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Kincaid v. Johnson, True, & Guarnieri, LLP

Court of Appeals of Kentucky

October 6, 2017

BRETT KINCAID, KEVIN KINCAID, & CIERRA KINCAID APPELLANTS/CROSS-APPELLEES
v.
JOHNSON, TRUE & GUARNIERI, LLP, CENTRAL BANK & TRUST CO., AS EXECUTOR AND TRUSTEE, MICHAEL D. FOLEY, AS MEMBER OF THE ADVISORY COMMITTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID, JOAN D. KINCAID, EXECUTRIX OF THE ESTATE OF JANE KINCAID JOHNSON, JOAN D. KINCAID, INDIVIDUALLY AND AS A MEMBER OF THE ADVISORY COMMITTEE FOR GARVICE D. KINCAID, DECEASED, BROOKE KINCAID, A MINOR, BRYCE KINCAID, A MINOR, CHANCE KINCAID, A MINOR, AND J. ROSS STINETORF, ESQ., GUARDIAN AD LITEM, FOR MINORS OF THE GARVICE KINCAID TRUST APPELLEES/CROSS-APPELLANTS AND JOAN D. KINCAID, EXECUTRIX OF THE ESTATE OF JANE K. JOHNSON, JOAN D. KINCAID, INDIVIDUALLY AND AS A MEMBER OF THE ADVISORY COMMITTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID, MICHAEL D. FOLEY, AS A MEMBER OF THE ADVISORY COMMITTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID, AND CENTRAL BANK & TRUST COMPANY, AS EXECUTOR AND TRUSTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID APPELLANTS/CROSS-APPELLEES
v.
JOHNSON, TRUE & GUARNIERI, LLP, BRETT KINCAID, KEVIN KINCAID, CIERRA KINCAID, BROOKE KINCAID, A MINOR, BRYCE KINCAID, A MINOR, CHANCE KINCAID, A MINOR, AND J. ROSS STINETORF, AS GUARDIAN AD LITEM FOR THE MINOR AND UNBORN BENEFICIARIES OF FUND C OF THE GARVICE KINCAID TRUST APPELLEES/CROSS-APPELLANTS AND J. ROSS STINETORF, AS GUARDIAN AD LITEM FOR THE MINOR AND UNBORN BENEFICIARIES OF FUND C OF THE GARVICE KINCAID TRUST,
v.
JOHNSON, TRUE & GUARNIERI, LLP, CENTRAL BANK & TRUST CO., INDIVIDUALLY, AS EXECUTOR AND TRUSTEE, MICHAEL D. FOLEY, AS MEMBER OF THE ADVISORY COMMITTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID, JOAN D. KINCAID, EXECUTRIX OF THE ESTATE OF JANE KINCAID JOHNSON, JOAN D. KINCAID, INDIVIDUALLY AND AS A MEMBER OF THE ADVISORY COMMITTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID, JOAN D. KINCAID, AS CO-EXECUTRIX OF THE ESTATE OF NELLE W. KINCAID, BRETT KINCAID, KEVIN KINCAID, AND CIERRA KINCAID APPELLEES/CROSS-APPELLANTS AND JOHNSON, TRUE & GUARNIERI, LLP APPELLANT/CROSS-APPELLEE
v.
KEVIN KINCAID, BRETT KINCAID, CIERRA KINCAID, CENTRAL BANK & TRUST COMPANY, AS EXECUTOR AND TRUSTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID, MICHAEL D. FOLEY, AS A MEMBER OF THE ADVISORY COMMITTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID, JOAN D. KINCAID, AS EXECUTRIX OF THE ESTATE OF JANE K. JOHNSON, JOAN D. KINCAID, INDIVIDUALLY AND AS A MEMBER OF THE ADVISORY COMMITTEE FOR THE ESTATE AND TRUST OF GARVICE D. KINCAID, BROOKE KINCAID, A MINOR, BRYCE KINCAID, A MINOR, CHANCE KINCAID, A MINOR, AND J. ROSS STINETORF, AS GUARDIAN AD LITEM FOR THE MINOR AND UNBORN BENEFICIARIES OF FUND C OF THE GARVICE D. KINCAID TRUST APPELLEES/CROSS-APPELLANTS

         APPEAL FROM FAYETTE CIRCUIT COURT HONORABLE ERNESTO M. SCORSONE, JUDGE ACTION NOS. 85-CI-01714 AND 97-CI-04028.

