Ruttenberg v. Friedman
| Decision Date | 11 May 2012 |
| Docket Number | 1090600. |
| Citation | 97 So.3d 114 |
| Parties | Pamela RUTTENBERG, Warren Ruttenberg, and Jodi Ruttenberg Benck v. Karl B. FRIEDMAN and Daniel H. Markstein III, as executors of the estate of Harold Ruttenberg, deceased. |
| Court | Alabama Supreme Court |
OPINION TEXT STARTS HERE
F. Timothy McAbee, Birmingham, for appellants.
Tony G. Miller, Cynthia G. Lamar, and Luther M. Dorr, Jr., of Maynard, Cooper & Gale, P.C., Birmingham, for appellee Daniel H. Markstein III; and Barry A. Ragsdale of Sirote & Permutt, P.C., Birmingham, for appellee Karl B. Friedman.
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Pamela Ruttenberg, Harold Ruttenberg's widow (“Pamela”), and two of the Ruttenbergs' three children, Warren Ruttenberg and Jodi Ruttenberg Benck (hereinafter sometimes collectively referred to as “the objectors”), appeal from a final judgment of the Jefferson Probate Court, granting the petition of Karl B. Friedman and Daniel H. Markstein III (hereinafter referred to individually as “Friedman” and “Markstein” and sometimes collectively as “the coexecutors”), the coexecutors of the estate of Harold Ruttenberg, for final settlement of the estate. Ruttenberg's third child, Don–Allen Ruttenberg (“Don–Allen”), who had worked with his father in the family business, Just For Feet, Inc. (“Just For Feet”), and who was involved in civil litigation and criminal prosecution surrounding Just For Feet, did not object to the coexecutors' administration and settlement of his father's estate. This Court has jurisdiction. See§ 12–22–20, Ala.Code 1975.
Ruttenberg moved his family to Birmingham from South Africa in 1977 and opened an athletic-shoe store known as Just For Feet. Ruttenberg met and retained Friedman to provide him with legal representation. Over the years, Friedman, and other members of the law firm of Sirote & Permutt, P.C. (“the Sirote firm”), represented Ruttenberg and members of his family in connection with both business and personal matters.
In November 1999, Just For Feet filed a petition in bankruptcy. Just For Feet's collapse resulted from accounting and securities fraud and spawned several criminal and civil lawsuits. Following the bankruptcy filing, Ruttenberg formed Amalgamated Concepts, LLC (“Amalgamated”), and Southbay Properties, LLC (“Southbay”), to engage in the restaurant business. Amalgamated owned and operated Cooper Grill restaurants in Birmingham, Richmond, Virginia, and Destin, Florida, and breakfast restaurants in Birmingham, Montgomery, and Destin. Southbay owned the property on which the Destin, Florida, restaurants were located.
By May 2000, Friedman, who remained Ruttenberg's close friend, had grown weary of the myriad legal issues and billing conflicts. He referred Ruttenberg to Markstein, a lawyer with the law firm of Maynard, Cooper & Gale, P.C. (“the Maynard firm”). Friedman recommended Markstein because Markstein focused his law practice on taxation and estate planning and advising family businesses and because Markstein holds an LL.M. in taxation and estate planning from Harvard Law School. Luther H. “Rusty” Dorr, Jr., also of the Maynard firm, was retained to provide legal representation to Ruttenberg and Don–Allen in the several legal actions that arose following the demise of Just For Feet.
In January 2004, Ruttenberg was diagnosed with terminal brain cancer. Ruttenberg asked Markstein to assist him with his estate planning and requested that his good friend, Friedman, be involved. Markstein recommended that Ruttenberg create a trust for his children and grandchildren, and he advised Ruttenberg to consider appointing a corporate executor, but, according to Markstein, Ruttenberg insisted that he serve. Initially, Markstein declined because he believed that Ruttenberg's estate would involve a particularly high degree of risk for the executor, but he agreed to serve on the condition that he and Friedman be named coexecutors.
Markstein drafted a will and a revocable trust for Ruttenberg. Friedman and Markstein were named coexecutors of the estate and members of the advisory committee of the trust. The revocable trust was created to manage Ruttenberg's businesses in the event he became disabled. Ruttenberg's estate plan provided that, upon final settlement of the estate, the remainder of the probate estate was to be transferred into the revocable trust and thereafter distributed together with the assets of the revocable trust into one trust for the benefit of Ruttenberg's children and grandchildren and two marital trusts for the benefit of his wife, Pamela.
