Opinion
C. A. PB-2012-3338 PB-2012-3476
04-16-2018
ANGELA GIGUERE KUMBLE f/k/a ANGELA GIGUERE and CHRISTINE TELLEFSON f/k/a CHRISTINE GIGUERE-CARROZZA v. MICHAEL VOCCOLA and DANIEL SHEDDMICHAEL A. VOCCOLA and DANIEL S. SHEDD, in their capacity as Trustees of the Trust Under Will of Frederick Carrozza Jr., and MICHAEL A. VOCCOLA in his capacity as Executor of the Estate of Frederick Carrozza Jr. v. ANGELA GIGUERE KUMBLE, CHRISTINE TELLEFSON and EVAN S. LEVISS
For Plaintiff: Mark W. Freel, Esq. For Defendant: Robert M. Duffy, Esq.
For Plaintiff: Mark W. Freel, Esq.
For Defendant: Robert M. Duffy, Esq.
DECISION
SILVERSTEIN, J.
This case is before the Court for decision with respect to a single issue. The issue-should prejudgment interest be added to the amount of legal fees and costs determined by the Court to be reasonable to which the Trustees (Defendants in PB-2012-3338 and Plaintiffs in PB-2012-3476) are entitled by way of indemnification. That issue appears not previously to have been presented to or ruled upon by our Supreme Court.
FACTS
The issue arises out of the following facts. The Trustees have been involved with lengthy, contentious, and somewhat bitter litigation with the Trust beneficiaries since 2012 when the beneficiaries sought and ultimately successfully obtained the effective termination of the Trust (subject however to the terms and conditions set forth in a Consent Order dated December 10, 2012 entered in PB-2012-3338). A copy of the Consent Order is annexed hereto as Exhibit 1 and is made a part hereof (the Consent Order). The Consent Order in Paragraph 8 clearly contemplated that the Trustees' fees and expenses, including professional fees, would be determined and would be paid and that thereafter judicial involvement with respect to the trusts, properties, assets, and proceeds would end. Subsequent to the entry of the Consent Order, extensive litigation ensued between the Trustees and the beneficiaries. On May 11, 2017, this Court issued its decision dealing with the merits of the controversy between the parties, a copy of which may be found at 2017 WL 2159096. Predicated upon that decision, the Court directed the Trustees, through counsel, to present their claims for professional fees (legal fees and costs) and in connection therewith to follow the procedure set forth in Tri-Town Constr. Co., Inc. v. Commerce Park Assocs. 12, LLC, 139 A.3d 467 (R.I. 2016). Consistent with the Court's direction, the parties followed the dictates of Tri-Town, and, on or about January 17, 2018, this Court rendered a Bench Decision determining that the amount of legal fees reasonably incurred by the Trustees subject to indemnification was $1,040,293.00, and that the amount of costs reasonably incurred by the Trustees subject to indemnification was $1688.66.
In its Bench Decision, the Court directed that amounts previously paid toward such fees and costs by retainer, pursuant to earlier Court orders or otherwise, be reconciled. Following such reconciliation, the Court finds the amount presently unpaid to which the Trustees are entitled is $765,456.66, leaving open only the issues stated above-should prejudgment interest be added to the amount that the Court has found to be due to the Trustees by way of indemnification for legal fees and costs incurred by them.
The Beneficiaries' Position
The beneficiaries contend that although there appears to be a void with respect to cases involving interest on legal fees and expenses awarded as indemnity to trustees, because such fees (and expenses) are not "damages" the provisions of our prejudgment interest statutes G.L. 1956 §§ 9-21-8 and 9-21-10 are not applicable. Further, the beneficiaries argue that until the Court's Bench Decision of January 17, 2018, a copy of which is attached hereto as Exhibit 2 and made a part hereof, the amount of reasonable legal fees (and expenses) subject to indemnification had not been determined. Accordingly, any interest at most should run from that date because prior to that date there was no amount which had been determined to be due to which interest would apply.
