Mary Ann T. Randar died intestate, a resident of the City of Binghamton, Broome County, New York, on December 30, 2015. A petition for letters of administration and temporary administration was filed with the Court on March 25, 2016, by Steven Mikula, decedent’s first cousin, once removed. The petition lists as distributees ten first cousins, once removed, all descended from decedent’s paternal aunt, Mary Mikula. A supporting affidavit requesting issuance of temporary letters of administration recited the need to maintain and secure the decedent’s real and personal property at her home on Belknap Avenue in the City of Binghamton and the need to arrange preparation and filing of her 2015 personal income tax returns. Another affidavit from counsel for the petitioner indicated continuing due diligence efforts regarding the paternal side of decedent’s family. The petition and supporting affidavit of assets and debts detail over nine hundred thousand dollars ($900,000) of assets, more than ninety percent (90 percent) of which were cash and marketable securities. Another six investment accounts, of unknown value, were also disclosed in that affidavit. Letters of temporary administration were issued to Steven Mikula on April 26, 2016, limiting the amount the temporary administrator could marshal and directing that the funds be held in the attorney trust account of his retained counsel, to the extent not used for payment of creditors of the estate. On May 25, 2016, exactly sixty days from the original filing in this estate, a notice of appearance was filed by the Law Offices of Matthew M. McDowell, LLC (McDowell), on behalf of six individuals recited as persons interested in this estate. None of these individuals is listed on the family tree filed with the original administration proceeding. On June 29, 2016, an amended notice of appearance was filed by McDowell, which identified two additional individuals represented by that firm in connection with this estate. Again, neither of the additional names is on the original family tree filed with the administration petition. On November 18, 2016, an amended petition for letters of administration and temporary administration was filed by Marie F. Kalka, then the chief fiscal officer (CFO) for Broome County, New York. The family tree filed with this amended petition identified eight paternal distributees, none of whom was identified as a distributee in the original petition and six of whom are among the individuals represented by McDowell. Mikula renounced his appointment as temporary administrator and temporary letters of administration were issued to the CFO, on November 18, 2016.1 The Court appointed Angelina Cutrona, Esq., as Guardian ad Litem for decedent’s unknown heirs, by Order dated April 26, 2016. The Guardian ad Litem made a report to the Court in conjunction with the amended petitions for letters of administration filed in November of 2016. This initial report was ultimately filed with the Court on January 17, 2017. The Guardian ad Litem reported that the decedent’s paternal heirs included two first cousins, residing in Ohio and Canada respectively, which had been located by counsel for the petitioner, and six paternal first cousins represented by McDowell. The initial report indicated the Guardian ad Litem was still gathering and assessing information regarding some alleged paternal heirs of the decedent but needed additional time to fully report. The Guardian ad Litem filed a supplemental report with the Court on April 12, 2017. That supplemental report indicates the Guardian ad Litem’s opinion that there are no surviving statutory distributees on decedent’s maternal side and that process was effectively served on all known distributees. Full letters of administration were issued to the CFO on May 26, 2017. A second amended petition for letters of administration was filed by the CFO with the Court on September 27, 2019. This amended petition is supported by a family tree showing, in addition to the already identified paternal distributees, three distributees on the decedent’s maternal side. These three maternal distributees are all represented by McDowell; two are the subject of his June 2106 notice of appearance. A citation on the second amended petition was issued and, after substantial difficulty, served on all necessary parties. The Guardian ad Litem filed a second supplemental report in support of the second amended administration petition. The newly identified maternal heirs are children of a maternal first cousin who was thought to have predeceased the decedent. Further review of the documentation disclosed that this maternal first cousin in fact survived the decedent and died the following year. She was thus a person with a vested interest in the decedent’s estate. Her heirs, her three children, were confirmed as such and succeed to her interest. At the Court’s direction, and after multiple extensions, a petition to account and accounting were filed by the administrator on May 1, 2020. Obtaining jurisdiction over all the parties and the submission of all necessary