Melbostad v. Kasolas CA1/3 ( 2023 )

Filed 6/16/23 Melbostad v. Kasolas CA1/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
PAUL H. MELBOSTAD,
Plaintiff and Appellant,
v. A165361
MICHAEL KASOLAS, as Trustee,
etc., (San Francisco City & County
Defendant and Respondent. Super Ct. No. PTR-20-303941)
Paul Melbostad, former successor trustee of the Benjamin M. Picetti
2007 Revocable Trust (Trust), petitioned the probate court for settlement and
approval of $165,061.82 in fees paid to his law firm for services provided to
the Trust. The court concluded Melbostad established he reasonably incurred
$48,081 for legal services performed by him, but the payment of an additional
$116,980.82 was improper and must be returned. In so concluding, the court
found Melbostad’s reasonable hourly rate was $465 (instead of the $525 rate
he claimed), and he spent 103.4 hours providing compensable legal services to
the Trust (instead of the 287.6 hours he billed). Melbostad argues the court
abused its discretion. We disagree and affirm.
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BACKGROUND
Debra Dolch was appointed as temporary conservator of Benjamin
Picetti’s person and estate in 2019. Dolch commenced this action by
petitioning for an order to bring the Trust under the supervision of the
probate court. She stated there had been “periodic episodes of confusion” in
the management and disbursement of Picetti’s assets because the
conservatorship estate was under court supervision, but the Trust was not.
The probate court granted the petition. It ordered Melbostad to file
“his first annual trustee’s account of his management of the assets of the
Trust for the first year of his tenure, . . . together with a petition for its
settlement and approval.” Melbostad was also ordered to submit (1) any
request “for an award of trustee’s compensation for services rendered by him
as Successor Trustee” during that time; (2) “all invoices from Goldstein,
Gellman, Melbostad, Harris, and McSparran which correspond to any
disbursements” from the Trust to the firm during that time; (3) information
concerning “such disbursements made and the status of any waiver” made by
Melbostad pursuant to Probate Code section 15687 (subsequent undesignated
statutory references are to this code); and (4) a request for an order regarding
the payment or reasonableness of Melbostad’s compensation.
Melbostad filed his petition for settlement and approval of the
accounting. It stated, “The total amount of compensation paid to [the firm]
for legal services provided by [Melbostad], in his capacity as Trustee of the
Trust is $165,061.82 which services are described in detail in time entries
recorded contemporaneous with when the services were provided.” A few
weeks later, Melbostad was replaced by Michael Kasolas as successor trustee.
Melbostad later filed an amended petition that included additional
documentation but sought approval of the same amount of legal fees. He
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again attached invoices with time entries describing services provided by his
firm — 287.6 hours of Melbostad’s time at a $525 rate. The amended petition
asserted the rate was reasonable given Melbostad had “practiced in the San
Francisco Probate Court since the early 1980’s and that because of the
amounts of monthly invoices discounted and time marked ‘No Charge,’ the
effective hourly rate charged is only about $475 per hour.” According to an
attached schedule, 31.7 hours of Melbostad’s time had been written off.
While the invoices also reflected services performed by paralegals and other
attorneys, Melbostad stated the Trust was either not charged for such time,
or “issued a credit for the small amount of time inadvertently charged.”
Picetti and his husband filed objections to the amended petition.
Among other things, they objected to the compensation claimed by
Melbostad’s firm, as well as Melbostad’s hourly rate and block billing. Picetti
asked the court to “closely review the services and charges as a whole.”
Melbostad filed a verified supplemental declaration to “clarify and/or
address accounting issues.” (All capitals omitted.) He declared that,
consistent with section 15687, subdivision (b), he had waived trustee
compensation for himself and his firm, and he decided “not to seek approval
for the right to dual compensation, concluding that compensation for legal
services provided by [him] at [his] then current hourly rate of $525 would be
sufficient.”