In response to the assertion that the Trustees had agreed with their counsel in a certain engagement letter dated June 11, 2012 to pay interest at the rate of 1% per month on amounts not paid within thirty days following billing and that the beneficiaries' counsel had been made aware of that fact, the beneficiaries argue that neither that fact nor the engagement letter had been made part of the record until the March 6, 2018 hearing on the objection by the beneficiaries to the imposition of interest.
The Trustees' Position
The Trustees assert that interest at the rate of 1% per month on sums outstanding after thirty days following billing is applicable to the reasonable fees and expenses found by the Court. They argue that pursuant to the provisions of the engagement letter such interest is specified-that the beneficiaries' counsel had been provided with a copy of that engagement letter-and that despite such knowledge the beneficiaries contested the Trustees' request for payments during the course of the litigation. Indeed, at one point the beneficiaries even unsuccessfully sought certiorari from our Supreme Court to an on-account award of fees by this Court which was subject to regurgitation if the Court ultimately found such fees to be unwarranted.
The Trustees, in addition to arguing that the agreement with their counsel contemplated the imposition of interest (a service fee so-called) as aforesaid, also argue that our Supreme Court's order in Sundlun v. Loper, 598 A.2d 653 (R.I. 1991) also supports their contention that interest is due with respect to the reasonable attorneys' fees and expenses subject to indemnification. In that case, the Court, following a show cause hearing, reversed a trial justice's decision denying a trustee prejudgment interest with respect to the trustee's fees found by the trial justice to be due. The Supreme Court remanded the matter to the trial court "to determine the amount of interest to be awarded." Id. at 653. The Supreme Court's order directed that interest run from the date on which the trustee's services had terminated even though no bill was rendered by the trustee until some six or seven months after the termination of his services (see trial court decision Sundlun v. Loper, No. 84-3285, 1990 WL 10000213 (Oct. 18, 1990). Here, essentially, the Trustees contend that their counsel periodically rendered bills to them and that if the trustees in Sundlun were entitled to interest for a period prior to rendering a bill, that they as the recipient of legal services from their attorneys were obligated to pay their attorneys a service fee or interest per the engagement letter.
Here, the Trustees established that bills were rendered to them by their attorneys on a regular, periodic basis and that the engagement letter freely entered into by them contemplated the interest factor for which they now seek indemnification.
Discussion
Having laid out the positions of the respective parties, the Court now turns to its determination of what is described at the inception of this Decision as the single issue to be decided, that is, "should prejudgment interest be added to the amount of legal fees and costs determined by the Court to be reasonable" and subject to indemnification from the trust assets.
After taking into account the arguments (both written and oral) of counsel for the parties, the Court turns to Rhode Island statutory law for the answer to the issue presented. G.L. 1956 § 18-6-1 provides, in pertinent part, as follows:
"Every trustee under any trust instrument . . . shall be entitled to reasonable expenses and costs incurred in the execution of the trust
The Court is satisfied that the provision contained in the retainer agreement, which, while not having heretofore been made an exhibit nor introduced at trial, had been provided to counsel for the beneficiaries early in the case.
Counsel for the beneficiaries did not object when Trustees' attorney produced a copy of the engagement letter to the Court at the March 6, 2018 hearing. (Tr. 3:6-1:5.)
Having found that there are no Rhode Island cases directly on point and having found that 1% a month on amounts due and unpaid thirty days following billing is reasonable and was called for by the retainer agreement, the Court further is satisfied that the service charge (interest) hereinbefore referred to constitutes in the language of § 18-6-1 "reasonable expenses and costs incurred in the execution of the trust" for which the Trustees are entitled to indemnification.,
The Court notes that at oral argument, counsel for the Trustees agreed that prior to the Consent Order, the Trustees had control of the trust res and could have paid their attorneys' invoices and indemnification for interest as to any such unpaid amount prior to said Consent Order would not be appropriate.
Also during arguments on March 6, Trustees' counsel articulated what essentially was a formula by which the amount of interest should be determined. The Court approves of that formula and directs that the amount of interest be computed through April 24, 2018, taking into account the provisions contained in n.l ¶ 1.
