IMO The Hawk Mountain Trust ( 2015 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN THE MATTER OF: :
THE HAWK MOUNTAIN TRUST DATED :
DECEMBER 12, 2002, SURVIVING TRUST, : C.A. No. 7334-VCP
AND THE JUDE MIRRA TRUST UNDER THE :
HAWK MOUNTAIN TRUST DATED :
DECEMBER 12, 2002, MERGED TRUST :
MEMORANDUM OPINION
Submitted: April 27, 2015
Decided: September 8, 2015
Sharon Oras Morgan, Esq., Vincent J. Poppiti, Esq., Carl D. Neff, Esq., Leslie Spoltore,
Esq., FOX ROTHSCHILD LLP, Wilmington, Delaware; Attorneys for Petitioners Bruce
Kolleda and Joseph A. Troilo, Jr., Co-Trustees of the Hawk Mountain Trust.
David J. Ferry, Jr., Esq., Rick S. Miller, Esq., FERRY, JOSEPH & PEARCE, P.A.,
Wilmington, Delaware; Attorneys for Respondent Kimberly Jordan.
Paul D. Brown, Esq., CHIPMAN, BROWN, CICERO & COLE, LLP, Wilmington,
Delaware; Attorneys for Respondents Kimberly Jordan and Carlyn S. McCaffrey.
Frank E. Noyes, II, Esq., OFFIT KURMAN, P.A., Wilmington, Delaware; Attorneys for
Interested Party Fineburg Law Associates PC.
PARSONS, Vice Chancellor.
Before this Court is the petitioners‟ motion for the final reimbursement of
attorneys‟ fees, costs, and expenses. This case involved a dispute over the true
beneficiary of a Delaware trust, and the release and judicial discharge of the petitioners in
their capacity as co-trustees of the trust. The petitioners seek to have more than $1
million paid by the trust or other parties to their attorneys and another professional. The
respondents are beneficiaries of the trust, and they oppose the petitioners‟ motion on a
number of grounds.
For the reasons set forth below, I conclude that, for the most part, the fees incurred
by the petitioners for professional services are subject to reimbursement by the trust. In a
few minor instances, that is not the case. In addition, I find that the amounts charged for
the reimbursable services were reasonable, and should be paid. I therefore grant the
petitioners‟ motion for final reimbursement of attorneys‟ fees, costs, and expenses,
subject to the exceptions specifically noted in this Memorandum Opinion.
I. BACKGROUND
A. The Parties
The petitioners in this action are Bruce Kolleda and Joseph A. Troilo, Jr.
(“Petitioners”), co-trustees of the Hawk Mountain Trust (the “HM Trust” or “Trust”).
The respondents are Kimberly Jordan and the Intercession Trust, as represented by its
trustee Michelle Mitchell (“Respondents”). Respondents are beneficiaries of the HM
Trust.
1
B. Facts
On December 2, 2002, Gigi Jordan and Petitioners created the HM Trust in
Pennsylvania, for the purpose of effectuating an inheritance tax reduction for the then-
living son of Gigi Jordan, Jude Mirra (“Mirra”). The Trust is governed by Delaware
law.1 On December 3, 2002, Gigi Jordan formed the Hawk Mountain LLC, a Delaware
limited liability company (the “HM LLC” or “LLC”) and executed the Operating
Agreement.2 Gigi Jordan was the manager and sole member of the LLC. By November
2009, the Trust owned all of the outstanding interests or units of the HM LLC as its sole
asset, with Gigi Jordan still acting as the LLC‟s manager.3 Respondent Kimberly Jordan
is Gigi Jordan‟s mother.
Mirra died on February 5, 2010, and shortly thereafter, Gigi Jordan was accused of
his murder. Throughout this litigation, she has been incarcerated at Riker‟s Island in
New York, New York. After Mirra‟s death, a dispute developed relating to the HM Trust
and HM LLC, which included questions as to the identity of the Trust‟s beneficiary.4
Bernard Eizen, Esq., who previously assisted Gigi Jordan in establishing both the HM
Trust and HM LLC, represented Petitioners, and Gigi Jordan retained her own counsel.
