A Summary Of The Birnbaum Commission's Report On Fiduciary Appointments

*By Anthony J. Enea

In December of 2001, a 17 member Commission, headed by Sheila L. Birnbaum, Esq. of Skadden, Arps, Slate, Meagher and Flom, as well as the Special Inspector General, Sherrill R. Spatz, Esq., both of whom were appointed by Chief Judge Kaye, issued their Reports and recommendations relevant to fiduciary appointments in the New York State Court System. Chief Judge Kaye has described the report as the "Rawest and most graphic firsthand account" of the interconnection between politics and fiduciary appointments. The question many attorneys, fiduciaries and members of the Judiciary are grappling with today is whether the recommendations go too far and have some unintended results.

Both reports provide a scathing condemnation of the present system and practices employed in the making of fiduciary appointments, and both reports call for major reforms. Few would argue that the fiduciary appointment system was in need of a major overhaul and de-politicizing, even before Thomas J. Garry and Arnold J. Ludwig, officers of the Brooklyn Democratic Organization, wrote their now infamous December 20, 1999 letter to the Chair of the Brooklyn Democratic Law Committee and created the firestorm prompting Judge Kaye to appoint the Commission.
Presently there exists a public comments period to the Reports, which I have learned was extended to early April of 2002. The House of Delegates of the New York State Bar Association has formed a special committee to examine the fiduciary appointment system and to formulate a formal response by the State Bar Association. As Fiduciary appointments pursuant to Article 81 of the Mental Hygiene Law were a focal part of the Reports, the Elder Law Section of the Bar has been instrumental in formulating a response. A major concern raised by many attorneys, particularly Elder Law attorneys, is that the Commission in its zeal to reform the system has perhaps created unintended restrictions on the ability of attorneys to represent Guardians in Article 81 proceedings. These concerns specifically relate to the Commission's Recommendations regarding "Secondary Appointees".

The full text of the Report can be found on the internet at www.courts.state.ny.us, the official website for the New York State Courts. In summary, the following are some of the most important recommendations made:

Training should be required for inclusion on fiduciary lists;

State and County Political Party Leaders and their immediate relatives and law firms should be ineligible for appointments;

Immediate relatives of higher-level non-judicial employees should be ineligible for appointment;

Former judges should be ineligible for appointment for 2 years after leaving the bench;

Judges should have full authority to select the fiduciary who should be selected from the OCA list;
Any person who held a top position in a judge's campaign would be ineligible for appointment for 2 years after the judge's election;

Specialized fiduciary lists should be created;

Re-registration required for all those on the OCA list, who should be assigned an identifying number;

Lawyers would be disqualified from receiving appointments for one year if they had received more than $25,000 in fees in a 12 month period and the firms of attorneys who received more than $25,000 within one year would need to disclose their earnings from appointments. The Commission found the existing $5,000 Rule as highly confusing and largely unenforceable;

Compensation should be reported to OCA in all cases, even in which no compensation is received; and

Additional types of "Secondary" appointees should be governed by the rules.

The Commission's recommendation that "Secondary Appointees," which would include attorneys, accountants, and others hired by Guardians and other appointees, has created great concern amongst many attorneys. Presently, court appointed guardians under Article 81 of the Mental Hygiene Law are free to hire attorneys, accountants and other professionals of their own choosing, subject to Court approval of the fees paid by the guardian for the services of the attorney, et al. The Birnbaum Commission has recommended that the attorneys, accountants and others retained by a duly appointed guardian should be treated as fiduciaries and subject to all of the applicable rules. By analogy the Commission has reported that "Secondary Appointees" in a receivership case are subject to the fiduciary rules and must be appointed by the court, not the primary fiduciary. The Commission has recommended that, as in a receivership, the primary fiduciaries should be able to request that the court appoint a particular individual, but, that the actual appointment be made by the court.

In my opinion, analogizing receivership to an Article 81 guardianship is wholly inappropriate as there are few similarities, if any, between the two. Whether it is an intended result or not, the Commission's recommendation that legal counsel, accountants and others retained by the guardian be a "Secondary Appointee" subject to the rules, would by implication prohibit an attorney from representing a prospective client if the attorney has received more than $25,000 in legal fees within the last 12 months in any guardianship matter, irrespective of whether or not they were legal fees generated because of appointments made by the court.

I am hopeful that the Commission will see that this is merely an unintended result. Clearly, this recommendation places an unwarranted and unjustifiable restriction upon an attorney to earn a living and would prohibit a guardian from selecting a professional of his or her own choosing. There has been to my knowledge no evidence that allowing guardians to retain attorneys or professionals of their choice, subject to court approval of their legal fees, has in any way led to any abuses of the system or has been a detriment to the general public or the individuals subject to the Article 81 proceeding.

This recommendation seems in fact inconsistent with the recommendation made by the Commission that specialized fiduciary lists be created. Therein, the Commission reported that "in selecting a fiduciary, the paramount objective must be to choose an individual who will provide quality service to the Court, the parties and others affected by the litigation. That goal is best achieved when judges, in the exercise of their discretion, select candidate with the skills and background needed to meet the task at hand." This recommendation would seem to severely restrict the number of guardianship matters qualified attorneys having the appropriate skills and background could handle in all instances. It would be analogous to the Surrogate's Court having once issued letters testamentary to an executor, requiring that fiduciary to come back to the Court for approval before he or she hires a professional, and if that professional has earned more than X dollars per year in any estate matters, he or she would then be ineligible to represent said fiduciary/client.

I am confident that the aforestated concerns will be addressed by the State Bar Association in its formal response. In general, the majority of the Commission's recommendations are warranted and welcomed. In the simplest terms, the Reports seek to insure that political favoritism will have no place in the fiduciary appointment process.