This morning the Supreme Court of Virginia released an unpublished opinion in the matter Harold v. Devening, Record No. 181308 (April 23, 2020) regarding breach of fiduciary duty and estate litigation fees. A jury found that the fiduciary, Susan Herold, had taken advantage of the decedent while acting as his power of attorney by transferring significant sums to herself, rendering a verdict in favor of the decedent’s estate for lack of capacity, undue influence, and breach of fiduciary duty with damages of $327,197.34. On Harold’s motion, the trial judge set aside the counts for lack of capacity and undue influence and reduced the damage award by $63,435.51, finding no evidence in the record that the two checks representing that amount had gone to Harold. The trial judge further found that Harold owed the Estate the legal fees it had paid for its primary law firm, but denied the fees for a second law firm and an accountant. Both sides appealed.
The Supreme Court affirmed the trial court’s ruling in all respects except one: the Estate was not, in fact, entitled to its legal fees. Virginia Code § 64.2-1614, the relevant statute at the time the case was filed, specifically limited any such award to the costs incurred for “restoring the corpus of the estate, not repaying the estate for transactional costs associated with litigation concerning the estate.” Id.. at 6. Therefore, Harold does not have to pay the other side’s legal fees on top of the damages she already owes.
This sounds like good news for a fiduciary who loses a breach of fiduciary claim, and bad news for the estate or principal trying to recover funds! Unfortunately, it’s not. The likely reason this opinion was issued as unpublished – in other words, it is not to be viewed as precedent – is that after this case was filed, the General Assembly amended § 64.2-1614 by adding subsection (E). The new subsection mandates that where an agent under a power of attorney is found to have committed a breach of fiduciary duty, the court may award costs and expenses, including reasonable attorney’s fees, to the plaintiff, to be paid by the agent.
In short, if an estate (or principal) proves in court that the power of attorney has breached their fiduciary duty, the estate is entitled to recover its reasonable costs and fees in doing so. This is a powerful weapon which significantly minimizes a plaintiff’s personal financial risk in trying to hold a wrongdoer accountable.