Episode 2–Stand, Fight, Win! LIVE: Real Lawyers, Real Answers – Informal Discovery Conferences

Restreams see what it does now we're on something what's his life all right let's turn it on all right we should be going so this is Keith and this is Stuart is it 1:30 no we're getting good it's going this is the first time that we're going to do a simulcast on YouTube and Facebook so we're getting going looks like we're live on Facebook and we're just about live on YouTube but we thought we'd get it started just a little bit early to get it up and running give people a chance to tune in and give us a chance to make sure everything's working there's gonna be our weekly live segment this is Keith Davidson right here Stuart Albertson over there and our plan is to be able to come to you on a weekly basis and we'll be talking about things in the trust and we'll Litigation world that we deal with and it's things that you might find interesting as well we certainly hope you do primarily we're gonna probably be going over a lot of our most recent appellate cases that come out by the California appellate courts so that's kind of the current events in our world and we can kind of take some lessons from that as we go and then as well there's some other topical issues that we want to cover with you that we'll be covering today but also in future episodes too and then it'll just give us an opportunity to also answer your questions so if you have any questions you can submit those on Facebook or you can submit those on YouTube so I are we up on YouTube now you might want to switch over to the YouTube account on the windows and kind of see what it looks like all right there we go so I think we're good to go so go ahead and feel free to ants ask questions you if you're on YouTube you can ask your questions there if you're on Facebook you can ask your questions there and our lovely and helpful assistant Kayla we'll be watching for your questions and we'll be letting us know when they pop up and you have the Facebook account Cayla so we're good to go there too awesome all right Stuart so what do you want to start with today so I came across a new device in the discovery act that's going to be very helpful to us they're called informal discovery conferences and you can think of an informal discovery conference a little bit like a mandatory settlement conference mandatory settlement conferences most attorneys are aware of where courts will order the parties into a settlement conference prior to trial to try to get them to settle the case well this is for discovery these I DC's they call them informal discovery conferences and it's under Code of Civil Procedure 2016 oh eight oh and it's effective January 1 2018 and essentially what you can do with and if what you can do with these informal discovery conferences where this arises is where we have sent discovery to an opposing side and they've decided that they don't want to answer that discovery and we've done the meet confer requirement that California discovery Act requires what we try to reach out to the lawyers and reason with them as to why they should answer this discovery and they still choose not to well now we can ask the court for an informal discovery conference or an IBC so that we can meet with the judge who can kind of play parents I guess between two children and see if we can present in our position we'd be asking the judge to help the other side understand that they owe us the discovery and that we're entitled to it under the discovery Act the other side then gets an opportunity to tell the judge why they don't think they have to produce it the interesting thing about these IBC's the judge really doesn't even make an order at all the judge simply tells you based on their experience of being a judge and being a lawyer which way they would rule on this case well I think that's pretty important because if they tell you how they're gonna rule and you're gonna be bringing a motion to compel in front of them chances are they're gonna rule the same way right so I think these are a pretty effective at least as an effective idea to get opposing counsel on the other side to respond to discovery as as I don't know what all of our viewers will know but discovery is just it's worse than getting a root now well let's talk about so okay the informal discovery conference so what you're really talking about is sitting down and talking about the problem with the judge without necessarily having to bring a formal motion although maybe you do bring a motion but but you work it out without the motion for people who don't haven't been through this process before what you may not realize if you're a client out there is that when somebody refuses to answer your discovery your lawyer has to draw up a motion and and that's a lot of work because you have to put down on paper all your legal reasons as to why you think that somebody should respond to your discovery and they're not going to do that you also have to do what we call a separate statement where you list out everything that every where question you asked or request you made what the response was to that request and then why that response isn't appropriate well you can imagine even if you have a short set of discovery you ask 30 questions you have to do that 30 times and you know now you have a document even on a simple motion your separate statement alone is gonna be 30 40 50 pages long and then the motion is another 10-15 pages and how much attorney time does it take to draft all that I mean you're talking several days sometimes I mean you could be 10 20 grand of attorney time and then what happens it goes to court and the other side has to do an opposition and then we get a chance to do a reply so that's a further drafting that we have to do is the moving party it goes to the judge well not even the judge really it's usually the the research attorney at the court is gonna look at it first and they're gonna decide kind of what the issues are for the judge the judge is gonna look at it and now the judge is sitting sitting there and keep in mind he's got what hundreds and hundreds he or she has hundreds and hundreds of these motions and they don't really want to deal with them they don't want to see you in court they don't want to talk about it and they have to decide if they're gonna allow the motion or not or what they're gonna do with it so you're talking about on if you didn't have this informal conference idea you're talking about tens of thousands of dollars of time both for the attorneys and the courts and then you usually don't get everything you want on a motion anyway because the court may see it wrong or they didn't understand what you were asking for who knows what and then you have to enforce it so now you get an order let's say that you do win and then you have to go out and you have to force the other side to comply with it and the other side obviously is not happy that you brought the motion and so maybe they're obstinate even after the court order you also tend to ask for sanctions right you want the other side to pay your attorneys fees for doing all this and now often two courts or sanctions on discovery motions it's rare in fact most judges don't want to hear the portion of the motion that has to do with sanctions sanctions essentially being your honor we were forced to file this motion to get discovery that we were entitled to so you should make the other attorney or their client or both of them pay us money for the time that we had to do to bring this very expensive and time-consuming motion most judges won't even address the sanctions request at the motion unless you specifically ask for it and then once you ask for it they usually say deny it you're denied they'll give you something you know $1,500 this is a good start for California law but I think California could do one better than this and that simply would be some form of mandatory discovery disclosures like they have in federal court it doesn't necessarily need to mirror the federal process but think if you had a requirement in a case as a lawyer that if you file a case or you're answering a case as a litigant you have certain duties to disclose what you have in your file to the other side without request it's just something that's do within a certain time frame after the case is at issue I think