In Klein v. Estate of Klein, an April 29, 2020 opinion from Florida’s Fourth District Court of Appeal, grandchildren appealed a final probate order that allocated all of the proceeds from a legal malpractice settlement agreement to their grandmother’s probate estate. The Florida appellate court affirmed the order.
The Facts of Estate of Klein
Eleanor Klein executed a pour-over will in 2009, distributing the assets of her estate to a trust. The trust named her children, Kenneth and Sydria, as 50% primary beneficiaries. The grandchildren were contingent remainder beneficiaries of Kenneth’s share of the trust.
In 2016 a curator was appointed for the specific purpose of bringing a malpractice action on behalf of Elanor’s estate against Janeiro. Ultimately three malpractice lawsuits were brought against Janeiro (by the estate, Sydria, and the grandchildren) relating to his advice during Eleanor’s guardianship.
The parties mediated the malpractice action, and a settlement agreement was entered. The settlement agreement provided that:
(1) Janeiro and his insurer would pay the balance of his malpractice insurance policy (approximately $800,000) to the curator, who would hold the settlement proceeds in escrow in a trust account “until there is an agreement approved by final order from the Probate Court or a final Probate Court order determining how the Settlement Amount shall be distributed”;
(2) the estate would pay $175,000 to Janeiro to be held in trust until any dispute over the settlement proceeds was resolved;
(3) Janeiro would withdraw all charging liens against the parties to the settlement agreement;
(4) the pending malpractice actions would be dismissed with prejudice as to Janeiro; and
(5) the parties would execute a general release.
The signatories all agreed “they have given and received adequate consideration in this Settlement Agreement.”
The Florida Probate Court Approves The Settlement Agreement
The settlement agreement was approved by the Florida probate court. The order invited anyone who claimed an interest in the settlement proceeds to file a petition within 90 days, and that if more than one petition was filed, the probate court would “adjudicate the rights of all parties claiming [an] interest in the Settlement Proceeds.” No one objected to this procedure.
Multiple Petitions To Determine The Allocation of the Settlement Proceeds Are Filed
Kenneth, Sydria, and the grandchildren all filed petitions for determination of allocation of the settlement proceeds. All parties agreed to a one-hour, non-evidentiary hearing to address the competing petitions. In the grandchildren’s response, they argued that they were entitled to one-third of the settlement proceeds.
Additionally, the grandchildren moved for relief from the order approving the mediated settlement agreement, stating:
[T]o the extent this Court determines that the Grandchildren are not entitled to any portion of the Settlement Amount, the Grandchildren move this Court for relief from this Court’s July 13, 2018 Order approving the Mediated Settlement Agreement pursuant to Florida Rule of Civil Procedure 1.540. The Grandchildren argued for rule 1.540 relief contending that the sum of zero dollars was insufficient consideration for the releases they provided pursuant to the settlement agreement.
At the hearing, Kenneth argued that Eleanor, not the grandchildren, was the intended beneficiary of Attorney Janeiro’s services, such that the damages should go to Eleanor’s estate.
The grandchildren argued that the hearing that the probate court should allocate one-third of the settlement proceeds to each of the three malpractice actions, it would be “legally impossible” for the probate court to try three legal malpractice cases, and even if the probate court could try the three cases, the trials would require evidence. Additionally the grandchildren’s’ counsel argued that if the grandchildren were not going to get $1 from the settlement agreement, then they should be relieved from the Settlement Agreement.
The Florida Probate Court’s Order
The probate court entered its order on the competing petitions finding that:
- The parties agreed to the probate court’s jurisdiction to adjudicate the rights of the parties claiming an interest in the settlement proceeds;
- The parties agreed to the procedure for the probate court hearing and ruling on the competing petitions;
- No timely objections were made to the procedure;
- The parties agreed that the allocation hearing would proceed to a resolution with the parties submitting and arguing their legal briefs to the probate court; and,
- The estate was damaged as a result of the alleged professional malpractice of Attorney Janeiro and, as a result, the entire proceeds should be distributed to the curator of the estate.
Does A Florida Probate Court Have The Authority To Allocate Settlement Proceeds?
Yes, particularly here because the parties collectively agreed in the settlement agreement that the Florida probate court would decide.
The grandchildren argued that the probate court failed to hear or rule on their Rule 1.540 motion for relief from the order approving the settlement agreement. Rule 1.540 of the Florida Rules of Civil Procedure provides that a final judgment can be set aside under certain circumstances, including mistakes, inadvertence, excusable neglect, newly discovered evidence, and fraud.
In this case, the grandchildren did not request a hearing on the 1.540 motion nor did they move for rehearing. Therefore, the issue was waived on appeal. However, even if the Florida probate court’s order was inconsistent with the Rule 1.540 motion, the grandchildren did not argue why the denial was substantively wrong. The Court stated:
“[T]he fact that one party to the agreement apparently made a bad bargain is not a sufficient ground, by itself, to vacate or modify a settlement agreement.” Casto v. Casto, 508 So. 2d 330, 334 (Fla. 1987). The consideration required to support a contract “need not be money or anything having monetary value, but may consist of either a benefit to the promisor or a detriment to the promisee.” Dorman v. Publix-Saenger-Sparks Theatres, 135 Fla. 284, 184 So. 886, 889 (Fla. 1938). A contingent benefit is sufficient consideration. Id. Here, the settlement agreement was clearly supported by consideration. In exchange for the Grandchildren dismissing their lawsuit, Janeiro paid a “pot of money” to which the Grandchildren could make a claim against in the probate court. To this end, the Settlement Agreement was supported by consideration, even if the Grandchildren’s claim with the probate court was ultimately unsuccessful.
Did The Florida Probate Court Err By Failing To Equally Allocate The Settlement Proceeds?
The grandchildren argued that the probate court inappropriately tried the malpractice actions, and that the order needed to be reversed on three separate grounds – res judicata, failure to hold an evidentiary hearing, and improperly inquiring into the intent of the parties’ in settling the malpractice actions.
The grandchildren argued that the probate court was required to equally allocate the settlement proceeds between the grandchildren, the curator, and Sydria. To this point, the grandchildren’s proposed distribution was totally arbitrary. Had the settlement agreement contemplated a three way split, it would have said so: “Indeed, nothing was improper about the probate court considering the merits of the various malpractice actions when exercising its discretion on how to allocate the settlement proceeds.”
As to res judicata, the appellate court determined that the argument was waived because it was not raised below. Even so, the settlement agreement specifically contemplated the scenario of the probate court determining the allocation of the settlement proceeds.
Regarding the failure to hold an evidentiary hearing, the parties all agreed that the petitions would be determined without evidence. Generally, a determination by the court to allocate settlement proceeds requires evidence. But here the grandchildren waived the right to an evidentiary hearing by agreeing in advance to the probate court holding a non-evidentiary hearing on the allocation question.
The result of this case was obviously not what the grandchildren wanted to happen. However, the outcome was one of the scenarios contemplated by the settlement agreement, which gave the Florida probate court the authority to determine the allocation of the settlement proceeds. Settlement agreements in Florida probate court are just like settlement agreements in other cases – they are interpreted like contracts, and the plain language controls.