In February 2010, the parties engaged in settlement negotiations as to the distribution of
1
Pet‟rs‟ Corrected Reply in Further Supp. of Their Mot. for Fees (“Pet‟rs‟
Corrected Reply”) Ex. D.
2
Id. Ex. R.
3
Compl. ¶ 13.
4
Compl. ¶ 6.
2
the Trust corpus. Eizen drafted a proposed Receipt, Release, Indemnification, Waiver of
Accounting and Trust Termination Agreement for the parties to sign.5 In the midst of the
Trust settlement negotiations, Eizen and Petitioners filed a Certificate of Cancellation for
the LLC. In August 2010, Petitioners filed a Certificate of Correction, reversing the
cancellation, because only Gigi Jordan, as manager, could cancel the LLC, and
Petitioners failed to get her approval.6 In addition to working on the settlement
negotiations and cancellation of the HM LLC, Eizen also assisted Petitioners with the
creation of the Conundrum Trust for the benefit of Gigi Jordan‟s ex-husband‟s, Ray
Mirra, children.7
Settlement negotiations over the distribution of the Trust corpus ultimately failed.8
In August 2011, Petitioners filed an action in the Court of Common Pleas of Delaware
County, Pennsylvania, seeking Court approval: (i) to sell and distribute the HM Trust‟s
assets; (ii) to compel the LLC to pay the outstanding expenses and liabilities of the Trust;
(iii) to confirm Petitioners‟ accounting; and (iv) to discharge Petitioners from further
5
Pet‟rs‟ Corrected Reply Ex. G.
6
See Pet‟rs‟ Mot. for Final Reimbursement of Att‟ys‟ Fees, Costs and Expenses
(“Pet‟rs‟ Mot. for Fees”) Ex. C, FLA Invoice dated Aug. 23, 2010, at 2.
7
See id. Ex. C, FLA Invoice dated May 13, 2010, at 2.
8
Pet‟rs‟ Mot. for Fees 3.
3
responsibilities as co-trustees (the “Pennsylvania Action”).9 On February 13, 2012, the
Pennsylvania Action was dismissed on jurisdictional grounds.10
On March 16, 2012, Petitioners commenced this action by filing their Verified
Complaint (the “Complaint”) in the Delaware Court of Chancery, seeking essentially the
same relief they sought in the Pennsylvania Action. Respondents opposed Petitioners‟
request for a release and judicial discharge based on objections to the scope of the
requested release, and allegations of fraud and forgery against Petitioners. Early on in
this litigation, Petitioners clarified that they sought a release only as to their activities as
co-trustees and not with respect to any actions they might have taken in their individual
capacities.11 It proved much more difficult, however, to pin Respondents down on the
contours of their allegations of fraud and forgery against Petitioners. As a result, I
ordered Respondents to assert any potential causes of action against Petitioners related to
the HM Trust or to actions they took in their capacity as co-trustees by November 21,
2012.12 I later extended this deadline to March 15, 2013.13 Respondents failed to state
any claim of fraud or forgery against Petitioners in their capacity as co-trustees by that
deadline.
9
Pet‟rs‟ Corrected Reply Ex. K.
10
Id. Ex. N.
11
Compl. ¶ 45.
12
Order Granting Case Sched. ¶ 1, Docket Item (“D.I.”) 37.
13
Order Granting Stip. Third Amend. Case Sched. ¶ 1, D.I. 120.