that would be the way to do it under California law and then if you don't produce everything and you're found later to not have produced things there can be you know terminating sanctions there can be all kinds of different things that courts could do to her to to penalize the party that didn't disclose the information there to disclose but then the court could also if somebody doesn't disclose something that is favorable to them down the road preclude them from using that at the time of trial so discovery is the bane of existence of most lawyers I mean we bring motions to compel in cases and we know how hard they are to do so we're gonna try these informal discovery conferences and see how they work well we can report back on that and people can decide if it's worth at least attempting that before you bring a full notion but walk me through how these work because why are these better than a motion because do you have to file the motion do you not file the motion is it I mean how are they gonna work to help litigants well and this is where some judges have been very helpful there's actually one judge in Los Angeles and she's actually has a standing order and it's posted right outside of her courtroom and it says you can't bring a motion to compel in her courtroom until you've done an IDC so you say what are you to do because as you you and I know you once you receive discovery responses you have 45 days within which to file a motion to compel the other side to produce better responses if they haven't done that to begin with so that 45 days runs fairly quickly according to court calendars which will stretch out much further than that in most cases so in her courtroom once the IDC is set which her courtroom is very favorable to they set these quite quickly there's an automatic stay about 45 days and so if you still insist on bringing a motion to compel after the IDC you'll have two weeks to do that after the IDC hearing so that judge is very friendly so you ask it what the you said I believe you start with a declaration or something well order you ask for the IDC well in Los Angeles in this particular courtroom you actually just call to get a hearing oh nice actually you can go through the automatic hearing system and try to get it that way but if you can't get it that way you can call the department and you can have the department give you a date the other side can either agree with you or you can have them come kicking and screaming and it just gives you an opportunity to sit down with a judge who again has a lot of experience generally in these motions to compel which they've heard hundreds and hundreds of them and it gives them the ability to give you kind of their two cents and I think it also makes lawyers behave a little bit better than we probably do when we're just dealing with each other being a lawyer is a very adversarial system and we fight hard and sometimes we don't like the people that we end up fighting against right in front of a judge we're gonna behave ourselves we'll probably even be a little bit more reasonable to find some compromise on do we really need this discovery and and that's the other question you have to ask yourself have we ever filed a motion to compel because we're just angry at the other attorney no or have we always filed it because we really need the discovery right that made me pause when I thought about that I think sometimes our ego gets in the way a little bit I hate to say but just because we have a right to get something doesn't mean we should go get it what if we don't need it and so we have to ask ourselves do we really need this and I think that's where a judge and an IDC who doesn't have a dog in the hunt who is not passionate because they're just to judge calling balls and strikes they can look at the two lawyers and say you guys are being knuckleheads you know you you know that you have to give this information why don't you just give it and you know you can't overreach and get more than what they're willing to give you so why don't you just accept what they're giving you I think that's the key right is trying to find that common ground because there's a lot of times when somebody I think you're right the lawyers get so angry at each other it's like I want all of the personal records of the other party and you know the other person says you're not entitled to them and and it's just loggerheads and it's either you know all or nothing and a corking a judge can step in and say well why don't you give them this this and this you know these sets of documents that they were relevant to the case but we won't produce anything else until we see how this plays out right you know there's a compromise to be had there as is the point and and the judge can definitely help with that compromise but I'm glad to see that the courts gravitating in this direction because motions to compel are an absolute nightmare they're expensive they're time-consuming and they're the only way the only option you have to try and get something done and if you don't do a motion to compel now you've got potential malpractice because you should have forced the other side to answer these things and that's the other thing that I think a lot of lawyers have concerns about is why I'm forced to do these I have to do them because otherwise down the line my client might say well you should have done this and you didn't now a judge can come in and say well this is how I view it and and this is what I would suggest you do it's interesting to me that at the IDC the conference part it's not a mandatory decision so the judge is just going to give a recommendation that's not mandatory and then the lawyers are going to step out work it out and then I guess if they don't work it out then they go ahead and either file their motion or proceed with their motion of authority on calendar or filed that's correct so it's kind of interesting I think that also is actually a good thing because it encourages people to be a little bit more open with the discussion maybe because they know that the judge isn't going to make a forced decision it's gonna be something that you're gonna have to agree to at the end of the day but obviously if you're sitting here with your judge and your judge is saying well this is how I view the issue you know that's how they're probably gonna rule so you'd be kind of it'd be very short-sighted for you to say I don't care I'm not gonna agree and and I don't know this to be the case but I think that we would find this that let's say you go to an IDC and you're kind of flippant with the judge and you tell the judge well I'm gonna I'm gonna file a motion anyway because I think I win on this even though you've come out against me informally right you know that's section in the statute that does allow a judge to give you our award monetary sanctions against you yeah maybe there will be some more Awards for monetary sanctions on those cases so yeah the judge would have a little bit more of an incentive but it's definitely something that I think we should be taking far more use of I wish the court would be even more open with other issues like they are with this one because I think part of the problem as being a practicing lawyer is that even to us on many occasions the way the court works is a bit of a mystery even though we're in court a lot the court different judges do things different ways I know there's times when the judges do get together and they decide that they're gonna start doing a certain thing you know whether it's I think there was a time in San Bernardino in fact when the judges decided they are going to start awarding at least some small amount of sanctions on discovery motions and things like that what in my opinion I think there should be at least some amount awarded on discovery motions because I think it encourages lawyers not to bring them well and I work it out and I think that what you're getting into there Keith is I don't think most people understand that aren't trial attorneys they don't understand the gamesmanship are the games that are played in the discovery process and you know we'll send out discovery to the other side which has written questions to the other side that they have 30 days to answer right yeah and what's the first thing we're gonna hear 29 days out and I need more time so if we give them another 