          BRIEFS FOR APPELLANTS BRETT KINCAID, KEVIN KINCAID, AND CIERRA KINCAID: Elizabeth R. Seif Lexington, Kentucky

          BRIEFS FOR APPELANT J. ROSS STINETORF, AS GUARDIAN AD LITEM FOR THE MINOR AND UNBORN BENEFICIARIES: J. Ross Stinetorf Lexington, Kentucky

          BRIEFS FOR APPELLEE JOHNSON, TRUE & GUARNIERI, LLP: E. Kenly Ames Bowling Green, Kentucky

          BRIEFS FOR APPELLEES JOAN D. KINCAID, EXECUTRIX OF THE ESTATE OF JANE KINCAID, ET AL.: C. Timothy Cone Paul E. Sullivan Barry D. Hunter Lexington, Kentucky.

          BEFORE: ACREE, JONES, AND THOMPSON, JUDGES.

          OPINION

          JONES, JUDGE:

         This appeal concerns the amount of attorney fees awarded to Appellees/Cross-Appellants, Johnson, True, & Guarnieri, LLP, and the manner in which those fees were calculated. Appellants/Cross-Appellees, which include the beneficiaries and administrators of the trust fund at the heart of this dispute, have previously appealed the amount of fees awarded to Johnson, True, & Guarnieri, LLP, to this Court, which vacated the award and remanded to Fayette Circuit Court. Following remand, all parties involved appealed to this Court alleging numerous assignments of error. After review of the record and applicable legal authorities, we affirm the Fayette Circuit Court.

         I. Background

         Garvice D. Kincaid passed away in 1975, leaving a substantial estate comprised largely of various business interests (the "Estate"). Garvice was survived by his wife, Nelle W. Kincaid; his twin daughters, Joan and Jane Kincaid (the "Kincaid Daughters"); and his grandsons, Brett and Kevin Kincaid (the "Kincaid Brothers"). Most of the Estate was placed in a trust, which was divided into two shares - a "marital share, " comprised of Funds A and B, and a "non-marital share, " comprised of Fund C. Pursuant to the terms of Garvice's Will and Trust Agreement, an advisory committee (the "Advisory Committee") was created to instruct Central Bank & Trust in its role as trustee of the trust.

         Upon Nelle's passing in 1984, the Kincaid Daughters became the sole beneficiaries of Funds A and B. The Kincaid Daughters, the Kincaid Brothers, and the issue of the Kincaid Brothers are the beneficiaries of Fund C. In 1985, the Kincaid Daughters brought suit against the Advisory Committee. This suit was settled in 1993, and, pursuant to the terms of that settlement agreement, the original members of the Advisory Committee resigned and were replaced by the Kincaid Daughters and Michael Foley, a certified public accountant.

         In December of 2005, the Advisory Committee and the Kincaid Daughters, individually, filed a motion in Fayette Circuit Court for approval of a proposed final allocation and distribution of trust assets among Funds A, B, and C. The Kincaid Brothers hired the law firm of Johnson, True and Guarnieri, LLP ("JTG"), which had represented them in previous ligation concerning Fund C, to oppose the proposed reallocation plan. In its previous representation of the Kincaid Brothers, JTG had billed them on an hourly basis and had received those amounts either from Fund C or directly from the Kincaid Brothers. In this representation, JTG continued to bill the Kincaid Brothers on an hourly basis, for each hour of service provided from January 2006 to June 2007.