An order consistent with the provisions of this Decision shall be prepared and presented by the prevailing party with notice and an opportunity to be heard to counsel for the beneficiaries.
EXHIBIT 1
Alan Baton, Senior Counsel SEYFARTH SHAW LLP
Bernard J. Jackvony, Esq., PANNONE LOPES DEVEREAUX & WEST LLC
CONSENT ORDER
This matter arose upon the Emergency Motion to Modify Order and For Stay filed on November 28, 2012, by Michael Voccola and Daniel Shedd in their capacity as Trustees (the "Trustees") of the Frederick Carrozza Jr. Testamentary Trust Under Will dated April 2, 2002, including the Marital Trust and the Family Trust contained therein (the "Trusts"). Upon consent and agreement of the undersigned parties, including Plaintiffs Angela Giguere Kumble f7k/a Angela Giguere ("Kumble") and Christine Tellefson f/k/a Christine Giguere-Carrozza ("Tellefson") (sometimes collectively, "Plaintiffs"), following a hearing before this Court on November 29, 2012, and a chambers conference on December 5, 2012, it is hereby
ORDERED
as follows:
1. Except as expressly set forth and modified herein, the Order entered by this Court on November 19, 2012 (the "November 19 Order"), shall remain in full force and effect according to its terms. Any previous stay of the November 19 Order by this Court, following the hearing held on November 29, shall be lifted and shall cease to be of force or effect upon entry of this Order.
2. The Trustees will transfer the real estate owned by the Trust (the "Properties") to Tellefson, absolutely, in fee simple, free of trust, in accordance with the November 19 Order, by Trustees' Deeds to be executed within twenty-four (24) hours of the entry of this Order, subject to Bank consent and Tellefson assumption as described below, by executing the deeds provided by Plaintiffs and delivering them to their counsel Mark W. Freel, Esq. Thereafter, the executed Trustees' Deeds shall be held in escrow by counsel for the Plaintiffs, Mark W. Freel, Esq., and shall not be recorded in the land evidence records or delivered to Tellefson or Kumble until the Trustees' receive verification that Newport Federal Savings Bank (the "Bank") has consented to such transfer, Tellefson has assumed any of the Trust's obligations under the Loan Agreement dated March 16, 2012 secured by the Properties, and the Bank has agreed to such assumption. Tellefson is free to pursue other financing arrangements for the Properties, provided those arrangements result in a release of all of the Trustee's obligations under the aforementioned Loan Agreement, and provided they do not increase the encumbrance on any one or more of the Properties. Tellefson and Kumble will indemnify and hold harmless the Trustees for any errors that may be contained in the aforementioned Trustees' Deeds.
3. Upon transfer, Tellefson will become responsible for all ongoing expenses, oversight, maintenance and management of the Properties, and neither the Trust nor the Trustees will have any further responsibility for the Properties after the date of the transfer. Effective immediately, Mark W. Freel, Esq., counsel for the beneficiaries, shall provide counsel for the Trustees with monthlyreports of revenue received and expenses incurred in connection with the management of the Properties after transfer within two weeks of the close of the prior month, but only until such time as the Trustees are duly discharged by the Court. Revenue generated by the Properties, after payment of necessary and ordinary expenses incurred in connection with operation of the Properties, shall be held in escrow with the law firm of Edwards Wildman Palmer, LLP until the Trustees are duly discharged by the Court. The Court shall retain an equitable lien (not to be recorded in any land evidence records) on the Properties and proceeds therefrom, as set forth herein, and shall retain jurisdiction over the disposition of the Properties and proceeds until the Trustees are duly discharged by the Court.
4. In accordance with the November 19 Order, the Trustees shall assign the Trust's interest in the Judgment entered by this Court in Civil Action No. NM02-0603, currently pending on appeal before the Rhode Island Supreme Court in Carrozza v. Voccola. Appeal No. SU-11-0132, (the "Judgment"), to Tellefson absolutely, in fee simple, free of trust. That assignment shall occur forthwith and shall be in a form reasonably satisfactory to Plaintiffs' counsel. Upon entry of this Order, the law firm of Duffy & Sweeney shall withdraw its appearance on behalf of the Trust in the pending appeal of the Judgment in the Rhode Island Supreme Court.