30 days so we're 60 days out now and then they call you and ask you for add another 2 weeks usually right no they ask for another month but you give them another 2 okay so now you're 70 80 90 days out from when you sent those questions to be answered right and your case is not on hold but you you want to get those written discovery responses prior to depositions generally not always but generally and then they send you just a bunch of garbage I mean it's literal garbage and it's it's it violates the discovery Act and can we go and tattle to the court on that person for violating the discovery Act no what do we have to do yeah you have to bring a motion and you gotta go through the and then after bringing up motion the judge might say and we'll figure it out a trial don't worry about it or they might award they might order yes you do have to answer it whatever it is it's a lot of work to get just the basic responses that you should be entitled to which I guess brings us back to your statement of shouldn't we just follow but the federal rules do mandatory it's just a mandatory disclosure and I you know I mean I think in a perfect world that is what you would do I think you'd have a lot of lawyers whose heads would be exploding if we started doing that in state court that's so vastly different from what we do right make you imagine you start a case and what is it because I don't I haven't done a lot of federal stuff but you've been in federal court a lot more than I have but what's the timeframe I mean what timeframe do you have to have to start like disclosing things you're talking about in a number of months I take it right it's generally it's very quick actually I believe it's been a while since I've looked at the rules but I believe it's 30 days and then there's an eight an obligation to do continued discovery so here in California let's talk about that for a second let's say you finally get them to respond after three or four meet and confers I mean thousands and thousands dollars of legal fees and arguing with the other lawyer to give you what you write with fleet have a right to under the Discovery Act and then they come into that one document that is gonna sink their case but they come into it a day after they respond to you they have no obligation to follow up which just blows my mind I'm not sure I mean we do have supplemental discovery requests we can make in California we do those twice before trial and that kind of buttons up those arguments about well we received this document after we responded to you but wouldn't it be nice if there was a continuing obligation for me and the other side to produce all facts all witnesses all documents that go to the claims in the case and now there's no surprises there's no Perry Mason moments even though there are no Perry Mason most moments in any event at least that's the idea behind discovery I would like to say that to the people that are making the rules in California about discovery and if you ever come across this video we literally have stopped doing most written discovery other than the ones we have an understanding that at least we're gonna get a good chance of getting reasonable responses back and then we just try to clean up all those other questions we would have at deposition and it's unfortunate because we would be I think counsel on both sides would be more informed and educated on their cases if we were to get the documents and the positions the contentions early on in a case before we spend thousands and thousands of dollars and become so emotionally invested in the case that now it doesn't matter if it's a bad case any longer we're gonna go forward on this case or a bad argument when you're trying to get discovery you're just trying to win to win because you're so mad at the other side and if people would properly answer written discovery it would also shorten depositions because you wouldn't have to probe for all that information but you can't get it in written discovery because of the gamesmanship and the cost involves and trying to force people to answer and then when they do answer it's not appropriate in any event so there are a lot of problems with how discovery is conducted and ironically discovery was meant to make trials more fair and more transparent so everybody has a chance to have equal access to the evidence and in so many cases it just doesn't accomplish that goal any longer because of the costs involved and the complexities involved so hopefully the discovery conference the informal discovery conference will start loosening some things up I mean what a great opportunity especially if you're in that particular judges courtroom where you can just set a date and don't have to file your motion you show up you get an automatic stay on your motion because you don't worry about filing it within 45 days and you you have a chance to resolve it without all the costs and and heartache that goes into those well we report back on that in a few months and let you know we have a we have one case right now where we think this may be something we want to try out but I do know you want to bring something up and that's an appellate case that you came across this week and say it's a fairly new appellate decision and we tie Roenick because it's not too often in California California's got what 40 million people and there's a lot of cases going on but we know both of the attorneys that argued this case in front of the Court of Appeal and we also know the fiduciary who was involved but let me setup the hypothetical and then maybe you can walk us through this opinion and by the way I'll be the first to admit I've always been confused on who carries the burden of proof in an accounting case yeah it's confusing it is confusing and so you're gonna you're gonna set that straight for us but here's the here's the here's the situation a trustee a fiduciary well interchangeably we can use those terms files and accounting with the court let's say they've been trustee of a trust for five years and maybe they've never accounted for that five years and we represent one of the beneficiaries and the beneficiary has been abused they haven't been listened to the trustee has not made distributions to the beneficiary as required the trustee appears to have made expenditures for the benefit of themselves when they're not entitled to do that when you're looking through the accounting it's been filed with the court the beneficiary gets it the beneficiary is upset and comes in and sees one of us and says I want to challenge this accounting and what happens from there how does how does it work what do we do to challenge the accounting how do we prove that the trustee breached their fiduciary obligation what burden is on the trustee to prove if anything I mean what do we do here with this mess yeah that's always it's always a good question there's a lot there's a lot of unanswered questions in accounting cases because usually a beneficiary comes in and they don't know what's going on they've been kept in the dark and how do you even I mean let's assume that you have a case where you actually were provided with an accounting okay well that's at least something you've got something to work with there as a beneficiary we can look at the accounting and we can see what assets were reported that doesn't mean we believe everything that's in the accounting but at least we have a starting point to start our discovery right if you don't have a proper accounting then it's an even bigger mess because you have to get an accounting and that it can take time because the court will order ultimately order the trustee to account usually the trustee will be given 30 60 90 days to do it that 69 days passes and the trustee doesn't do it and you go back to court and the judge says okay now I want you to do it in 30 days and 30 days goes by and they still haven't done it and just goes okay now I want it in two weeks and finally I mean if you don't get it to me in two weeks you're gonna be sanctioned and finally here comes the accounting and it's garbage but again at least when you have the accounting that's information and so that's the starting point for doing your subpoenas and so every accounting case must have subpoenas because it's the only way to actually get at the source documents and buy subpoenas I mean go to the banks go