supporting documents were finally completed, all made more complicated by the Covid-19 pandemic, at the end of October 2020. No objections to the accounting were received. The matter is before the Court for a decision, on submission. The major issue for the Court’s determination is the appropriate compensation to be allowed to the assignees of certain agreements filed with respect to the majority of the distributees. Nine of the eleven distributees of the decedent, with interests totaling eighty-seven and a half percent (87.5 percent) of the total estate, were located by and advised of their interest in this estate by a set of affiliated heir search firms. All nine signed documents titled “Agreement and Assignment” with Family Tree, Ltd. (Family Tree). The agreements give Family Tree the right to act on behalf of each distributee with respect to this estate, in consideration of an assignment by each distributee of one-third (1/3) of their respective interest in the estate. While the decedent’s name is identified in the agreement, the agreement provides that the location of her estate and its value will not be disclosed to the distributees until after it is signed by them. Family Tree had been engaged to participate in this heir location process by Kemp and Associates, Inc. (Kemp), an heir search firm based in Salt Lake City, Utah. In addition to the Agreement and Assignment entered into by each of the nine distributees with Family Tree, each executed a power of attorney in favor of two employees of Kemp, not disclosed as such on the power of attorney. The powers of attorney authorized these two Kemp employees to represent the distributees in “all matters concerning the estate” and to take any action with respect to the estate on behalf of the distributees, including accepting estate funds, issuing a receipt for the same, and granting discharge to the fiduciary. It was Kemp, as agent for the distributees, that retained McDowell to appear on behalf of the assigning distributees. Family Tree, Kemp and McDowell are collectively referred to in this decision as the Heir Search Firm. The three entities have agreements among themselves regarding the splitting of the one-third (1/3) contingency fee set forth in the Agreement and Assignment. The powers of attorney executed by the distributees in favor of the Kemp employees and the assignment agreements entered into with Family Tree are within the scope of the Court’s jurisdiction over this estate, as part of its effectuation of a complete disposition of the estate by final decree. Matter of Piccione, 57 NY2d 278 (1982); Matter of Devlin, 182 AD2d 322 (2d Dept 1992); Matter of Stackowitz, 2020 NY Slip Op 51603(U) (Sur Ct, Broome County 2020); Matter of Rudin, 2020 NY Slip Op 51602(U) (Sur Ct, Broome County 2020). They are instruments within the purview of Estates, Powers & Trusts Law Section 13-2.3(a), which applies to “every power of attorney relating to an interest in a decedent’s estate and every conveyance or assignment of an interest in an estate.” The instruments were duly recorded in the Court, as required by EPTL 13-2.3(a) and Surrogate’s Court’s Rule 207.48(a)(2). The Surrogate’s Court is empowered to fix and determine the validity and reasonableness of the compensation payable to any person acting under a power of attorney or an assignment. SCPA 2112; Devlin, supra; Stackowitz, supra; Rudin, supra. The purpose of these statutory provisions is “to protect distributees in Surrogate’s Court from practices which unduly diminish their undistributed interests in estates”. Devlin, supra, at 327; In re Diliberto, 49 Misc 3d 171, 178 (Sur Ct, New York County 2014). The Court is not bound by the terms of the agreement and can set a different compensation, deemed reasonable, despite lack of objections by the assigning distributees. Devlin, supra at 328; Diliberto, supra at 179. Courts have carefully scrutinized heir search firm compensation arrangements “and in particular, have condemned the practice employed here in which the heir locator retains counsel at its own expense to represent the interests of the distributes.” Devlin, supra at 328; see, e.g., Matter of Tuttle, 256 A.D. 539 (1st Dept 1939); Matter of Lynch, 154 Misc. 260 (Sur Ct, New York County 1935). There is no question that the services performed by the Heir Search Firm conferred a substantial benefit upon the distributees they represent. As noted by McDowell and Kemp in affirmations submitted in support of the requested fee, these distributees would not have received any benefit without the Heir Search Firm establishing the connection to the decedent. The Heir Search Firm is clearly entitled to compensation for the valuable services provided, but only to the extent that its fee is reasonable. Devlin, supra at 328; Diliberto, supra, at 183. The determination of reasonable compensation under SCPA 2112 requires consideration of factors comparable to those utilized for determination of attorney compensation in an estate, or a fee for a Guardian ad Litem. Factors include the difficulty of the matters involved, the skill