https://news.okstate.edu/articles/communications/2017/osu-student-grows-through-internship.html
https://news.okstate.edu/articles/communications/2017/osu-student-grows-through-internship.html
https://www.google.com/amp/s/itsartlaw.org/2016/02/17/case-review-rauschenberg-estate-saga-of-trust-and-fees-explained-again/amp/
Prior to his death, iconic artist and philanthropist Robert Rauschenberg (1925-2008) established a revocable trust whose sole remainder beneficiary was the Robert Rauschenberg Foundation. The Foundation is an organization he had established to further his philanthropic and educational initiatives, and to support artists and art related issues. The trustees were three of Rauschenberg’s long time friends and business associates: Darryl Pottorf, the artist’s business partner and companion of over twenty-five years; Bennet Gruntman, his accountant for over eighteen years; and Bill Goldston, a trusted associate.
During their four years as trustees, the value of the assets in the trust, comprised mainly of high-value works of art created by Rauschenberg, increased from $605 million to over $2 billion.
This increase was due at least partially, to the trustees’ “strategic plan to withdraw Rauschenberg’s art from the market, in order to prevent a decline in value from speculators or collectors flooding the market with his art,” a fate that other famous artists’ estates, such as Andy Warhol’s estate, were not as lucky to avoid. In Re Estate of Rauschenberg, Circuit Court of Florida, 20th Judicial Circuit (Lee County), File No. 08-CP-2479 (Aug. 15, 2014). The trustees maintained a hands-on approach to the job throughout their tenure, and the trial court noted that “Rauschenberg’s artistry was recognized in the marketplace, and some of that recognition is attributable to the Trustee’s management of his ‘brand,’” though the artist’s talent and favorable market conditions at the time after his death should also be mentioned. Id.
The written instrument outlining the parameters of the Trust did not contain a provision addressing the methodology to be used in determining trustee’s fees, and the difference between what the parties thought the fees should be, or $59.625 Million, would prove impossible to settle. So the parties looked to the Florida statute addressing trustee fees. Unfortunately, the statute provides only that the award be “reasonable under the circumstances” without providing any criteria, methodology, or further explanation. § 736.0708(1), Fla. Stat. (2007).
At trial, both sides brought in experts and utilized case law to explain their differing world views. The Foundation focused on the amount of time that the trustees worked and sought to set a reasonable hourly rate. The Foundation thus calculated trustee fees using the “lodestar” method, set forth in Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), by multiplying the number of hours reasonably expended by a reasonable hourly rate. This method is typically used to determine attorney’s fees but was expanded to determine reasonable fees for guardians or personal representatives in In re Estate of Platt, 596 So. 2d 328 (Fla. 1991). The Foundation sought to expand the doctrine and apply this method to trustee fees.
The trustees, on the other hand, focused on the work rendered and value created for the trust. They argued that the court should use the criteria set forth in West Coast Hospital Ass’n v. Florida Nat’l Bank of Jacksonville, 100 So. 2d 807 (Fla. 1958), a case in which trustee fees were actually being contested. The eleven factors to be considered are:
- The amount of capital and income received and disbursed by the trustee;
- The wages or salary customarily granted to agents or servants for performing like work in the community;
- The success or failure of the administration of the trustee;
- Any unusual skill or experience which the trustee in question may have brought to his work;
- The fidelity or disloyalty displayed by the trustee;
- The amount of risk and responsibility assumed;
- The time consumed in carrying out the trust;
- The custom in the community as to allowances to trustees by settlors or courts and as to charges exacted by trust companies and banks;
- The character of the work done in the course of administration, whether routine or involving skill and judgment;
- Any estimate which the trustee has given of the value of his own services; and
- Payments made by the cestuis to the trustee and intended to be applied toward his compensation.
