Opinion
Case No. 00-14333 MSK, Case No. 00-12152 MSK, Case No. 00-10066 MSK
September 6, 2002
ORDER
THIS MATTER comes before the Court on three supplemental Chapter 13 fee applications filed by George T. Carlson Associates (Applicant) as attorney for the Debtors named above. The Chapter 13 Trustee has objected to each of the fee applications. Trial in this matter was conducted on June 13, 2001. By agreement, the parties subsequently submitted transcripts of expert testimony on attorney fees charged in non-bankruptcy matters presented to Judge Campbell in an unrelated matter. Having considered the evidence presented and the arguments made, the Court
FINDS and CONCLUDES as follows:
I. JURISDICTION
This Court has jurisdiction in this matter pursuant to 28 U.S.C. § 1334 (a). This matter is a core proceeding pursuant to 28 U.S.C. § 157 (b)(2).
II. ISSUES
This matter concerns the allowance of attorney fees and expenses for services provided following confirmation of three Chapter 13 plans. With regard to all three applications, the Court is requested to determine whether: (1) the hourly rate charged for attorney and paralegal services is reasonable; (2) the time spent providing the services described is reasonable; and (3) the charge for such services is reasonable given the nature of the services.
III. FACTUAL FINDINGS
1. All three cases were brought under Chapter 13 of Title 11 of the United States Code. All cases resulted in confirmed Chapter 13 plans.
This title is known as the Bankruptcy Code and will be referred to hereafter as "the Code". All future statutory references, except as specifically identified, refer to Title 11.
2. In each case the Debtors entered into a fee agreement with the Applicant which estimated the fee for representation during the case between $1,000.00 and $2,500.00. According to the fee agreement, each Debtor paid part of the fee pre-petition and agreed to pay all remaining fees and costs through the confirmation hearing. The fee agreements further provided that "the fee for a Chapter 13 proceeding does not include representing me in contested bankruptcy matters, including, but not limited to, filing responses to motions for relief from automatic stay, for dismissal or conversion of the case, or for any other motion or hearing". The fee agreements do not specify how the fee will be computed, whether on a flat rate, hourly basis or otherwise, or what expenses will be charged. The plan confirmed in each case anticipated allowance of attorney's fees between $2,000.00 and $2,300.00.
3. In each case the Applicant sought and was allowed pre-confirmation fees of $1,500.00 together with varying expense amounts.
4. The subject applications all request allowance of additional fees and expenses incurred after the confirmation of the Chapter 13 plan. These services have been rendered by Ellen R. Welner, an attorney who charges $185.00 per hour and by paralegals, Eric Apjoke and Richard Ponds, who charge $75.00 per hour.
5. Given the nature of the post-confirmation representation provided in these three cases, the expertise of the individuals providing the services and the rates charged by comparably skilled practitioners in non-bankruptcy cases, the hourly rates charged by these individuals in these cases are reasonable.
6. Upon consideration of the nature, extent and value of the services provided, except as delineated below, the Court finds the compensation requested by the Applicant to be reasonable.
a. Potter: Applicant seeks an award of $444.00 for 2.4 hours of attorney services in conjunction with a post-confirmation motion to dismiss. of the services described, the Court finds that the charge for one hour spent on March 20, 2001 for travel and attendance at a hearing, a signed stipulation and a conference with client to be excessive.
b. Kimber: Applicant seeks an award of $759.00 comprised of $721.50 for 3.9 hours of attorney services and .5 hours for paralegal services. of these services, the Court finds that the following services rendered by attorney Welner did not require her knowledge and expertise. Such services could have been performed by a paralegal or clerical staff. Therefore, the charge based on the hourly rate of $185.00 is excessive.
Date Description Time
12/14/00 Telephone conference with trustee's office re: no stipulation [.1] in. 12/14/00 Send stipulation to clients regarding resolution of motion to [.1] dismiss (second time). 01/09/01 Correspondence to client re: motion to dismiss. [.2] 03/06/01 Correspondence to client re: appointment to prepare for [.2] hearing
An appropriate charge for these services would range between $0 and $45.00. Furthermore, the charge for Ms. Welner's trip to the Court on March 19, 2001 (one hour) is excessive.
c. Smith: Applicant requests an award of $1,581.00 for services rendered in connection with a post-confirmation motion for relief from automatic stay. The charges are comprised of 8.1 hours of attorney time and 1.1 hour of paralegal time. The motion presented a novel, legal issue requiring research. The fees charged appear reasonable with the exception of the following duplicative entry on January 31, 2001:
Date Description Time
01/31/01 Review facts re: attorney's fees and interest. ERW .1III. ANALYSIS
These cases resurrect the never ending controversy as to what attorney fee is reasonable for representation of a debtor in a Chapter 13 case. With regard to the subject fee applications, the Chapter 13 Trustee objects to the requested fee contending that:
(a) the hourly rates charged by the Applicant for attorney and paralegal services were excessive;
(b) the attorney performed services for which appropriate charges would be less than that calculated at the attorney's rate; and
(c) the time spent in the Kimber case was excessive.