needed to handle issues presented, or the time and labor required, the experience of the people providing the services, fees for similar services and the amount of benefits conferred. Devlin, supra at 328 (citing Matter of Freeman, 34 NY2d 1 [1974]); In re Betlem, 2 Misc 3d 1012(A) (Sur Ct, Monroe County 2004), aff’d 19 AD3d 1066 (4th Dept 2005). Throughout the course of this estate, commencing with the filing of the Agreement and Assignment and power of attorney documents with the Court, the Court made clear to the administrator’s counsel and to Kemp and McDowell that the Court would review the compensation payable to the Heir Search Firm. In order for the Court to conduct the appropriate analysis of the Heir Search Firm, each of McDowell, Kemp and Family Tree were directed to submit affidavits detailing their respective services, along with any contemporaneous time records and any other information relevant to services performed, and itemize all expenses and disbursements. The affidavit of McDowell confirms his retention by Kemp to represent the interests of decedent’s nine European distributees. McDowell has been involved in “several hundred” matters similar to this estate over the course of more than 20 years. Both McDowell and an associate in his office worked on this matter. Review of his appended time records, reporting over 140 hours, discloses frequent instances of duplication of effort by McDowell and his associate, common in matters where multiple attorneys are involved. The records disclose research on the enforceability and validity of heir search firm fees. This work clearly benefits McDowell and his colleagues in the Heir Search Firm, not the distributees on whose behalf he appeared. Notably, the agreements which are now subject to this Court’s scrutiny were entered into by the distributees with Kemp and Family Tree before McDowell appeared for the distributees. Clearly, he was not representing the interest of those individuals at the execution of these agreements, further supporting the statutory and case law basis for Court review of them. Bryan O. Kraus, an estate supervisor employed by Kemp, and Gergely Galovics, a “genealogist and estate researcher” employed by Family Tree, submitted affidavits of services with respect to those two organizations. Both affidavits describe the work done in some detail, but neither provide time records. Estimates of the time involved are included with respect to broad categories of work done. Kemp reports approximately 130 hours of work on this matter and Family Tree approximately 370 hours, so 500 hours between the two firms. All personnel involved appear to be experienced and capable. The Court has no reason to doubt that substantial efforts were expended but is also not required to accept the estimates of time spent, unsupported by contemporaneous time records. Devlin, supra at 329; In re Betlem, supra. A letter memorandum submitted by McDowell expresses, as do the affidavits themselves, the “hours spent and expenses paid are done on behalf of the client without knowing whether or not the matter will be successful.” The Court finds this position disturbingly disingenuous. The estimated value of this estate was set forth in the papers filed with the original petition for letters of administration.2 It was that filing, including the information on the assets of the estate, that triggered the efforts made by the Heir Search Firm to locate these distributees. The papers filed 60 days later in the Court confirm that six paternal distributees had been located and “signed on” by the heir search firm. Two of the three maternal distributees had also been identified and signed on at this point, although confirmation of their legal status as distributees, established by proof of the date of death of their mother, was not confirmed until a few months later. Another argument advanced the Heir Search Firm in support of its one-third (1/3) contingency fee is that their services are “more akin to a personal injury fee arrangement” under which a one-third (1/3) contingency fee is recognized by Court rule. 22 NYCRR §806.27. “Courts have particularly raised issue with the propriety of contingency agreements for compensation in non-tort matters”. Dilibarito, supra at 182; Betlem, supra. As noted by the Court in Betlem, the analogy of the heir search service and a personal injury action fee arrangement “is specious at best.” Betlem, supra at *3. “The risk factor of an attorney accepting a negligence case based upon a contingency fee is hardly comparable to an heir finder seeking a lost legatee or distributee. Whereas an attorney in a negligence suit cannot definitively know the quantity of recovery when he is retained due to a myriad of factors, …an heir finder already has full knowledge of the value of the estate and potential of recovery before setting out to look for a lost heir.” Id. In fact, courts have more often analogized the agreements in these cases to the compensation agreements of abandoned location services, limited by statute to fifteen percent (15 percent) of the amount