         In December of 2007, the parties reached a settlement agreement (the "Settlement") concerning the reallocation plan. Pursuant to the Settlement, $113 million of the $195 million in Fund C at that time would be transferred to Funds A and B. This resulted in Fund C retaining approximately $30 million more in assets than it would have retained under the reallocation plan originally proposed by the Advisory Committee. According to JTG's calculations, the Settlement "enhanced" Fund C from the original proposal by $30, 140, 748.00, $2 million of which was to be used to pay final administration expenses of the Estate. Additionally, the Settlement guaranteed the Kincaid Brothers cash distributions of $8 million total, to be distributed over the next four years. The Settlement contained the following provision concerning attorney fees:

15. The attorneys representing Brett Kincaid and Kevin Kincaid will file a motion seeking an award of attorneys' fees, costs, and expenses. Any attorneys' fees, costs, and expenses awarded or otherwise paid out of the assets of the Estate or Trust of Garvice D. Kincaid shall be funded solely by Fund C out of the assets distributed to Fund C pursuant to the terms of this settlement.

         On December 26, 2007, JTG filed a motion with the Fayette Circuit Court for attorney fees of $2.8 million dollars. JTG asserted that its representation of the Kincaid Brothers had resulted in a $28 million savings to Fund C, which savings constituted a "common fund" for the current and future beneficiaries of Fund C. As such, JTG believed it was entitled to an award of reasonable fees under KRS 412.070.[2]

         The Kincaid Brothers, the Advisory Committee, and the Trustee all opposed JTG's motion, arguing that it was in breach of the hourly fee agreement between JTG and the Kincaid Brothers, and that the fee was unreasonable under the circumstances. On March 6, 2008, the Fayette Circuit Court entered an order granting JTG's motion for $2.8 million in fees. The Kincaid Brothers' new counsel filed a motion to reconsider, which was denied. The Kincaid Brothers, the Kincaid Daughters, the Advisory Committee, and Central Bank & Trust as Trustee then appealed the $2.8 million award to this Court.

         On February 5, 2010, this Court rendered an opinion (the "2010 Opinion") vacating the Fayette Circuit Court's order and remanding. Johnson v. Johnson, True, & Guarnieri, LLP, Nos. 2008-CA-000653-MR and 2008-CA- 000668-MR, 2010 WL 391847 (Ky. App. Feb. 5, 2010) (reh'g denied, April 6, 2010) (disc. rev. denied, Mar. 16, 2011) (depublished). This Court instructed the circuit court to determine the Kincaid Brothers' proportionate share of the recovery to Fund C, then to determine whether an hourly fee arrangement existed between the Kincaid Brothers and JTG.[3] If the circuit court found there was an hourly-fee arrangement, it was instructed to enforce that agreement. If not, the court was instructed to entertain any motions by JTG for quantum meruit recovery against the Kincaid Brothers. This Court then instructed the circuit court to determine a reasonable fee as to the recovery for the remaining beneficiaries of Fund C pursuant to KRS 412.070.

         Following additional discovery, the circuit court granted partial summary judgment in favor of the Kincaid Brothers on October 20, 2011, finding that JTG and the Kincaid Brothers did agree to an hourly-rate engagement for JTG's services. On January 25, 2012, the Kincaid Brothers again moved for partial summary judgment, this time on the issue of whether the initial hourly-rate fee agreement between JTG and themselves had been modified. On February 13, 2012, JTG moved to vacate the court's October 20, 2011, finding of partial summary judgment. JTG argued that depositions of the Kincaid Brothers, taken subsequent to the partial summary judgment order, revealed that there were genuine issues of material fact concerning the existence of an hourly-rate fee agreement. Both the Kincaid Brothers' motion for partial summary judgment and JTG's motion to vacate partial summary judgment were denied by order dated March 20, 2012. In April of 2013, there was a two-day hearing concerning whether the hourly-rate fee arrangement had been modified and/or breached, at which Mr. True testified extensively regarding his fee arrangement with the Kincaid Brothers and the amount of work he put into the case. The court entered Findings of Fact, Conclusions of Law, and an Interlocutory Judgment on November 13, 2013, finding that JTG had not met its burden of proving that it and the Kincaid Brothers had modified the original hourly-rate fee arrangement. Additionally, the circuit court found that the Kincaid Brothers had breached the fee arrangement by failing to pay JTG's monthly statements in full, but JTG had waived this breach. The court then ordered the Kincaid Brothers to pay JTG the balance they owed under the hourly-rate fee agreement. The Kincaid Brothers have paid this amount in full.

