A common complaint we receive about lawyers and their fees involves fees charged by lawyers who are acting as guardians or otherwise involved in a guardianship, such as legal counsel to the nominal guardian. (Similar problems occur whenever money or control of anything valuable is given to a lawyer, including trust funds, real estate closing proceeds, estates pending in bankruptcy or probate of a will, and so on.)
Needless to say, the root of the typical problem is that there is a pot of money entrusted — directly or indirectly — to the lawyer, and the lawyer expects to be paid for his or her services out of that pot. All too often, by the time the pot is turned over to the rightful owners, there’s nothing left in it. There are times when a lawyer (or employee) simply steals money or other valuables end up in the hands of the lawyer or her friends, but the more common problem is that the lawyer’s billings are high, even if the lawyer feels they are reasonable and even if the lawyer regularly charges other clients in the same way.
The problem is a common one whenever the client either has more money than sense, fails to keep an eye on the lawyer’s bills, is afraid to say anything, or is disabled. “Disabled” clients might include clients in comas, children, people with dementia, and so on. Disabled clients with no money and no access to “free” lawyers provided one way or another, have many of the same problems that might suggest the need for a lawyer, but, without money, they go unassisted.
Often there are nominal checks and balances on the lawyer’s ability to write checks to himself. This usually involves some sort of court or government oversight of the bills, but these systems can be cheated, ignored, or short-circuited by corruption or an “old boy network” including lawyers and the judges who appoint and judge them. Part of the solution is more transparency, plus abandoning the notion that only a lawyer or professional guardian recognized by the local court is the right person to perform many of the duties of a guardian.
Part of the problem is that lawyers really don’t make very good guardians of anything other than certain types of legal rights — certainly not reasonably priced guardians. But being a guardian for someone with a disability and lots of stuff and personal problems, often means that the person needs anything from help moving or selling property to dealing with family finances and problems to making decisions about life and death. (It is a regrettably common occurrence to see lawyers pop up in their client’s wills, one way or another, even though this has ethical restrictions.)
Often the lawyers resent the family or heirs who, the lawyer feels, are receiving a windfall the lawyer should have received all or part of — though the lawyer did nothing more than the usual legal job for which they are typically paid in full. A common variant is for beneficiaries or family members to have their own struggle for control, which gives the lawyer an excuse to bill like crazy and blame them for it. Lawyers who know they are charging too much tend to rationalize this by blaming others this way.
From what we’ve observed over the years, the most money is wasted not through spectacular schemes or crimes that make the front pages, but through hundreds or thousands of dollars wasted in a slow drip of unnecessary or dubious legal work or even nonlegal services charged to the client. While some of these clients are fully aware of what’s going on, they are typically unable to get anyone’s attention in time. Most often, however, not only does the client notice the problem, but so do family, friends, and others who interact with the lawyers, including other lawyers. But, even if they go to court or otherwise object, their objections are usually swept under the rug.
Lawyers are supposed to be paid only a reasonable fee and only for professional, i.e., legal, services. You don’t hire a lawyer to be a chef, doctor, or even an accountant. Charging for non-legal work in a legal bill is just part of the problem with bad guardian fees, but a couple of stories in the last week caught my eye because the amounts wasted on these non-fees were considerable and because the excuses provided by the lawyers were so typical. In one case, Virginia lawyers are relying on the legal establishment to rally round and excuse them — basically they claim “everyone does it” as their defense. In the other, a Louisiana lawyer (who admitted what she did) has been suspended for two years for nearly identical behavior. The contrast between how lawyers are supposed to be overseen and what they actually get away with in practice is stark.
Here’s part of the Virginia story, from the Washington Post:
[A Virginia judge decided] that the Drakuliches [who are elderly with squabbling adult children] needed a third-party caretaker. A judge appointed a law firm, which is common in Virginia when the elderly and incapacitated have no one else.
Now the Drakuliches and the law firm are fighting over tens of thousands of dollars in billings in a conflict that likely will be decided by the state Supreme Court.
It has raised questions among elder-care advocates and legislators about how a small number of paid guardians — both lawyers and non-lawyer professionals — are treating the aging and how states oversee the process. …
“We need to look at ways to strengthen the oversight system for guardians,” said Sen. Amy Klobuchar (D-Minn). “While most court-appointed guardians are undoubtedly professional, caring and law-abiding, we have seen mounting evidence that some guardians use their position of power for their own gain.” [Not going to happen in Virginia.]
In the McLean case, Needham, Mitnick and Pollack (NMP) [the law firm] took control of the Drakuliches’ lives and $700,000 nest egg, as it had done in six similar cases in Fairfax County. It charged wards up to $125 an hour — its normal professional rates — for personal services, such as renewing dog licenses, sorting boxes and preparing instructions on emptying a dryer’s lint trap, court records show.
NMP billed the Drakuliches $6,300 to prepare $1,800 worth of household items for auction, another ward $2,300 to sell a $4,000 car and a third person in their care $4,200 to recover $5,300 worth of investments, a court investigator found.
The Drakulich family calls the bills exorbitant; NMP says they are normal legal bills. [Seriously? Not from what I've seen. And do they think that calling them typical for lawyers is going to sound like a good thing to anyone but another lawyer?] The firm says it and other firms can’t afford to become guardians unless they are allowed to charge their regular rates. [Which is a good reason why they shouldn't be guardians in general, just when and if there's a real legal issue.]