4
In the context of Respondents‟ vague allegations against them, Petitioners sought
to depose Gigi Jordan to better understand those allegations and any claim she or
Respondents had against them. During a September 21, 2012 teleconference, I found that
Gigi Jordan‟s deposition was relevant to this action,14 and on October 24, 2012, I
authorized issuance of a commission for that deposition.15 On November 30, 2012, the
New York Supreme Court issued an order allowing Petitioners to proceed with the
deposition, but requiring that the transcript be placed under seal and no quotes be used or
referred to until the criminal proceeding was concluded.16 Petitioners decided, however,
not to proceed with Gigi Jordan‟s deposition.17 On December 23, 2013, Gigi Jordan filed
suit against Petitioners in the U.S. District Court for the District of Delaware under the
Racketeer Influenced and Corrupt Organization Act18 (the “RICO Act”), alleging fraud
and forgery.19 That case is still pending in federal court.
14
Sept. 21, 2012 Teleconf. Tr. 22.
15
Order Granting Iss. of Comm‟n for Dep. of G. Jordan, D.I. 45 [hereinafter Order
Granting Iss. of Comm.‟n].
16
IMO Kolleda, 2012 WL 6221147 (N.Y. Sup. Nov. 30, 2012).
17
Pet‟rs‟ Corrected Reply 15.
18
18 U.S.C. §§ 1961 to 1968.
19
Ltr. to Ct. from Kurt M. Heyman Encl. Copy RICO Compl., D.I. 182.
5
On October 31, 2013, Petitioners moved for summary judgment in this action.20
After hearing argument on that motion, I delivered an oral ruling on it on July 21, 2014.21
In that ruling, I held that: (i) Kimberly Jordan was the sole beneficiary of the HM Trust;
(ii) Respondents waived all claims against Petitioners in their official capacity as co-
trustees of the HM Trust and as members of the HM LLC; and (iii) Petitioners were
entitled to a release and judicial discharge in their capacities as co-trustees and members
of the HM LLC.22 From the time this action was filed until Petitioners‟ motion for
summary judgment was resolved, the HM LLC held approximately $7 million in a
brokerage account with Merrill Lynch. In the July 21 summary judgment ruling, I
ordered that 1,000 shares of the LLC be distributed to Kimberly Jordan as the Trust
corpus, and that $1.5 million of the LLC funds in the custody of Merrill Lynch be
transferred to, and held in escrow by, a third party.23
On August 7, 2014, I entered an implementing order based on my July 21 rulings.
As to the funds held in escrow by the third party, the order stated they were:
for the purpose of paying administrative fees and costs of the
Trust, including payment of Petitioners‟ attorneys‟ fees and
costs (“Administrative Expenses”), subject to Respondents
objections as to the amount of attorneys‟ fees and costs to Fox
Rothschild LLP and as to whether Eizen Fineburg &
20
Pet‟rs‟ Mot. for Summ. J. and Other Rel. Relief, D.I. 166.
21
July 21, 2014 Teleconf. Tr.
22
Id. at 27-49.
23
The funds at Merrill Lynch not transferred to the escrow agent were to be
distributed to Kimberly Jordan.
6
McCarthey [sic] and Joseph P. McDonald, Esq. are entitled to
any attorneys‟ fees and costs whatsoever.24
The order further stated that “[a]ny Escrow Funds remaining after payment of
Administrative Expenses and resolution of any disputes related to such expenses shall be
paid to Kimberly Jordan.”25
On August 13, 2014, Petitioners moved for the final reimbursement of attorneys‟
fees, costs, and expenses (the “Motion”). From the time of Mirra‟s death in February
2010 through April 27, 2015, Petitioners have incurred $1,100,954.04 in attorneys‟ and
other professionals‟ fees, costs, and expenses related to this litigation and their attempts
to dissolve the HM Trust.26 On April 27, 2015, after receiving further briefing from
Respondents and Petitioners, I heard argument on the Motion.27
II. ANALYSIS
Petitioners employed a number of firms during the relevant time period. Those
firms and the respective fees claimed to be owed to each of them are as follows: (1) Fox
Rothschild LLP (“Fox Rothschild”) $957,153.59; (2) Fineburg Law Associates, P.C.,
24
Order Granting in Part Pet‟rs‟ Mot. for Summ. J. and Other Relief ¶ 2, D.I. 283
[hereinafter Order Granting Summ. J.].
