the adage, “fool me once, shame on you; fool me twice, shame on me,” but was expressed more eloquently by Justice Davis of the Supreme Court of Florida in Columbus Hotel Corp.:

And, where parties are given to understand that they are dealing at arm’s length in the compromise of an already existing controversy that itself comprehends charges of legal fraud, misconduct, and dishonest suppression of material facts, as was the situation with the parties now before this court in the instant proceeding, there arises no duty on the part of one of the antagonists to reveal his own peculiar situation to his adversary, on pain of being held liable for fraudulent concealment of facts if he does not do so.

156 So. at 902 (emphasis omitted).

“It ain’t over till it’s over.” – Yogi Berra

After all these years and two appellate decisions, it looks like this estate has yet to see its final day in court. As reported by the Daily Business Review in Fight Over Big Estate Draws Fire for Running Up Legal Fees, both sides are gearing up for continued litigation:

Sugar said Stern’s $12 million estate has dwindled to about $6 million on mounting legal fees and court costs.

“Hopefully this decision will bring finality and stop the bleeding of legal fees from what we thought were baseless claims,” said Sugar’s attorney, Michael Schlesinger of Schlesinger & Associates in Miami. . . . “It’s a shame that all these fees were paid out of the estate to challenge a settlement that was final in 2011.”

The Sugars won’t walk away without trying to recover that money.

Schlesinger said they’ll now turn their attention to forcing their in-laws’ attorneys to “disgorge the sizable legal fees and compensation paid to them.”

The three sisters, meanwhile, also aren’t likely to retreat. They are gearing to pursue litigation over taxes owed on funds in the Israeli account.

Stay tuned for more . . .

Firm announcement: Juan Antúnez is certified by the Florida Supreme Court as a Circuit Civil Mediator

Posted in Settling, Mediating & Arbitrating Inheritance Cases

Alternative dispute resolution (ADR) has been utilized by the Florida Court System to resolve disputes for over 30 years, starting with the creation of the first citizen dispute settlement (CDS) center in Dade County in 1975. ADR processes offer litigants court-connected opportunities to resolve their disputes without judicial intervention. In Florida, this has resulted in one of the most comprehensive court-connected mediation programs in the country. The Florida Dispute Resolution Center (DRC) was created during the mid-1980s to provide assistance to the courts in developing ADR programs and to conduct education and research on ADR in general. The Supreme Court of Florida, through the DRC, offers certification for mediators in the areas of county court, family, circuit court, dependency and appellate cases.

I’m pleased to announce I’ve been certified by the Florida Supreme Court as a Circuit Civil Mediator (certification # 32893 R). I am a big believer in the value of niche-specific expertise, so the plan is to limit my mediation practice exclusively to probate and trust litigation matters.

My mediator’s pledge:

I’m committed to the process of mediation and the goal of self-determined resolution. I will work hard to gain an unbiased understanding of your case. I will explore all the evidentiary, legal and practical issues driving your particular dispute to spark meaningful dialogue and negotiations. I will foster a joint problem-solving mentality. I will ask hard questions: What do you aspire to? What would you be content with? What could you live with? I will work collaboratively with all sides to identify and develop creative options and solutions. I am personally invested in your success. In short, I AM A DEAL MAKER, NOT A MESSAGE CARRIER.

If I can be of service, please do not hesitate to contact me by calling 305-379-4008 or emailing me at jantunez@smpalaw.com.

I look forward to successful mediations for all!

2015 legislative news: Florida overhauls its elder guardianship system

Posted in Contested Guardianship Proceedings, Probate & Guardianship Statutes

(Source: Sarasota Herald-Tribune, Elder guardianship: A well-oiled machine.)

Most of the 2015 legislative changes to our Probate and Trust Codes were rolled into House Bill 343, which I reported on here. This blog post is all about this year’s overhaul of our adult guardianship system, which was spearheaded by Rep. Kathleen Passidomo, R-Naples, and advocated for by AARP Florida, among others.

House Bill 5 was the legislative vehicle for a wide-ranging package of reforms responding to criticisms of Florida’s existing elder guardianship system (some valid, some not so much), many of which were chronicled in a special multi-part investigative series published by the Sarasota Herald-Tribune entitled Elder guardianship: A well-oiled machine. In my opinion, to the extent we do have a “systemic” problem, the root cause is an underfunded and overworked court system where judges are routinely expected to juggle thousands of cases at a time with little or no support. Bottom line, you get what you pay for.

Regardless of whether you believe our court system needs better funding (my prescription) or improved checks and balances (HB5’s approach), I think it’s safe to say that but for the Herald-Tribune’s investigative reporting, nothing would have changed (yay for newspapers!). So it must have been with no small amount of satisfaction that this same team reported on HB5’s passage in Adult guardianship bill becomes law. Here’s an excerpt:

With Florida’s population aging in advance of the rest of the nation, [the bill’s author and primary sponsor, Rep. Kathleen Passidomo, R-Naples,] said she saw an urgent need “to give courts a little more tools as they manage guardianship files. We put in some language that hopefully lets the bad guys know we’re looking over their shoulders.”

The law — which includes criminal penalties for exploitation or abuse of a ward, requires more notice of emergency temporary guardianship proceedings, and makes it harder to suspend a family member’s power of attorney during the litigation process — takes effect on July 1.

“This legislation advances Florida guardianship law,” said Zayne Smith, associate state director of advocacy for AARP Florida, which worked to get it passed. “It clarifies how and when guardians are appointed, better protects wishes and rights of wards and codifies the duties and responsibilities of court-appointed guardians. Legislators who sponsored and supported guardianship legislation during session deserve kudos.”

A working lawyer’s guide to HB5’s legislative reform package:

For those of us in the trenches, a good first start in terms of making sense of how HB5’s reforms will actually impact our day-to-day practice is the bill’s Legislative Staff Analysis, which I’ve summarized and annotated below.

[1] Fiduciary Duties of a Guardian:

HB5 amends F.S. 744.107 and F.S. 744.1075 to authorize a court to appoint the Office of Criminal Conflict and Civil Regional Counsel as a court monitor for an indigent ward. The bill would serve to codify current practice in that the Office of Criminal Conflict and Civil Regional Counsel are currently providing this service. The Regional Conflict Counsel Offices were created by act of the legislature in 2007 to represent indigent clients. Here’s a link to Region One’s website, which in turn has links to all of the other regions.

The bill creates F.S. 744.359, which provides that a guardian may not abuse, neglect, or exploit a ward under the guardian’s care. Exploitation is described as any action whereby a guardian commits fraud in obtaining appointment as a guardian, abuses his or her power as guardian, or wastes, embezzles, or intentionally mismanages the ward’s assets. Any person believing that a guardian is abusing, neglecting, or exploiting a ward must report the incident to the central abuse hot-line of the Department of Children and Families. And courts are directed to interpret F.S. 744.359 in conformance with F.S. 825.103, which creates criminal penalties related to the exploitation of an elderly person or disabled adult.

The bill amends F.S. 744.361(1) to confirm and codify pre-existing Florida law that a guardian is a fiduciary with respect to a ward under the guardian’s care. The bill further amends F.S. 744.361 to impose additional statutory duties upon a guardian as a fiduciary:

  • To act only within the scope of the authority granted to the guardian;
  • To act in good faith;
  • To act in the ward’s best interests; and
  • To keep clear, distinct, and accurate records.

Specific to guardians of the person, the bill creates the duty of a guardian to:

  • Consider the expressed desires of the ward;
  • Allow the ward to maintain contact with family and friends except where contact may harm the ward (the court may review such decisions upon petition by an interested person);
  • Not restrict the physical liberty of the ward more than necessary;
  • Assist the ward in developing or regaining capacity if medically possible;
  • Notify the court if the guardian believes that the ward may have capacity to exercise one or more of the ward’s removed rights;
  • Make provisions for medical services and, to the extent possible, acquire a clear understanding of the risks and benefits of a recommended course of treatment;
  • Evaluate the ward’s medical and health care options, financial resources, and desires in making decisions regarding the ward’s residence; and
  • Advocate for the ward in institutional and residential settings.

