Wednesday, May 22, 2019

Attorney Charged With Unreasonable, Unnecessary Duplicative Fees

The Illinois Administrator has charged an attorney with charging unnecessary and unreasonable fees and dishonesty  in an estate matter.

The clients

 In 2015, Dee ("D.J.) and Jane ("Jane") Newby were a married couple who had three adult children: Elizabeth ("Liz"), William and David. Neither D.J. nor Jane had previously been married.

In 2000, attorney Kevin J. Huck prepared, at D.J.'s and Jane's request, living trust agreements for D.J. and Jane. Both trust agreements provided that D.J. and Jane were co-trustees of the trusts and that upon either one of their deaths, the surviving spouse would become the sole successor trustee of the deceased spouse's trust. D.J. and Jane's living trust agreements also created two sub-trusts, a marital and a family trust, which the grantors funded with assets from his or her trust upon the grantor's death.

D.J. and Jane executed the living trust agreements on April 20, 2000.

Between April 20, 2000 and September 2015, some of D.J.'s assets were re-titled or transferred into his trust. Those assets included the couple's residence, which was located in St. Charles, investment accounts at Raymond James investment company, and a life insurance policy issued by Zurich American Insurance ("Zurich"). D.J. also had a life insurance policy with National Education Association ("NEA"), and an Individual Retirement Account ("IRA") at Raymond James, both of which named Jane as the beneficiary.

Enter Respondent

D.J. and Jane were owners of a business involving the breeding and raising of miniature poodles. In or about 2009, Respondent met D.J. and Jane at a poodle-training class. Between 2009 and 2015, they became friends through their shared interest in breeding poodles and traveling to dog shows.

In 2015, D.J. was hospitalized due to a serious illness. Jane sent regular updates to Respondent about her husband’s health condition.

On September 20, 2015, D.J. Newby died at age 75. He was survived by his wife, Jane, who was then 73 years old, and their children Liz, William and David.

At the time of D.J.’s death, D.J.’s and Jane’s assets were valued at $1.2 million. The value of those assets was well below the federal estate tax exemption of $5.43 million and the Illinois estate tax exemption of $4 million, and therefore would not be taxable. D.J.’s estate had no probate assets, and did not require a probate estate to be opened in order to distribute his assets to Jane.

The administration of D.J.’s trust matters included the settlement of D.J.’s credit card bill, obtaining D.J.’s life insurance proceeds from NEA and Zurich (both policies naming Jane as the beneficiary), transferring the proceeds of D.J.’s investment account at the Raymond James investment company to Jane’s trust account, rolling over of D.J.’s IRA to Jane’s IRA, notifying creditors of D.J.’s death and filing D.J.’s will.

Nonetheless

Between October 2015 and December 2015, Respondent informed Jane that in order to protect her assets, she would need to hire him for additional work beyond the administration of D.J.’s trust, which included preparing wills and trusts for Jane and Liz. Respondent also told Jane and Liz that he would need to do additional work to incorporate Liz’s separate dog breeding business. Based on Respondent’s advice, Jane and Liz allowed Respondent to proceed with this proposed work.

At no time did Respondent provide Jane or Liz with a written fee agreement or discuss any hourly rate or flat fee he would charge for this additional work described...above.

At no time did Respondent discuss with Jane or Liz that Joseph would also provide services with respect to the proposed additional work described...above, or the hourly rates that Respondent would charge her for any services Joseph performed.

Between October 2015 and December 2015, Respondent asked Jane to pay him a total of $20,605 as purported legal fees of $20,000 plus purported costs of $605, related to the matters he was handling on her behalf. Jane made three payments during this time totaling $20,605 to Respondent.

At no time between October 2, 2015 and January 20, 2016, did Respondent provide Jane with an invoice outlining the work he claimed he and Joseph did, when they did that work, how long it took them to do it, his or Joseph’s hourly rates, or whether the payments Jane made were advance fees or payment for work already completed.

On January 21, 2016, approximately three-and-one-half months after their initial meeting, Jane and Liz met Respondent at his office to sign the estate plan documents Respondent had prepared for them. At that meeting, and without any notice to Jane, Respondent gave Jane an itemized billing statement for fees and costs totaling $87,302.27 which, in addition to charges at an hourly rate of $595, included a $15,000 flat fee for purported work described as "trusts and corporation" and an overall proposed five percent bonus for his work ($4,157.27). Respondent’s billing statement listed the services Respondent claimed that he and Joseph provided to Jane and Liz between October 2, 2015 and January 20, 2016 relating to the administration of D.J.’s trust, preparation of wills and trusts for Jane and Liz and the incorporation of Liz’s dog-breeding business. Respondent deducted a purported 50 percent discount from the $83,145 (the amount of fees before adding the bonus) he had charged her, and then deducted Jane’s payments towards fees (totaling $20,000) from the remaining balance, which left a total outstanding balance of $25,729.75 (including the five percent bonus).

At no time prior to January 21, 2016, did Respondent inform Jane that he would charge her $595 per hour for the time he claimed to have spent on her matters, of the purported $15,000 flat rate fee or five percent bonus, and the costs incurred in connection with the purported services Respondent claimed to have provided on her and Liz’s behalf.

There are a number of other allegations of false and unreasonable billings, e.g.,

In the January 21, 2016 billing statement, Respondent charged Jane a "flat fee" of $15,000 (which was discounted at the bottom of the billing statement to $7,500) for purported estate planning work related to creating trusts for Jane and Liz and for the incorporation of Liz’s poodle breeding business. But, in addition to the flat $15,000 fee, Respondent also charged Jane $4,763.50 (6.8 hours of his time at $595 per hour for a total of $4,046, and 2.05 of Joseph’s time at $350 per hour for a total of $717.50) for estate planning work related to creating trusts for Jane and Liz. Respondent also charged Jane 1.7 hours of his time (at $595 per hour for a total of $1,011.50) and .4 hours of Joseph’s time (at $350 per hour for a total of $140) for work related to the incorporation of Liz’s poodle breeding business.

Respondent’s hourly charges for work related to creating trusts for Jane and Liz and incorporating Liz’s poodle breeding business were false and unreasonable. Respondent knew that he had had already charged Jane for those services when he charged the $15,000 flat fee that covered those services. Further, Respondent knew that the total fee of $13,415 that he charged Jane ($15,000 flat fee, less 50 percent discount ($7,500), plus charges of $4,763.50, $1,011.50 and $140 equals $13,415) was unreasonable for two simple wills and trusts and the incorporation of a business.

The phrasing of the fee-related allegations

...charging or collecting an unreasonable fee, by conduct including charging Jane $87,302.27, and collecting $20,605 in legal fees for services related to the administration of D.J.'s trust, Jane and Liz's estate planning and incorporation of Liz's business for which the amount of time, labor or difficulty of the work required was exaggerated, not necessary or duplicative, in violation of Rule 1.5(a) of the Illinois Rules of Professional Conduct (2010);

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2019/05/the-illinois-administrator-has-charged-an-attorney-with-excessive-fees-and-related-misconduct-in-an-estate-matter-dj-and-j.html

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