25
Id.
26
Petitioners originally claimed $1,078,538.27 in attorneys‟ fees incurred through
September 26, 2014. See Pet‟rs‟ Corrected Reply 16. Fox Rothschild LLP
submitted an additional invoice for the period from September 26, 2014 through
April 27, 2015. I have included the fees incurred during that time period in the
total amount Petitioners seek in the Motion. See Carl D. Neff. Aff. in Supp. of
Pet‟rs‟ Mot. for Fees Ex. 3.
27
Transcript of Oral Argument (“Tr.”).
7
formerly Eizen, Fineburg & McCarthy, P.C. (“FLA”), $109,722.46; (3) Flaster
Greenburg, P.C. (“Flaster Greenburg”) $7,412.49; (4) Joseph P. McDonald, Esq.,
$15,582.50; and (5) Morris J. Cohen & Co., P.C. (“Morris J. Cohen”) $11,083.28
A. Petitioners’ Application for Payment of the Claimed Fees Is Not Premature
As a threshold issue, I address Respondents‟ contention that Petitioners‟ fee
application is premature. Respondents argue that Petitioners‟ application should be
deferred until the conclusion of Gigi Jordan‟s federal RICO action.29 The outcome of the
RICO action, however, is unlikely to have any bearing on this case, because that action
involves allegations against Petitioners in their individual capacities. This case is limited
in scope to actions taken by Petitioners in their capacity as co-trustees of the HM Trust.30
Therefore, I conclude that Petitioners‟ fee application is not premature and should
proceed notwithstanding the pending federal RICO action.
B. Are the Claimed Fees Reimbursable?
1. Legal standard
Petitioners advance four separate arguments for having the fees and expenses they
claim paid to the professionals involved by the Trust or an interested party. The first two
grounds stem from the common law.
28
In their opposition, Respondents did not object to the payment of $11,083 to
Morris J. Cohen or the reasonableness of its fees; therefore, I will grant
Petitioners‟ request for reimbursement of these fees without further comment.
29
Resp‟ts‟ Resp. in Opp‟n to Pet‟rs‟ Mot. for Fees (“Resp‟ts‟ Opp‟n”) 27.
30
See Order Granting Summ. J. ¶ 4(b).
8
Under traditional Delaware law the payment of attorneys‟
fees out of the trust corpus has generally been proper in two
circumstances: (i) where the attorney‟s services are necessary
for the proper administration of the trust, or (ii) where the
services otherwise result in a benefit to the trust. In either
circumstance the trustee may charge the trust estate with the
expenses of litigation, even if the litigation is unsuccessful.31
The third ground Petitioners rely on for reimbursement of the claimed attorneys‟
fees, costs, and expenses is statutory in nature. Specifically, 12 Del. C. § 3584 provides
that “[i]n a judicial proceeding involving a trust, the court, as justice and equity may
require, may award costs and expenses, including reasonable attorneys‟ fees, to any party,
to be paid by another party or from the trust that is the subject of the controversy.”
Finally, Petitioners contend they are entitled to recover their attorneys‟ fees and
expenses under the American Rule. In that regard, I note that:
Delaware follows the American Rule and litigants must pay
their own attorneys‟ fees and costs. As an equitable
exception to the American Rule, however, this Court may
grant attorneys‟ fees if it finds that a party brought litigation
in bad faith or acted in bad faith during the course of the
litigation. Still, this Court does not lightly award attorneys‟
fees under this exception, and has limited its application to
situations in which a party acted vexatiously, wantonly, or for
oppressive reasons.32
31
Merrill Lynch Trust Co., FSB v. Campbell, 2009 WL 2913893, at *11 (Del. Ch.
Sept. 2, 2009) (internal citation omitted) (citing Bankers Trust Co. v. Duffy, 295
A.2d 725, 726 (Del. 1972)).
32
Postorivo v. AG Paintball Hldgs., Inc., 2008 WL 3876199, at *24 (Del Ch. Aug.
20, 2008).