         On August 22, 2014, the Kincaid Brothers moved the court for an order stating that JTG was not entitled to any additional fee over the hourly-fee amounts it had already been paid. The Kincaid Brothers argued that JTG had represented all beneficiaries of Fund C, with the exception of the Kincaid Daughters, up until the point that the Settlement had been reached and a guardian ad litem was appointed to review it for the minor and unborn beneficiaries. Accordingly, the Kincaid Brothers asserted, there could be no common fund fee as such fee is only available when an unrepresented beneficiary has received a benefit that would not have been received but for another beneficiary paying for legal counsel. The Kincaid Brothers acknowledged that the 2010 Opinion had stated that the minor and unborn beneficiaries (the "Remaining Beneficiaries") had not been represented by counsel; however, the Kincaid Brothers asserted that this was an erroneous statement made in dicta.

         On September 8, 2014, the circuit court held evidentiary hearings to determine the Kincaid Brothers' proportionate share of the enhancement to Fund C, which the court would then use to determine the reasonable fee owed to JTG from the Remaining Beneficiaries. For its case-in-chief, JTG called Judge David L. Knox as an expert witness. Judge Knox testified exclusively as to his opinion of a reasonable fee owed to JTG for its representation of the Remaining Beneficiaries of Fund C. Judge Knox did not offer an opinion on how to calculate the Remaining Beneficiaries' proportionate share of the benefit JTG had gained for Fund C, and JTG offered no other witnesses to address the issue during its case-in-chief. In rebuttal, the Advisory Committee called Michael Foley - who testified as to different formulae he had used to calculate the proportionate shares of the benefit to Fund C - and Judge Gamble - who testified as to his opinion of the reasonableness of JTG's fees for the Remaining Beneficiaries.

         On September 10, 2014, the circuit court entered an order denying the Kincaid Brothers' Motion for an Order that JTG is Not Entitled to an Hourly-Rates Fee It Has Been Paid. Thereafter, on September 23, 2014, the court entered an Opinion and Order addressing the amount of fees owed to JTG for the proportion of benefits gained for the Remaining Beneficiaries. By that order, the court found that the Kincaid Brothers' proportionate share of the total recovery to Fund C is the $8 million they were guaranteed in the Settlement, and that the remaining $20 million is the proportionate share of the Remaining Beneficiaries. Based on the amount of recovery accredited to the Remaining Beneficiaries, the court determined that JTG was still owed $482, 000.00 in attorney fees. The court reached this calculation by reasoning that the Remaining Beneficiaries' benefit was more than double the Kincaid Brothers' benefit, and, as such, it was reasonable for the Remaining Beneficiaries to pay double the amount the Kincaid Brothers had paid to JTG.

         A slew of post-disposition filings followed. On September 25, 2014, the Advisory Committee filed motion to alter, amend, and/or clarify with the circuit court, seeking to have the court alter the Opinion and Order to specify that the fee it awarded JTG was not collectible until such time that the funds accredited to the Remaining Beneficiaries were actually distributed to the Remaining Beneficiaries. To support this motion, the Advisory Committee cited to language from the 2010 Opinion, which stated:

While the case law set forth above limits the actual collection of fees by [JTG] until the time the funds are actually distributed to the beneficiaries, it does not affect the award of said fees based on the enhancement of funds available for distribution to these beneficiaries. See Howell, 181 S.W.2d at 45 ("The attorney is entitled to his proportionate share of the fee assessed against the [recovery paid] to date and the balance of the share assessed against the principal when the [remainder of the recovery is] paid to the [beneficiaries] . . . .).