The Chapter 13 Trustee also objects to the Court's consideration of testimony elicited in a matter before Judge Campbell as to attorney rates being charged in non-bankruptcy matters. The Chapter 13 Trustee identified her objection as that raised at the hearing before Judge Campbell. Having considered that objection, I reach the same conclusion that Judge Campbell did — that the evidence is admissible.
The Applicant argues that the hourly rates charged, time spent and amounts charged for particularized services are all reasonable. Furthermore, Applicant argues that the Chapter 13 Trustee's review and objection to these and other fee applications is inconsistent with Judge Matsch's ruling in In re Ingersoll, 238 B.R. 202 (D.C. D. Colo. 1999). Applicant contends that any review and objection to fee applications by the Chapter 13 Trustee will chill the desire of practitioners to represent debtors in Chapter 13 cases.
A. Fee Allowance Process in Chapter 13 Cases
Most Chapter 13 plans, including these at issue, propose to pay some or all of the fees and expenses owed to debtor's counsel as an administrative expense pursuant to § 507(a)(1) and § 1322(a)(2). This requires that the fees be reviewed and allowed in accordance with § 330.
Fee allowance for debtor's attorneys in Chapter 13 cases is problematic for all those participating in the process — practitioners, the Chapter 13 Trustee and the Court. This is, in part, because the Code and the Bankruptcy Rules make no distinction between fee applications of debtor's counsel in Chapter 13 cases, which often involve small sums and relatively standardized services, and fee applications of counsel representing the Trustee in Chapter 7 cases or the estate in Chapter 11 cases, which often involve larger amounts and issues unique to the particular case.
Recognizing the difference between fee applications in Chapter 13 cases and in Chapter 7 or Chapter 11, many districts have adopted simplified procedures for Chapter 13 applications. In this district, Local Bankruptcy Rule 216, General Order No. 1993-2 and most recently, General Procedure Order 2001-1 were adopted for that purpose. These procedures allow for the submission of an abbreviated fee application where the fees sought fall under a specified amount. In essence, the procedures reduce the information required to satisfy an applicant's burden of proof
L.B.R. 216(c) requires the submission of a narrative fee application together with a time summary exhibit. In 1993, General Order No. 1993-2 excused the attachment of the time and task summary if the fee sought was $1,000.00 or less. Effective April 4, 1995, L.B.R. 216 was amended, allowing counsel for debtors in Chapter 13 cases to submit an abbreviated application in all cases.
In 1999, at the suggestion of Judge Matsch in Ingersoll, supra., the Bankruptcy Court requested the formation of a bar committee to evaluate the process and the appropriate fee in Chapter 13 cases. After ten months of deliberation the committee returned recommendations to the Court which resulted in the adoption of General Procedural Order 2001-1. This General Procedural Order applies to all cases filed on or after January 1, 2001. It allows counsel for Chapter 13 debtors to file an abbreviated fee application without a time and task summary where the total fees requested do not exceed $1,500.00.
Although the procedure and proof required has been modified to accommodate the nature of Chapter 13 cases, the standard for allowance of fees has not changed. Fee allowance in all chapters is governed by 11 U.S.C. § 330. In Chapter 13 cases it specifies:
(4)(B) In a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor's attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section.
The factors referenced in the above provision are set out in subsections three and six of § 330(a). They are the same factors applicable to attorney fee applications in all other bankruptcy cases.
(3) In determining the amount of reasonable compensation to be awarded, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including —
(A) the time spent on such services;
(B) the rates charged for such services;
(C) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title;
(D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed; and
(E) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title.
(6) Any compensation awarded for the preparation of a fee application shall be based on the level and skill reasonably required to prepare the application.