5. Tellefson shall not further encumber or borrow against the Properties until such time as the Trustees are duly discharged by this Court. If she first obtains approval of this Court, Tellefson may sell one or more of the Properties, the net proceeds of any such transaction, after payment of usual and customary costs of sale, to be placed in escrow with the law firm of Edwards Wildman Palmer, LLP, until such time as the Trustees are duly discharged by this Court.
6. Tellefson and Kumble shall not assign, encumber or otherwise dispose of any part of their interest in the Judgment until such time as the Trustees are duly discharged by this Court. Any collection or recovery that Tellefson or Kumble obtains on the Judgment following the entry of this Order shall be placed in escrow with the law firm of Edwards Wildman Palmer, LLP, until such time as the Trustees are duly discharged by this Court. The foregoing is subject to Plaintiffs' right to assert a claim for reimbursement of legal fees and costs incurred in pursuit of the Judgment as expenses incurred in administration of the Trust. No payment shall be made on any such claim prior to Court approval and Trustee discharge. The amounts to be placed in escrow include, but are not limited to, all payments on the Promissory Note dated November 21, 2011 received by Kumble from Barbara Patriarca and Soho, Inc. in partial satisfaction of the Judgment.
7. Attorney Mark Freel will make monthly reports to Trustees' counsel of all activity in the escrow account within two weeks of the close of the prior month.
8. Once all claims and issues related to the wind-down of the Trust have been fully adjudicated and resolved (in this action and/or in Civil Action No. 12-3476), including but not limited to any claims by the Trustees for fees or expenses, including professional fees, and Plaintiffs' defenses and Counterclaims, and after the Trustees and their professionals have received whatever remuneration and compensation is deemed to be due to them and they have been discharged by this Court, any restrictions on the disposition of the Properties, other Trust assets or proceeds set forth in this Order shall be lifted and will automatically cease to be of any force or effect, without any further action by Tellefson or Kumble.
9. To the extent that the Trust assets are insufficient to pay for any expenses, fees or liabilities incurred in the administration of the Trusts and approved by the Court, Tellefson and Kumble shall personally indemnify the Trustees for any such expenses, fees or liabilities, but only to the extent of the value of all proceeds or property that Tellefson and/or Kumble received from the Trust; provided, however, that this limitation on indemnity shall not apply to the extent that the Court determines, following notice and an opportunity to be heard, that Tellefson and Kumble were not harmed by the actions complained of or that any claims or defenses were pursued by them in bad faith. The Trust expenses and liabilities referred to in this Paragraph include, but are not limited to, Federal and State taxes, professional fees incurred in the administration of the Trust, and any compensation that the Court determines is due to the Trustees. Plaintiffs reserve the right to contest any such fees or expenses.
10. Plaintiffs further agree to indemnify the Trustees for any potential fees, penalties, taxes, interest or other liabilities imposed by the Internal Revenue Service with regard to or as a result of tax returns filed for or on behalf of the Trust by James Alves, C.P.A., and the Trustees will cooperate in signing future Trust tax returns to be prepared by Mr. Alves or another tax professional of Plaintiffs' choice, provided that Plaintiffs will bear the cost of the tax work and the accuracy of the tax returns to be signed by the Trustees is duly certified to the Trustees by Mr. Alves or another tax professional. The Trustees will not seek payment from Trust assets for any further fees or expenses generated by any other accountants or accounting professionals without first obtaining Court approval.