Ruttenberg died on December 23, 2005. His will was admitted to probate, with Friedman and Markstein serving as coexecutors. Ruttenberg's will expressly authorized the coexecutors to act as attorneys and to perform legal services for the estate and provided that the coexecutors could hire additional attorneys to assist in the administration of the estate. Because the will expressly authorized the coexecutors to hire law firms to assist in the administration and because Ruttenberg had previously engaged the legal services of the Sirote firm and the Maynard firm, the coexecutors hired those firms to perform legal work for the estate, assigning to the Maynard firm the issues relating to Amalgamated and Southbay and the Just For Feet litigation and to the Sirote firm the preparation of the federal tax returns. The Sirote firm and the Maynard firm continued to bill the estate for legal services rendered as they had billed Ruttenberg before his death. Friedman and Markstein billed the estate separately for work performed in their capacities as coexecutors and in their capacities as his attorneys. Friedman maintained sole responsibility for communicating with Ruttenberg's family, keeping them informed through numerous detailed letters, telephone conversations, and meetings.
Charles R. Goldstein, the Chapter 7 bankruptcy trustee for Just For Feet, filed a claim against Ruttenberg's estate in the amount of $400,000,000 (“the Goldstein claim”). Knesseth Israel Temple filed a claim for $246,000 (“the Temple claim”). Bayer Properties, Inc., agent for Bayer Retail Company, LLC, filed a claim for $232,695.12, plus interest and attorney fees (“the Bayer claim”). Other claims were filed and paid.
On January 25, 2008, after more than two years of administering the estate and managing the numerous legal issues, the coexecutors petitioned the probate court for a final settlement of the estate. The coexecutors also filed three supplemental accountings. Specifically, in the petition for final settlement, the coexecutors requested: (1) approval of their actions in administering the estate; (2) an award of compensation for ordinary services in the amount of $1,200,000, including approval of a prior payment to the coexecutors of $800,000; 2 (3) an award of compensation for extraordinary services in an amount to be determined within the court's discretion; (4) approval and an award of fees and expenses to the Sirote firm and the Maynard firm for legal services rendered by them through final settlement; and (5) the release from all further liability relating to administration of the estate.
On September 22, 2008, the objectors filed an objection to the petition for final settlement. The objectors excepted to: (1) approval for previously paid ordinary compensation to the coexecutors and an award of additional compensation for ordinary and extraordinary services to the coexecutors; (2) approval of previously paid fees, expenses, and bonuses 3 to the Sirote firm and the Maynard firm and an award of additional fees and expenses for legal services rendered by those law firms through final settlement; (3) payment made in settlement of the Goldstein claim; (4) payment of the Temple claim; and (5) payment of the Bayer claim. The objectors contended that the coexecutors had breached their fiduciary duties to the estate and its beneficiaries by failing to keep the objectors properly informed concerning all matters, and they sought compensatory and punitive damages.
During the bench trial, which lasted nine days, the probate court heard testimony from numerous witnesses and reviewed hundreds of exhibits. After the trial, both the coexecutors and the objectors submitted briefs. On December 29, 2009, the probate court entered an opinion and order, granting the petition for final settlement, approving the accountings, and discharging the coexecutors from liability for all actions in administering the estate. The probate court found that the coexecutors had “fully administered the decedent's Estate in accordance with the decedent's Will and in the best interest of the Estate” and that the objectors' claims were without merit.
The probate court determined that the coexecutors were entitled to be fully compensated for the risks and responsibilities they assumed in administering the estate pursuant to §§ 43–2–682 and –848, Ala.Code 1975, and awarded fees for ordinary services in the amount of $1,165,937. The court found that the coexecutors had accepted extraordinary risks and responsibilities and had achieved extraordinary results for the estate, warranting additional compensation for extraordinary services in the amount of $700,000. See§ 43–2–848(b), Ala.Code 1975. The court also found the legal fees and expenses were reasonable and were properly payable from the estate pursuant to §§ 43–2–682 and –849, Ala.Code 1975. On January 29, 2010, the objectors filed a timely notice of appeal with this Court.
The applicable standard of review in an appeal from a probate proceeding, conducted in Jefferson and Mobile counties, where the probate court has concurrent statutory equitable jurisdiction with the circuit court to hear actions concerning the administration of an estate, is well settled. See Regions Bank v. Reed, 60 So.3d 868, 878–79 (Ala.2010); Jett v. Carter, 758 So.2d 526 (Ala.1999). See also Shewmake v. Estate of Shewmake, 940 So.2d 260, 264 (Ala.2006).4
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