After hearing from 21 witnesses and seeing over 300 exhibits, the Circuit Court found “that there is no precedent for use of the lodestar analysis to determine a reasonable fee for trustees, and further [found] that the use of the lodestar analysis would be unreasonable under the particular facts and circumstances of this case.” In Re The Estate of Rauschenberg. While the trial court applied the West factors recommended by the trustees, it found that they were still asking for more than was appropriate. Using the same factors as the trustees, the court awarded trustee’s fees in the amount of $24,600,000, approximately half of $55,000,000 requested at trial. (For an analysis on how the court weighed the factors and came to this conclusion, please see Rauschenberg Estate Saga of Trust and Fees Explained). Despite the trial court reducing the award and splitting the difference, the Foundation appealed, believing that the judgment frustrated the testator’s intent and hoping to persuade the Court of Appeals that the lodestar method was really the correct way to calculate trustee fees.
On appeal, Circuit Court Judge Silberman, writing for a unanimous court, upheld the trial court’s decision and wrote “only to explain why the trial court correctly refused to calculate fees using the lodestar method.” The opinion focused on the history of applying the lodestar method, emphasizing that it was to proper in determining attorney fees, but there were no cases on point in which the lodestar method was used to determine trustee fees. Since the Florida Statute discussing trustee fees, Fla. Stat. § 736.0708(1) (2007), merely explains that trustees should receive reasonable compensation, the Court of Appeals looked to the statute’s legislative history. The decision relied heavily on the Senate Staff Analyses in support of the bill, which explained “[o]n the factors to be taken into account in determining a reasonable compensation, see West Coast Hospital Association v. Florida Nat’l Bank of Jacksonville.” Therefore, while attorneys will continue to be paid following an hourly rate, trustees fees must be calculated based on the particular trust over which they have control and how well they’ve maintained the trust assets.
The three trustees were represented by Michael Gay, Partner at Foley & Lardner LLP in Orlando Florida, and the Robert Rauschenberg Foundation was represented by Robert W. Goldman, attorney at Goldman Felcoski & Stone P.A. law firm.
Sources:
- In Re The Estate of Robert Rauschenberg, No. 08-CP-2479 (Fla. Cir. Ct., Aug. 15, 2014).
- Robert Rauschenberg Foundation v. Grutman et al, 127 So.3d 514 (Fla. Dist. Ct. App., 2016).
- Fla. Stat. § 736.0708(1) (2007).
- Robert Rauschenberg Foundation, http://www.rauschenbergfoundation.org/ (last visited Feb. 15, 2016).
- Juan C. Antunez, 2d DCA Says YES to $24.6 Million in Trustee Fees; NO to Hourly Billing, Probate & Trust Litigation Blog (Jan. 29, 2016), http://www.flprobatelitigation.com/2016/01/articles/new-probate-cases/compensation-disputes/2d-dca-says-yes-to-24-6-million-in-trustee-fees-no-to-hourly-billing/.
The written instrument outlining the parameters of the Trust did not contain a provision addressing the methodology to be used in determining trustee’s fees, and the difference between what the parties thought the fees should be, or $59.625 Million, would prove impossible to settle. So the parties looked to the Florida statute addressing trustee fees. Unfortunately, the statute provides only that the award be “reasonable under the circumstances” without providing any criteria, methodology, or further explanation. § 736.0708(1), Fla. Stat. (2007).
At trial, both sides brought in experts and utilized case law to explain their differing world views. The Foundation focused on the amount of time that the trustees worked and sought to set a reasonable hourly rate. The Foundation thus calculated trustee fees using the “lodestar” method, set forth in Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), by multiplying the number of hours reasonably expended by a reasonable hourly rate. This method is typically used to determine attorney’s fees but was expanded to determine reasonable fees for guardians or personal representatives in In re Estate of Platt, 596 So. 2d 328 (Fla. 1991). The Foundation sought to expand the doctrine and apply this method to trustee fees.