to the money get the information erupted you they're key so I just want to make sure word I'm clear on this and that is let's say an accounting has been filed with the probate court after at that time period you talked about where the trustee simply took forever to file it but now it's been filed and so we look at it it is garbage we represent the beneficiary we file an opposition to that accounting is that how that works now yes right so then you have to file your objections to that accounting and you have to state what you believe is improper with the accounting okay so if we see line items where things are written out you know $20,000 to cash 50,000 to cash right you know 10,000 to American Express that the American Express happens to be the card held by trusty we see those line items we include that in our objection is that right that's right okay so now we file our objection we're at issue the trustee created their accounting out of some documents right we call those underlying documents what do we mean by underlying documents you're talking about all the financial documents so the bank accounts the financial account statements if they are paying credit cards the credit card statements and I was I was laughing when you said twenty thousand to cash and all that because I remember I had a case fairly early in my career where a trustee was spending just tons of money on credit cards we got the credit card statements and it was purchases for Victoria Secrets Harry and David all this stuff well the beneficiary was 90 year old man oh I'm not sure he might have been an interesting man at least not on the outward part of his clothing I don't know what he's wearing underneath I didn't ever know him to that level but I don't think he was spending thousands and thousands of dollars on Victoria's Secrets but that's where when we talked about the underlying documents and you're gonna go and look at the financial documents that support the accounting they tell a story and it maybe it's not quite that risque of the story but they do tell a story and so you need to get the financial documents you need two credit card statements the bank statements the financial statements if the real estate was sold you need the escrow documents you know what was the final closing statement on escrow if there's a mortgage you need to see the mortgage documents any private placement documents oh my gosh yeah so I mean we had a case before to where a trustee invested in private placements which is something that only high net worth individuals should invest in individuals have net worth trust and that's because those speculative nature of those yes they're not they're not license with the SEC they're not overseen by the government they're highly speculative not something that would be reasonable or prudent for a trust investment and yet there they were so if you have something like that you need to see those documents those documents must be around somewhere because there needed to prepare the account II you can't prepare an accounting without them and so where is this doctor these documents you're not going to have them they won't be filed with the court with the accounting cuz accounting is really just the end product of somebody going through those documents and listing what's in there okay they should be around so let's say that you have gotten all those underlying documents you sent out those subpoenas and you've got the bank statements the credit card statements and the IRS statements and whatever other financial account statements you need the court has now ready is now ready to set a trial date that's a trial date and you and the trustee show up to trial who goes first and what are these burdens of proof and what do they mean and how do we walk through those and that gets us back to the case and it's Scott versus McDonald is the case it just came out in August of this year and it was this the original case was decided in the county of Riverside by Judge Karimun which were very familiar with Karimun we were in front of them a lot by the way since this is on the record I want to point out I think he's a very fine judge yes he really is he is a good judge I do like it I do like judge chairman he's been very good to us through the UM he's an honest broker but he's been very good and fair to us as well we have no problem kissing up the judges but in this case it happens to also be true okay we're both kissing up and truthful it works so all right so this is a this is a really interesting case cuz you have a trustee yes imagine this you're a trustee and we represent a lot of beneficiaries so we wish that this was the result in most of our cases against trustees it's not because the court tends not to clobber trustees as much as we think they should but unless we're representing trustees which we do represent trustees from time to time only the good ones you have to plug your nose when you do that we only represent the good trustees okay all right yeah we know that gun all right so but the bad trustees they should get clobbered and they're not always clobbered but in this case this trustees worth clobbered because she went in asking to have her accounting approved and to be awarded fees of $35,000 and the court denied the fees and surcharged her which means she has to pay out of her own pocket back to the trust over ninety three thousand dollars ouch so okay so you told the beginning and the end of the story I want to get to the middle here but I wanna i want to punctuate that and that is we have the trustee she filed in accounting yeah we had beneficiary come in and object to it I'm sure they did their subpoenas like we just talked to you and got the underlying financial documents and a trial date was set and at that trial judge care man a very fine judge we haven't pointed that out yet he surcharges the trustee not only denies her the $34,000 in trustees fees she's requesting but then surcharges her and tells her you're gonna pay out of your own money ninety-three thousand dollars back to this trust yeah and was this a special needs trust yeah so this was a special needs trust for a beneficiary who was in a must have been in some sort of catastrophic accident because she had received a personal injury settlement but she was I think a minor but also disabled and so it was put in a special needs trust well the point of these special needs trusts is you're not supposed to use the money for things for daily living because disabled people qualify for governmental benefits that pay for those things and so the special needs trust is only for extras that would help make the beneficiary more comfortable in their living the problem is is that the trustee really and she testified to this she didn't really read the trust she said she did not read the truck yeah okay she did not read the trust okay well there's your first mistake so if you're a trustee you you want to read your trust and she just kind of administered it the way she would any special needs trust is what she said but the the problem is this trust specifically said that distributions could be made to the beneficiary that are reasonably necessary to provide for the care and comfort of the beneficiary above daily living but it didn't give the trustee the right to just distribute money willy-nilly and that was really the problem is that the trustee bought a car for the beneficiary well the beneficiary doesn't drive the mom drives and the mom used the car and so the courts saying well that's more of a benefit to the mom that is the beneficiary and I want to take I want to take a little bit with you there and I think you're doing this on purpose it seemed to me she bought the car for the mom she didn't buy the car for the beneficiary and that's exactly what the testimony showed is that the trustee specifically said I'm buying this for the mom because the moms times student and she needs a car to get around but she also is gonna try the beneficiary in it from time to time well that that's not what the trust allowed the trust didn't allow you you weren't allowed to make a distribution with the trust for reasons that benefit the mom so I'm gonna buy a car because the mom is a full-time student that's not a proper way to look at the trust I'm gonna buy a car because the beneficiary drives and needs a car would be different a different