[2] Guardianship Plan:

HB5 amends F.S. 744.367 to revise when a guardian of the person must file an annual guardianship plan. Where a calendar year filing is required, the plan must be filed between September 1 and December 1 of the previous year. Otherwise, the plan must be filed between 60 and 90 days before the last day of the anniversary month. The bill also amends F.S. 744.369 to provide that a guardian may continue to act under a previous year’s annual guardianship plan until the next year’s annual guardianship plan has been approved by the court unless otherwise ordered by the court.

[3] Emergency Temporary Guardianship:

HB5 amends F.S. 744.344(4) to allow for the appointment of an emergency temporary guardian if a petition for appointment of a guardian has not been ruled upon at the time of the hearing on the petition to determine incapacity. The bill also amends F.S. 744.3031 to require that notice of the filing of a petition for appointment of an emergency temporary guardian and any hearing thereon be served on an alleged incapacitated person, and the alleged incapacitated person’s attorney, at least 24 hours prior to commencement of the hearing unless the petitioner can demonstrate that substantial harm to the alleged incapacitated person would occur if notice was given.

[4] Costs and Fees of Examining Committee:

HB5 amends F.S. 744.331(7)(c) to provide that if the petition is dismissed or denied, the fees of the examining committee are paid upon court order as “expert witness” fees under F.S. 29.004(6). This change implements the provisions of F.S. 29.004(6), which awards fees to court appointed experts generally, and provides a secure source of funding to insure that the members of the examining committee are reasonably compensated as contemplated by F.S. 744.331 without incentive to find incompetency. The bill also provides that, where the petitioner was found to have filed a petition in bad faith and the state has paid the members of the examining committee, the petitioner must reimburse the state for fees paid.

[5] Power of Attorney:

HB5 amends F.S. 709.2109 to provide that if proceedings are initiated to determine the principal’s incapacity or for the appointment of a guardian advocate, the power of an agent under a power of attorney is not automatically suspended if the agent is the parent, spouse, child, or grandchild of the principal (“relative agent”). The power of such agents to act on behalf of the principal may only be suspended by the court pursuant to a request by verified motion.

The bill also creates F.S. 744.3203, which specifies the motion procedure to suspend the authority of a relative agent. The motion may be filed at any time during proceedings to determine incapacity but must be filed before the entry of an order determining incapacity. The plain language of the bill suspends the power of a relative agent upon the filing of the motion. The motion must:

  • Set forth one of the following grounds for suspending the authority of the relative agent:
    • The agent’s decision is not consistent with the alleged incapacitated person’s known desires;
    • The power of attorney is invalid;
    • The agent has not discharged his or her duties or incapacity or illness renders him or her incapable of discharging those duties;
    • The agent has abused powers; or
    • There is a danger that the property of the alleged incapacitated person may be wasted, misappropriated, or lost unless the authority under the power of attorney is suspended.
  • Allege specific statements of fact demonstrating that there are grounds to justify the suspension of the power of attorney.
  • Be verified by the petitioner under penalty of perjury.

It is not grounds to suspend a power of attorney if a dispute exists between the agent and the petitioner and the matter is appropriately resolved in a different forum or a legal proceeding other than a guardianship proceeding.

The court must schedule an expedited hearing on the motion upon the response of the relative agent. Notice of the hearing must be provided to all interested persons, the alleged incapacitated person, and the alleged incapacitated person’s attorney. If the agent’s response sets forth an emergency situation, the property or matter involved, and the power to be exercised by the agent, notice is not required. The court order must set forth what powers the agent is permitted to exercise, if any, pending the outcome of the petition to determine the principal’s incapacity.

Attorney fees and costs may be awarded to a relative agent who successfully challenges the suspension of the power of attorney if the petitioner’s motion was made in bad faith.

[6] Persons Qualified to Serve as Guardian:

HB5 amends F.S. 744.309 to provide that a for profit corporate guardian existing under the laws of this state is qualified to act as guardian of a ward if the entity:

  • Is qualified to do business in the state;
  • Is wholly owned by the person who is the circuit’s public guardian in the circuit where the corporate guardian is appointed;
  • Has met the registration requirements of F.S. 744.1083; and
  • Posts and maintains a blanket fiduciary bond or a liability insurance policy.

If the corporate public guardian posts a fiduciary bond, the bond must:

  • Be at least $250,000 and posted with the clerk of the circuit court in the county in which the corporate guardian has its principal place of business. The corporate guardian must provide proof of the bond to the clerks of each additional circuit court in which the corporate entity is serving as guardian.
  • Cover all wards for whom the corporate entity is serving as guardian at any given time.
  • Have terms that cover the acts or omissions of each agent or employee of the corporation who has direct contact with the ward or the ward’s assets.
  • Be payable to the Governor and his or her successors.
  • Be conditioned upon the faithful performance of all duties of the guardian.

The liability of the provider of the bond is limited to the face value of the bond. The bond is in lieu of and not in addition to the bond required under F.S. 744.1085 for professional guardians, but is in addition to any bonds required under F.S. 744.351 to exercise the authority of a guardian. The expenses incurred to satisfy the bonding requirements may not be paid from the assets of the ward.

If a corporate guardian maintains a liability insurance policy, the policy must cover any losses sustained by the guardianship caused by acts, errors, omissions, or any intentional misconduct committed by the corporation’s officers or agents and each agent or employee who has direct contact with the principal or the principal’s assets up to $250,000. The corporate entity must provide proof of the insurance policy to the clerks of each additional circuit court in which the entity is serving as guardian. A for-profit corporation that has been appointed as guardian prior to the effective date of the bill is deemed qualified to serve in those guardianships in which the corporation has already been appointed.

[7] Appointing a Guardian:

HB5 amends F.S. 744.312 to require that a court consider the wishes of the next of kin of the alleged incapacitated person if he or she cannot express a preference concerning who should be appointed permanent guardian. A court is also prohibited from giving the emergency temporary guardian preference in the appointment of a permanent guardian.

Further, except where designated and appointed as the standby or preneed guardian, the bill places restrictions on the appointment of professional guardians as permanent guardian of a ward. A court that does not utilize a rotation system for the appointment of a professional guardian in a particular matter must make specific findings of fact regarding why the guardian was selected by the court. The order must reference each factor a court is required to consider in the appointment of a permanent guardian. The bill also prohibits a professional guardian from being appointed as the permanent guardian of a ward if the professional guardian served as the emergency temporary guardian of the ward unless the ward or the ward’s next of kin requests the appointment. The court may waive the restriction, by specific written findings of fact, if the special requirements of the guardianship demand that the court appoint a guardian because he or she has special skills, talent, or experience.

The bill also amends F.S. 744.3115 and F.S. 744.345 to provide that the court must specify in any order appointing a guardian of the person and in all letters of guardianship what authority the guardian may exercise with regard to the ward’s health care decisions versus what authority, if any, a health care surrogate previously designated by the ward may continue to exercise.

Additionally, the bill amends F.S. 744.331(6) to require that a court consider the incapacitated person’s unique needs and abilities when determining what rights should be removed in a guardianship proceeding. It further requires that the court only remove such rights which the alleged incapacitated person does not have the legal capacity to exercise.

[8] Costs and Fees Associated with Guardianship Administration:

HB5 adds new subsection (9) to F.S. 744.108 dispensing with any requirement for expert testimony to support an award of fees unless requested. Expert testimony may be offered at the option of either party after giving notice to interested persons. If expert testimony is offered, a reasonable expert witness fee must be awarded by the court and paid from the assets of the ward. The bill also amends F.S. 744.108(8) to provide that the court may award attorneys’ fees and costs associated with proceedings to determine the fees of a guardian or an attorney who has rendered services to a guardian or ward, including court-appointed counsel.