recovered. Abandoned Property Law §1415. Dilibarito, supra; Devlin, supra at 329. The facts in this case are roughly analogous to those in Devlin, although Devlin involved searching domestic, not foreign, records. This heir search was conducted in a non-English speaking area of eastern Europe, although such services are evidently well developed, as documented in the Galovics affidavit of services. After a thorough review of the affidavits of McDowell, Kraus and Galovics, and consideration of the relevant criteria discussed above, this Court, pursuant to the exercise of its discretion, fixes the fair and reasonable compensation of the Heir Search Firm (McDowell, Kemp and Family Tree, collectively) at $185,000, plus disbursements detailed in the affidavits. The services provided did confer a benefit to these distributees and the fee allowed reflects the effort expended and the results achieved. Devlin, supra; Betlem, supra. The Court did not rely on any particular factor(s), but notes that this fee seems more than reasonable when considered on an hourly basis (600 hours total work alleged) and, at nearly twenty percent (20 percent) of the share of their clients, is modestly higher than the fifteen percent (15 percent) utilized by the Surrogate and ratified by the Appellate Division in Devlin. There are agreements in place among the three component firms that together comprise the Heir Search Firm. The Court leaves it those three entities to determine the allocation among them of the fee set by the Court.3 The Court’s review of the file reveals that its order issued February 3, 2020, directing $1,900 of compensation to the Guardian ad Litem for her second supplemental report, remains unpaid. Payment of that outstanding obligation will be directed by the Court in the Decree issued in this matter. Counsel for the estate also submitted an affirmation of legal services, at the direction of the Court. Counsel has already received an excess of $37,000 of legal fees and requests approximately $43,000 additional fees. A total of $80,000 in legal fees for the administration of this estate is approximately twice the commission payable to the administrator and over five percent (5 percent) of the gross estate. The complexities associated with unknown distributees, largely non-domiciliary, the resulting service challenges and the impact of the Covid-19 pandemic on the accounting proceedings, certainly support a fee higher than might be typical. Review of the time records submitted with counsel’s affidavit discloses two areas of work concerning to the Court. The first relates to efforts by counsel to negotiate with its own client, the CFO of Broome County, for allocation of a portion of his fee to the original temporary administrator, who was also counsel’s client. In addition, counsel’s office spent more than a nominal amount of time pushing back on the Court’s conclusion an accounting was needed to wrap up this estate, leading the Court to ultimately issue an order directing its filing. Approximately ten percent (10 percent) of counsel’s time was spent on the above endeavors. Counsel has offered a write-down of her fees in approximately the same amount. Counsel attempts to reserve the right to request additional fees, expressing an inability to estimate the work required to conclude the distribution directed by the Court, particularly with respect to the overseas distributees. The powers of attorney from the European distributees to Kemp’s employees allow them to issue receipts and releases on behalf of those distributees. The Court will authorize the final distributions to the European distributees to be made to their agent under the filed powers of attorney. This will greatly simplify the final efforts by estate counsel. Considering all the above, the Court awards the sum of $44,000 as additional legal fees to Levene Gouldin & Thompson, LLP, counsel to the estate, inclusive of services to complete distribution. Disbursements in the amount of $1,600 are also allowed, which includes a modest additional amount for the three packages which will be required to forward the final distributions. The final distributions due the nine distributees represented by McDowell will be forwarded to that firm, inclusive of the fees and disbursements awarded by this Court. McDowell is directed to coordinate and deliver to counsel for the estate receipts by the agent under the power of attorney on behalf of those distributees. McDowell is further directed to retain in its trust account the full amount of fees authorized to the Heir Search Firm in this decision, to be released only upon the provision to the Court by McDowell, and the Court’s acknowledgment of receipt, of proof of payment of the net distributive shares to the nine distributees represented by McDowell. This Decision constitutes the Order of the Court. The Court will issue a Decree consistent with this Decision, upon receipt of the affidavit requested from the administrator updating the accounting from its April 28, 2020 closing date to a current date, and a proposed Decree. Dated: March 9, 2021