standard of distribution so and what else what else about this trustee was interesting that we found out about her requirements that she's supposed to have she was unlicensed for two years so private professional fiduciaries must be licensed by the state of California if you're just an individual you know if you were a trustee of one or two trusts that's fine you don't be licensed but if you do this for a living and you're not a trust company you have to be licensed well she was unlicensed for two years from oh wait until 2010 but she still operated as trustee and she still took trustees fees without prior court order during that time well that's gonna anchor a judge I guarantee you that if you are violating the law so blatantly like that you're gonna get clobbered I mean that's that's a bad one I thought I remember the trial judge pointed out that you didn't inform the court of you know you should have informed the court that you were a continuing to take fees under this special needs trust and you were not licensed for what two years something like that yeah I mean number one you shouldn't be operating as a trustee and number two if you are doing it and you took fees you darn well but I tell the court when you file because that's a problem and you you know it's kind of like and you say this a lot just in terms of any trial that you're going into is you want to tattle on yourself first because if you don't tattle on yourself about bad facts in your case somebody else is gonna gonna tattle on you and it's gonna be far worse than if you just let the cat out of the bag yourself right that's right and and just on a brief comment on that when I was a young attorney and I still am a young attorney but when I was a much younger attorney I was in a in a courtroom and I I didn't hide some facts from the court but I didn't go out of my way to try to tell those facts to the court because they were very much against my client and I remember this old Savi attorney on the other side said your honor after I've made my argument said Your Honor I'm gonna tell you the things that mr. Albertson didn't tell you about and then he kept saying that for every fact so he said it about 10 times let me tell you another fact that mr. Albertson didn't tell you about and I learned very quick that it's probably a good idea for us not to say and this is a little tip for for younger trial attorneys out there don't say Your Honor the defense is gonna argue or Your Honor they're gonna argue say Your Honor before the jury madam ladies and gentlemen the jury before we came here to have you look at this case we had to determine for ourselves if there was any issues that we should be concerned about and we want to add in full disclosure we will have to tell you those things that we need to make sure you understand that we know before we came here today because we believe we can explain all this and then you go through those ten items and I'll tell you I did this in a jury trial once and out of the corner of my eye the defense attorney just kept sinking lower and lower and lower in his seat and he kept crossing things off on his on his mahat because I was taking away all of his ammunition because once you tell on yourself when you get up there in front and when the opposing side gets up to go they can't say well what mr. Albertson didn't tell you about what he hid from you what he was nefarious about and so what you're getting at is if this fiduciary had had a license suspended the appropriate thing to have done would it have been to go to the court of jurisdiction and immediately disclose that it's a court what should I do yeah and and certainly when you do your filing so when she filed the petition to have her accounting approved and her fees approved I think you have to disclose that in that filing tell the court look you know I want you know we weren't license for two years and I also would tell if I were representing her I'd say you're gonna have to reduce your fees because you're gonna have to show the court that not only was I not license but I'm doing something to make it right for the trust right by not being license right well if you go in and you don't disclose it and you want fees for those two years yeah you're not gonna no courts gonna be happy with you but if you go in you say yes I wasn't licensed and I'm reducing my fee because of that now you've told on yourself and you made it right and I guarantee you that most judges are not going to punish you if you tell on yourself and you make it right but if you hide it and you don't make it right yeah you're gonna get clobbered so so this trustee also did something interesting towards the end and maybe I'm jumping ahead here so we can back up after this but she made some kind of a distribution or something towards the end of the trust administration without court order yeah because once the beneficiary objected there was a little over fifteen thousand dollars left in the trust and so the thought was well let's just distribute this out because the mom of the disabled beneficiary said well we need money to buy a house and the trustee was talking to the beneficiaries attorney and saying well we both agree that if we just keep fifteen thousand dollars in trust it's going to be wasted through fees and such so I'm just going to distribute it out to the mom so she could buy a house the problem is the mom wasn't told that this money is so that you could put a down payment on the house for the beneficiary and the trustee didn't follow up to make sure that that's in fact what happened in fact what happened so mom put it in her own personal bank account and used most of it to pay her bills the mom's bills well the problem is is that and this is why I know that the beneficiary is a minor now I think about it is because the court specifically said look the mom has a legal obligation of support of the child under the family code which means she can't use the daughter's the beneficiary's money to pay for expenses that the mom is legally required to pay for like utilities and food you know groceries and all that sort of thing and so that's what the money was used for is used for all of moms bills and the trust was not set up to benefit mom it was set up to benefit the disabled child and the court said that's just an improper distribution you just couldn't do that okay so let's get back to the burdens of proof and so just basically for the the audience that it that that aren't lawyers this is the burden that is put on a party and they are the ones that have to carry that burden in order to win on the claim that they're asking the court to win on and that is quite confusing and these accounting cases so where do we start with with the burden of proof in these cases it is confusing it's confusing for clients it's confusing for lawyers it's confusing for judges and if you're a lawyer heading into an accounting trial it's your number one job to educate the judge as to what the burdens are don't assume that the judge is readily familiar with these things especially in a lot of our cases they're what they call long cause trials which means you don't get the probate judge hearing them they get kicked out to a civil department you might be in front of a judge who's never heard a truss case never heard an accounting case before and let me just add there because I know you feel the same way I do these are very bright judges we're not suggesting they're not they just have not had a lot of exposure to these types of cases and by the way I would say that even probate attorneys that practice in this area are not entirely clear on what the birds to proof are and I think that's why this case is so great and it just came out in August of this year so I'm sorry for the rough EEMA go ahead I want to make sure we're clear that we're not trying to disparage anybody here we're pointing out that this is a difficult concept to get and this is the case you want to read before you go into your next accounting litigation matter so that you know where the burdens of proof fall yeah yeah and I would agree with that I mean it's not that the judges aren't aren't smart people they're very bright people and in our experience the judges want this type of education I mean they they they want you to help them out and and show them the burden they may already know the burden