11. Tellefson and Kumble waive any accounting for any Trust period other than March 1, 2012 to the present as set forth below. On or before Monday, December 17, 2012, the Trustees will account to Plaintiffs for any revenue they received as Trustees from the Trust or its assets at any time since March 1, 2012, the specific manner in which any and all such revenue was spent or disbursed, and the current whereabouts and status of any such funds still on hand. That shall include, without limitation, funds received from the refinancing of the Properties on or about March 16, 2012; funds received from the sale of any Trust properties after March 1, 2012; and funds received as a result of the management of the Properties after July 1, 2012. The Trustees will also disclose any contracts, memoranda of understanding, letters of intent or other agreements of any kind that the Trustees have entered into at any time on or after March 1, 2012, to sell, convey, pledge or encumber any Trust assets, or any portion thereof, to any third parties. Within five (5) business days of the receipt of all of the foregoing information, and without otherwise delaying the prompt transfer of the Properties to Tellefson as set forth in Paragraph 1, and in the November 19 Order, Tellefson and Kumble will inform the Court if they will agree to waive a further accounting by the Trustees for this period. After resolution of all Trust matters, as set forth herein, Tellefson and Kumble will release and indemnify the Trustees at the time of final discharge of the Trustees from and for all claims arising out of or relating to the Trusts, the Carrozza Estate and/or their conduct as Trustees and Executor. If Tellefson and Kumble elect not to waive further accounting for the limited period March 1, 2012 to the present, as set forth above, their responses to the Trustees' pending discovery requests in this action shall be due on December 23, 2012.
12. This Order is without prejudice as to any other claims or demands that any party may have as against any other party or parties arising out of or with respect to the administration and/or termination of the Trusts, whether set forth in this action (as amended) or in Civil Action No. 12-3476 (as amended). The parties also reserve the right to conduct discovery as to all facts and time periods, notwithstanding any other provisions of this Order. Following the entry of this Order, the parties shall confer in good faith in an effort to consolidate the claims made in this action and in Civil Action No. 12-3476, and shall make best efforts to resolve any of those claims that have been adequately addressed by the entry of this Order.
13. All parties waive any right to appeal this Order and agree that it shall be fully binding and enforceable upon entry by this Court.
EXHIBIT 2
BENCH DECISION RENDERED BY ASSOCIATE JUSTICE MICHAEL A. SILVERSTEIN ON; WEDNESDAY, JANUARY 17, 2018
APPEARANCES:
MARK EREEL, ESQUIRE.................FOR THE BENEFICIARIES
ROBERT DUFFY, ESQUIRE
STACEY NAKASIAN, ESQUIRE............FOR THE TRUSTEES
WEDNESDAY, JANUARY 17, 2018
MORNING SESSION
THE CLERK:. PB/2012-3338, Angela Rumble versus Michael Voccola.
THE COURT: Counsel identification, please.
MR. DUFFY: Good afternoon, Your Honor.
Robert Duffy for the trustees.
MS. NAKASIAN: Stacey Nakasian for the trustees.
MR. FREEL: And Mark Freel for the beneficiaries. Thank you, Your Honor.
THE COURT: All right, Counsel. The Court is prepared to render a bench decision in this matter, which follows.
This matter is before the Court for decision with respect to the request of Messrs. Voccola and Shedd in their capacities as trustees of the trust under the will of Fred Carrozza, Jr. for indemnification as to the reasonable attorneys' fees and expenses incurred by them in connection with or related to the matters which were the subject of the decision dated May 11, 2017, rendered by the Court in the captioned litigation.
(Sometimes hereinafter, that decision is referred to as "the decision.")
The Court quotes a portion of the conclusion of the decision as follows, quote:
"The Court also determines that the Trustees are indemnified as to the reasonable attorneys' fees and expenses incurred in a manner consistent with the reasoning articulated above. The amount of reasonable attorneys' fees and expenses to which the Trustees are entitled is still subject to the procedure outlined in Tri-Town."
That's from Page 43 of the decision. The reference to Tri-Town is to our supreme court's opinion in Tri-Town Construction Co. v. Camnerce Park Associates, LLC, 139 A. 3d 467 at Pages 479 through 480, an opinion of our supreme court in 2016.
The Court notes that counsel for the pre - excuse me, the prevailing party here seeks legal fees aggregating approximately $1,040,293 and un-reimbursed expenses of $12,505.
