Judge: Yolanda Orozco, Case: 19STCV13174, Date: 2022-09-16 Tentative Ruling
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Case Number: 19STCV13174 Hearing Date: September 16, 2022 Dept: 31
Petition
to Approve Compromise
of Persons with Disability and
Approval of Special Needs Trust IS CONTINUED
Background
The present action arises from the death of Ernest Newman (“Decedent”). On November 9, 2018, Decedent was a pedestrian crossing the intersection of Gage Avenue and Hoover Street in Los Angeles, California when he was struck by a vehicle driven by Maria Mercedes Guerrero. Maria Mercedes Guerrero was operating the vehicle within the course and scope of her employment with MV Transportation at the time of the subject accident.
On April 16, 2019, Decedent’s mother, Katherine Rivers, initiated the present action. On December 10, 2019, the operative First Amended Complaint was filed. The First Amended Complaint alleges the following causes of action: (1) Negligence/Wrongful Death, and (2) Survival Action.
On July 9, 2019, Jocelyn Newman, Decedent’s wife, initiated a separate action for wrongful death arising out of the death of the Decedent.
On September 25, 2019, Ernest Newman Jr., Decedent’s son, initiated a separate action for wrongful death arising out of the death of the Decedent.
On June 12, 2020, the Court consolidated all three (3)
actions identified above under the parties’ Stipulation to Consolidate Action.
The present case, bearing case number 19STCV13174, was designated as the lead
case.
On July 15,
2022, a Petition to Approve Compromise of Disputed Claim was filed.
Legal Standard
An enforceable settlement of a minor’s claim or that of a
person lacking the capacity to make decisions can only be consummated with
court approval.¿ (Prob. Code, §§ 2504, 3500, 3600 et seq.; Code Civ. Proc., §
372; see Pearson v. Sup.Ct. (2012) 202 Cal.App.4th 1333, 1337.)¿ “[T]he
protective role the court generally assumes in cases involving minors, [is] a
role to assure that whatever is done is in the minor's best interests . . . [I]ts primary concern is
whether the compromise is sufficient to provide for the minor's injuries, care
and treatment.” (Goldberg v. Sup. Ct. (1994) 23 Cal.App.4th 1378,
1382.)¿
¿¿
A petition for court approval of a compromise pursuant to
Code of Civil Procedure section 372 must comply with California Rules of Court,
Rules 7.950, 7.951 and 7.952.¿
California Rules of Court, rule 7.950 provides, in relevant
part, “[a] petition for court approval of a compromise of, or a covenant not to
sue or enforce judgment on, a minor’s disputed claim; a compromise or
settlement of a pending action or proceeding to which a minor or person with a
disability is a party; or the disposition of the proceeds of a judgment for a
minor or person with a disability under Probate Code sections 3500 and
3600-3613 or Code of Civil Procedure section 372 must be verified by the
petitioner and must contain a full disclosure of all information that has any
bearing upon the reasonableness of the compromise, covenant, settlement, or
disposition. Except as provided in rule 7.950.5, the petition must be submitted
on a completed Petition for Approval of Compromise of Claim or Action or
Disposition of Proceeds of Judgment for Minor or Person With a Disability (form MC-350).”¿ (Cal. Rules of Court,
Rule 7.950.)
Discussion
I.
Petition to Approve Compromise
Petitioner Cynthia Stephens as Guardian ad litem files this petition seeking Approval of Compromise of Persons with a Disability and approval of a Special Needs Trust (SNT) on behalf of claimant Ernest Newman Jr, age 38, a person with a disability.
This action arises out of a wrongful death action of the Claimant’s father. The Claimant’s claim was settled for $600,000.00 in damages for the loss of the Decedent’s companionship, love, society, advice, and moral support. (MC-350, Item 6, 10). Of the $600,000.000, Claimant’s net settlement is $361,995.97 with $200,000.00 going towards attorney’s fees and $38,003.3 allocated to costs. (MC-350 Item 16, attachment 13b.)
In support of the attorney’s fees and costs sought, Petitioner presents the Declaration of Plaintiff’s counsel, Alvin Chang. (Attachment 13a.) Plaintiff’s counsel prepared a tort case against the City of Los Angeles, the County of Los Angeles, and the City of Los Angeles Department of Transportation, including engaging in discovery and deposing several witnesses. Under the retainer agreement, Plaintiff’s counsel is entitled to recover thirty-three and one-third percent (33-1/3%) of any settlement after commencement of trial, arbitration, or mediation. A copy of the Retainer Agreement is attached. (Attachment 17a) The Court finds that the services provided, the experience of counsel, and the complexity of the case make the thirty-three and one-third percent (33-1/3%) of attorney’s fees requested fair and reasonable.
The Petitioner wishes the claimant’s net settlement of $361,996.97 be transferred to the trustee of the SNT under Probate Section 1604 for the benefit of the Claimant, an adult person with a disability. (Attachment 18(b)(4).) Petitioner also requests that the Court approve and direct payment in the sum of $4,074.00 to the Urbatsch Law Firm, P.C. as compensation for legal services associated with administering the SNT. (Id; see also Kevin Urbatsch Declaration attached as Ex. B to attachment 18(b)(4).)