9
Because I base my conclusions primarily on the applicable principles of Delaware
common law, and secondarily on 12 Del. C. § 3584, I do not reach Petitioners‟ argument
for fees under the American Rule.
2. Application
Respondents argue generally that Petitioners‟ attorneys‟ fees, costs, and expenses
are not reimbursable, because Petitioners‟ administration of the Trust was “a front to
carry out a widespread unlawful fraudulent enterprise to misappropriate assets of the
Trust.”33 Respondents have not proven this contention, and have failed to plead it in a
timely manner. Rather, they steadfastly avoided providing a clear statement of their
substantive claims against Petitioners as co-trustees for a long period of time. In
addition, Respondents have had three separate teams of counsel and contributed
significantly to the multi-year duration of this litigation and a docket that contains more
than 300 entries. I find that Petitioners, on the other hand, necessarily utilized the
services of professionals to determine the proper beneficiary of the HM Trust,34 and
reasonably sought a release as co-trustees from a trust in which they effectively had no
control over its sole asset, the HM LLC. Therefore, I conclude that the fees and expenses
Petitioners incurred for the services of attorneys and accountant generally were necessary
for the proper administration of the HM Trust.
33
Resp‟ts‟ Opp‟n 17.
34
See In re IMO Trust for Grandchildren of Gore, 2013 WL 771900, at *3 (Del. Ch.
Feb. 27, 2013).
10
Alternatively, Respondents dispute the reimbursability of certain fees incurred for
specific services that they contend were not necessary for the proper administration of, or
did not confer a benefit to, the Trust.35 I address the merits of each of those challenges
next.
a. The Pennsylvania Action
Petitioners owe $15,582.50 to Joseph P. McDonald in connection with the
Pennsylvania Action.36 Respondents argue these fees are not reimbursable, because that
action never should have been brought, as demonstrated by the fact that it was
dismissed.37 Because the Trust was created in Pennsylvania, Petitioners had at least a
colorable basis for bringing the action there. Further, the Pennsylvania Action, while
arguably not necessary for the proper administration of the Trust, did result in some
benefit to the Trust. The Delaware complaint is almost identical to the complaint filed in
Pennsylvania.38 It is reasonable, therefore, to infer that Petitioners‟ counsel drew heavily
from the Pennsylvania complaint in drafting the Complaint filed here. Thus, most of the
time and effort put into the Pennsylvania Action were relevant and beneficial to this
action in Delaware. For these reasons I agree with Respondents that not all of
McDonald‟s time is reimbursable, but I find that the usefulness of the underlying work
35
Resp‟ts‟ Opp‟n 4.
36
Pet‟rs‟ Mot. for Fees Ex. E.
37
Resp‟ts‟ Opp‟n 26.
38
Tr. 35 (Resp‟ts‟ counsel).
11
justifies providing for payment to McDonald of $10,000 of the $15,582.50 fees incurred
in connection with the Pennsylvania Action.
b. Cancellation of the HM LLC
Petitioners owe at least $2,073 to FLA for services it provided in connection with
the cancellation of the HM LLC.39 Respondents contend the fees Petitioners incurred in
connection with the unauthorized filing of the LLC Certificate of Cancellation and
Certificate of Correction are not reimbursable. Gigi Jordan is the manager of the HM
LLC; therefore, Petitioners needed her approval to file a Certificate of Cancellation,
which they failed to procure. Thus, Petitioners‟ cancellation of the HM LLC, and later
reversal of that action, were neither necessary to the proper administration of nor
beneficial to the Trust. I therefore deny Petitioners‟ application for payment of the fees
associated with those actions—i.e., $2,073 of the amount sought for FLA.
c. The Conundrum Trust
FLA charged Petitioners $1,344 for work it performed in connection with the
Conundrum Trust.40 Respondents oppose reimbursement of any fees incurred in
connection with the Conundrum Trust. Because the Conundrum Trust was established as
a separate trust by Gigi Jordan‟s ex-husband, for the benefit of his own children, the fees
incurred in relation to the Conundrum Trust are not reimbursable. The amount requested
39
This number is based on the representation of Petitioners‟ counsel at argument,
and is also consistent with my review of the invoices submitted by Petitioners.