[9] Restoration to Capacity:

HB5 amends F.S. 744.464 to establish a “preponderance of the evidence” burden of proof for the restoration of an incapacitated person’s rights. The bill also requires that a court make specific findings of fact regarding competency and that a court to give priority to any suggestion of capacity and advance such cause on the judicial calendar.

[10] Settling Claims of Minors:

Although almost all of the legislative changes focused on the elderly, there were a few changes having to do with minors.

Court approval is required to settle any claim of a ward arising before or after the appointment of a guardian or any claim of a minor valued in excess of $15,000. The court approval process requires a petition setting forth the terms of the settlement, which may also be reflected in a subsequent order approving the settlement. HB5 amends F.S. 744.3025(1)(a) to provide that the court may appoint a guardian ad litem only “if the court believes that a guardian ad litem is necessary to protect the minor’s interest.”

The petition and the order are part of a court file, and therefore, are a matter of public record and open for inspection under current law even if the settlement agreement contains a confidentiality provision. House Bill 7 (a companion bill to HB5), creates a public records exemption for these proceedings. As explained in HB7’s Legislative Staff Analysis, the bill amends F.S. 744.3701 to provide that any court record relating to the settlement of a ward’s or minor’s claim, including a petition for approval of a settlement on behalf of a ward or minor, a report of a guardian ad litem relating to a pending settlement, or an order approving a settlement on behalf of a ward or minor, is confidential and exempt from the provisions of F.S. 119.07(1) and section 24(a), Art. I of the State Constitution, and may not be disclosed except as specifically authorized.

Because the record is made confidential and exempt, it may not be disclosed except as provided in law. HB7 amends F.S. 744.3701 to authorize inspection of such records by parties that may be involved in a proceeding to approve a minor’s settlement agreement “upon a showing of good cause.” The list of parties authorized to inspect these records now includes all of the following:

  • The court;
  • The clerk or the clerk’s representative;
  • The guardian;
  • The guardian’s attorney;
  • The guardian ad litem related to the settlement (if any);
  • The ward if he or she is at least 14 years of age and has not been declared totally incapacitated;
  • The attorney for the ward;
  • The minor if he or she is at least 14 years of age;
  • The attorney representing the minor with regard to the minor’s claim; and
  • As “otherwise provided” by Ch. 744.

4th DCA: When does a court lack “procedural jurisdiction” to appoint a guardian?

Posted in Contested Guardianship Proceedings, Practice & Procedure

Adelman v. Elfenbein, — So.3d —-, 2015 WL 5026178 (Fla. 4th DCA August 26, 2015)


“Even when a court has subject matter jurisdiction and personal jurisdiction — hence the power to proceed — the procedural equivalents of traffic signals regulate when it is permissible to proceed. For example, a case must be commenced by pleadings before a court can enter an order. Until that occurs, the court is like a motorist facing a red light: Proceeding is physically possible but is deterred by the prospect of undesirable consequences. The light turns green once proper pleadings are filed, but directional signals (rules confining actions to the scope of the pleadings) still limit where the court may permissibly go. When a final judgment is entered, the court faces another red signal.” Florida’s Third Species of Jurisdiction.

Florida’s elder guardianship system has gotten a lot of bad press lately (see here). Some of this criticism is unfair, but not all of it. To the extent we do have a “systemic” problem, in my opinion the root cause is an underfunded and overworked court system where judges are routinely expected to juggle thousands of cases at a time. Bottom line, you get what you pay for.

So what’s to be done? Simple: stay out of court. And how do the elderly do that? By relying on the same tools estate planners have been using for decades: durable powers of attorney, health care surrogate designations, and revocable trusts. These are all “less-restrictive alternatives to guardianship,” which means a court shouldn’t appoint a guardian for you if you’ve signed one (or all) of them, which is what keeps you out of court. The statutory authority for this stay-out-court card is found in F.S. 744.331(6)(b), which provides in relevant part as follows:

A guardian may not be appointed if the court finds there is an alternative to guardianship which will sufficiently address the problems of the incapacitated person.

But none of this works if our trial court judges allow themselves to get pulled into family disputes in a way that exceeds their jurisdictional authority. That’s what happened in this case.

Case Study:

At the heart of this case is an elderly man who all agree is incapacitated. There’s also no dispute over the fact that he had previously executed “advance directive documents” that: (a) provided a less-restrictive alternative to guardianship, and (b) appointed his ex-wife his surrogate and fiduciary, making a court-appointed guardian unnecessary.

[T]he general magistrate found that, while plenary incapacity was established, Mr. Adelman’s advance directive documents provided a less-restrictive alternative to guardianship. Mr. Adelman’s former spouse, Ruby Adelman, was a party to the proceeding and was named in his advance directive documents as attorney-in-fact, health care surrogate, plenary guardian, and trustee. The trial court adopted and ratified the general magistrate’s report and thereafter dismissed the grandniece’s petition for appointment of a plenary guardian. No appeal was taken from those orders.

As so often happens in these cases, the family conflict that initially brought the case before the court didn’t go away once the case was dismissed. About six months later the original petitioner accused ex-wife of not doing a good job as caretaker, so she filed a “petition to reopen the guardianship.” According to the 4th DCA:

She sought appointment of a professional plenary guardian, alleging that Mr. Adelman’s former spouse was not providing “consistent adequate care.” Over continuing and vigorous objection by both Mr. Adelman and his former spouse, the trial court entertained the petition, conducted a trial, and issued an order appointing Lori Shuman–Auspitz as the professional plenary guardian for Mr. Adelman.

Here’s the problem. Once the trial court dismissed the original guardianship petition without ever appointing a guardian, it lacked jurisdictional authority to get involved in the case again. No jurisdiction = reversal, so saith the 4th DCA:

We find that . . . ongoing jurisdiction of the circuit court in an incapacity proceeding does not exist unless a guardian is appointed. . . . Because the trial court lacked jurisdiction to enter the order, we reverse.

If anyone wants to bring these parties back before this court, he or she needs to file a new complaint and comply with all of the procedural rules we have in place to make sure we get the best work-product possible from our courts. In other words, there’s a right way to tackle this problem. Here’s how the 4th DCA made this point:

Mr. Adelman’s advance directive documents entrust his affairs to his former spouse. Her role is fiduciary, and the laws of this state are more than adequate to protect him from future exploitation or abuse. See, e.g.,§§ 709.2101–.2402, Fla. Stat. (2015) (“Florida Power of Attorney Act”); §§ 415.101–.113, Fla. Stat. (2015) (Florida “Adult Protective Services Act”).

Procedural jurisdiction = red light/green light:

The trial court judge in this case exceeded the scope of his “procedural jurisdiction” by entering an order once the original case had been dismissed — the jurisdictional light was red. This court doesn’t have a green light to proceed until someone triggers its jurisdictional authority by filing a new legally authorized complaint/petition. Until then, the light stays red and any litigation that goes on during that time is a big waste of time and money for all concerned.

You won’t really understand what’s going on in this case if you don’t zero in on the “procedural jurisdiction” concept lurking under the surface. Tampa trial court judge Scott Stephens defined this kind of jurisdiction in his excellent Florida Bar Journal article entitled Florida’s Third Species of Jurisdiction:

Procedural jurisdiction has nothing to do with the scope of the court’s constitutional or statutory power, or the status of the parties. Instead, it is a matter of compliance with applicable procedural principles, some codified in rules, but more often products of case law. These principles can correctly be characterized as “jurisdictional,” in that they address a particular court’s authority to proceed in a specific direction at a defined time. Even when a court has subject matter jurisdiction and personal jurisdiction — hence the power to proceed — the procedural equivalents of traffic signals regulate when it is permissible to proceed. For example, a case must be commenced by pleadings before a court can enter an order. Until that occurs, the court is like a motorist facing a red light: Proceeding is physically possible but is deterred by the prospect of undesirable consequences. The light turns green once proper pleadings are filed, but directional signals (rules confining actions to the scope of the pleadings) still limit where the court may permissibly go. When a final judgment is entered, the court faces another red signal.

