September 8th, 2011
In Foster v. Professional Guardian Services Corporation, the Alaska Supreme Court determined that a court-appointed conservator breached its fiduciary duties through a number of acts and a failure to timely act. Even though the conservator prevailed on a majority of the claims brought against it, and thus prevailed in the “global” scheme of the litigation, the Alaska Supreme Court determined that the conservator could not have its attorney’s fees paid from the ward’s estate for those claims on which it lost.
In reaching its decision, the Alaska Supreme Court suggested that there is no such thing as a de minimis breach of fiduciary duty.The facts and procedural history of this case are long and convoluted (but also a very familiar factual scenario worth reading), but the bottom line is that Professional Guardian Services Corporation was the court-appointed conservator of Ann Davis. Professional Guardian Services Corporation either breached or may have breached its fiduciary duties by:
- Failing to conduct an adequate inventory of the ward’s property. The conservator prepared an inventory of the ward’s property, but did not list anything in the inventory worth less than $400. The conservator contended that National Guardianship Association Standards require an inventory only of items valued over $400. There was nothing in the applicable Alaskan statute, however, that relieves a conservator from listing items worth less than $400 in an inventory and, thus, the inventory was inadequate. While, viewed in isolation, the inadequate inventory may have been harmless, combined with the next point, the issue was remanded back to the trial court for further proceedings.
- Use of paid storage. The conservator paid storage fees to store certain of the ward’s items contending that valuable items in the house required preservation. Again, in isolation, payment of the storage fees may have been permissible, but given the conservator’s contention that there was really nothing of value to inventory, payment of storage fees for valuable items appeared inconsistent with the conservator’s inventory argument. Therefore, the trial court was ordered to clarify this inconsistency on remand.
- Missing pension payments. The federal government thought the ward died before she actually did. As a result, 13 monthly pension payments were not sent to the conservatorship but were paid out directly to the beneficiaries of the pension plan. The trial court found that the conservator had not corrected the issue in a timely manner, resulting in a loss to the conservatorship estate.
The trial court sympathized with the conservator and accused the plaintiff of engaging in wide-ranging, often unclear litigation against the conservator. The court tallied the “small” issues on which the plaintiff prevailed and concluded that the conservator overwhelmingly prevailed on the global attack against it and, therefore, could charge the entirety of its attorney’s fees to the ward’s estate.
Not so fast, held the Alaska Supreme Court. The conservator did actually breach its fiduciary duties here – no matter how small or insignificant the damage to the ward’s estate. It would be unreasonable to reimburse the conservator from the estate for its attorney’s fees spent defending the breaches of fiduciary duty. Thus, the trial court was required to parse out those fees spent defending acts that damaged the ward’s estate no matter how small or difficult to calculate.