Bittner v. U.S. Bank Nat'l Ass'n (In re Bittner)
| Docket Number | 22-0328 |
| Decision Date | 03 March 2023 |
| Citation | 986 N.W.2d 853 |
| Parties | In the MATTER OF the CONSERVATORSHIP OF Joan Y. BITTNER. Jeffrey S. Bittner, Appellant, v. U.S. Bank National Association, Appellee. |
| Court | Iowa Supreme Court |
Jeffrey S. Bittner, pro se, for appellant.
Lynn W. Hartman and Nicholas D.K. Peterson of Simmons Perrine Moyer Bergman PLC, Cedar Rapids, for appellee U.S. Bank National Association.
Mansfield, J., delivered the opinion of the court, in which all participating justices joined. Waterman and May, JJ., took no part in the consideration or decision of the case.
This appeal relates to attorney fees. It is a companion case to U.S. Bank, N.A. v. Bittner , 986 N.W.2d 840 (Iowa 2023), also decided today.
Shakespeare recognized the importance of attorney fees. To quote Lear's Fool, who was definitely not a fool: William Shakespeare, King Lear act 1, sc. 4, l. 133–34. The issue in this case is whether the trustee of an individual retirement account (IRA) is entitled to recover over $200,000 in attorney fees from the assets of that account for successfully litigating its view of who was the proper beneficiary of the IRA. We conclude that the district court did not abuse its discretion in concluding that fees were potentially recoverable and that $200,000 was a reasonable total sum given the Lear-like quality of this contentious intrafamily litigation. However, we also conclude that the district court abused its discretion in ordering the eighty-nine-year-old protected person under this conservatorship to pay for two sets of attorneys—her own and the trustee's—to litigate the same position in the same litigation. Accordingly, we affirm in part, reverse in part, and remand so that the district court may establish a lower award of attorney fees consistent with our opinion herein.
In U.S. Bank, N.A. v. Bittner , U.S. Bank, N.A. filed a declaratory judgment as trustee of an IRA established by the decedent, Richard Bittner. 986 N.W.2d at 845. U.S. Bank named a number of defendants: Richard's widow, Joan; Joan's conservator, MidWestOne Bank; Richard's four children: Jeffrey, Kimberly, Todd, and Lynn; and a marital trust created by Richard's will. Id. U.S. Bank asked the court to determine that Joan was the 100% beneficiary of the IRA. Id. The district court so ruled, and in our other opinion today, we have affirmed that order. Id. at 846, 853.
After the district court ruled that Joan was the 100% beneficiary of Richard's IRA, Joan's conservator filed an application in the conservatorship to pay U.S. Bank's attorney fees. To justify payment of those fees, Joan's conservator invoked the terms of the IRA agreement between Richard and U.S. Bank. That agreement provided, among other things, that U.S. Bank would be "indemnified and held harmless ... for all of its otherwise unreimbursed expenses (including, without limitation, [U.S. Bank]’s legal fees) under this Agreement"; that U.S. Bank "may employ ... legal counsel"; and that U.S. Bank would be "reimbursed by the IRA Trust Account, [Richard,] or the beneficiary(ies) for [U.S. Bank]’s costs incurred in employing such parties." The application filed by Joan's conservator sought authorization to pay a total of $205,020.42 in attorney fees and expenses incurred by U.S. Bank's counsel—Simmons Perrine Moyer Bergman PLC (Simmons Perrine).1
Jeffrey objected to the attorney fee application on several grounds. First, he argued that U.S. Bank breached a duty of impartiality by seeking a declaratory judgment in favor of one potential IRA beneficiary—Joan—to the detriment of other potential beneficiaries. Jeffrey maintained that U.S. Bank should not have taken sides but should have filed an interpleader and let the potential beneficiaries sort it out among themselves. Second, Jeffrey argued that the doctrine of issue preclusion foreclosed the claim for attorney fees. In that regard, Jeffrey relied on a previous district court order from October 2021 that had largely denied a separate U.S. Bank attorney fee application, while criticizing the bank for resisting Richard's efforts to have the bank removed as co-executor of Richard's estate. Third, Jeffrey argued that the attorney fees sought were excessive. Specifically, Jeffrey urged that Simmons Perrine's rates were too high, that the law firm had performed unnecessary tasks, and that two attorneys had not been needed to try the case. No party other than Jeffrey objected to the fee application.