By the way, defining our “jurisdictional” terms matters because it tells us when we need to first raise this objection — or risk waiver. According to judge Stephens, you need to assert this objection immediately:

As a practical matter, counsel should be careful to raise all forms of jurisdictional objection at the first opportunity, since most jurisdictional objections are procedural, and waived if not timely asserted.

You’ve been warned!

Thoughts on the Tom Clancy estate tax allocation litigation

Posted in Trust and Estates Litigation In the News

“This Court is charged with the task of determining the estate tax liability of one of the testamentary trusts created by the Last Will and Testament of renowned author and beloved resident of Baltimore City, Thomas L. Clancy, Jr.” Judge Lewyn Scott Garrett, Orphans’ Court, Baltimore, MD

Baltimore City Orphans’ Court Judge Lewyn Scott Garrett entered this 47-page order ruling that the late author’s estate taxes must be paid exclusively from the trust going to the four adult children of his first marriage, exempting the share going to his second wife and their child from paying any estate tax. The economic implications of this ruling are huge, as reported here by Law360:

Tom Clancy’s widow is not responsible for a multi-million dollar tax bill on the best-selling author’s $83 million estate, which includes a minority share of the Baltimore Orioles, a 535-acre Maryland estate, and a rare World War II tank, a Maryland probate court judge ruled on Friday. Baltimore City Orphans’ Court Judge Lewyn Scott Garrett concluded Friday that none of Alexandra Clancy’s two-thirds share of the $83 million family estate can be used to foot the hefty $11.8 million tax bill. Instead, the taxes must be paid out of the roughly $28.5 million trust Clancy left to his four adult children from his first marriage, the judge said.

A working lawyer’s perspective:

As a person who litigates these kinds of cases for a living, what I found most interesting about the order was how close the call was. This wasn’t a slam dunk. It could have gone either way. At the center of this controversy are the convoluted estate-tax allocation provisions incorporated into Clancy’s will, which Judge Garrett charitably describes as “inartfully drafted.”

Sloppy drafting = heightened litigation uncertainty. Why? Because this kind of drafting often leaves room for more than one “plausible” interpretation that also makes sense and seems fair. That’s what happened in this case.

Under the interpretation advocated by Clancy’s second wife, the court was asked to interpret Clancy’s will in a way that reduced his overall tax bill, but resulted in 3/4 of the net after-tax estate set aside for family members going to Mrs. Clancy and her child, and only 1/4 going to Clancy’s children from his first marriage. Under the interpretation advocated by Clancy’s older children, the tax bill would be higher, but the estate would have been split in three equal shares: 1/3 for surviving spouse, 1/3 for her child, and 1/3 for children of first marriage. So what did Clancy want (i.e., what’s his “overriding intent”)? Less taxes or an even split? Both interpretations make sense and seem fair. And according to Judge Garrett, both are “plausible,” as he repeatedly states in his order:

Respondent’s construction of the plain language of the Will is certainly plausible . . .

* * *

Certainly, both constructions are plausible.

* * *

Respondent’s construction is certainly plausible . . .

Good lawyering = better judging:

When it’s a close call and the stakes are high, the premium on good lawyering goes up exponentially. Why? Because it’s in these kinds of cases that a state court judge is going to rely most heavily on the lawyers giving him or her the “ammunition” needed to do a good job (i.e., thorough, well-written legal briefs and a clear factual record). If you read Judge Garrett’s 47-page order, it’s clear he was the beneficiary of excellent lawyering.

First, the order contains a detailed quantitative analysis of the tax/economic implications of the competing interpretations (who says lawyers can’t do math!). Then, the order wades through Maryland’s estate-tax apportionment statute. These statutes are notoriously complex and difficult to decipher (as I recently noted here in connection with amendments to F.S. 733.817, Florida’s equivalent apportionment statute). Finally, the order applies a three-pronged analysis to deconstruct the key text of Clancy’s will, starting with its “plain language,” then applying an exhaustive analysis of interpretive case law, and concluding with a thoughtfully reasoned determination of Clancy’s “overriding intent.”

For those of us in the trenches, this kind of judicial work product is gold, and certainly worth holding onto for future reference. I’m assuming this order’s going to be appealed. If it is, it’ll be interesting to see how much of it gets folded into the appellate court’s opinion. Stay tuned for more . . .

2015 Florida trust and estate legislative roundup

Posted in Probate & Guardianship Statutes

The rotunda of the Capitol, the natural habitat of advocates and lobbyists, during the closing week of the legislative session in April. (Photo: Democrat files )

This was another busy year on the legislative front. Most of the changes to our Probate and Trust Codes were rolled into House Bill 343, which I report on below. In this subsequent blog post I’ll report on House Bill 5 (which overhauled Florida’s elder guardianship system).

1. What’s it take to get a court order shifting legal fees in contested probate and trust proceedings?

If you’re ever involved in any contested probate or trust proceedings, this is the single most important legislative item you’ll want to focus on for 2015. Why? Because the fee-shifting statute in our Probate Code (F.S. 733.106) and its analog in our Trust Code (F.S. 736.1005) need to be considered in every one of these cases. There aren’t many statutes you can say that about. And this year both were overhauled in significant ways.


Contested probate and trust proceedings almost by definition involve multiple beneficiaries (what’s to fight over if there’s only one beneficiary?) Often, only one of the beneficiaries is driving the litigation, the others are basically innocent bystanders. The default rule is that the cost of this litigation is borne proportionately by all — not just the litigious beneficiary. To say this is unfair to the “innocent bystander” beneficiaries is putting it mildly. Under F.S. 733.106 (in probate cases) and F.S. 736.1005 (in trust cases) our courts have the authority to work some equity here by shifting the cost of the litigation so it’s borne solely (or at least mostly) by the litigating beneficiary’s share of the estate.

Over the years some of our appellate courts have interpreted these statutes as requiring specific findings of bad faith, wrongdoing, or frivolousness before fees could be shifted, which is akin to a F.S. 57.105 standard (as discussed here). That standard may make sense in the context of civil litigation generally, but it really doesn’t work in the “innocent bystander” scenario (i.e., why should non-litigating beneficiaries bear the cost of litigation they never wanted any part of, even if the claims weren’t technically frivolous?) On the other hand, giving probate judges unbridled discretion to shift fees isn’t a good idea either (see here for what can go wrong).

Statutory revamp:

House Bill 343 tries to balance the competing interests, amending both F.S. 733.106 and F.S. 736.1005 in two fundamental (and identical) ways. First, to the extent courts were requiring specific findings of bad faith, wrongdoing, or frivolousness before fees could be shifted, that requirement’s been statutorily eliminated. In other words, the bar for shifting fees has been lowered to something below what’s currently needed to shift fees under 57.105. Second, both statutes now contain detailed lists of “factors” courts “may” (read should) consider when shifting legal fees:

  • The relative impact of an assessment on the estimated value of each person’s part of the estate.
  • The amount of costs and attorney fees to be assessed against a person’s part of the estate.
  • The extent to which a person whose part of the estate is to be assessed, individually or through counsel, actively participated in the proceeding.
  • The potential benefit or detriment to a person’s part of the estate expected from the outcome of the proceeding.
  • The relative strength or weakness of the merits of the claims, defenses, or objections, if any, asserted by a person whose part of the estate is to be assessed.
  • Whether a person whose part of the estate is to be assessed was a prevailing party with respect to one or more claims, defenses, or objections.
  • Whether a person whose part of the estate is to be assessed unjustly caused an increase in the amount of costs and attorney fees incurred by the personal representative or another interested person in connection with the proceeding.
  • Any other relevant fact, circumstance, or equity.

