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In re Trust U/W of Henry Tatnall Brown

and August 20 1986 Decided: April 9, 1986.


Haines, A.j.s.c.


The First Opinion.

The trustees of the trust established under the will of Henry Tatnall Brown, deceased, are Robert P. Brown and Provident National Bank. They have filed their second intermediate accounting of the trust's financial transactions. New Jersey and Pennsylvania counsel apply for an allowance of fees as permitted by R. 4:42-9 and R. 4:88-4. The affidavits submitted indicate that services were rendered not only by counsel, but also by paraprofessionals, including a certified public accountant employed by the Pennsylvania firm, for whom separate fees are sought. This opinion denies fees to paraprofessionals, permits consideration of their services in the allowance of attorney's fees and analyses the method of calculating that allowance.

R. 4:42-9(a) provides: "No fee for legal services shall be allowed in the taxed costs or otherwise, except . . . out of a fund in court." The trust estate before the court is a "fund in court." Sunset Beach Amusement Corp. v. Belk, 33 N.J. 162, 168-169 (1960). Subparagraph (b) of the rule provides in pertinent part that

The comment in Pressler, Current N.J. Court Rules, to this part of the rule states:

The rule was amended, effective September, 1971, to add to the information to be included in the affidavit, the amount of the estate or fund, the responsibility assumed, the results obtained, the time spent by paraprofessionals (accountants, investigators and the like), and other pertinent factors. The purpose of the amendment was to provide a more accurate catalogue of the factors to be considered by the court in fixing the fee and to deemphasize the factor of the attorney's time spent, which is in itself often an unreliable guide but too often overemphasized by the court.

The rule allowing fees, while not expressly so stating, anticipates the allowance of a fee sufficient to cover the office overhead of attorneys together with a reasonable profit. That has always been the understanding. See, for example, Conover v. West Jersey Mtg. Co., 96 N.J. Eq. 441, 451 (Ch.1924). Office overhead consists of all expenses incurred by an attorney in the operation of a law office, e.g., rent, insurance, salaries, assistants, supplies and utilities. The salary expense for paraprofessionals and accountants is overhead; it is not an expense for which an independent fee allowance may be made. Our rules allow fees for attorneys' services, not for services of persons who are not attorneys. Were the contrary true, it would be impossible to draw the line; fees could be allowed for legal secretaries, computer operators, bookkeepers, and employed experts in any field, all of whom might be defined as "paraprofessionals."

Paraprofessionals are identified here as qualified persons*fn1 who perform services under the supervision of an attorney which the attorney would otherwise be obliged to perform, e.g., preparing a tax return or reviewing an accounting for compliance with rules and statutes. Their use is to be encouraged.

They free attorneys for sophisticated work and lower the cost of legal services. Fee allowances should recognize not only the cost of paraprofessionals but also the risk and responsibility assumed by counsel when they are employed.

In appropriate cases fiduciaries are permitted to employ accountants, appraisers, real estate brokers and others who provide special services which the fiduciaries do not have the capacity to perform and the reasonable cost of those services may be allowed as an expense of the estate. In re Risica's Estate, 179 N.J. Super. 452, 455-456 (App.Div.1981). In the present case, if the trustees had employed accountants to prepare their accounting, the cost would not represent an allowable charge against the estate since corporate fiduciaries are expected to have the capacity to prepare accounts. In re Bloomer, 37 N.J. Super. 85, 90-91 (App.Div.1955) (quoting 6 N.J.Practice (Clapp, Wills and Administration) (1950) at 504, 453-454). The rule is long-standing. In Hagedorn v. Arens, 106 N.J. Eq. 377 (Ch.1930), the court underlined the usual rule denying fees to bookkeepers or lawyers for keeping trustee's books or for preparing an account because these services were the responsibility of the fiduciary. It then asked:

What, however, is the fiduciary's work? Certainly work which is beyond the ordinary or reasonably to be expected skill and ability of such a fiduciary, cannot be deemed his work, and he will be entitled to obtain the skilled services of experts where necessary or advisable, and to have their compensation paid out of the estate; and indeed would probably be censurable, and perhaps personally liable, if he failed to do so. [At 383]

In Pyatt v. Pyatt, 44 N.J. Eq. 491, at 495 (Prerog.Ct.1888), the court disallowed a request for "Counsel fee and making account -- $15" because there was no breakdown between services of counsel and account preparation. Consequently, a law firm representing a corporate fiduciary, as here, cannot be paid for estate accounting services performed by accountants in its employ unless payment is charged against the fiduciary's commissions, i.e., paid by the fiduciary.

