IN THE MATTER OF THE ESTATE OF KEITH R. O'MALLEY (P-000405-16 AND P-000280-18, MONMOUTH COUNTY AND STATEWIDE) (CONSOLIDATED) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NOS. A-4084-17T1
A-1276-18T1
IN THE MATTER OF THE ESTATE
OF KEITH R. O'MALLEY,
Deceased.
Argued November 21, 2019 – Decided March 10, 2020
Before Judges Alvarez and Suter.
On appeal from the Superior Court of New Jersey,
Chancery Division, Monmouth County, Docket Nos. P-
000405-16 and P-000280-18.
Robert D. Borteck argued the cause for
appellants/cross-respondents Barbara O'Malley,
Dennis O'Malley, Jessica Shuman, Dylan Shuman,
Luke Shuman, and Brooke Shuman in A-4084-17 and
appellants in A-1276-18 (Borteck & Czapek, PC,
attorneys; Robert D. Borteck and Christine Socha
Czapek, on the briefs).
Anthony J. La Porta argued the cause for
respondent/cross-appellant Michele O'Malley in A-
4084-17 and respondent Michelle O'Malley in A-1276-
18 (Connell Foley LLP, attorneys; Anthony J. La Porta
and Daniel B. Kessler, on the briefs).
Brian R. Selvin argued the cause for respondent/cross-
appellant Michael K. Feinberg in A-4084-17 and
respondent Michael K. Feinberg in A-1276-18
(Greenbaum Rowe Smith & Davis LLP, attorneys;
Brian Selvin and Irene Hsieh, on the briefs).
Lauren D. Bercik argued the cause for respondent
Estate of Keith O'Malley in A-1276-18.
PER CURIAM
In these two appeals, consolidated for decision, beneficiaries of certain
trusts challenge orders granting substantive relief to interested parties and
counsel fees. We affirm as to the substantive relief. We also affirm the counsel
fee awards, except that we remand for the Probate Part judge to make more
detailed findings regarding amounts.
The Estate of Keith O'Malley, who was only thirty-two at the time of his
death on June 1, 2014, consists of a $5,000,000 trust created for his minor child
(specific bequest trust). The residue of the estate is divided equally between
two trusts, a trust designated as available for the benefit of the child
(discretionary trust), and a trust for the benefit of his surviving extended family
members: mother, father, sister, and the sister's children (family residual trust).
In addition, decedent disinherited a second child, a son, which generated
litigation ultimately settled by the testamentary trustee and the child. The family
residual trust beneficiaries (beneficiaries) did not contribute to the settlement
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with the son. In fact, when the settlement agreement reached by the testamentary
trustee, with contribution from the child, was approved by the Probate Part, it
was over the objection of the beneficiaries.
The child, whose interests were represented by her mother, engaged in
post-death litigation regarding ongoing support payable by the estate. The
beneficiaries object that the child support settlement reached by the testamentary
trustee, approved by the judge, was improper because the judge did not review
the child's mother's budget. The beneficiaries contend that the child support
payable by the estate is excessive, and improperly depletes estate assets while
inuring to the benefit of the child's mother.
Two orders are appealed. The first is the April 3, 2018 order awarding
counsel fees and costs: the judge's award of $373,116.98 in counsel fees to the
child's mother's attorneys, Connell Foley LLP. The beneficiaries object to the
amount of fees and payment from estate funds. On cross-appeal, the child's
mother challenges the counsel fee award payable on behalf of the beneficiaries'
attorney, Borteck & Czapek, P.C., in the amount of $146,772.42. She too
contends the award should not be payable from estate funds, and is excessive.
The testamentary trustee, also by way of cross-appeal, challenges the award to
Borteck & Czapek, contending the fees are unreasonable and were accrued for
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the individual benefit of the beneficiaries, not the estate, and therefore should
not be paid from estate assets.
In reaching her conclusions, the judge who awarded the fees noted that
"this was not an ordinary estate. . . . The [w]ill was [thirty-nine] pages and
involved numerous trusts and other requirements." With regard to the amounts,
the judge said that she had reviewed the time records of each firm, that the time
was invested appropriately, that the fees were reasonable based on the firm's
geographical location, and that in light of the extensive years-long litigation,
"the amount of fees were necessary for the results . . . ." She further stated that
an award of counsel fees should be made from a fund in court when the party
receiving them "aided directly in creating, preserving, or protecting the fund."
The judge considered the estate assets to be a fund in court from which fees
should be paid. She opined that:
the actions taken by the attorneys in this case were
designed to advance the purposes of the [e]state and the
testator's estate plan.
Each party viewed its actions as promoting the
testator's intent.