The bill also codifies case law regarding the assessment of fees in estate proceedings by authorizing a court that assesses fees and costs against one person’s part of an estate, to direct payment of such fees and costs from the person’s part of a trust if the person’s part of the estate is insufficient to fully pay the assessment, a “pour-over” will is involved, and the matter was interrelated with the trust from which payment is made. These amendments apply to proceedings filed on or after July 1, 2015.

2.  What exception applies to the 3-month deadline for filing objections to the validity of a will, venue of the probate proceeding, or the court’s jurisdiction?

I previously wrote here about the split between the 1st DCA and the 3d DCA regarding whether the 3-month statute of limitations period contained in F.S. 733.212(3) applies to personal-representative disqualification motions. 3d DCA said NO, 1st DCA said YES. As I reported here, in Hill v. Davis, — So.3d —-, 2011 WL 3847252 (Fla. Sep 01, 2011), the Florida Supreme Court weighed in on the issue, holding that YES, the 3-month statute of limitations period DOES apply to personal-representative disqualification motions, but left open what some considered to be a huge loophole “where fraud, misrepresentation, or misconduct with regard to the qualifications is not apparent on the face of the petition or discovered within the statutory time frame.” Because objections to the validity of a will, venue of a probate proceeding, or the court’s jurisdiction are also covered by F.S. 733.212(3), the Hill loophole logically applied to those objections as well. House Bill 343 closes that loophole for any basis other than estoppel (and then only in very limited circumstances), as explained in the bill’s Legislative Staff Analysis:

In the case of objections to the validity of a will, venue, or the jurisdiction of a court, the bill partially codifies the holding of the Hill decision and provides that except for estoppel based on the misstatement of a personal representative as to the time that an objection may be filed, the three month time period for objections under s. 733.212, F.S., may not be extended for any reason. Any objection not barred by the three month time period must be filed no later than the earlier of entry of an order of final discharge of the personal representative or one year after service of notice of administration.

These amendments apply to proceedings filed on or after July 1, 2015.

3. But what about statutorily disqualified personal representatives? Does the 3-month SOL still apply?

Under F.S. 733.303 and F.S. 733.304, no matter how well qualified you might be to serve as someone’s personal representative (“PR”) or how badly the decedent wanted you to do the job, you’re statutorily disqualified from serving if:

  • You’ve ever been convicted of a felony.
  • You’re mentally or physically unable to perform the duties.
  • You’re under the age of 18.
  • You’re not a Florida a resident (unless one of the family-member exceptions in 733.304 applies).

One of the primary objections to the Florida Supreme Court’s ruling in Hill was that there should never be a limitation on objecting to a person serving as PR who was statutorily disqualified from doing the job since day one. In other words, this person should have never been appointed PR in the first place, so why give him or her a pass just because no one figured this out until it was too late to object? House Bill 343 addresses that concern by eliminating the limitations period for statutorily disqualified PRs, as explained in the bill’s Legislative Staff Analysis:

The bill amends ss. 733.212(2)(c), 733.212(3), and 733.2123, F.S., to remove the limitation periods for objections to the qualifications of a personal representative after service of notice of administration. All interested persons may object to an unqualified personal representative after the issuance of letters and within 30 days after a personal representative serves a notice of ineligibility under s. 733.3101, F.S. If the personal representative was not qualified to act at the time of appointment, no action will be required on the part of an interested person to remove such personal representative as the bill amends s. 733.504, F.S., to require a personal representative who knows that he or she was not qualified to act at the time of appointment to immediately resign. Courts are also required to remove a personal representative and revoke his or her letters of appointment if he or she was not qualified to act at the time of appointment. A personal representative who was qualified to act at the time of appointment but later becomes ineligible to serve must provide in the notice required under s. 733.3101, F.S., that interested persons have the right to petition for his or her removal. A personal representative who fails to resign if not qualified at the time of appointment or who was qualified at the time of appointment but fails to provide notice of later ineligibility to serve will be personally liable for attorney fees and costs incurred in removal proceedings.

These amendments apply to proceedings filed on or after July 1, 2015.

4. What about changes to the allocation of estate tax liability in probate proceedings?

Our estate-tax apportionment statute is found in F.S. 733.817, and it’s notoriously complex and tricky to apply. This statute hasn’t been substantially revised since 1998, although a number of significant changes have occurred in federal and state tax laws since that time, including the elimination of the federal credit for state death taxes and, by extension, the Florida estate tax. To fill that gap House Bill 343 substantially revises F.S. 733.817 to:

  • update the statute for consistency with changes in federal estate tax laws;
  • codify case law governing estate tax apportionment; and
  • address “gaps” in the current statutory apportionment framework.

If you’re looking for a good place to quickly get your arms around the particularities of these statutory amendments, you’ll want to read the bill’s Legislative Staff Analysis, which is way too long to summarize in this blog post. If you’re willing to wait, you can rest assured legions of tax lawyers will be presenting on these changes over the next year.

4th & 5th DCAs: When does a probate judge have “personal” jurisdiction over a personal representative or trustee?

Posted in Compensation Disputes, Practice & Procedure

jurisdiction-personalSection 731.105 of our Probate Code tells us that all probate matters are “in rem” proceedings. In my last post I wrote about two recent cases testing the outer limits of a probate court’s in rem jurisdictional authority. In this post the focus is on personal (i.e., “in personam”) jurisdiction in contested probate proceedings.

A distinctive feature of most in rem proceedings is that you don’t have to personally serve anyone to get your case up and running. Not surprisingly, because most of their cases are purely in rem proceedings, probate lawyers get used to litigating claims without ever having to go through the trouble of personally serving anyone. Here’s the problem: this mindset can be a trap when a probate case involves someone’s personal assets. Prime example: fee disputes.

If you want a probate judge to order a personal representative or trustee to refund excessive fees paid to himself or his lawyers, what you’re really asking for is a personal judgment against the fiduciary, which means the court must have personal jurisdiction over the fiduciary. And your court’s not going to have that kind of personal authority over your fiduciary until you personally serve him. Miss that procedural step and you may find yourself on the receiving end of a motion to dismiss, which is what happened in the Kozinski case.

Kozinski v. Stabenow, — So.3d —-, 2014 WL 5611595 (Fla. 4th DCA November 05, 2014)

This case revolves around the inheritance a woman identified by the court as “E.W.H.” left to her children. One of her daughters, Kozinski, was appointed personal representative of her mother’s estate and trustee of her trust. Two of E.W.H.’s other daughters contested the amount of fees their sister paid herself as PR/trustee, and also the amount of attorney’s fees she paid with estate assets. To contest these payments the objecting sisters filed a petition pursuant to F.S. 733.6175 and F.S. 736.0206. Both statutes provide that “[a]ny person who is determined to have received excessive compensation [from a trust or estate] for services rendered may be ordered to make appropriate refunds.” The PR/trustee wasn’t personally served with this petition, triggering a motion to dismiss for lack of personal jurisdiction. The trial court didn’t buy this argument, but stayed the case. On appeal, 4th DCA disagreed and reversed:

[W]e hold that a proceeding seeking an order or judgment imposing a refund or surcharge against a fiduciary or a fiduciary’s agent, individually, and the immediate return of money to a trust, probate, or guardianship estate as a result of a breach of fiduciary duty (charging excessive fees) is tantamount to a judgment for damages, requiring personal service on the fiduciary as an individual, and not in any representative capacity.

So how do you personally serve a PR/trustee within the context of an ongoing probate proceeding? Think “formal notice” in accordance with Probate Rule 5.040. Formal notice is the method of service used in contested probate proceedings and, according to F.S. 731.301(2), it’s “sufficient to acquire jurisdiction over the person receiving formal notice to the extent of the person’s interest in the estate.”