At p. 27.[4]

         On October 2, 2013, JTG filed its own motion to alter or amend the Opinion and Order, requesting that the circuit court remove any language in its order referring to the fee it awarded JTG as a "contingency" fee. That same day, by a separate document, JTG responded to the Advisory Committee's motion to alter, amend, and/or clarify and filed a cross-motion to alter, amend and/or clarify. By this motion JTG noted the fact that any distributions to the Remaining Beneficiaries were at the sole discretion of the Advisory Committee, and argued that the Advisory Committee's motion to alter, amend, and/or clarify was essentially a motion to have the court render its award to JTG illusory.

         On October 3, 2013, the Kincaid Brothers filed three separate motions - a motion for a new trial or proceedings in lieu of a new trial; a motion to alter or amend, in the event the court denied their motion for a new trial; and a motion for a court order that Fund C reimburse them for any fees and expenses they had personally paid to JTG. The motion to alter or amend was essentially the same as the Advisory Committee's motion to alter or amend. In their motion for a new trial, the Kincaid Brothers maintained their argument that JTG had represented the Kincaid Brothers and the Remaining Beneficiaries and, therefore, could not be entitled to a common fund recovery. They additionally argued that the fee awarded to JTG was a contingency fee, which was in violation of ethical rules. Thereafter, all parties filed responses to the others' respective motions.

         On October 21, 2014, the circuit court entered an order granting JTG's motion to alter or amend and its cross-motion to alter, amend, and/or clarify. The remaining motions filed by the Kincaid Brothers and the Advisory Committee were denied by this same order. Also on October 21, 2014, the circuit court entered a final judgment stating that: (1) the Kincaid Brother's proportionate share of the Fund C recovery was $8 million, and the Remaining Beneficiaries' proportionate share was $20 million; (2) JTG was entitled to a reasonable attorneys' fee of $482, 000 from the Remaining Beneficiaries; and (3) the $482, 000 fee shall be paid to JTG within 45 days of the entry of the judgment, bearing 12% interest per annum from the due date.

         These appeals and cross-appeals followed.

         II. Analysis

         There are a multitude of issues being raised on this appeal. JTG argues that the trial court erred in granting partial summary judgment in favor of the Kincaid Brothers on the issue of whether there was an hourly-rate fee agreement. Based on that argument, JTG asserts that the circuit court should have set the Kincaid Brothers' fee in quantum meruit, and that the interlocutory judgment and the common fund fee amount - as they were based on the amount the Kincaid Brothers had paid to JTG - should be reversed. In the alternative, JTG argues that the circuit court erred in finding that the hourly-rate fee agreement was not modified and in finding that JTG waived the Kincaid Brothers' breach of that agreement.

         The Kincaid Brothers, the Kincaid Daughters, the Advisory Committee, and the Remaining Beneficiaries all argue that the circuit court erred in finding that additional fees (i.e., fees above what the Kincaid Brothers have already paid to JTG) are owed to JTG, as they contend that the Engagement Letter demonstrates that JTG represented both the Kincaid Brothers and the Remaining Beneficiaries in this action. Alternatively, all argue that, should we determine the Remaining Beneficiaries were not represented by JTG, the law of this state dictates that the Remaining Beneficiaries should only be responsible for reimbursing the Kincaid Brothers for a proportionate share of the fee the Kincaid Brothers have already paid to JTG. Should we not accept either of the above two arguments, all argue that the circuit court erred in ordering that the additional fees owed to JTG are immediately payable.

         The Kincaid Brothers additionally argue that the circuit court erred in its determination of their proportionate share of the recovery to fund C; that the trial court erred as a matter of law in denying their motion for reimbursement from Fund C; and that JTG's request for a "common fund fee" is unethical in that it is essentially a request for a contingency fee, and therefore is violative of SCR[5]3.130(1.5).

         A. Existence of an Hourly-Rate Fee Agreement

         JTG argues that the trial court erred in finding on summary judgment that an hourly-rate fee agreement existed between JTG and the Kincaid Brothers, then further exacerbated this error by denying JTG's motion to vacate that finding of summary judgment.

The proper standard of review on appeal when a trial judge has granted a motion for summary judgment is whether the record, when examined in its entirety, shows there is "no genuine issue as to any material fact and the moving ...

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