Section 15687, subdivision (a) provides, “Notwithstanding any
provision of a trust to the contrary, a trustee who is an attorney may receive
only (1) the trustee’s compensation provided in the trust or otherwise
provided in this article or (2) compensation for legal services performed for
the trustee, unless the trustee obtains approval for the right to dual
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compensation . . . .” Subdivision (b) provides, in relevant part, that “no law
partnership . . . whose partner, shareholder, or employee is serving as
a trustee shall receive any compensation for legal services performed for the
trustee unless the trustee waives trustee compensation or unless the trustee
obtains approval for the right to dual compensation . . . .”
Melbostad’s verified supplemental declaration attached an hourly fee
agreement signed by Melbostad and Dolch and dated July 2019, along with
a cover letter from Melbostad. The letter stated Melbostad was waiving his
“right to trustee compensation” for his services in his capacity as trustee, he
agreed his firm would only charge for his “legal services provided for trust
administration,” and he did not intend to seek approval for compensation
“other than hourly fees for legal services at my current hourly rate of $525
based on the actual number of hours provided of legal services for trust
administration.” The section of the fee agreement entitled “Hourly Rate”
began, “As Trustee, [Melbostad] will only charge for legal services for Trust
administration on an hourly basis at his current rate of $525 per hour.” But
the supplemental declaration also stated, if the “percentage discounts made
to monthly totals is factored in, the effective rate . . . is only approximately
$475 per hour. That has been my ‘discounted rate’ for clients we have chosen
to charge at a reduced rate as a courtesy for a variety of reasons.”
Before the hearing on the petition, the probate court informed the
parties “its initial review of Melbostad’s billing records indicated that the
lion’s share of the time billed was for trustee services, not legal services
performed for the trust, which did not make sense to the court because
Melbostad waived trustee fees.” The court asked for “guidance regarding the
standard for distinguishing between non-compensable trustee services, on the
one hand, and compensable legal services performed for the trust, on the
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other hand, that would allow the court to segregate compensable fees for
legal services from non-compensable trustee fees.”
Melbostad’s submission asserted “the standard for approving the
amount of fees charged, and paid by me out of the Trust, to my firm, for my
attorney services only, is whether the services described in the time entries in
my firm Invoices, were attorney services, and, if so, whether the amount
charged for those attorney services was in compliance with the rate specified
in the Hourly Fee agreement, and was reasonable and appropriate for the
benefit of the trust and its sole beneficiary, [Picetti].”
The probate court issued its order on March 17, 2022. It concluded
Melbostad had established that “as trustee he reasonably incurred $48,081
for legal services performed by him and his colleagues at [the law firm] for
the trust during the accounting period,” but payment of the additional
$116,980.82 “was not proper” and must be returned to the trust. It reasoned
trustee fees were “simply not before the court” because Melbostad had elected
to receive legal service fees and waive trustee fees. Thus, pursuant to the
waiver, time spent performing trustee services was noncompensable.
The probate court explained trustee services generally “include tasks
reasonable and appropriate for administering the trust, such as stewardship
over funds, budgeting, maintaining records and accounts, accepting receipts,
making payments, disbursements and distributions, investigating and
researching the status and condition of trust assets, communicating with
beneficiaries and other interested parties, and retaining and overseeing
agents and advisors.” Citing section 15684 — which sets forth a trustee’s
general entitlement to repayment of expenditures out of the trust property —
and Donahue v. Donahue (2010) 182 Cal.App.4th 259 (Donahue), the court
defined compensable legal services to “include tasks where legal judgment or
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action is appropriate for the sound administration of the trust, whether
involving administration, advice, regulatory actions or filings or legal
proceedings.” The court observed it had “been involved in these proceedings
for some time and has carefully reviewed the relevant portions of the docket
to understand the type of legal services required for this trust,” had “a great
amount of experience reviewing trustee fees and fees for legal services,” and
would “draw upon this experience in identifying compensable legal services in
this case.” While the blockbilled time entries made such review “difficult,”
the court found Melbostad spent 103.4 hours providing compensable legal
services to the Trust; the “bulk” of the remaining time was spent providing
noncompensable trustee services.