Virginia has no cap on fees attorneys can charge for guardianship work or even basic guidelines about how much they should be compensated. …
When one of the Drakuliches’ daughters questioned NMP’s fees, the firm charged her parents $975 for its response, records show. Family members say such billings left them afraid to confront the firm for fear it would be their loved ones who would pay. [This kind of retaliatory billing is a common problem, and the family's response is also typical, especially if they think the system is rigged.]
And when the county’s watchdog told NMP to refund about $229,000 in billings in seven cases last year, the law firm challenged the order in a precedent-setting case that could land before Virginia’s Supreme Court. The firm also made what family members considered a galling demand: NMP wanted the seven wards it was accused of overbilling to pick up its $165,000 legal tab….
In another Virginia case, a lawyer in Arlington County billed a mentally disabled ward $800 to throw him a party at Hooters and $725 to travel from Virginia to the District to pick up his birth certificate, among $19,000 in charges that a court ultimately ordered to be refunded. This year, a Falls Church lawyer was found guilty of embezzling $275,000 from an elderly couple for which she was serving as guardian….
Virginia has a schedule of fees for how much conservators should charge, but the law says only that guardians are entitled to “reasonable” compensation — a fuzzy term that some say leaves wards vulnerable to overbilling….
“It will have a significant chilling effect on the willingness of attorneys to serve as independent guardians and conservators if they can’t charge their professional rates,” said NMP’s attorney Bernard DiMuro. [DiMuro is a former Virginia Bar president I've known for years -- for better then worse.] …
DiMuro said NMP is appealing the ruling to Virginia’s Supreme Court — a move backed by many lawyers in Virginia. [The lawyers assume the Supreme Court will support the bar over the general public -- another problem with the incestuous relationship between lawyers and the bodies that are supposed to be regulating them. Where, for example, is the Virginia Bar, which loves to claim that it's protecting the public from all manner of nefarious legal wrongdoing, just not the part that matters.]…
“NMP did not hurt my parents in the sense that it made them destitute,” Drakulich-Clarke said. “But they carefully calibrated so there would have been nothing left in their estate when they were gone.” [That's an astute observation that we can confirm from many similar situations, including divorces, fights over benefits and estates, and so on: The lawyer's fee is calibrated to the amount they can get and, if that runs out, so do they.]
Here’s a very different story from Louisiana — well, very different in terms of how the state handled the lawyer’s conduct, not in terms of the underlying facts.
This background is from early proceedings by the state bar:
At the time that Respondent began to represent Mr. Perniciaro in August 2007, he had been diagnosed with Huntington’s disease and lived in a nursing home. Respondent testified that he was very paranoid. …
Respondent represented Mr. Perniciaro from August 2007 until mid February 2008. She did not have a written contract with Mr. Perniciaro and did not provide billing statements to him. … She was paid approximately $30,000 by him. No contemporaneous record keeping of hours. … Respondent represented Mr. Perniciaro related to a traffic accident and drafted a power of attorney for him. … She was paid approximately $4,500 for those services.Respondent’s additional “representation” of Mr. Perniciaro consisted, according to Respondent’s own testimony, of chauffeuring and otherwise assisting him … Respondent was aware that she was billing at a rate of $125 for non legal services.
The following quote is from the final order of the Louisiana Supreme Court, issued this past week:
Having found that respondent was acting as Mr. Perniciaro’s attorney when she performed services for him from August 2007 to February 2008, we must now address the issue of whether the fee respondent collected was excessive. As previously stated, Mr. Perniciaro paid respondent a total of $29,000, and according to her accounting, she performed 215.9 hours of services (both legal and non-legal) for him at $125 per hour, for a total of $26,987.50. However, respondent could not ethically charge her client for her time as a lawyer when she was providing nonlegal services. Therefore, her fee is excessive.
In determining a sanction for respondent’s actions, we are mindful that disciplinary proceedings are designed to maintain high standards of conduct, protect the public, preserve the integrity of the profession, and deter future misconduct. … [Pretty much the same for all bar organizations, including Virginia.] …
She was suspended for two years.
The court did create an unnecessary and even silly potential loophole that some lawyers will undoubtedly seek to exploit, especially by adding some tail-covering language in their fee agreements (though how that’s going to work with disabled clients is unclear):
We do not mean to suggest that a lawyer may never enter into an arrangement to provide purely personal services to a current or former client. For example, a lawyer who is an accomplished artist might enter into an agreement with a client to paint a portrait for the client. However, in such instances, the parties must clearly set forth the nature of the arrangement in writing and make it clear the lawyer is providing the agreed-upon service in a purely personal capacity and not as a lawyer. The lawyer should maintain appropriate records and ensure that there is no overlap between the amount charged for personal services and for the lawyer’s legal services. Obviously, none of these precautions were observed in the instant case.
Because of the professional and fiduciary relationship the lawyer-guardian is supposed to have with the client, it would just be better to have no such transactions and let the “hungry artists” fill the gap.
The court also noted that the lawyer had attempted to paper over the problem when the client objected by signing a promissory note to pay the client back for the fees — she had obviously spent the money already. This only confirmed the court’s impression that she knew what she did was wrong: I guess Louisiana lawyers know things that Virginia lawyers can only imagine.
The message to the client community is simple: Your lawyer’s not supposed to be your concierge. If your legal bill starts looking like your hotel bill, your bar tab, or anything other than a legal bill, complain early and often (or move to Louisiana).
Washington Post article: Guardianship case in McLean illustrates lack of regulation for those caring for the elderly
Louisiana Supreme Court Decision: Guste-Suspension-Opinion.pdf (application/pdf Object).