but it's still good to reinforce it the other thing I will say to both clients and young attorneys is all this burden stuff gets real confusing during trial because it's not clear as to what's happening and when it's happening but legally speaking this is the burden so when you have an accounting first let's talk about what the trustees burden is so the trustee has come to court and they filed a petition asking the court to please approve this accounting and what that means is they want the court to issue an order saying everything that the trustee did that's reported in the accounting was proper and so when to bring that to this case this trustee said the $15,000 distribution at the end to the mom that's proper the money for things that weren't necessarily proper that's proper so the trustee in this case is saying I did all these proper things and putting it in line item form right right okay and they want the court to say yes you you did everything correctly and the other thing this trustee did in this case by the way is pay for a whole bunch of vacations to Hawaii in England and yet Jamaica right they did go to ye though - so but they had family in Jamaica so that's why it made sense well that's what they said so they want the court to say yes all those line items are proper and I'm approving it once it's approved then nobody can come back and try to sue the trustee later because you have a court order approving it but that's an important point though you just had there Keith and that is once a court rules basically on anything in the universe assuming you don't appeal that ruling which is a very short time frame to appeal a ruling isn't that the gold standard that trustees want if they get a court to say your trust accounting is valid and hereby approved can anyone come back and sue them assuming no appeal is taken can anyone ever come back and sue them on that accounting no it closes the door it is the gold standard I mean that's the best that you're ever gonna do it's even better than a release because arguably you could set aside a release if it was obtained under improper circumstances so yeah getting a court to approve an accounting is very important for a trustee because it closes off their liability right in the future so here's their burden so a trustee comes into court court I want you to prove it the trustee bears the burden of establishing the correctness of the accounting that the disbursements were correct in the mount and the disbursements claimed were for proper purposes so think about that you have to show that the disbursements are correct in the amount which means it's not good enough that you put down you know I spent $2,000 on real property taxes for the trust real property you're gonna have to substantiate that in some way if the beneficiary objects to it so here's the real property tax bill here's the check that I use to pay it you can see it's cleared the bank because it's stamped on the back there's my proof that that was the correct amount okay I have a question for you because you said something interesting you said if a beneficiary objects to a particular line item if a beneficiary objects to the $15,000 payment that has gone out inappropriately we believe that's an inappropriate expenditure but let's we already know that because the court ruled but let's assume we we're not there in the case yet we see this $15,000 we object to it that's all we do is object to it and the trustee says well your honor since the beneficiary objected that line item they have to prove that something is wrong with that line item is that how that works no no so the trustee has to prove correct its correctness of amount and that was for a proper purpose so first of all show me that this was an actual that whatever you have listed in your accounting was a true amount and a correct amount and then the second part of that is was it for proper purpose of the trust so then you look at the trust what were the proper trust distribution what does the trust distribution requirements hold and if that 15,000 was paid for proper purpose so my example when I said I paid $2,000 for real property taxes for a piece of for a for a home let's say that the trust owns I can show the receipt so you have to show a receipt to prove that yes I was you know the trust was asked to pay this by the county $2,000 here's the check I paid it and you can see on the real property tax bill that it's for this house that the trust owns so therefore it was paid for proper purpose in order to maintain property that the house huh that the trust owns so to be clear then the only person at this point in time in our story up to here that has a burden of proof is the trustee and even though the beneficiary objected to that line item the trustees still gonna have to meet this burden of proof that you've enunciated that's right so we're yeah it's all trustee up to this point okay beneficiaries all they have to do is sit back and throw rocks you know and it seems like hotshots seems they are in some of the cases we've had it does seem that the attorneys we've gone against have told us that once you object you carry the burden to invalidate any line item and I think this case clears up for us that it is the trustee initially now that has the burden to prove the particular line items up in each line item in the trust account to show that it's a proper amount and that the truss allowed it yeah and that's what's so great about this case and the other standards that have been around for years and years I mean there meaning the appellate court is quoting a case from 1944 Neil versus Barnard also perdy versus Johnson hurty versus Johnson is the seminal case these cases have been around for a long long time but the nice thing about this case Scott versus McDonald is that it puts it all together and it makes it really nice and easy to go through what the burdens are so only the trustee has a burden to prove that the line items are proper and correct an amount and for a proper purpose beneficiaries don't have to prove anything all they have to do is say I don't like that one that one in that one and the trustee has to prove it up the court can do it to the court on its own motion or on its own prerogative you can say well what was this amount and why did you spend it and was it proper and so the problem that the trustee got into in the Scott versus McDonald case is that they she wasn't able to meet the burden right so on the one hand she might have been able to show that yes the $15,000 was actually paid and it's the right of max I got a check to back it up but it didn't meet the purposes of the trust because it was distributed to the mom not the beneficiary and it was distributed for a purpose that didn't benefit the beneficiary and the trust required that all distributions be made out in a way that benefits the beneficiary and her life and care and comfort not the moms and so it didn't meet the purpose of the trust and for that reason the court would deny that line item and say I'm not going to prove that and so I'm just not going to approve it okay so now we're gonna get to the next step which is the surcharge so this is where we want the court to take a step further so it's we don't just want the court to deny that line item but now we want the court to ask the trustee or ordered the trustee to pay that money back to the trust that's a surcharge and when you say we you're talking about the beneficiary yeah right the beneficiary yeah we always represent beneficiary so I think right as we write the beneficiary wants the trustee to be ordered okay now pay it back and the standard for there is different because now the burden is on the beneficiary the beneficiary now a burden arises for them if the beneficiary wants the trustee to pay money back and that's because it's an affirmative claim the beneficiary wants the court to take an action against the trustee and and pay something back so this is what the beneficiary's burden then becomes as first the beneficiary must prove that there is in fact a fiduciary duty okay so you can't get a surcharge from somebody who didn't have a fiduciary duty over the money to begin with well that's gonna be easy on trust because you have a trust document yeah somebody's named as trustee somebody's actually acting as trustee boom you've proven that they have a