The probate court explained the lodestar method applies to attorney fee
inquiries, which “multiplies the reasonable number of hours spent by the
reasonable hourly rates for service providers.” It found the reasonable hourly
rate for Melbostad was $465. The court stated that in March 2019, the
month before the applicable accounting period, Picetti was billed for services
at $400 per hour, but the rate had “jumped” to $525 the next month when
Picetti was under conservatorship. The court also acknowledged the $525
hourly rate set forth in the fee agreement, but concluded the rate was “not
binding on the court.” Citing PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th
1084, the court stated it was “well aware of the local market for legal services
and prevailing local rates for the legal services involved here.” It concluded
the $465 hourly rate was supported by Melbostad’s experience, as well as
his “history as a legal services provider to [Picetti], and the purposes of
circumstances of this trust.”
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DISCUSSION
Melbostad does not challenge the probate court’s determination he had
elected to receive legal service fees and waived trustee fees for services
performed for the Trust. Instead, he argues there are five ways the court
abused its discretion in finding his reasonable hourly rate was $465 and that
he spent 103.4 hours providing compensable legal services. (Syers Properties
III, Inc. v Rankin (2014) 226 Cal.App.4th 691, 697 [“The abuse of discretion
standard governs our review of the trial court’s determination of a reasonable
attorney fee”].) None are persuasive.
First, Melbostad contends the probate court failed to apply “all five
steps” of the lodestar method in determining whether his requested fees were
reasonable. “[T]he fee setting inquiry in California ordinarily begins with the
‘lodestar,’ i.e., the number of hours reasonably expended multiplied by the
reasonable hourly rate.” (PLCM Group, Inc. v. Drexler, supra, 22 Cal.4th
at p. 1095.) Melbostad thusly describes the first three steps of the method:
determination of reasonable rate, determination of hours reasonably
expended, and multiplication of the rate and hours. After reaching this
lodestar figure, the court may then adjust it by applying a positive or
negative multiplier “based on consideration of factors specific to the case, in
order to fix the fee at the fair market value for the legal services provided.”
(Ibid.) Melbostad argues the court “failed” to take these fourth and fifth
steps: consideration and application of a multiplier. What this argument
overlooks, however, is that Melbostad did not request any multiplier, and the
court was not required to impose one. (Gorman v. Tassajara Development
Corp. (2009) 178 Cal.App.4th 44, 98 [party seeking attorney fees bears
burden to prove fees it seeks are reasonable]; Mikhaeilpoor v BMW of North
America, LLC (2020) 48 Cal.App.5th 240, 247 [court is “neither foreclosed
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from, nor required to, award a multiplier”].) “Rather, applying a multiplier is
discretionary.” (Rey v. Madera Unified School Dist. (2012) 203 Cal.App.4th
1223, 1242.)
Melbostad fails to show the probate court abused its discretion in
declining to apply a multiplier here. Factors for applying a multiplier include
the novelty, difficulty, and skill required for the litigation, as well as the
contingent nature of the fees. (Serrano v. Priest (1977) 20 Cal.3d 25, 49.)
This was not a contingency fee case; moreover, contrary to Melbostad’s
contention, the order shows the court did consider these other factors in
determining the reasonable rate and compensable hours, including
Melbostad’s experience, his history as a legal services provider to Picetti, the
purposes and circumstances of the Trust, and the services rendered here.
Melbostad also suggests the probate court should have used the
“objective factors” in California Rules of Court, rule 7.776 in analyzing the
fourth and fifth steps of the lodestar method. That rule lists factors a court
may consider in determining or approving compensation of a trustee.
Melbostad provides no authority, nor are we aware of any, to support his
position that failure to apply optional factors related to trustee compensation
when determining the reasonableness of compensation for legal services is
an abuse of discretion. (Gorman v. Tassajara Development Corp., supra,
178 Cal.App.4th at p. 98 [party seeking attorney fees bears burden on appeal
to prove abuse of discretion].)