Since everyone engaged in litigation attempted to preserve the residuary estate,
ultimately benefitting the child as well as the beneficiaries, she was satisfied
that all "parties were bona fide in their actions," although they held "divergent
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views of how the testator's intent should be fulfilled." The judge made fees for
counsel for the testamentary trustee payable from estate assets because he was
a necessary party to all the litigation. Thus, she ordered $94,389.24 to be paid
to Greenbaum, Rowe, Smith & Davis LLP on behalf of the testamentary trustee.
On October 5, 2018, a different Probate Part judge approved a settlement
agreement between the child's mother and the testamentary trustee. That second
order is also appealed by the beneficiaries. Under the agreement, the prior
Family Part order for child support of $14,000 per month was reduced to
$11,000. Certain additional fluctuating payments for the child's expenses that
mirrored the Family Part order were reduced to fixed amounts.
The judge approved the settlement because it "minimizes the need for
contact between the parties and effectively eliminates potential disputes . . . by
providing a steady, consistent and clear method of compensation and payments
of [the minor child's] support." The beneficiaries objected to the settlement,
among other reasons, because the judge was not provided a monthly budget from
the child's mother. The judge rejected the argument because reviewing the
child's mother's budget "would effectively be engaging in the micromanagement
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[of the trustee] that our Appellate Division held that our courts cannot do in
Wiedenmayer."1
The Family Part judge had ordered the creation of a property settlement
agreement (PSA) trust in the related litigation, to be funded with $1,000,000.
The judge opined that the settlement agreement between the child's mother and
the testamentary trustee eliminated potential for future disputes, and created "a
clear path forward for these parties." Further, by virtue of the structured
settlement, the parties were "increasing the likelihood of the life of the PSA
trust, which will then have the effect of increasing the life and preserve the assets
of the specific bequest trust . . . ." The judge considered "the settlement
agreement [to have] no negative pecuniary impact on the trust . . . [and] may
very well and likely will have the effect of reducing obligations related to annual
child support." Once the determination was made by the Family Court judge as
to the amount of child support, she was bound by that decision. As the judge
further explained, the beneficiaries "cite no law, no rule which would permit this
[c]ourt sitting in [p]robate to question those determinations . . . ."
1
Wiedenmayer v. Johnson, 106 N.J. Super. 161, 165 (App. Div. 1969) (finding
"[o]nly unwarranted judicial interference would induce a negating of the course
pursued by the trustees" in the best interests of the beneficiaries).
A-4084-17T1
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The beneficiaries raise three points on appeal for A-4084-17:
POINT I
THE TRIAL COURT'S AWARD OF LEGAL FEES
AND COSTS TO CONNELL FOLEY FROM THE
ASSETS OF THE ESTATE CONSTITUTED AN
ABUSE OF DISCRETION.
POINT II
THE TRIAL COURT ERRED IN AWARDING TO
GREENBAUM LEGAL FEES AND COSTS FROM
THE ASSETS OF THE ESTATE RATHER THAN
FROM THE ASSETS OF THE TRUSTS FOR WHICH
THE FIRMS' CLIENT SERVED AS TRUSTEE.
POINT III
THE AWARD TO CONNELL FOLEY WAS AN
ABUSE OF DISCRETION BECAUSE THE TRIAL
COURT FAILED TO CONSIDER THE
REASONABLENESS OF THE REQUESTED FEE
AWARD.
By way of cross-appeal, the child's mother raises one point:
POINT I
TRIAL COURT ABUSED ITS DISCRETION IN
AWARDING FEES TO APPELLANTS.
The testamentary trustee raises a similar point on cross-appeal:
POINT I
THE TRIAL COURT ERRED IN AWARDING
ROBERT D. BORTEK, P.C.'S FEES AND COSTS
BECAUSE ALL OF THE FEES AND COSTS
INCURRED WERE FOR THE INDIVIDUAL
BENEFIT OF THE FAMILY MEMBERS, NOT THE
ESTATE.
A-4084-17T1
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The beneficiaries raise three points on appeal for A-1276-18:
POINT I
THE TRIAL COURT ERRED IN APPROVING THE
SETTLEMENT AGREEMENT BECAUSE IT IS NOT
A REASONABLE COMPROMISE OF THE DISPUTE
BETWEEN THE PARTIES.
POINT II
THE TRIAL COURT ERRED IN APPROVING THE
SETTLEMENT AGREEMENT BEFORE FIRST
REVIEWING AND CONSIDERING (1) THE
BUDGET UPON WHICH THE SETTLEMENT WAS
BASED AND (2) [the child's mother's] FINANCIAL
RESPONSIBILITY TO SUPPORT HER CHILD.