We hold that, absent a written waiver, formal notice served on the respondent individually, and not in a representative capacity, is required for a proceeding to surcharge a personal representative, as well as for a petition filed in a probate case pursuant to sections 733.6175 or 736.0206 seeking to require the fiduciary to return to the estate the overpayment of compensation paid to the fiduciary or agent. With regard to notice and procedure in such adversary proceedings, Florida Probate Rule 5.025(d)(1) explicitly states that in adversary proceedings, a “[p]etitioner must serve formal notice.” Fla. Prob. R. 5.025(d)(1) (emphasis added).

Kozinski was not served individually with formal notice of the petition for review of fees, and she did not waive in writing her right to receive such notice. Because personal jurisdiction over Kozinski in her individual capacity was not properly obtained, the trial court’s order denying Kozinski’s motion to dismiss is reversed without prejudice.

Simmons v. Estate of Baranowitz, — So.3d —-, 2015 WL 2089071 (Fla. 4th DCA May 6, 2015)

In this case the issue was whether the fiduciary’s counsel — not just the fiduciary — also has to be served by formal notice in accordance with Probate Rule 5.040 before the court can order the law firm to refund excess legal fees paid. Surprise! The 4th DCA came to the same conclusion it did just a few months earlier in its Kozinski opinion: formal notice = personal jurisdiction. Skip that step and you’re getting reversed. So saith the 4th DCA:

Here, as in Kozinski, the remedy sought in the petition against the personal representative’s counsel was against him individually. Therefore, service by formal notice under the Florida probate rules was required for the court to have personal jurisdiction over him.

The trustee argues that service by formal notice is not required because the Florida probate code gives a court the authority to review the propriety of any compensation paid to a personal representative’s employee and, if that employee has received excessive compensation, to order that employee to make appropriate refunds. . . .

We disagree with the trustee’s argument. We recognize that the Florida probate code gives a court the authority to review the propriety of any compensation paid to a personal representative’s employee and, if that employee has received excessive compensation, to order that employee to make appropriate refunds. See §§ 733.6175(1) & (3), Fla. Stat. (2010). Here, however, the issue is not the court’s authority to act, but the manner by which the court notifies the employee that action may be taken. As we held in Kozinski, service by formal notice is required.

Sowden v. Brea, — So.3d —-, 2010 WL 4135857 (Fla. 5th DCA Oct 22, 2010)

In the Kozinski case the fiduciary challenged the court’s personal jurisdiction over her at the very beginning of the case. She didn’t wait for the litigation to play out then realize somewhere along the way that maybe there was a problem. In the Sowden case the trustee didn’t do that. Instead, after having asked the court to bless a settlement agreement he was a party to, the trustee had second thoughts and took the position that the court didn’t really have personal jurisdiction over him. Here’s the problem with that approach; even if you’re right, if you participate in the case and generally act like a party to the litigation, the court’s going to treat you like a party — which means you’re in by consent. So saith the 5th DCA:

We . . . reject the trustee’s contention that the trial court lacked jurisdiction over the trustee. Personal jurisdiction can be conferred by consent. Bush v. Schiavo, 871 So.2d 1012 (Fla. 2d DCA 2004). By entering into and benefitting from a mediation settlement agreement that (with the trustee’s concurrence) was court-approved in the guardianship proceeding, the trustee submitted to the jurisdiction of the court.

4th DCA: When does a probate judge NOT have jurisdiction over contested property?

Posted in Practice & Procedure, Wrongful Death Claims

jurisdiction-in-remIn contested probate and trust proceedings, if you hear the word “jurisdiction” being used as part of the litigation, it’s probably coming up in one of two contexts. Either your probate judge didn’t have the legal authority to order that certain property be disposed of in a certain way (i.e., the court lacked “in rem” jurisdiction); or your probate judge didn’t have the legal authority to order someone do something personally that they’d really rather not do, such as paying a sanction with personal funds (i.e., the court lacked “in personam” jurisdiction). These jurisdictional arguments are attractive to litigators because you’re contesting a trial court’s interpretation of the law (an argument that’s always viable on appeal) vs. a trial court’s interpretation of contested issues of fact (an argument that’s almost always a loser on appeal).

What follows are two recent cases turning on whether a probate judge had in rem jurisdiction over contested property. In a subsequent post I’ll write about two recent cases turning on whether a probate judge had personal jurisdiction over certain parties. Read these four cases together and you’ll have a good idea of how these esoteric-sounding concepts play themselves out in the very real rough and tumble world of trusts and estates litigation.

Does a probate judge have in rem jurisdiction to decide how the proceeds of a wrongful-death case should be split?

Pitcher v. Waldo, 159 So.3d 422 (Fla. 4th DCA March 25, 2015)

This case involves a dispute between a father and mother over how the proceeds of the wrongful-death lawsuit arising out of their daughter’s death should be divided between the two of them. “Mom”, as PR, prosecuted the lawsuit (only PRs can prosecute wrongful-death suits, see F.S. 768.20). According to “Dad”, he and Mom had agreed to share any award 60/40. Mom apparently remembered things differently after the trial, in which the jury awarded her $1,000,000 and only $100,000 to Dad (i.e., a 91/9 split).

The jury awarded nothing to the deceased daughter’s estate. This last point is key for jurisdictional purposes: because none of the jury’s award was an asset of the probate estate, these were all non-probate funds, which means the probate judge didn’t have in rem jurisdiction over any of it. If Dad wants to litigate any kind of deal he may have had with Mom, he’ll have to do it in a brand new lawsuit, he can’t skip that step by simply filing a petition in the probate proceeding. So saith the 4th DCA:

Appellant sought relief pursuant to section 733.815, Florida Statutes (2012), which provides that interested persons can agree to alter their shares of property from an estate. That statute is inapplicable, because the estate had no assets. Although a wrongful death claim must be brought by the personal representative of the estate of the deceased, the survivor’s claims are for their survivors’ sole benefit and do not become part of the estate. See § 768.21, Fla. Stat. (2012); Hartford Ins. Co. v. Goff, 4 So.3d 770, 773 (Fla. 2d DCA 2009). As the alleged agreement was between the father and mother but not the estate, the trial court correctly concluded that it had no jurisdiction to adjudicate the dispute.

Does a Florida probate judge have in rem jurisdiction to decide how Georgia real estate should be distributed?

Brown v. Brown, — So.3d —-, 2015 WL 4269921 (Fla. 4th DCA July 15, 2015) 

The decedent at the heart of this contested probate proceeding apparently owned property in Florida and Georgia. There was a dispute over how the Georgia property should be divided. A Florida probate judge’s in rem jurisdictional authority over property ends at the borders of our state. If you want a probate court to decide how real estate in Georgia should be divided, you need to go to Georgia and file an ancillary probate proceeding in that state to be adjudicated by a Georgia judge. That didn’t happen here. Instead, the Florida judge entered one order covering all of the decedent’s property — including his Georgia real estate. That may have made sense as a practical matter (a determination that’s bullet proof on appeal), but it doesn’t hold up legally (the ultimate appellate weapon). Bottom line, the party that didn’t like how the Florida judge divided up the Georgia real estate gets a do-over in Georgia. So saith the 4th DCA:

An estate beneficiary appeals from the circuit court’s final order directing the personal representative to divide and distribute “the [decedent’s] Georgia real estate and Florida real estate and other miscellaneous inventory assets of the Estate” amongst several estate beneficiaries. The appellant primarily argues that the circuit court lacked jurisdiction to direct the personal representative to distribute the decedent’s Georgia real estate.