fiduciary duty next you have to prove that they breached some duty that they had so what what did they breach and then you have to show what the claim damage was from that breach so going back to this case Scott versus McDonald that's where you would say well clearly the trustee has a duty because she's been acting as trustee that's a fiduciary duty what she breached is she breached her duty to follow the trusts terms and make distributions according to those trust terms that's Probate Code section 1600 1 it's basic the number 1 basic duty of any trustee you must follow the trust terms so that was the breach and number 3 the damage was $15,000 fifteen thousand went out of the trust it shouldn't have but it did that's that's where it's at the trustee still could come back after the beneficiary has met that burden the trustee can come back and try to prove that the fifteen was in fact for a proper trust purpose but obviously that'd be hard to do because it wasn't that was the breach so so let's follow that through so far I think you've talked about three burdens of proof thus far and the first is on the trustee when they file their accounting they have the burden to prove up the line-item and that the trust allowed that expenditure then you've got a beneficiary's burden to prove if they want a surcharge in other words they want the trustee to be personally reaching into their own pocket and paying back damages to the trust that they caused and there they have to show that there was a duty that that Duty was breached and that there are damages and then you say that there's kind of a they don't call it a rebuttable Burton approve but they're the trustees allowed at that point in time to also have a burden to show that the expenditure that the beneficiary wants a surcharge on that it was an appropriate expenditure yeah so the trustee can come back Andra but the the surcharge by saying it was appropriate but at that point had it been appropriate I don't think you would get that far I don't think the beneficiary would meet the beneficiary's burden right if in fact it was a proper surcharge so that's what happened in this case is that there was a meeting of that burden and the court said okay well based on that I am going to issue a surcharge to the trustee and I'm gonna order her to pay back to the trust $93,000 and that's one hell of a surcharge I mean that's that's tough so the attorney that won this appeal and it's it's not as hard to win Appeals when you've won in the court below right I mean 90% or so of cases that are won below if you if they're appealed your chances are you're gonna win but still it takes hard work I don't want to take anything away but it's Sarita Miller and we also know jury that from Riverside very very good attorney yes I'm saw her probably court many many times she's very kind person she fights hard for her clients and what a result she got here in this case because I haven't seen this happen in a long time I haven't ever I don't think I've ever seen this happen I mean trying to get that big of a surcharge against the trustee I mean I think given these facts the trustee deserved it and but to be able to actually follow through and get it it's not easy not an easy thing to do we have been a successful on these cases but it's it's not without a lot of work and and stuff going into the case and yeah my hats off to de retha Miller she is an excellent attorney I've worked with her and against her on cases before and she's not to be underestimated she's excellent and she got a great result here for this client and you could tell in terms of the objections she brought and that's the other thing I'm gonna tell you about beneficiary objections she really went for the big stuff she focused on what mattered and you could tell that she had a passion for this case there was something about this case that clearly you know struck her sideways and she didn't like well what's happening here and what was happening to this minor disabled beneficiary and rightly so but in the objections that the appellate court cites they really are focusing on the big stuff and that's an important point for all beneficiaries is don't sweat the small stuff well and we see even young attorneys that are first starting out in this area when they bring in a petition like this and they're in miss Miller's position where they're the ones that are objecting to the accounting they want to object to every single line item and I think there's some great wisdom and what you just said there look you're gonna confuse the court perhaps you're gonna confuse yourself when you're trying to make your case pick the best ones to go after and don't let go push in on those but don't worry about the ten dollars that went to Walmart that probably shouldn't have gone to Walmart because it's too much time and effort it adds too much complexity too much information to the case and what we call these are a shotgun approach we don't want a shotgun approach we don't want to have a whole host of bullets and pellets flying out there when nobody knows what direction they're going we want to have very tight legal arguments based on fact that we can prove up to the court and we want to walk the court through that one step at a time and I I wasn't there for this but it looks like Teresa did that in this case by simply sticking to those larger items like you're pointing out and then the court glommed onto those and said hey this isn't appropriate this shouldn't have happened you can also use categories so one of the things I think that was effectively used here is being able to say let's look at the category of vacations and you know all this stuff was under the category of vacations and it came out to something like $17,000 or the $15,000 distribution at the end or whatever there's ways to categorize these things and streamline the presentation for the court but yeah if you if you're gonna focus on every little nickel and dime that you think is wrong here you're you're just going to confuse the situation you're gonna confuse the judge and if you confuse the judge they're gonna throw their hands up in the air and say forget it so I think you do have to streamline the process as much as you can and I think this case they did that very effectively by focusing on vacations the end distribution and the vehicle those were the big items oh and the trustees fees because the trustee had paid herself without court order for many years so you know when were big categories one thing they hit me I think this trust had one a little over two hundred some thousand dollars and to begin with yeah and you know thirty four thousand dollars and trustees fees that's that's a large amount for such a small trust yeah it is I mean I guess they probably would say it was for many years of service but at the end of the day it wasn't very mushy got nothing because she had to pay back ninety three thousand dollars so whatever it is she paid herself it it definitely wasn't worth it right because of not following the trust terms and it's so frustrating to see a trustee get away with doing these type of acts that this trustee did and I have to admit it's a little satisfying to see a trustee have to pay something back for doing wrong you know it's the way it should be but not always doesn't always work out that way so the last thing that I want to mention that Scott and versus McDonald brought up is the difference in discretionary standards so this trust was a discretionary trust and it allowed the trustee to make distributions at her discretion and there's two different probate codes on this there's 1608 oh and then that which is just discretionary standard and then there's 1608 one which is what we call absolute discretion or sole discretion and the court kind of makes I think the trustee was trying to make an issue of this on appeal the appellate court kind of brushes it aside and says well this trust wasn't dealing with absolute discretion it was dealing with just regular old discretion and the distinction between those two is kind of interesting because with regular discretion if a trustee is required to make distributions at his or her discretion it's a reasonableness standard right so you have to make discretions in a reasonable manner which is what we would expect I mean every other act of a trustee is supposed to be based