POINT III
THE TRIAL COURT ERRED IN APPROVING THE
PROVISION OF THE SETTLEMENT THAT
PERMITS TRUST FUNDS TO BE USED TO PAY [the
child's mother's] FUTURE LEGAL FEES WITHOUT
THE COURT'S REVIEW AND APPROVAL
PURSUANT TO RULE 4:42-9(A)(2).
I.
We first address the beneficiaries' challenge to approval of the settlement
agreement, appeal No. A-1276-18. A fiduciary "shall, in the exercise of good
faith and reasonable discretion," have the power to "compromise, contest, or
otherwise settle any claim in favor of the estate, trust, or fiduciary . . . ." N.J.S.A.
3B:14-23(m). Trustees of a discretionary trust are afforded broad discretion,
implicitly limiting a beneficiary's ability to compel a specific action by the
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trustee. Tannen v. Tannen, 416 N.J. Super. 248, 267 (App. Div. 2010). Such
"absolute and uncontrolled discretion" is limited only by a trustee's
determination that a decision is for the beneficiary's best interests.
Wiedenmayer, 106 N.J. Super. at 164. A trustee's decision must be "made in
good faith, after consideration of all the facts and attendant circumstances, and
for reasonably valid reasons." Id. at 165. "Courts may not substitute their
opinions as to the [beneficiary's] 'best interests,' as opposed to the opinion of the
trustees vested by the creator of the trust . . . to make that determination." Ibid.
The Probate Part judge did not abuse her discretion in approving the
settlement agreement. The court identified decedent's "clear and unquestioned"
principal intent to be the "maintenance and care of the [child.]" Thus, the
Agreement was in her best interest, with the added benefit to the estate that it
reduced child support obligations, resolved ongoing legal disputes, and
increased the life of the PSA Trust. It was a reasonable exercise of the
testamentary trustee's discretion.
In support of their appeal, the beneficiaries contend the settlement
agreement lacked consideration. But that is an issue they cannot raise, as they
are limited to challenging whether the trustee made a good faith decision,
supported by the evidence, for reasonably valid reasons. See Wiedenmayer, 106
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N.J. Super. at 165. They have not demonstrated bad faith, or that the settlement
agreement was not supported by the evidence, or that the settlement agreement
was reached for impermissible reasons.
Consideration is a "bargained-for exchange of promises or performance,"
which does not even require the dollar amount of a settlement to be lower than
the original agreement, so long as there is some exchange. See Bernetich,
Hatzell & Pascu, LLC v. Med. Records Online, Inc., 445 N.J. Super. 173, 183
(App. Div. 2016). On its face, the settlement agreement benefits the estate, and
thus there was bargained-for consideration.
The beneficiaries again argue that without seeing the child's mother's
budget, the court should not have approved the settlement. But the issue is
whether the decision was made in the best interest of the beneficiary, and does
not require the court to scrutinize the details of that discretionary decision once
made by a trustee. See Wiedenmayer, 106 N.J. Super. at 165 ("Only
unwarranted judicial interference would induce a negating of the course pursued
by the trustees.").
It is always possible that a minor's caretaker benefits from child support.
See Isaacson v. Isaacson, 348 N.J. Super. 560, 584 (App. Div. 2002) ("We also
recognize . . . that the law is not offended if there is some incidental benefit to
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the custodial parent from increased child support payments."). But the focus is
solely on whether the minor benefits from the agreement. The child gained
benefits from the agreement.
As part of the settlement, the testamentary trustee agreed to fund the
child's mother's counsel fees if incurred in future litigation. The beneficiaries
argue that equals a blank check. Such fees will be paid from the estate, however,
only if approved by the court. If the estate is not required to pay the fees, then
they would be paid through the PSA trust. Thus, either the court would approve
fees drawn from the estate, or fees would be taken from the child's assets.
Therefore, the points raised in No. A-1276-18 regarding the court's approval of
the settlement agreement lack merit.
II.
The decision to award or deny attorney's fees rests within the sound
discretion of the trial court. Desai v. Bd. of Adjustment, 360 N.J. Super. 586,
598 (App. Div. 2003). Judges have broad discretion to determine when,
whether, and under what circumstances attorney's fees should be awarded. Ibid.
A trial court's award of attorney's fees should be disturbed only on the rarest of
occasions, "and then only because of a clear abuse of discretion." Rendine v.
Pantzer, 141 N.J. 292, 317 (1995).
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Generally, rulings by courts of equity on discretionary decisions "are
entitled to deference and will not be reversed on appeal absent a showing of an
abuse of discretion involving a clear error in judgment." In re Estate of Hope,
390 N.J. Super. 533, 541 (App. Div. 2007).
Abuse of discretion occurs when a decision is "made without a rational
explanation, inexplicably departed from established policies, or rested on an
impermissible basis." Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571 (2002).