Prior to rendering the decision and during the course of the proceedings before the Court, conditional on-account payments with respect to counsel fees totaling $276,525 were ordered by the Court.
The Court further notes that in connection with claims by certain tenants of real estate constituting a portion of the trust res, it appears that a third party payment was made to the trustees' attorneys.
Finally, the Court notes that the record suggests that the attorneys also were paid a retainer at the time they were engaged by the trustees.
To the extent that further payments to trustees counsel through this request for indemnification is approved by the Court in this decision, all payments heretofore made to them shall be reconciled, and only the net amount remaining shall be paid from the trust assets or assets heretofore impressed with an equitable lien by the Court or by the trust beneficiaries, Angela Giguere Kumble and/or Christine Tellefsen, to the extent that they may under circumstances pursuant to a certain consent court order dated December 10, 2012, be liable therefore.
This Court in drafting the decision devoted substantial time to addressing and resolving the issue of whether the trustees are entitled to indemnification for attorneys' fees and expenses. Indeed, in its decision the Court suggested that that issue might be the "most pressing issue presented in this case." That's in the decision at Page 29.
The Court determined as to all categories of work performed, except with respect to the work performed by the attorneys post March 31, 2015, that indemnification was proper but left a determination as to reasonable amount as to another day.
As to the post March 31, 2015, issues, the Court neither held that legal fees and expenses after that date were or were not indemnifiable. A determination as to that issue was also left to another day.
And the issue of what reasonable fees were was left to the procedure contemplated by Tri-Town.
As stated in the decision, quote:
"If the Court finds that a party is entitled to attorneys' fees, the Court must then make a determination as to the dollar figure, but only after the prevailing party has had an opportunity to prove and non-prevailing party has had the opportunity to contest the reasonableness of the attorneys' fees sought. (See Pages 479 through 480) . 'To prove the reasonableness of legal fees, ' the party awarded attorneys' fees and expenses must offer competent and independent evidence, in the form of an affidavit or expert testimony, 'from counsel who is a member of the Rhode Island Bar and who is not representing the parties to the action.' That independent affidavit or expert testimony must include 'the criteria on which the fee award is to be based.' (See Sisto v. America Condo Association, 140 A. 3d 124, which quotes Colonial Plumbing & Heating Supply, 464 A.2d 744) . The non-prevailing party will then have an opportunity to submit his or her own affidavit or expert testimony from an independent Rhode Island attorney regarding the reasonableness of the fees requested. See Tri-Towa, 139 A.3d at 479-480)."
After considering the evidence from both parties, the Court then makes its determination as to reasonableness. Here
By the way, that closes the quote.
Here, the Court directed the parties to follow the dictates of Tri-Towi. And the trustees, as well as the beneficiaries, separately engaged highly qualified, well-respected members of the Rhode Island Bar to review, assess, and analyze the reasonableness of the legal fees and expenses for which the trustees sought indemnification.
Neither of the affiants represented any of the parties to this litigation, and each of the affiants in performing their appointed tasks reviewed inter alia, the fee affidavits filed by Attorney Stacey Nakasian, one of the trustee's attorneys, as well as all significant documents in connection with these matters, including pleadings, memos, and briefs; the court decision, trial records and summaries, as well as client invoices.
Each of the affiants - Mr. Oliverio for the trustees and Mr. Corrente for the beneficiaries - took into account in reaching his opinion the so called Colonial Plumbing factors. (See also Section 1.05 of the Rules of Professional Conduct Which hereby is incorporated herein by reference as if fully set forth here) . The same factors are found at Colonial Plumbing & Heating Supply previously cited.
Generally speaking, the application of these factors is referred to as the lodestar method of determining the reasonableness of legal fees. Some courts apply the method by determining the reasonable number of hours and apply a reasonable, appropriate, proper hourly rate, they call that a lodestar; and then just the lodestar by application of the additional factors to determine the appropriate amount of an award or here of the appropriate amount to be indemnified.