Second, Melbostad argues the probate court “misconstrued” and
“miscalculated” the charges in the invoices when it concluded Picetti was
being charged $400 per hour on the March 2019 invoice, and then $525 on
the April 2019 invoice (when under conservatorship). The March 2019
invoice shows Melbostad entered 5.9 hours of time but wrote off 1.1 of those
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hours (as well as 0.40 hours of paralegal time). Accordingly, Picetti was
effectively charged a $400 hourly rate — $2,520 for 6.3 hours of time actually
spent. The court did not make any factual error in calculating this effective
$400 hourly rate. The April 2019 invoice shows Melbostad entered 9 hours of
time (plus 0.50 hours of paralegal time) but wrote off only 0.20 of his hours.
Accordingly, Picetti was effectively charged a $497 hourly rate — $4,720 for
9.5 hours of time actually spent. Deducting $100 for the 0.50 hours of
paralegal time billed on this invoice, Melbostad’s effective hourly rate was
$513 — $4,620 for 9 hours of time actually spent. We are not persuaded the
$12 discrepancy — between $513 and $525 — in the court’s calculation on
this invoice shows an abuse of discretion; there were subsequent invoices
(November 2019, January 2020, May 2020) where Melbostad did not write off
any of his time and charged an hourly rate of $525.
More importantly, Melbostad repeatedly conceded that, “because of the
amounts of monthly invoices discounted and time marked ‘No Charge,’ the
effective hourly rate charged is only about $475 per hour,” and his $475
rate “has been my ‘discounted rate’ for clients we have chosen to charge at
a reduced rate as a courtesy for a variety of reasons.” And, as explained
above, Melbostad wrote off his time on invoices to Picetti, resulting in an
effective hourly rate well below that amount. The write-offs and “discounted”
rate Melbostad provided to clients are not, as he suggests, “completely
irrelevant.” Under the lodestar method, courts must look at the “actual time
expended” and the money charged for such time. (Mikhaeilpoor v BMW of
North America, LLC, supra, 48 Cal.App.5th at p. 247.) The amount charged
by Melbostad’s firm here resulted in an hourly rate ranging from
approximately $400 to $525. The probate court found Melbostad’s reasonable
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hourly rate was $465 — well within that range. No abuse of discretion
appears.
Third, Melbostad argues the probate court should have relied on
“objective evidence of publicly available market rate charged by attorneys for
legal services in the San Francisco legal services market” instead of the
court’s own “personal experience” in deciding Melbostad’s reasonable hourly
rate. He specifically cites the “Laffey Matrix,” a billing schedule of attorney
rates in the Washington, D.C. area that can be adjusted to comparable
billing rates in other areas. (Syers Properties III, Inc. v Rankin, supra,
226 Cal.App.4th at p. 695.) Melbostad suggests his hourly rate would have
been more than $899 under this matrix. But Syers made clear the court “was
neither required to follow the Laffey Matrix nor to adopt the rate defense
counsel opined was the ‘market rate’ for services of this type.” (Id. at p. 702.)
Instead, a court “may rely on its own knowledge and familiarity with the
legal market in setting a reasonable hourly rate.” (Heritage Pacific
Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 1009.) It may also
consider the experience of the attorney requesting fees. (Ibid.) The court
did both here. As the California Supreme Court has acknowledged, the
“ ‘experienced trial judge is the best judge of the value of professional services
rendered in his court, and while his judgment is of course subject to review, it
will not be disturbed unless the appellate court is convinced that it is clearly
wrong.’ ” (Serrano v. Priest, supra, 20 Cal.3d at p. 49.) We are not so
convinced.
Fourth, while conceding the hourly rate in the fee agreement was not
binding on the probate court, Melbostad argues it should have been afforded
“at least some deference in determining the reasonable rate to apply on the
petition.” Melbostad cites In re HPL Technologies, Inc. Securities Litigation
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(N.D.Cal. 2005) 366 F.Supp.2d 912, but that case does not support his
position. It articulates the principle that “the earlier a fee arrangement is
concluded between lead plaintiff and lead counsel, the more deference the
court should pay to that fee agreement” because “fee agreements set early in
the litigation—ex ante, so to speak—are more likely than ex post fee
agreements to be the product of market forces (i.e., competition among
counsel proposing to represent the class).” (Id. at p. 916.) Even assuming
this principle applies in the trustee-attorney context, Melbostad and Dolch
entered into the fee agreement in July 2019, two months into the accounting
period for which Melbostad was seeking approval of fees. We are not
persuaded this was an “ex ante” agreement entitled to deference such that it
limited the court’s discretion to determine $465 was the reasonable hourly
rate here. (Ibid.)