See Pet‟rs‟ Mot. for Fees Ex. C.
40
This number is based on my review of the FLA invoices submitted by Petitioners.
See Pet‟rs‟ Mot. for Fees Ex. C.
12
for FLA, therefore, will be reduced by the $1,344 attributable to work done on the
Conundrum Trust.
d. Gigi Jordan’s Deposition
Finally, it appears that Petitioners owe $59,951 to Fox Rothschild in connection
with preparation for Gigi Jordan‟s deposition.41 From August 2012 to February 2013,
Petitioners and their counsel explored the possibility of and prepared for that deposition.
Respondents argue the fees incurred in connection with attempting to take Gigi Jordan‟s
deposition should not be reimbursed, because Petitioners decided not to take the
deposition after “aggressively” fighting to do so. I previously determined, however, that
Gigi Jordan‟s deposition was relevant to this case.42 Therefore, I find Petitioners‟
attempts to take that deposition to be neither entirely unnecessary to the proper
administration of, nor without benefit to, the Trust. The proposed deposition of Gigi
Jordan appeared to be relevant to understanding the nature of the fraud and forgery
claims Respondents, who appear to have been aligned with Gigi Jordan, were threatening
to bring against Petitioners as co-trustees of the Trust. It was necessary to understand the
potential claims against Petitioners to determine the issues regarding the disputed scope
of the release and terms for terminating the Trust. On the other hand, while significant
41
This amount is based on my review of invoices submitted by Petitioners.
According to the invoice entries, it appears that legal research and other
preparation for Gigi Jordan‟s deposition began in August 2012, and the deposition
ultimately was cancelled on February 8, 2013. See Pet‟rs‟ Mot. for Fees Ex. B.
42
Order Granting Iss. of Comm‟n.
13
effort was involved in preparing for Gigi Jordan‟s deposition, as well as extensive
procedural skirmishing, Petitioners decided against taking the deposition, despite the
New York Supreme Court‟s order that they could proceed with it.43 Based on these
circumstances and the fact that there were valid reasons from the outset to question the
deposition‟s ultimate utility, I authorize payment of only 50% of the fees and expenses
incurred with respect to Gigi Jordan‟s deposition. As such, the amount to be paid to Fox
Rothschild from the HM Trust will be reduced by $29,975.50.
I do not understand 12 Del. C. § 3584 to require a showing of bad faith as
generally would be necessary under the American Rule. Having presided over the twists
and turns of this multi-year litigation, I find that it also would be appropriate to award
fees and expenses under Section 3584.44 To some extent, the difficulties the parties
experienced in achieving agreement on the scope of the release and the propriety of
distributing much of the money in the Trust to Kimberly Jordan took much longer than it
should have. This was due, in large part, to Respondents‟ failure to articulate more
clearly their potential claims against Petitioners. Thus, I conclude that payment of most
of the fees requested is in order under the common law and 12 Del. C. § 3584. Hence, I
need not address Petitioners‟ argument for an award of fees under the American Rule. I
43
IMO Kolleda, 2012 WL 6221147 (N.Y. Sup. Nov. 30, 2012).
44
See Merrill Lynch Trust Co., FSB v. Campbell, 2009 WL 2913893, at *14 n.95
(The statute allows the Court to shift attorneys‟ fees under a more relaxed standard
than that of the American Rule.).
14
note, however, that my preliminary view is that Respondents did not proceed in bad faith,
and no fees should be charged against a party other than the Trust.45
C. Respondents’ Objections to Fees Based on Counsel’s Conflict of Interest Is
Waived
Over the course of this litigation, Eizen worked on Petitioners‟ case at two
different firms, FLA and Flaster Greenburg. Respondents contest awarding any fees to
either FLA or Flaster Greenburg, because Eizen created an alleged conflict of interest by
representing Petitioners despite his former representation of Gigi Jordan.46
The Delaware Lawyers‟ Rules of Professional Conduct (“DLRPC”) provide that
an attorney owes a duty to former clients to not represent new clients in matters
materially adverse to the former client without the former client‟s informed consent.