We agree and reverse that portion of the order on appeal. See Polkowski v. Polkowski, 854 So.2d 286, 286 (Fla. 4th DCA 2003) (“Like lines in the sand, state boundaries determine a court’s jurisdiction over real property,” and thus the court lacked in rem jurisdiction to order the partition and sale of foreign property); Pawlik v. Pawlik, 545 So.2d 506, 507 (Fla. 2d DCA 1989) (“In no event could the [circuit] court effect a partition of lands outside this state.”) (citation omitted); In re Roberg’s Estate, 396 So.2d 235, 235–36 (Fla. 2d DCA 1981) (“When a testator executes a will devising lands in two or more states, the courts in each state construe it as to the lands located therein as if devised by separate wills.”) (citations omitted).

Stay tuned for more!

In a subsequent post I’ll write about two recent cases turning on whether a probate judge had personal jurisdiction over certain parties. Read these four cases together and you’ll have a good idea of how these esoteric-sounding concepts play themselves out in the very real rough and tumble world of trusts and estates litigation.

Can you sue a Florida trust protector for breach of fiduciary duty?

Posted in Practice & Procedure, Will and Trust Contests

If a trust protector acts in a way that’s incompetent, vindictive or self-serving, and the trust’s beneficiaries suffer economic loss due to those actions, can they sue him? Maybe. It all depends on whether or not the trust protector is a fiduciary. And yes, that’s an open question. (Illustration: Matt Collins for Barron’s)

Over the last few years there’s been a trend towards wider use of trust protectors in domestic trusts (see here for why), and last year’s 4th DCA opinion in the Minassian case (which I wrote about here) may go a long way towards accelerating that trend — especially in Florida.

As trust-protector clauses get incorporated into more and more trust agreements, sooner or later we’ll have to figure out what do when one of these trust protectors goes off the rails. So here’s the kind of question we need to start thinking about. If a trust protector acts in a way that’s incompetent, vindictive or self-serving, and the trust’s beneficiaries suffer economic loss due to those actions, can you sue him? For now, the best we can say is “maybe.” It all depends on whether or not the trust protector is considered a fiduciary. And yes, that’s an open question.

When is a trust proctor a fiduciary?

The term “trust protector” is a marketing tool, it’s not actually found in our Trust Code. As explained by the 4th DCA in the Minassian case, the authority for the type of role usually filled by a trust protector is found in section 736.0808 of our Trust Code (powers to direct), which was adopted from section 808 of the Uniform Trust Code. Under F.S. 736.0808(4), a person — other than a beneficiary — who holds a power to direct is presumptively a fiduciary. If a beneficiary’s also a trustee, he’s not exempted from any of the duties usually applicable to any other trustee. So why the different standard for trust protectors? Prof. Ausness asks this same questions in a 2014 article entitled When is a Trust Protector a Fiduciary?

The comment to section 808 of the UTC suggests that this exemption is primarily applicable to self-directed accounts such as employee benefit plans and individual retirement accounts. Clearly, there is no need to impose a fiduciary duty in a case where the sole beneficiary of a trust has the power to direct how the trust assets are invested or distributed. On the other hand, if a trust protector is only one of several beneficiaries, it seems that he should be subject to minimal fiduciary duties just as a trustee or trust advisor would be who was also one of the trust beneficiaries.

Subjecting all trust protectors — no matter who they might be — to “minimal fiduciary duties” makes sense to me unless the power granted is purely personal in nature (such as a general power of appointment that can be exercised for the benefit of the power holder). That’s the position Prof. Ausness argues for in his piece (he would apply a “good faith” duty to all trust protectors). It’s also the view advocated by Alexander A. Bove, Jr., as explained in his 2012 ACTEC article entitled The Case Against the Trust Protector.

In considering whether the protector is a fiduciary, this question may be best answered by asking another question: what was the settlor’s intent and purpose in naming the protector and granting the specific powers? If the answer is to give the protector the enforceable power to carry out certain objectives consistent with and in furtherance of the settlor’s intent and the purposes of the trust, then one must conclude that the settlor expected that person to use his best judgment and exercise the powers in “good faith with regard to the purposes of the trust and the interests of the beneficiaries.” On the other hand, if the answer is clearly no, that the settlor intended the power(s) to be exercised at the sole personal discretion of the protector without regard to the settlor’s intent, the interests of the beneficiaries, or the purposes of the trust, then the power will be a personal one.

So what’s the bottom line?

The safe approach is to assume all trust protectors are fiduciaries until a Florida appellate court says otherwise or our Trust Code’s amended. This approach makes sense to me because it’s what we can reasonably assume most clients actually intended. Here’s how Bove makes this same point by actually stating what’s implied by the no-liability approach to trust protectors:

[S]ay the protector is granted the typical power to remove and replace the trustee, but the power is to be non-fiduciary (assuming that is possible). Would you feel comfortable stating the following in the relevant trust provision?

It is the settlor’s intention that in exercising this power the protector shall not be deemed a fiduciary, shall not be required to monitor the trustee’s performance, and shall not be bound by or required to consider any particular standards of trustee performance. He shall not be required to act upon notice that a trustee is in breach if its fiduciary duty, and in the event of appointment of a successor trustee, the protector shall not be required to consider whether any such successor trustee has any experience in or knowledge of trust administration, or is a suitable person or entity to act as trustee. The protector may exercise or refrain from exercising such power in a capricious or whimsical manner at his total personal discretion, without liability therefor.

Note that the forgoing provision is quite consistent with the legal basis of personal powers. Contrast this with the case, again, where the settlor wants to limit the protector’s liability, but in this case does not want to place the trust and the beneficiaries at unreasonable and unnecessary risk. In such a situation, we (and the settlor) might feel more comfortable with something like this:

It is in the settlor’s intention that in exercising this power the protector shall consider and review on a periodic basis all relevant circumstances, including the trustee’s performance in light of the purposes of the trust and the needs of the beneficiaries, and shall use his best judgment in maintaining a qualified, suitable person or entity to serve as trustee hereof. The protector serving hereunder shall not be liable for any action or inaction except where there is found to be fraud, recklessness or willful misconduct.

I readily acknowledge that the proposed language in the first illustration may appear extreme, but isn’t that what we intend when we make the power personal and attempt to totally exculpate the protector from liability. Unfortunately, we simply can’t have it both ways, so that a protector who removes or replaces a trustee, for instance, with a totally unsuitable successor who proceeds to waste trust assets, has no liability for the loss.

Can we have the best of both worlds?

There’s a place for trust protectors. Trustees — especially corporate trustees — don’t want to be given broad discretion to make decisions that can be second-guessed years later by beneficiaries in a courtroom. At the same time, clients are justifiably fearful that even the threat of litigation may be sufficient to frustrate their carefully crafted testamentary plans. This last concern is especially valid in Florida, given the unpredictability and qualitative limitations inherent to an overworked and underfunded public court system that asks our probate judges to juggle thousands of cases at a time. (In Miami-Dade – on average – each of our probate judges took on 2,848 new cases in FY 2012-13, and in Broward the figure was even higher at 3,105/judge.)

So how can our clients have the best of both worlds? Stick to the basics. The new level of administrative flexibility trust protectors are supposed to deliver with less litigation risk can be had by employing the same old drafting tools estate planners have always used, such as exculpatory clauses and litigation-cost advancement provisions. But sometimes human conflict is unavoidable. No one’s perfect — not even trust protectors! What then?

For those rare cases where a trust protector’s actions (or inaction) cause economic damages, we need to plan for a better dispute resolution “process,” not simply duck the issue entirely by immunizing the trust protector from any accountability. And the best dispute-resolution planning tool we have available to us is the mandatory arbitration clause (which was statutorily blessed in Florida, see here). Arbitration clauses allow our clients to “opt out” of all the problems inherent to an overworked and underfunded public court system, while still ensuring beneficiaries have some recourse against incompetent or self-serving trust protectors.  Bottom line, better process + accountability = smart planning; no dispute-resolution process + no accountability = lazy planning.

5th DCA: Can a trial judge assess over $85,000 in attorneys fees against beneficiaries for suing a trustee who committed “numerous breaches” of fiduciary duty?