Under § 330, it is the burden of the applicant to establish entitlement to allowance. Continental Ill. Bank Trust Co. of Chicago v. Charles W. Wooten, Ltd (Matter of Evangeline Refining Co.), 890 F.2d 1312 (5th Cir. 1989); In re Stromberg, 161 B.R. 510, 518 (Bankr. D. Colo. 1993); In re Zwern, 181 B.R. 80 (Bankr. D. Colo. 1995); In re Recycling Industries, Inc., 243 B.R. 396, 402 (Bankr. D. Colo. 2000). "It is counsel's burden to prove and establish the reasonableness of each dollar, each hour, above zero." Mares v. Credit Bureau of Raton, 801 F.2d 1197, 1210 (10th Cir. 1986). To satisfy this burden, applicant must supply meaningful and complete information which establishes that the services were necessary and beneficial to the debtor and that the fees requested are reasonable. In re Zwern, supra.; In re Casull, 139 B.R. 525, 527 (Bankr. D. Colo. 1992); In re Paul, 100 B.R. 38, 41 (Bankr. D. Colo. 1989); FED. R. BANKR.P. 2016(a).
The Code and Bankruptcy Rules require that notice of a fee application be given to parties in interest. Section 330(a) requires notice to parties in interest and the United States Trustee prior to a hearing. Bankruptcy Rule 2002(a)(6) requires that notice of applications requesting allowance of more than $1,000.00 be given to the debtor, trustee, and all creditors. However, because the fees for debtor's counsel in Chapter 13 cases are generally reflected in the Chapter 13 plan which is noticed out to all creditors before fee allowance is considered, Local Bankruptcy Rule 216(d) requires the notice of a fee application be given only to the Chapter 13 Trustee.
General Procedural Order 2001-1 requires that for cases filed after January 1, 2001, notice be given to debtors, as well.
Section 1302(b)(1) requires that the Chapter 13 Trustee review and object to any improper claim. This includes administrative claims for allowance of attorney fees. Thus, to the extent that attorney fees are not reasonable or proved in accordance with § 330, the Chapter 13 Trustee is required to object to their allowance as administrative expenses.
The recent Ingersoll opinion neither prohibits nor discourages objections to applications by the Chapter 13 Trustee. To the contrary, in Ingersoll, Judge Matsch criticized the process by which the bankruptcy judge raised objections to a fee application then ruled upon such objections, but specifically urged the Chapter 13 Trustee to be more active in the review and objection process.
There is a standing trustee for Chapter 13 plans in this district, appointed pursuant to § 586(b) to perform the duties described in 11 U.S.C. § 1302. It appears to be appropriate that reviewing of fee applications by debtor's counsel in Chapter 13 proceedings and the making of objections are within the province of the standing trustee and the development of a procedure involving that official would avoid the development of the adversary relationship between the bankruptcy judge and the applying attorney and maintain the role of a neutral arbiter.
Ingersoll, 238 B.R. at 209. See also In re Zamora, 251 B.R. 591, 595 (D. Colo. 2000); In re Bueno, 248 B R. 581, 583 (D. Colo. 2000); In re Recycling Industries, Inc., 243 B.R. 396, 401 (Bankr. D. Colo. 2000).
That is precisely the role the Chapter 13 Trustee has performed in these cases. In doing so, she has utilized her experience in administering all Chapter 13 cases in the district. She has performed her statutory obligations. Although the Chapter 13 Trustee's review of fees may be inconvenient and uncomfortable for counsel representing Chapter 13 debtors, it is an essential component of the fee allowance process.
B. Merits of Objection
Many courts have addressed the methodology to be used in determining the reasonableness of attorney fees and expenses for purposes of allowance as administrative expenses. Almost all reported decisions concede that the process is a holistic endeavor, imprecise by nature and requiring an evaluation of the factors enumerated in § 330. In re Zamora, 251 B.R. 591, 596-97 (D. Colo. 2000); In re Recycling Industries, Inc., 243 B.R. 396, 400-01 (Bankr. D. Colo. 2000); In re Raffle, 216 B.R. 290, 293 (Bankr. D. Colo. 1998).
There is little that this Court can add to the thoughtful decisions on this issue, except to emphasize the obvious. The fee for representation of a debtor in a Chapter 13 case is considered in its totality, in light of the context of a particular case and the needs of a particular debtor. This means that a reasonable fee in one case may not be a reasonable fee in another. Each case must be viewed independently. The determinations made in these cases, for example, have no bearing upon the reasonableness of the fees charged by Applicant or other attorneys in other Chapter 13 cases. Put bluntly, just because the Court finds the hourly rates charged to be reasonable for the services rendered by particular professionals in these cases, does not mean that they are presumptively reasonable for these or other professionals in any other Chapter 13 case.
