After 'Reasonable Compensation' Litigation, Who Pays Trustees' Attorneys? (Part Ii)

The Legal Intelligencer

Editor's note: This is the last in a two-part series. Click here to read the first part.

Last week, we reviewed Pennsylvania cases that addressed this question. This week, we review the law in other jurisdictions and look to see how attorney fees are treated in an array of similar circumstances outside of the trust arena.

"The right of a trustee to an award of counsel fees, incurred in the defense of its right to compensation as trustee, is generally recognized" the court held in Cleveland Trust v. Wilmington Trust, 258 A.2d (Del. 1969) (awarding reasonable compensation and attorney fees incurred in connection therewith). (See also In re Trust of McKinley, 2002 Del. Ch. LEXIS 155 (Del. Ch. Dec. 31, 2002); Estate of Griffith, 218 P.2d (Cal. App. 1950).)

In Griffith, the trustee sought extraordinary compensation of $35,000, and $3,000 for its attorney fees in connection with the hearing on the application for extraordinary fees. The trust was a charitable trust established for the creation of the Griffith Park Observatory. The city of Los Angeles opposed the extraordinary services fee and the attorney fee. The court allowed a $30,000 fee for extraordinary services and the $3,000 attorney fee. Some courts merely require that a trustee's reasonable compensation claim be made in good faith. (See, e.g., In re Messer's Guardianship, 17 N.W.2d 559, 562 (Wis. 1945).)

Pennsylvania courts should favorably consider the decision of the Florida Supreme Court in West Coast Hospital Association v. Florida National Bank, 100 So. 2d 807, 812-13 (Fla. 1958), in which the court awarded attorney fees because the trustee had made its reasonable compensation claim in good faith. At that time, Florida's "new trust accounting law," Chapter 26656 — (No. 177) H.B. No. 204, provided, in language almost identical to the Uniform Trust Act, that a trustee's attorney fees for services "incurred by him in the management of the trust estate" should be paid by the trust. If there is a meaningful difference between the provisions, i.e., between "management" and "administration" of a trust, the use of "administration" in the UTA is probably broader, thus providing for payment of such fees even more clearly. The Florida statute was repealed by Laws 1974, c. 74-106, §3.

In 2006, Florida enacted the Florida Trust Code, effective July 1, 2007, allowing a trustee "reasonable expenses that were properly incurred in the administration of the trust." This is...