Herbalife Founder's Death is a Lasting Legacy for Trust Litigation.
The tangled web of litigation can cause some pretty funny alliances at times. Emily Green of the Daily Journal reported on February 28, 2013 that the estate of Mark R. Hughes, founder of Hebalife, Ltd., who died in 2000, is still being litigated in the appellate court. The latest turn of events comes from a claim for $3 million in attorneys’ fees made by the law firm of Mitchell Silberberg & Knupp LLP and attorney Hillel Chodos (Mitchell Silberberg & Knupp LLP and Hillel Chodos vs. Suzan Hughes, et. al., A130802).
The $3 million fee is for services provided to the guardian (Suzan Hughes) of Mr. Hughes’ minor son, Alex. At the time of the litigation, Alex was a minor and Suzan Hughes was fighting to remove the Trustees of Mr. Hughes’ Trust, which had an estimated value of $300 million. The Guardian’s attorneys (Mr. Chodos and company) were allegedly paid $3 million for their services, but they had outstanding fees due of another $3 million. Apparently, the lawsuit to remove the Trustees was unsuccessful.
Once the $3 million bill was asserted, both the guardian (Suzan Hughes) and the Trustees objected to payment of the fees—bringing these former enemies into alliance. At the trial court level, the $3 million fee was denied because the Judge reasoned that the litigation was unsuccessful and was carried out primarily for the personal gratification of the guardian and NOT for the benefit of the minor. Mr. Chodos and company disagreed, saying that during their representation they were following the instructions of the guardian and fighting a lawsuit that they honestly believed was in the best interests of the minor.
The First District Court of Appeal in San Francisco heard arguments and is expected to rule later this year.
Just goes to show that fee issues are a universal truth, the only difference being the amounts. Most people don’t have to argue over $3 million in fees because not everyone has a Trust worth $300 million. While the amounts may be large, the underlying arguments are no different. Fiduciaries of all types, be they Trustees, guardians, executors, or agents under a power of attorney, owe a duty to act reasonably and only take action that is in the best interest of their beneficiaries and wards. Violate that universal truth, and fees may be denied—not just attorney’s fees, but Trustees’ fees too (and executor fees, guardian fees, agent fees, etc).
Notice I said “may” be denied. Why not “must” be denied? Because so much is left to the discretion of the trial court. If you can convince a Judge that your actions were reasonable, even if unsuccessful, then you have a chance of getting those fees approved. Not so black and white after all.