Posted in Compensation Disputes, Will and Trust Contests

Harrell v. Badger, — So.3d —-, 2015 WL 3631639 (Fla. 5th DCA June 12, 2015)


The trustee’s lawyer (Linda Littlefield) stole trust funds, triggering a lawsuit against the trustee. Things took a turn for the worse when the trial judge assessed over $85,000 in legal fees against the beneficiaries for suing a trustee the 5th DCA said committed “numerous breaches of his fiduciary duty to the Trust.” As reported in the Orlando Sentinel, Linda Littlefield (currently disbarred and serving time) and her former husband, Ross Littlefield, plead guilty to stealing $2.9 million from 26 clients.

The default rule in most civil trials is that win or lose, each side pays its own attorneys fees. Known as the “American rule,” it’s something we all learn about in law school and assume applies most of the time. That assumption can get you in big trouble in trust and estate litigation. Why? Because it simply doesn’t apply. This is a huge risk factor litigators who don’t usually handle these cases can easily overlook. Which can be bad news if a case goes sideways on you and your client’s left holding the bag for the other side’s gazillion dollar legal tab.

Section 736.1004 of our Trust Code authorizes courts to award attorneys fees “as in chancery actions.” (There’s a similar rule in our Probate Code at F.S. 733.106). “The well settled rule in chancery cases is that a court of equity may, as justice requires, order that costs follow the result of the suit, apportion the costs between the parties, or require all costs be paid by the prevailing party.” Estate of Brock, 695 So.2d 714, 716 (Fla. 1st DCA 1996). Under the chancery rule, ordering the losing side to pay the prevailing party’s fees is one option, but not the only one. It all depends on what your particular judge believes is fair or “equitable” under the particular facts of your case. In other words, it’s virtually impossible to predict what might happen in advance with any reasonable degree of certainty. Which means your client better be ready for the worst case scenario, no matter how much of a slam dunk his case might look like going in. This case is a prime example of what a “worst case” scenario might look like.

Case Study:

Everything that could possibly go wrong, did go wrong. The trust’s assets were all transferred to a “pooled trust,” which was intended to preserve trust assets for the beneficiary’s care while not disqualifying him from needs-based government programs. This transfer was a form of “decanting,” which is authorized by F.S. 736.04117. If done right, decanting is a great way to fix tricky trust problems (see here). Unfortunately, it wasn’t done right. First, the remainder beneficiaries of the trust were completely cut out when the trust was decanted. Which is why they should have been notified in advance. That didn’t happen:

 Here, section 736.04117(4) plainly and unambiguously requires a trustee to provide notice to “all qualified beneficiaries” of his intent to invade the principal of a trust at least 60 days prior to the invasion. Appellants are qualified beneficiaries as defined in section 736.0103(16), Florida Statutes (2008), of the Trust because of their interest in the distribution of any principal remaining after Wilson’s death. Badger improperly exercised his power to invade the principal of the Trust by failing to provide any notice to Appellants prior to transferring the entire contents of the Trust to the FFSNT.

Also, if you’re going to decant assets from one trust and send them to another trust, the second trust can only include beneficiaries of the first trust. Again, that didn’t happen:

Additionally, under section 736.04117(1)(a)1., the decantation of trust principal is limited to situations where the beneficiaries of the second trust “include only beneficiaries of the first trust.” Here, the first trust defined Wilson as the primary beneficiary and Appellants as the contingent remainder beneficiaries. The second trust—the FFSNT sub-account—also defined Wilson as the primary beneficiary but provided a contingent remainder interest to beneficiaries of the other FFSNT sub-accounts. The second trust clearly included beneficiaries not contemplated by the original Trust, rendering Badger’s decantation of all assets from the original Trust invalid.

Trustee’s lawyer steals the money:

OK, the decanting was botched, but the problem was still “fixable”. It’s what happened next that brought this case up to a whole new level of disaster. Working with her then husband, the elder law attorney hired by the trustee to make this all happen — stole the money! It turns out she and her now ex-husband stole $2.9 million from 26 clients. Included in that mess was the trust at issue in this case. Here’s how that story was reported by the Orlando Sentinel in Kissimmee couple plead guilty to defrauding elderly clients:

A Kissimmee couple who stole nearly $2.9 million from elderly clients pleaded guilty in federal court Tuesday and could be sentenced to 10 years in prison each. Linda Littlefield, a disbarred attorney also known as Linda Vasquez, and her former husband, Ross Littlefield, stole nearly $2.9 million from elderly clients and used the money to buy real estate and cars and prop up their other businesses. Between 2007 and 2010, the Littlefields took more than $4.7 million from 26 clients, then began transferring money to accounts for their personal use. Their business, with an office in downtown Kissimmee, was called JNN Foundation. Ross Littlefield, 48, sent falsified quarterly statements to clients making it appear as if their balances where greater than they actually were. In many cases, people lost most of their life savings. The money was supposed to become part of a pooled trust designed to shelter assets while maintaining the beneficiaries’ Medicaid eligibility.

For the official version, you’ll want to read the U.S. Attorney’s press release.

Can a trial judge assess over $85,000 in attorneys fees against beneficiaries for suing a trustee who committed “numerous breaches of his fiduciary duty to the Trust”? NO!

If trust money’s stolen, who pays? The trustee (whose job it is to safeguard the trust) or the beneficiaries (whose job it is to oversee their trustee)? That’s what this case should have been about. Instead, it became a scary example of what can go wrong when a fee-shifting statute’s improperly applied.

According to the 5th DCA, the trustee in this case was guilty of “numerous breaches of his fiduciary duty to the Trust.” When the remainder beneficiaries of this trust hired a lawyer to sue the trustee (after learning the money had been stolen), he probably thought: numerous breaches of fiduciary duty = slam dunk case, no problem. Which is why what happened next must have completely taken everyone by surprise. At trial, the judge ruled against the claimants on all grounds and, adding insult to injury, awarded $85,005.50 in attorneys’ fees to the trustee based on a finding that the claimants had “presented absolutely no evidence” of wrongdoing. But for this fee-shifting order, I don’t think this case would have gotten much attention at the 5th DCA. Because of this fee-shifting order, we now have another appellate opinion we can point to when weighing the risks and rewards of trust litigation:

We review a trial court order on a motion for attorneys’ fees in an action challenging the exercise of a trustee’s power for an abuse of discretion. Nalls v. Millender, 721 So.2d 426, 427–28 (Fla. 4th DCA 1998). Section 736.1004, Florida Statutes (2008), requires a trial court to award attorneys’ fees and other costs “as in chancery actions.” Under the chancery rule, a trial court “may apportion the costs between the parties, or require all costs to be paid by the prevailing party.” Nalls, 721 So.2d at 427. Although we find that the equities of the instant case do not favor any award in favor of Badger, the trial court did not specifically base its award on equitable considerations. See generally Tesla Elec., Armature & Mach., Inc. v. JLM Advanced Technical Servs., Inc., 128 So.3d 865, 866 (Fla. 1st DCA 2013). Rather, the trial court based its imposition of attorneys’ fees against Appellants on the finding that they “presented absolutely no evidence” in support of their claims. Because our ruling necessarily invalidates the trial court’s finding as to the sufficiency of Appellants’ evidence, the award of attorneys’ fees in favor of Badger was an abuse of discretion. We remand for a reasonable apportionment of the parties’ attorneys’ fees. See Republic Nat’l Bank v. Araujo, 697 So.2d 164, 166–67 (Fla. 3d DCA 1997).

So what now?

In trust cases, the same person is your law giver and fact finder: the judge. If that judge has made up his mind about how a certain case should turn out, getting reversed doesn’t matter all that much if the case is sent back to the same judge post appeal for a “do over.” At least that won’t happen here. Although the 5th DCA sent the case back to the trial court, the original trial judge has since announced his retirement (see here).