Under Rule 1.9:
A lawyer who has formerly represented a client in a matter
shall not thereafter represent another person in the same or a
substantially related matter in which that person‟s interests
are materially adverse to the interests of the former client
45
See Hardy v. Hardy, 2014 WL 3736331, at *18 (Del. Ch. July 29, 2014) (“To
satisfy the bad faith requirement, a party‟s conduct „must rise to a high level of
egregiousness, such that their actions extend beyond the realm of zealous
advocacy.‟” (quoting The Estate of E. Murton Dupont v. Dinneen, 2008 WL
2950764 (Del. Ch. Mar. 26, 2008)).
46
Resp‟ts‟ Opp‟n 15. In December 2002, Eizen represented Gigi Jordan in creating
the HM Trust and the HM LLC. After the death of Mirra, Eizen represented
Petitioners in matters regarding the distribution of the Trust corpus and settlement
negotiations with Gigi Jordan, who had retained new counsel. There has been no
showing, however, that Petitioners personally had an interest in how the Trust
corpus was distributed beyond seeking payment of the attorneys‟ and other
professional‟s fees they incurred in their role as co-trustees.
15
unless the former client gives informed consent, confirmed in
writing.47
In the litigation context, however, Delaware courts generally waive disqualification
claims if the parties fail to assert them in a proper or timely manner.48
Petitioners argue that the conflict of interest claim should be considered waived
due to the untimely manner in which Respondents asserted it.49 In April 2010, Gigi
Jordan‟s new counsel, Mark Petersen, raised Eizen‟s conflict of interest in representing
Petitioners in an email.50 The following month, then-trustee of the Intercession Trust,
Carlyn McCaffrey, raised the same issue during a telephone conversation with Eizen.51
Based on the invoices from his firms, Eizen continued to represent Petitioners until April
2013. In October 2013, Petitioners sought interim reimbursement in this action of
attorneys‟ fees owed to both of Eizen‟s firms,52 but Respondents never brought a formal
47
DLRPC R. 1.9(a).
48
See Dunlap v. State Farm Fire & Cas. Co., 950 A.2d 658, 658 (Del. 2008)
(reversing disqualification of counsel when no motion to disqualify was made); cf.
Kenton v. Bellevue Four, Inc., 1999 WL 463684, at *1 (Del. Super. Apr. 26, 1999)
(“Failure to make a timely objection may result in a waiver of the right to seek
disqualification.” (citing Cox v. American Cast Iron Pipe Co., 847 F.2d 725, 729
(11th Cir. 1988))).
49
Pet‟rs‟ Corrected Reply 12; see also Suppl. Reply in Supp. of Pet‟rs, Mot. for Fees
2.
50
Pet‟rs‟ Corrected Reply 8.
51
Id. at 10.
52
Pet‟rs‟ Mot. for Interim Reimbursement of Att‟ys‟ Fees, Costs and Expenses Exs.
B and C, D.I. 165.
16
objection to paying Eizen‟s fees. In their Answering Brief to Petitioners‟ Motion for
Summary Judgment and Other Relief, Respondents stated in a footnote that “Eizen‟s
representation of the Trustees in opposing Jordan‟s interest was a blatant conflict of
interest given his earlier representation of Jordan in connection with the formation of the
HM Trust,”53 but did not raise the issue elsewhere in their brief or suggest that the fees
owed to Eizen‟s firms should be denied on that basis. Respondents only now assert
Eizen‟s conflicted representation as an affirmative defense to Petitioners‟ fee application.