on reasonableness right I mean even prudent investing is what a reasonable prudent investor would do under similar circumstances so reasonableness is usually the standard that we're thinking of of what trustees should do absolute discretion allows the fiduciary the trustee to have a little bit more control so now they can only be in trouble if they act in bad faith or in disregard to the purposes of the trust and that's interesting to me because when we were doing our live show last time you brought up something about how bad faith can be a trustee ignoring the terms of the trust right right and and and I think that's important because you might think that if this case comes along there's absolute discretion given to the trustee that you're dead in the water and the beneficiary as a beneficiary that's correct thank you for clarifying that but you may not be because if they simply disregarded the trust and the fact that this particular trustee said she didn't even read the trust document okay see that and like you said the duty is to follow the trust terms how do you follow the trust terms if you the trustee by the way this is a professional trustee you didn't even read the trust document so how could you follow the term so if that's not bad faith I don't know what is yeah a damn it it better be and it the court actually says the trustee even with absolute discretion the trustee is still required to avoid to avoid arbitrary action and to use her best judgment well that makes sense I mean arbitrary action would be the trustee is doing whatever the heck they feel like it without regard to the trust term it also says that does not authorize a trustee to neglect the trust or abdicate her judgment well that's exactly what she's doing by not following the trust terms is just ignoring the trust terms and again that goes back to trustee duties 101 which is you have got to follow the trust terms so in this case the trusts didn't allow for absolute discretion so the argument was was kind of an empty argument for them to make I think what they were trying to say is that absolute discretion would mean that you could only search hearts to trustee if she acted in bad faith and the court said no well number one this trust was an absolute discretion and number two ignoring the trust terms is acting in faith anyway so what's the difference I kind of picked up from this court that and after we in this opinion that it wasn't entirely happy with this appeal it was it was almost asking it you know the question why was this appeal brought we're not clear on the arguments that were in it they weren't enunciated clearly and they even painstakingly go through and say how two arguments appear to be brought on top of each other when they should have been separated out so it appears that this appellate court was not impressed with this appeal in any manner and the problem with Appeals I mean obviously I think when you get a trust to surcharge to the tune of ninety-three thousand dollars you're gonna appeal because you might as well I mean what do you got to lose you you might as well try what people don't understand though is that the appellate courts power to set aside a trial court decision is very limited and so I think a lot of people think well we'll appeal it and the appellate court will have a chance to do the trial all over again and make a new decision and is that how it works no the trial court is given deference in fact the appellate courts will actually try then and there they're actually told to do this by statute by California law they will try to find ways to affirm the trial court's decision in other words they'll look at the trial court's decision and if the trial court here surcharge $93,000 the appellate court will actually look through the record that's brought before them and try to find ways to support that $93,000 order by that by the court below and I think I talked about this earlier and in our broadcast here and that is that ninety percent of Appeals are going to be lost it when people appeal we call that the trial the pella Court will affirm the trial court meaning we they will agree with the trial court and disagree with the person who's bringing the appeal ninety percent of the time that happens in California that's just the way it is and you brought up something else new and that is does the court of appeal hold another trial do they have a whole new look at all of this and on questions of fact they certainly don't they don't do that but there is a small exception on appeal and that is where questions of law or interpretation of contracts is looked at which is a question of law and here if there's a trust provision that needs to be interpreted say that judge Karimun had not interpreted a trust provision correctly that's not the case but if that were the case the Court of Appeal could look at that a new they call that a de novo review and determine if in fact a bad decision was made because there was an improper interpretation of the trust given yeah that's we call that de novo review and that's not that's not what the court used here and it's not what the court was allowed to use here and so what that leaves you with is either abuse of discretion or substantial evidence those are the only two appellate standards that the court could apply in this case abuse of discretion is a question of did the trial court abused their discretion and making their ruling well there's a lot of reasons why the appellate court was not willing to say that and so the appellate court said no the trial court did find substantial evidence is just whether or not the trial court decision lacked substantial evidence to support the ultimate finding and again the court said no there's there was plenty of evidence and like you said there's a there's a presumption that the appellate court is going to rule in favor of the trial court and you know so and they kind of have to do that because if they didn't then they just they would end up being a second trial court you didn't have two trials for every case and there's just not the way our system works so so that I think was the problem with this appeal to is that if you're going to do an appeal number one it really pays to hire an appellate specialist we're not appellate specialist but there's there are there are appellate specialists out there we have done some Appeals but we've also worked with attorneys who are appellate specialist and they are excellent and one of the things that they really the expertise that they can bring to the table more than anything is using the right standard and that's so important because you're never gonna win your appeal even have a chance of winning your appeal if you don't stack your argument in favor of the standard that the appellate court is going to use and so that's I think what happened that's what went wrong with this appeal in part is that they probably didn't argue to the standard and that was some of the confusion but even if you do argue to the standard in a case like this you know your chances of winning on appeal for the trustee to overturn the trial court very very small because it's just there's so much discretion in the trial court to make these decisions so so anyway that's something out the accounting and the accounting area and the accounting burdens it is confusing if anybody has any other questions about it always feel free to drop us an email Keitha al dad law comm or Stewart at al dev law calm oddly enough we enjoy talking about this stuff we talked about it a lot and we'll talk about it again and again and we'll talk we'll talk you to sleep we'll talk so much about it what I can sleep you won't need sleeping pills anymore if you just talk to us so that's what else any other final thoughts do it no my only final thought would be please join us here once a week on Wednesdays at 1:30 Pacific time join us we'll answer any questions you have to the best of our ability and we really do enjoy this stuff and I think Keith is right if you do have a bout of insomnia just throw us on and within about three or four minutes you'll be fast asleep yeah we don't know you feel free to ask us your questions we are going to make this consistent Wednesday 1:30 p.m. we don't know him everything we just think we do so give us a shot you got to say it confidently yeah we'll see you next week.