Fifth, Melbostad argues the determination of compensable legal
services was “mistakenly” based on the probate court’s own experience and
not on “any established legal principle or objective criteria.” Not so. The
court made clear it had reviewed the invoices to determine which time entries
reflected compensable legal services — “tasks where legal judgment or action
is appropriate for the sound administration of the trust” — rather than
noncompensable trustee services — “tasks reasonable and appropriate for
administering the trust,” such as “stewardship over funds, budgeting,
maintaining records and accounts, accepting receipts, making payments.”
Melbostad fails to offer either argument or authority disputing these criteria.
Melbostad’s repeated citation to Donahue is similarly unavailing. In
that case, the successor trustee petitioned for more than $5 million in
attorney and trustee fees, including reimbursement for fees paid to his 45-
member legal team. (Donahue, supra, 182 Cal.App.4th at p. 264.) The billing
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records numbered over 800 pages. (Id. at p. 270.) The trial court denied the
opposing party’s request for discovery and issued an order granting the
petition but did not expressly specify the amount of the fee award or explain
its ruling. (Id. at pp. 265–266, 270.) Given the size and complexity of the
request, along with the “pithy explanation” in the order, the appellate court
could not determine whether the court had appropriately exercised its
discretion, including whether it had “distinguished between fees expended to
protect [trustee’s] personal interests from those of the trust.” (Id. at pp. 270,
272.) Donahue reversed and remanded, explaining the opposing party could
renew her request for discovery, noting the size and complexity of fees at
issue “may merit discovery, particularly expert assistance, which cannot be
flatly denied simply on the basis of expediency.” (Id. at p. 276.) It also noted
“judges themselves are deemed to be experts on the value of legal services,
and may rely on their own experience about reasonable and proper fees,
without resort to expert testimony,” but their litigation experience “may not
extend to many critical aspects of fee awards pertaining to prudent trust
administration.” (Ibid.) Donahue concluded: “On remand, we leave it to the
sound discretion of the trial court to fashion appropriate discovery regarding
proper and reasonable levels of legal services for the benefit of the trust.” (Id.
at pp. 276–277.)
The circumstances in Donahue are a far cry from those of Melbostad’s
petition to approve $165,061.82 in payments for his own billed time.
Moreover, Donahue made clear that even when there is a level of complexity
and size not present here, trial courts retain the discretion to determine
whether it can rely on its knowledge and experience. (Donahue, supra,
182 Cal.App.4th at pp. 276–277; see also Marshall v. Webster (2020)
54 Cal.App.5th 275, 287 [explaining “case law gives trial judges great
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discretion in using their knowledge and experience” to assess the value of
legal services].) Here, the probate court was simply tasked with determining
Melbostad’s reasonable hourly rate and compensable hours. It reviewed the
time entries to determine what hours had been spent performing legal
services, instead of trustee services, and thoroughly described its
understanding of differences between the two categories. In doing so, the
court appropriately exercised its discretion drawing on its “great amount of
experience reviewing trustee fees and fees for legal services.”
In sum, we conclude the probate court did not abuse its discretion in
finding Melbostad’s reasonable hourly rate was $465, and that he spent 103.4
hours providing compensable legal services to the Trust. Accordingly, we
need not address Melbostad’s arguments regarding a new fee determination
on remand.
DISPOSITION
The March 17, 2022 order is affirmed. Kasolas is entitled to recover his
costs on appeal.
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_________________________
Rodríguez, J.
WE CONCUR:
_________________________
Fujisaki, Acting P. J.
_________________________
Petrou, J.
A165361
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