Furthermore, although counsel may calculate a fee by multiplying time spent in rendering legal services by a particular hourly rate, the determination of whether the fee is reasonable is not so mechanical. Because it is the total fee which is considered, the reasonableness of any component in calculating the fee may not be determinative. For example, a high hourly rate may be offset by an attorney's efficiency in delivery of services, excessive time may be offset by a low hourly rate, or unnecessary services or lack of billing judgment may be offset by services for which no charge is made.
It is expected that attorneys with substantial expertise who charge a higher hourly rate will be more efficient than less experienced counsel. It is also expected that every attorney, but especially one with substantial experience, will exercise billing judgment to assure that an appropriate fee is charged given the nature of the service, rather than presuming that a fee is reasonable simply by multiplying the rate charged by the individual who provided the service by the time spent.
1. Hourly Rate
The Chapter 13 Trustee's argument that Ms. Welner's hourly rate of $185.00 and the paralegal's hourly rate of $75.00 are excessive because they are the highest charged by Chapter 13 practitioners in this district is unpersuasive. Simply because these rates are higher than those charged by other practitioners does not make them excessive. Indeed, unless all Chapter 13 practitioners charge precisely the same rate, some rates will necessarily be greater than others, and some rate will become the highest rate charged.
To be excessive, the rates charged must be inappropriate in light of 1) the experience and qualifications of the person providing the service; 2) the nature or quality of the services provided; or 3) because the hourly rate exceeds that charged by practitioners in similar legal fields outside of bankruptcy. None of these circumstances exists here.
2. Billing Judgment
As noted, attorneys with substantial experience and expertise such as that demonstrated by Ms. Welner must be particularly vigilant in exercising billing judgment. Her hourly rate reflects the value of the composite of her skills and experience, all of which may not be required for every task she performs. Where the task is simple enough to be performed by a lesser skilled person, billing judgment requires a reduction in the fee charged. This could be a reduction in rate by the time spent or by a write-off of all or part of the calculated fee. Similarly, if the fee is unreasonable because the time spent was excessive or the benefit obtained was marginal, an adjustment should be made.
In each case, the Applicant has failed to demonstrate adequate billing judgment. In Potter, the Applicant's records reflect that a stipulation on the Motion to Dismiss was discussed on March 15 and 16, 2001, and a written stipulation was submitted to and reviewed by Ms. Welner on March 19. Despite the apparent acceptability of the stipulation's terms, Ms. Welner charged one hour for travel to the courthouse for the hearing on March 20, at which time she conferred with the client and the client signed the stipulation.
This Court allows appearance by telephone where stipulations have been reached and allows counsel to vacate a scheduled hearing by the filing of a stipulation with the Court the day before the hearing. Were this not the case, Ms. Welner's trip to Court might have been necessary, but the procedural flexibility made her decision to spend one hour traveling to and from the courthouse purely discretionary. No justification is given for the trip. Therefore, the Court concludes that the charge for services rendered on March 20 2001, should be reduced to reflect the most efficient use of Ms. Welner's time — appearance at the hearing by telephone to report the stipulation and a meeting with her client at her office to sign the stipulation. This could have been accomplished in one-half hour at a charge of $92.50.
In Kimber, Ms. Welner performed services on December 14, 2000, January 9, 2001, and March 6, 2001, which did not require the skill and expertise reflected in her hourly rate of $185.00. The tasks were either clerical or, at most, required the knowledge and expertise of a paralegal. The appropriate charge for these tasks entailing .6 hours would be $45.00 if billed at the paralegal hourly rate. In addition, the one hour charge for attendance at a hearing on March 19, 2001, should be reduced by 50% for the same reasons enumerated with regard to the Potter case.
In Smith, the Applicant double billed for Ms. Welner's services on January 31, 2001.
IV. CONCLUSION
The fee requested by Applicant in these cases is not reasonable. In accordance with the findings and conclusions above, reasonable fees for the services rendered in these cases are as follows:Case Allowed Fee Reduction from Amount Requested
In re Potter $341.50 $92.50 In re Kimber $608.00 $151.00 In re Smith $1,562.50 $18.50 IT IS THEREFORE ORDERED that Applicant, George T. Carlson Associates is allowed the foregoing fees pursuant to 11 U.S.C. § 330 and 507. To the extent that the confirmed plans authorize payment of such sums, they may be paid in accordance with such plans.