An estate hired a lawyer to act as the co-executor of the estate. The lawyer was paid on a percentage basis – 3% of the gross amount of the Estate. (In Illinois this type of payment arrangement is illegal. However, in Kentucky is it is perfectly legal). Of note is that the maximum fee in Kentucky is 5% – the lawyer only charged 3%. For those with an understanding of economics, that would indicate a working market in Kentucky where there is bargaining power on both sides of the transaction. In addition, the lawyer’s firm charged over one million in legal fees to the estate. These were apparently hourly charges.
As a result of the fee agreement, the lawyer/executor collected a large fee, in excess of $300,000. The executor then sued the lawyer for legal malpractice for charging excessive fees. (The executor could not sue for breach of contract because the lawyer complied with the terms of the contract and the court approved the payments).
Result: summary judgment for the lawyer. This passage of the opinion sets out the key issues in the dispute:
Gail claims the Circuit Court erred in concluding Kentucky does not recognize a claim of legal malpractice or breach of fiduciary duty based solely on a fee dispute between an executor or attorney of an Estate and the client in a probate case. However, she cites no Kentucky case supporting her position. Mauldin and BOAM argue the reasonableness of the fee must be decided by the district court because this is a probate matter. They further argue if Gail is correct, every dispute over an executor’s commission or an attorney’s fee arising from an estate will give rise to a civil action for legal malpractice and breach of fiduciary duty coupled with a demand for a jury trial.
Several states have held allegedly “excessive legal fees cannot provide the sole basis for a malpractice claim.” Davis v. Findley, 260 Ga.App. 443, 579 S.E.2d 848 (2003). The Circuit Court stated its research—and that of the parties—had revealed “no negligence claim based solely on a fee dispute has been approved in any published case law in Kentucky or nationally.”…
We hold Kentucky does not recognize a claim of legal malpractice or breach of fiduciary duty based solely on a fee dispute between an executor or attorney of an Estate and the client in a probate case.
Comment: a percentage fee for an executor would not pass muster in Illinois. In Kentucky, it does. Once the probate court approved the fee, as well as the legal fees charged by the law firm, that was the end of the matter.
I frequently handle legal fee disputes for both lawyers and their former clients. It is an area of law that I am familiar with.