While other courts take into account all the factors and call the result the lodestar and award that amount, our supreme court has directed lower courts to consider -- this is in quotes, "consider all the elements which properly enter into the fee setting process, giving each such weight as may be appropriate to the particular circumstances of the case." (Colombo v. The United States Rubber Company, 102 R.I. 220 at Page 224; again, an opinion of our supreme court in 1967) .
So far as this Court is concerned, whether the lodestar is determined by time times rate and then adjusted as aforesaid, or if the lodestar is the result of the application of all of the factors, it makes no difference to the final amount of award or here, the amount to be indemnified to the trustees. The arithmetic either way would come out the same.
Finally the Court, directly addressing and determining the reasonable amount of gross fees to which trustees' here attorney - to which trustees' attorneys are entitled subject to the reconciliation referred to above and for which the trustees should be indemnified, the Court holds that the post March 2015 submission of the trustees as hereinafter adjusted by the Court should also be subject to indemnification.
In reviewing the evidence before the Court with respect to the question of the proper amount or by way of indemnification for reasonable legal fees and expenses to the trustees, the Court notes that that evidence consists not only of the so-called Tri-Town affidavits but also the affidavits and other items relied upon by Attorneys Corrente and Oliverio in connection with their respective Tri-Town affidavits.
Turning briefly now to those affidavits and to the opinions expressed therein. The Court notes that, except as hereinafter stated, the experts, though coming to different bottom line conclusions, agree with respect to the many of the Colonial Plumbing factors. (See, for example, the factors 5 through 8) .
The essential disagreement giving rise to the "different bottom line conclusions" are found with respect to:
A) The hourly rate billed by Attorney Duffy;
B) Whether the protracted hearings and time demands were (i) the joint responsibility of the parties or (ii) the responsibility of the beneficiaries to a greater extent than of the trustees;
C) Whether certain out-of-pocket expenses ought be treated as reimbursable or should they rather have been deemed part of general overhead incidental to the trustees' attorneys1 practice of law; and
D) Did the trustees' counsel achieve success.
The last item leads into a discussion of a factor not specifically enumerated in the Colonial Plumbing factors but one that was discussed by this Court in its decision in Ferris Avenue Realty, LLC v. Ruhtamaki, Inc., PB/07-1995, found at 2013 WL 17889488, a decision rendered by this Court on April 22, 2013.
Both Attorneys Corrente and Oliverio discussed and came to different conclusions with respect to the applicability of the issue of proportionality raised in the Ferris Avenue case. In substantial part, the Court has concluded that the differing conclusions reached by what the Court has referred to as the Tri-Towi affidavits stems from the four factors just mentioned by the Court in the preceding paragraph.
The Court now will discuss each of these issues seriatim.
First, the Court is satisfied based upon the affidavit of Attorney Oliverio, as well as its specific knowledge of hourly rates of Rhode Island attorneys dealing with sophisticated matters such as the ones that the Court believed were involved in this case. The Court recognizes that both affidavits recognize that Attorney Duffy was a sophisticated, experienced attorney in matters of this nature. The Court finds, as did Mr. Oliverio, that the rates charged by Mr. Duffy are and have been within the rates charged by lawyers of his experience and skill in the community. The Court specifically rejects the conclusion that the rate of $550 an hour only is charged by highly sophisticated and qualified Rhode Island attorneys when involved in regional or national litigation. That has not been the experience of this Court.
Second, there is no question but that this matter was extremely hard fought. There is no question but that both sides of the V seemed to have developed, for whatever reason, a take no prisoner strategy in connection with this case. Each issue required extensive motion practice. It was as if more was at stake in the case then the legal issues that were pending before the Court. The Court is unable to quantify which of the parties, which side of the V, was more responsible for the amount of time that was necessarily expended in connection with the handling of this litigation and the related matters.