The New Jersey firm indicates that its lawyers have spent 11.04 hours, the Pennsylvania firm 21.25 hours and certified

public accountants (employees of the firm) 42.25 hours on this matter. They seek an allowance of $7,500 ($2,500 to New Jersey counsel; $5,000 to Pennsylvania counsel) for these services. A Pennsylvania partner's affidavit states: "In my firm, accountants' time is charged in the same manner as attorneys' time and represents a direct cost rather than an overhead item." The firm refers to its accountants as "a category of paraprofessionals." That definition is acceptable here. The accountant's work consisted of reviewing accounts, documents and pleadings, preparing drafts and discussing progress and problems with attorneys, all of which work counsel would otherwise have performed. The accountants' time is charged at the rate of $65 an hour in the analysis provided in the firm's affidavit. The various attorneys in the two firms charge fees apparently ranging from $75 to $175 an hour. The actual cost of the accountants' services is not provided.

In fixing counsel fees, hours spent by counsel and (for the purpose of assessing the value of risk and responsibility) hours spent by paraprofessionals are to be considered. The significance of hours (and rates) is discussed below. Pressler suggests that hours are "too often over-emphasized by the court." They are a primary concern but not a controlling one. All aspects of an attorney's work and responsibility must be considered and the importance of one factor over another will vary from case to case. For example, an attorney who solves a complex problem through an intellectual tour de force, made possible by her experience and high capacities, should be paid for those qualities and for that result regardless of time expended. An inept attorney who takes 50 hours to complete a task which a competent attorney would perform in 2 hours, must expect to have 48 hours of her services ignored. Some legal services involve substantial responsibilities and significant risks having nothing to do with time. These circumstances cannot be ignored when fee allowances are considered. R. 4:42-9(b) (repeated for convenience) therefore sets forth some

of the factors to be addressed in connection with fee applications:

Except in tax and mortgage foreclosure actions, all applications for the allowance of fees shall be supported by an affidavit stating in detail the nature of the services rendered, the amount of time actually expended and a good faith estimate of time to be expended, the amount of the estate or fund, if any, the responsibility assumed, the results obtained, the amount of time spent by the attorney, any particular novelty or difficulty, the time spent and services rendered by paraprofessionals, other factors pertinent in the evaluation of the services rendered, and the amount of the allowance applied for, and an itemization of disbursements for which reimbursement is sought.

Our Rules of Professional Conduct ("RPC") also list fee criteria. RPC 1.5(a) provides:

A lawyer's fees shall be reasonable. 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;

(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.*fn2

In the present case, representation of the trust estate required the performance of some special services. Questions arose regarding the payment of certain medical expenses. Tax consequences attending a stock redemption plan designed to provide money for that purpose required research and advice. Otherwise, however, the services rendered to the trust during the period covered by the account were routine. The accounting itself was prepared by the Provident National Bank, one of the trustees. Counsel reviewed the accounting, prepared pleadings, exchanged telephone calls and correspondence, rendered advice, and attended conferences. The size of the estate may be a consideration since a large estate can attract more responsibility

than a small one. The assets are valued at $429,000 in round figures. They consist almost entirely of the stock of one corporation, a circumstance which could dictate special care if problems were present. The affidavits of service, however, do not disclose any "particular novelty or difficulty," or any problems involving the corporate stock, or any other factors affecting the requested allowances, except hours spent by attorneys and paraprofessionals. These hours (for both firms) total 32.29 for attorneys and 42.35 for paraprofessionals. There is no indication that the attorneys spent any time in supervising the paraprofessionals. The fact that their cost is not disclosed does not matter. That cost is overhead, to be recovered by counsel as part of the fee allowance and not to be separately stated. The requested fees are $2,000 for New Jersey counsel and $5,500 for Pennsylvania counsel ($2,400 of which has been paid), plus out-of-pocket expenses.

Except for hours and rates, fee criteria (as suggested, for example, in R. 4:42-9(b) and RPC 1.5(a)) are notably imprecise. Hours themselves, while reflecting numerical precision, are not models permitting exact calculations. Time-keeping methods may produce varied results; hours spent on particular work may be excessive or, as the result of skill and efficiency, may be the opposite. Rates depend upon counsel's own practice, experience, skill and estimate of worth, plus, in most cases, the court's sense of current charges to clients. Hours and rates, however, provide the only measures permitting comparison and a degree of uniformity while assuring attorneys an adequate return upon what Abraham Lincoln referred to as their "stock in trade"-time. The only certain alternative, a fixed percentage of the gross estate, produces arbitrary results ...

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