It is true that Eizen did not obtain Gigi Jordan‟s informed consent to represent
Petitioners in a matter arguably adverse to her interests. But, Respondents failed to raise
this issue as a defense to Petitioners‟ fee application in a timely manner, despite multiple
opportunities to do so. As a result, the relevant facts have not been developed, and I find
that the defense of conflicted counsel is waived. Respondents are not precluded from
raising their conflict of interest charge with the appropriate disciplinary authorities, but
that is not an issue for this Court. Therefore, I authorize the payment of all fees owed
FLA, except those incurred in connection with the Conundrum Trust and the LLC
cancellation, and all fees owed Flaster Greenburg.
D. Are the Claimed Fees Reasonable?
In addition to the requirement that an attorney‟s services be necessary for the
proper administration of the trust or result in a benefit thereto, the DLRPC provides that
53
Resp‟ts‟ Answering Br. in Opp‟n to Pet‟rs‟ Mot. for Summ. J. and Other Relief 7
n.5, D.I. 177.
17
attorneys‟ fees, costs, and expenses must be reasonable. DLRPC Rule 1.5 provides in
relevant part:
A lawyer shall not make an agreement for, charge, or collect
an unreasonable amount for expenses. The factors to be
considered in determining the reasonableness of a fee include
the following: (1) the time and labor required, the novelty
and difficulty of the questions involved, and the skill requisite
to perform the legal service properly; … (3) the fee
customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained; … (7) the
experience, reputation, and ability of the lawyer or lawyers
performing the services; and (8) whether the fee is fixed or
contingent.54
Respondents argue that the fees on behalf of Petitioners were unreasonable. Given
the somewhat unusual nature of this matter involving co-trustees of a trust, the sole asset
of which was an LLC that was under the management of an adverse managing member
rather than the co-trustees, I disagree. I also note that Respondents vigorously contested
numerous aspects of this action through three different sets of attorneys. Thus, I find that
the amount of time devoted to this matter on Petitioners‟ behalf was reasonable.
I also conclude that the amounts charged by Petitioners‟ attorneys generally were
reasonable, but that one aspect of their fee request was not justified adequately. In
particular, Petitioners presented no detailed evidence on the following factors of DLRPC
Rule 1.5: “(1) … the novelty and difficulty of the questions involved, and the skill
requisite to perform the legal service properly;” “(3) the fee customarily charged in the
locality for similar legal services;” and “(7) the experience, reputation, and ability of the
54
DLRPC R. 1.5(a).
18
lawyer or lawyers performing the services.” In this case, none of the lawyers in the firms
other than Fox Rothschild charged more than $500 per hour for their services.
Approximately 11.7% of the time spent by Fox Rothschild involved lawyers charging
more than $500 per hour, with the highest rate being $645. Based on the limited record
before me, I find that a maximum rate for reasonable attorneys‟ fees in this matter is $500
per hour. Accordingly, I have capped the reimbursable billing rates for the Fox
Rothschild attorneys at $500 per hour. As a result of that adjustment, the amount to be
paid to Fox Rothschild has been reduced by $28,178.50 to obtain a revised total for that
firm of $898,999.59.
III. CONCLUSION
For the foregoing reasons, I grant in part Petitioners‟ motion for final
reimbursement of attorneys‟ fees, costs, and expenses and deny it in part. I hereby order
the third party escrow agent, Grover C. Brown, Esq., to distribute from the funds in the
escrow account $1,033,800.54 to pay Petitioners‟ attorneys and accountant listed below
the indicated amounts:
Firm Amount
Fox Rothschild LLP $ 898,999.59
Fineburg Law Associates 106,305.46
Morris J. Cohen & Co., P.C. 11,083.00
Joseph P. McDonald, Esq. 10,000.00
Flaster Greenburg, P.C. 7,412.49
Total $1,033,800.54
Any funds remaining in the custody of the escrow agent after those distributions
and payment of any administrative fees related to the escrow shall be distributed in
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accordance with Paragraph 2 of the Order Granting in Part Petitioners‟ Motion for
Summary Judgment and Other Relief.
IT IS SO ORDERED.
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