U.S. Bank—still represented by Simmons Perrine—intervened and urged the court to approve the fee application. Thereafter, U.S. Bank and Simmons Perrine took on the primary responsibility for defending the fee application. Their filings clarified that the fees and expenses—if approved—would be paid from the IRA assets of which Joan was 100% beneficiary.
On January 12, 2022, the district court held a hearing on the fee application. Our record does not contain a transcript of that hearing.
On February 17, the district court sitting in probate entered a written order rejecting all of Jeffrey's arguments and approving payment of virtually all the requested fees. The court concluded that "[w]hile U.S. Bank could have elected to pursue this matter via interpleader, the Court finds it was not inappropriate for it to do so via a declaratory judgment action." It also determined that the IRA agreement required indemnification. In addition, the district court decided that issue preclusion did not apply to bar a fee award because the prior ruling involved different issues. Lastly, the district court found that the Simmons Perrine fees were reasonable. In the court's view, their time spent was reasonable; the use of two attorneys was reasonable (Jeffrey had hired another attorney to assist him); and the rates were "reasonable for the community," although "at the top end for the community." After deducting $151 for a stray time entry that related to another matter, the district court approved $204,969.42 to be paid from the IRA assets to U.S. Bank. Jeffrey appealed this ruling.
We review awards of attorney fees for abuse of discretion. Homeland Energy Sols., LLC v. Retterath , 938 N.W.2d 664, 684 (Iowa 2020).
We will turn to Jeffrey's second and third arguments, saving his initial argument for last.
A. Issue Preclusion. "[I]ssue preclusion prevents parties to a prior action in which judgment has been entered from relitigating in a subsequent action issues raised and resolved in the previous action." Dorsey v. State , 975 N.W.2d 356, 361 (Iowa 2022) (alteration in original) (quoting Hunter v. City of Des Moines , 300 N.W.2d 121, 123 (Iowa 1981) ).
We agree with the district court that issue preclusion does not apply. The October 2021 ruling cited by Jeffrey denied most of a U.S. Bank request for attorney fees in its capacity as co-executor of Richard's estate on the ground that the bank had unreasonably resisted Jeffrey's request for its removal as co-executor. Richard's will allowed Jeffrey to select a co-executor other than the bank if Jeffrey was "dissatisfied" with the bank's services, but the bank plowed ahead over Jeffrey's opposition. It then asked to be awarded extraordinary fees for the attorney fees incurred in unsuccessfully resisting Jeffrey's efforts to have it removed as co-executor. The district court sitting in probate said no. The court also observed that U.S. Bank had a conflict of interest in serving as both co-executor of Richard's estate and trustee of his IRA.
As the district court correctly observed, the issues are different here. Whether U.S. Bank should have insisted on fighting its removal as the co-executor of Richard's estate is different from whether it had the right to remain IRA trustee and seek a judicial determination of the IRA's proper beneficiaries. When the court removed U.S. Bank as co-executor in March 2021, it did so based solely on the will provision allowing Jeffrey to select a new co-executor, without finding a conflict of interest. And, on the same day it removed U.S. Bank as co-executor, the court ruled for U.S. Bank in the declaratory relief action it had brought in its capacity as IRA trustee.
B. Reasonableness of Simmons Perrine Fees. We also find no abuse of discretion in the district court's ruling that the Simmons Perrine fees were reasonable.
Their two primary attorneys, both with considerable experience, billed at rates of $302 and $265 per hour, respectively. At first blush, the bill of $204,969.42 seems surprising for a two-day declaratory judgment trial, but this was no-holds-barred litigation from Jeffrey's standpoint. Jeffrey vigorously contested the designation of Joan as "primary beneficiary" of the IRA from many different angles. He did so even while conceding that the outcome probably made no difference to him financially. Either way, he would basically get one-quarter of what was left of the IRA assets after Joan's death.2 Notably, even while claiming that Simmons Perrine's fees were excessive, Jeffrey resisted any discovery into his own time spent on the matter.
C. Advocating for One Potential Beneficiary Over Another. However, we do conclude the district court abused its discretion in one respect. Jeffrey points out that in Northern Trust Co. v. Heuer , the Illinois Appellate Court reversed an award of attorney fees to a trustee in a proceeding the trustee had brought to determine who was the proper beneficiary of a portion of the trust. 202 Ill.App.3d 1066, 148 Ill.Dec. 364, 560 N.E.2d 961, 965 (1990). The court explained, "When there are conflicting claims to trust funds, a trustee is not required to make a determination as to the rights of the prospective claimants but should file an interpleader action to avoid acting at its own peril." Id. , at 964, 148 Ill.Dec. 364, ...
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