An award of fees is an abuse of discretion when not premised upon consideration
of all relevant factors, is based upon consideration of irrelevant or inappropriate
factors, or amounts to a clear error in judgment. Ibid.
A.
Rule 4:42-9(a)(2) states a court "in its discretion" may award attorney's
fees out of a fund in court. A "fund in court" generally refers to some fund in
the hands of a fiduciary but within a court's jurisdictional authority to be dealt
with. In re Probate of the Alleged Will of Landsman, 319 N.J. Super. 252, 272
(App. Div. 1999). Generally, "allowances are payable from a 'fund' when it
would be unfair to saddle the full cost upon the litigant for the reason that the
litigant is doing more than merely advancing his own interests." Henderson v.
Camden Cty. Mun. Util. Auth., 176 N.J. 554, 564 (2003) (citing Sunset Beach
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Amusement Corp. v. Belk, 33 N.J. 162, 168 (1960)). A party who participates
in litigation involving an estate may be awarded fees from a fund in court when
the litigation serves to "protect the estate or . . . further its proper
administration." Sunset Beach, 33 N.J. at 169. They "must have aided directly
in creating, preserving or protecting the fund." Landsman, 319 N.J. Super. at
272.
We agree with the Probate Part judge's conclusion that regardless of the
perspective of others involved in the litigation, each party sought to maximize
estate funds. Decedent's estate plan was intended to substantially benefit the
child before all others—thus efforts to maximize estate assets inured to her
benefit. In that respect, the actions taken by all parties "were designed to
advance the purposes of the estate and the testator's estate plan."
The child's mother engaged in litigation in order to protect her child's
interests. The beneficiaries engaged in litigation in order to protect the residuary
estate. The testamentary trustee engaged in litigation in order to both protect
the child, the focus of decedent's estate plan, while maintaining trust funds at
maximal level with an eye to the future. Given the nature of the estate plan and
the litigation which followed, both in the Probate and the Family Part, attorneys'
fees should be paid from estate funds.
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B.
Rule of Professional Conduct 1.5(a) requires that "[a] lawyer's fees shall
be reasonable." This applies in all cases regarding fees, not just cases governed
by a fee-shifting statute. Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21-22
(2004). "The starting point in awarding attorneys' fees is the determination of
the 'lodestar,' which equals the 'number of hours reasonably expended multiplied
by a reasonable hourly rate.'" Id. at 21 (quoting Rendine, 141 N.J. at 335). First,
the trial court must determine the reasonableness of the rates proposed in support
of the fee application. Id. at 22. "Second, a trial court must determine whether
the time expended in pursuit of the 'interests to be vindicated,' the 'underlying
statutory objectives,' and recoverable damages is equivalent to the time
'competent counsel reasonably would have expended to achieve a comparable
result . . . .'" Ibid. (quoting Rendine, 141 N.J. at 336). Excessive and
unnecessary hours spent on the case cannot be included in calculating the
lodestar. Ibid.
There is considerable overlap between calculating the lodestar and the
factors laid out in Rule of Professional Conduct 1.5(a), but the New Jersey
Supreme Court is adamant that the factors "must inform the calculation of the
reasonableness of a fee award in . . . every case." Ibid. Those factors are:
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(1) the time and labor required, the novelty and
difficulty of the questions involved, and the skill
requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the
acceptance of the particular employment will preclude
other employment by the lawyer;
(3) the fee customarily charged in the locality for
similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the
circumstances;
(6) the nature and length of the professional
relationship with the client;
(7) the experience, reputation, and ability of the lawyer
or lawyers performing the services;
(8) whether the fee is fixed or contingent.
[R.P.C. 1.5(a).]
The trial court recognized these factors and applied them to the facts of this case.
In applying the factors, however, the court stated only that it reviewed the
records from each attorney and firm, concluding "each firm expended its time
properly." That does not suffice.
That same judge, during the course of earlier proceedings, stated that she
never reviewed the number of hours expended by attorneys because no
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reasonable way exists to determine if the sum was appropriate. Unfortunately,
pursuant to Rendine, a court must review the number of hours and determine
whether or not they are reasonable. 141 N.J. at 336. It is not clear from the
record if such review occurred here.
Hence, we agree with the parties that the actual amount of fees requires a
more detailed examination and discussion, and remand for that purpose.
Although the judge properly exercised her discretion by ordering the sums to be
paid from the estate, we have no explanation of the basis for specific numbers
awarded. Basically, the judge just gave each firm the amount it requested. That
may ultimately be correct, but requires more explicit analysis.
Affirmed, except remanded for reconsideration of specific amounts of
counsel fees.
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