Inspired by a disabled San Jose man’s crusade to save his trust fund, a bill getting its first hearing in Sacramento on Tuesday offers strong new protections for incapacitated adults from lawyers who siphon off their savings with huge legal bills.
Senate Bill 156, authored by Jim Beall, D-San Jose, addresses one of the central perversities in the years-long fight mounted by Danny Reed: When Reed challenged the excessive fees being levied to manage his money, he was responsible both for his bills and the legal bills of those he believed were cheating him — even if he won his case.
Beall’s legislation essentially reverses that burden by creating a “loser pays” system. In a case alleging excessive fees, a disabled adult who lost would pay his conservator’s legal costs, but the conservator could eat those costs if the fees were judged excessive.
Reed’s lengthy journey through the Santa Clara County court system — highlighted by this newspaper’s investigation “Loss of Trust” — revealed the little-known “fees on fees” provision in state law that makes it extremely risky for elderly and disabled adults to challenge how much they are charged by court-appointed professionals.
Reed, 38, nearly lost much of his life savings beginning in 2010, after the Superior Court appointed him a temporary trustee.
“Danny Reed affected me greatly, and I think Danny Reed is exactly the type of person that generally we as a society should protect,” Beall said. “My bill will empower the Danny Reeds.”
‘Some abuses’
Beall said he believes there are more instances of “massively inappropriate levels of fees,” other than those described in this newspaper’s 2012 series. SB 156, he added, will act as a deterrent for “unscrupulous fiduciaries and attorneys” who pad their bills and then charge to fight over them. “There have been some abuses,” Beall said, “and we need to have legislation to protect people.”
Senators debating the bill Tuesday afternoon in the Senate Judiciary Committee are expected to encounter strong push-back to that assertion. The bill is likely to be opposed by lawyers and private conservators, who say they need protection from unwarranted challenges of their fees for service, which can be costly because the work is complex and time-consuming. For now, Beall’s bill would apply to the largest group of people who face such conflicts — those with private conservators; Reed’s conflict was with a court-appointed trustee.
“Rather than accomplish the desired reduction in litigation, the new provisions would encourage frivolous lawsuits from all interested parties pertaining to conservatorships,” Jerry Desmond Jr., a lobbyist for the Professional Fiduciary Association of California, wrote to Beall’s office, objecting to the bill.
An analysis written for the Senate committee reflects similar concerns and forecasts a “chilling effect” on conservators’ willingness to serve. It notes that if a judge denied even $1 in fees, the conservator could be on the hook for legal costs.
In Reed’s case, after trustee Thomas Thorpe submitted for a judge’s approval a $108,771 bill for less than five months work, the San Jose man challenged those fees and his costs spiraled even more. The fight over the original set of fees led to $261,878 in additional charges from Thorpe and his attorneys to defend the original bill — an amount totaling more than half of Reed’s life savings. The state appeals court has ultimately rejected much of Thorpe’s billing, after it came under intense scrutiny.
SB 156 is described in the committee analysis as aiming to close a gap in state law that “has placed California’s elderly and disabled adults in the untenable position of choosing to accept the overcharges solely because it will cost more to challenge them in court, win or lose.”
The bill “provides more equality,” said Deputy Public Defender George Abel, who represents incapacitated adults in Santa Clara County probate court. “They don’t have to be in that damned-if-you do, damned-if-you-don’t situation.”
Additional bill
For their part, the group representing conservators has used Reed’s case to highlight the case for another bill.
Assembly Bill 1339 would require early notice of estimated fees and periodic monthly payments.
Norine Boehmer, president of the professional fiduciaries trade group, which is sponsoring the legislation, said her take-away from the Reed case is that people in probate court need to be protected from “sticker shock” when the bill lands after a year or more.
Under AB 1339, she said, “Mr. Reed would have had an estimate and some idea of how much it was going to cost. He’d have some assurance that if really unusual things happened — and in his case, really unusual things did happen — he’d know that it would be approximately this much money.”
Contact Karen de Sá at 408-920-5781.