Kevin Urbatsch’s hourly rate is $480.00 while that of his paralegal, Jessica Marmolejo, is $190.00. A summary of the services performed between April 13, 2022, and July 5, 2022, is attached. (Ex. B-1) A detailed summary is attached as Exhibit C-1 to attachment 18(b)(4). The Court finds the amount requested by Urbastch to be fair and reasonable. The balance of the proceeds of the proposed settlement remaining for the Claimant after payment of all requested fees and expenses is $357,992.97.
II. Special Needs Trust
a.
Notice
When seeking approval of a Special Needs Trust, service must be made upon three state agencies including the Department of Mental Health, Department of Developmental Services, and Department of Health Care Services. (Prob. Code, § 3611, subd. (c).) There is a proof of service that indicates adequate mailed service to those entities and the other parties/counsel in this case and therefore service is complete.
b.
Proposed Special Needs Trust Instrument
At Attachment 18b(4) to the Petition, Petitioner has attached the text of the proposed Special Needs Trust instrument. (MC-350 attachment 18b(4).) The text of the proposed Special Needs Trust instrument is also attached to the [Proposed] Order and incorporated therein. (MC-351 Ex. A.)
A cornerstone requirement of
an SNT instrument is that it have a “payback provision” whereby any trust
assets remaining upon termination of the SNT by death of the beneficiary (or
any other reason), the remaining trust assets shall be “paid back” to the state
to the extent of benefits received by the beneficiary. The instrument
here contains adequate payback provisions in Article VI, Section 2 of the
proposed SNT. (Ex. A at p. 19)
c.
Findings under Probate Code Section 3604
When ultimately approving the establishment or funding of a SNT from settlement proceeds, the Court must make the following findings pursuant to Probate Code section 3604(b). The Court finds that the Petition (MC-350) and attachment 18(b)(4) set forth factual allegations in attachments supporting the settlement that generally cover the requisite findings:
d.
Trustee and Bond
The SNT instrument indicates that Roxanne Gunther, a Private Professional Fiduciary in Burbank, California, will be the SNT trustee. Normally, a bond must be required of a trustee unless the trustee is a corporate fiduciary. (California Rules of Court, Rule 7.903(c)(5), Probate Code section 2320.) The Petitioner does not meet that requirement and is required to give a bond.
In the SNT briefing, the Petitioner calculates the bond at $410,000 based upon the SNT funding amount, anticipated annual investment income, and an additional amount required for the costs of any recovery on the bond. (Attachment 18(b)(4) at ¶ 20.) This is calculated as follows:
Principal amount of $361,997.97, plus anticipated interest for one year based on 3% ($10,859.91) = $372,856.88, plus bond recovery fee of 10% ($37,285.69) = $410,142.57; which rounded to the nearest thousand is $410,000.
Accordingly, the Trustee is ordered to post a bond of $410,000.00.
III. Proposed Order
a.
Additional Requests for Relief
Petitioner adds the following requests for relief in addition to those that are essential to the approval of the SNT:
1) Petitioner requests authority to employ a broader range of investment authority than the statutory baseline, to include investments in mutual funds and bonds with maturity dates greater than five years. (Attachment 13 ¶ 8.)
2) Petitioner requests authority to pay $4,074 fees to the trust specialist counsel, Kevin Urbatsch of The Urbatsch Law Firm, for tasks relating to the minor’s settlement trust including drafting of the trust instrument and related portions of this petition. (Attachment 13 ¶ 10.)
The Court finds that the requests are reasonable and will grant Petitioner’s additional requests.
b.
Deficiencies in Proposed Order
The Court cannot approve the Petition at this time because the proposed order is deficient in the following ways:
The proposed order does not include language requiring the submission of a Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044 within 60 days. It is that filing that will hand the case off to start the trust administration for the SNT and that will host the future SNT accountings and any bond issues or other trust issues.
The proposed order should also state that this Court has set an OSC in Department 31 in 60 days, on November 18, 2022, at 9 a.m., to ensure that the probate case has been opened and that any required bond has been posted.
Based on the foregoing, hearing on the Petition is CONTINUED
to October 7, 2022.
CONCLUSION
Petition is CONTINUED to October 7, 2022, to permit Petitioner
to correct the two items noted above.
The Court sets an OSC on December 15, 2022, at 9 a.m., in Department 31, at which time Petitioner must confirm that the probate case has been initiated by filing a copy of the Notice of Commencement of Proceedings for a Court Supervised Trust on LASC Form PRO 044, and that the bond has been posted.
The first SNT accounting hearing shall occur in the Probate Department no later than April 26, 2024, in the Probate Department to which this case will be assigned.
Petitioner to give notice.
The
parties are strongly encouraged to attend all scheduled hearings virtually or
by audio. Effective July 20, 2020, all matters will be scheduled virtually
and/or with audio through the Court’s LACourtConnect technology. The parties
are strongly encouraged to use LACourtConnect for all their matters. All masking
protocols will be observed at the Courthouse and in the courtrooms.