Third. The Court finds that two categories of out-of-pocket expenses for which indemnification is sought should be deemed nonreimbursable overhead of the trustees' law firm; therefore, not subject to indemnification to the trustees. Those categories are meals and computer research. Older certain circumstances the Court would and has permitted reimbursement for expenses for meals but never, to the best of the Court's recollection, when the matter is local. If counsel is out of town, out of state, that's a different issue. So far as computer research, the Court doesn't believe that that should be reimbursable, just as the maintenance of a law library or the rental for the attorney's office is not a separate reimbursable amount but is contained in general overhead and is a factor used in determining the hourly rate charged by timekeepers.
Four. Beneficiaries here through their affiant suggest a lack of success on the part of the trustees and trustees' counsel. They suggest that lack of success predicated on the disparity between what the executor and the trustees sought as compensation for their services and the amount that the Court ultimately allowed both as to the executor and as to the trustee a substantial reduction from the amount sought.
For Mr. Corrente, that demonstrated that the trustees' attorneys had not been successful; and pursuant to the Colonial Plumbing factors, that lack of success ought be taken into account in determining the reasonableness of the trustee or the attorney -- the trustees' attorneys' fee.
Further, if the Ferris Avenue test is applied, then the $1 million plus or minus fee here sought, plus, actually, if allowed, is so disproportionate at to the amount recovered as to be beyond the realm of reasonableness and to be inconsistent with the fourth Colonial Plumbing factor, the amount involved, and the result obtained.
Here, however, the Court is satisfied that far more was involved in this litigation than the quantum of fees to be paid to the trustees and to the executor. Substantial claims had been asserted against the trustees which were resolved in their favor. This is not simply a classic fee dispute. The results obtained transcended the number of dollars recovered by way of fees to the executor and to the trustees.
The Court here is satisfied that subject to the adjustments that the Court indicated, which I will repeat in a moment, that the fee request under all the attendant circumstances predicated on the evidence before the Court, including the affidavit of Mr. Oliverio, as well as the Court's familiarity with every aspect of the case from the day it was filed to now, the fee request is reasonable; that subject only to the adjustments with respect to the payments heretofore authorized by the Court in the full amount of $276,525; subject to such amount as may have been received from the situation involving the Newport tenants suit; an adjustment with respect to whatever retainer was paid at the time of the engagement; and an adjustment with respect to disallowing, with respect to the $12,000 plus out-of-pocket expenses sought, the fees for meals - the amounts for meals and computer time research.
Other than that, the fee application, the request for indemnification is approved.
The Court recommends that you folks work out the arithmetic and present an appropriate order. I take it that, while I am going to ask that you run the order by and work the arithmetic out with your opponent, that, I take it, it's not going to be a consent order?
MR. EREEL: It's not going to be?
THE COURT: A consent order.
MR. EREEL: Well, actually, the one issue I'd like to raise with the Court now that I -- I see as sort of the one remaining possible hurdle to getting something done, and I am speaking without any opportunity to have discussed this result with my client yet, is the question of prejudgment interest.
Mister Duffy and Ms. Nakasian have referred at various times in the past in connection with this ultimate award to be made by the Court of an entitlement to prejudgment interest on this amount. But the considerable research that I have done and the underlying facts in this case suggest to the contrary.
So, that's one last issue the resolution of which --
THE COURT: Do you gentlemen want to brief that issue quickly?
MR. FREEL: Well, I am going to suggest that unless we can maybe in the next week to ten days resolve something by agreement, and I want to leave that window open, that That's exactly what we then will have to do.
THE COURT: All right.
MR. EREEL: Because that's going to be one more large factor before we can resolve this.
MR. DUFFY: Your Honor --
THE COURT: We will -
Go ahead, Bob.
MR. DUFFY: Yeah, just briefly.
Mister Freel is correct. We think that the - our supreme court in the Sundlun case applied interest in precisely this situation. We believe that the law is very clear. But if they feel otherwise, unless we can come to agreement, we are going to have to brief it.
These bills and charges have been accruing for many, many years. So there's interest. And the debt was carried. So these are things that need to be addressed.
THE COURT: If we can go off the record just for a moment, please.
(Off the record)
(Bench decision concluded)
(RECESS)