The trustees, on the other hand, focused on the work rendered and value created for the trust. They argued that the court should use the criteria set forth in West Coast Hospital Ass’n v. Florida Nat’l Bank of Jacksonville, 100 So. 2d 807 (Fla. 1958), a case in which trustee fees were actually being contested. The eleven factors to be considered are:
- The amount of capital and income received and disbursed by the trustee;
- The wages or salary customarily granted to agents or servants for performing like work in the community;
- The success or failure of the administration of the trustee;
- Any unusual skill or experience which the trustee in question may have brought to his work;
- The fidelity or disloyalty displayed by the trustee;
- The amount of risk and responsibility assumed;
- The time consumed in carrying out the trust;
- The custom in the community as to allowances to trustees by settlors or courts and as to charges exacted by trust companies and banks;
- The character of the work done in the course of administration, whether routine or involving skill and judgment;
- Any estimate which the trustee has given of the value of his own services; and
- Payments made by the cestuis to the trustee and intended to be applied toward his compensation.
After hearing from 21 witnesses and seeing over 300 exhibits, the Circuit Court found “that there is no precedent for use of the lodestar analysis to determine a reasonable fee for trustees, and further [found] that the use of the lodestar analysis would be unreasonable under the particular facts and circumstances of this case.” In Re The Estate of Rauschenberg. While the trial court applied the West factors recommended by the trustees, it found that they were still asking for more than was appropriate. Using the same factors as the trustees, the court awarded trustee’s fees in the amount of $24,600,000, approximately half of $55,000,000 requested at trial. (For an analysis on how the court weighed the factors and came to this conclusion, please see Rauschenberg Estate Saga of Trust and Fees Explained). Despite the trial court reducing the award and splitting the difference, the Foundation appealed, believing that the judgment frustrated the testator’s intent and hoping to persuade the Court of Appeals that the lodestar method was really the correct way to calculate trustee fees.
On appeal, Circuit Court Judge Silberman, writing for a unanimous court, upheld the trial court’s decision and wrote “only to explain why the trial court correctly refused to calculate fees using the lodestar method.” The opinion focused on the history of applying the lodestar method, emphasizing that it was to proper in determining attorney fees, but there were no cases on point in which the lodestar method was used to determine trustee fees. Since the Florida Statute discussing trustee fees, Fla. Stat. § 736.0708(1) (2007), merely explains that trustees should receive reasonable compensation, the Court of Appeals looked to the statute’s legislative history. The decision relied heavily on the Senate Staff Analyses in support of the bill, which explained “[o]n the factors to be taken into account in determining a reasonable compensation, see West Coast Hospital Association v. Florida Nat’l Bank of Jacksonville.” Therefore, while attorneys will continue to be paid following an hourly rate, trustees fees must be calculated based on the particular trust over which they have control and how well they’ve maintained the trust assets.
The three trustees were represented by Michael Gay, Partner at Foley & Lardner LLP in Orlando Florida, and the Robert Rauschenberg Foundation was represented by Robert W. Goldman, attorney at Goldman Felcoski & Stone P.A. law firm.
Sources:
- In Re The Estate of Robert Rauschenberg, No. 08-CP-2479 (Fla. Cir. Ct., Aug. 15, 2014).
- Robert Rauschenberg Foundation v. Grutman et al, 127 So.3d 514 (Fla. Dist. Ct. App., 2016).
- Fla. Stat. § 736.0708(1) (2007).
- Robert Rauschenberg Foundation, http://www.rauschenbergfoundation.org/ (last visited Feb. 15, 2016).
- Juan C. Antunez, 2d DCA Says YES to $24.6 Million in Trustee Fees; NO to Hourly Billing, Probate & Trust Litigation Blog (Jan. 29, 2016), http://www.flprobatelitigation.com/2016/01/articles/new-probate-cases/compensation-disputes/2d-dca-says-yes-to-24-6-million-in-trustee-fees-no-to-hourly-billi
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