Opinion
Case No 11-15980-13
09-03-2013
In re JANICE R. BUVEL, Debtor.
WRITTEN DECISION - NOT FOR PUBLICATION
ORDER ON FEE APPLICATION
OF MICHAEL FELDMAN, ESQ.
Debtor has objected to the fee application of attorney Feldman in this Chapter 13 case. At the center of the dispute is a judgment obtained by AAMCO against debtor. Debtor filed her petition on September 28, 2011. She listed AAMCO in Schedule F as an unsecured creditor with a claim of $71,615.96 which she marked "disputed." She listed that it was incurred Novemeber 5, 2007, and stated: "$4,500.00 credit was applied to the debt because of a levied bank account." Debtor's Schedule D listed as assets her residence with just over $100,000 equity, and a commercial building with almost $150,000 in equity. Her Schedule A listed additional properties, with net equity of all real property of approximately $895,000. Her Schedule F listed a total of $78,349.96 of unsecured debts, of which all but $6,734 is the AAMCO judgment. With her petition, debtor also filed her proposed Chapter 13 plan, which called for payments of $500 per month for 5 years, and proposed a 100% dividend to unsecured creditors.
In conjunction with the filing of her bankruptcy petition, Mr. Feldman filed his Rule 2016(b) Disclosure of Compensation form which stated he had agreed to accept $4,000 "for legal services", of which he had received $3,500 from the debtor. In paragraph 5, he listed the usual legal services of analysis, advice, preparation and filing of any petition, Schedules, plan, and confirmation hearing(s). Paragraph 6 stated that the quoted fee "does not include the following services: Representation in Reaffirmation Agreements". Concurrent with the petition, the firm also filed a copy of this district's "Rights and Responsibilities of Chapter 13 Debtors and their Attorney (Consumer Case)". That form sets out that the basic fee was $2,100, and included a list of possible services with presumptive (or no-look) fees for each service. The document recognized that the initial fee charged was $4,000. The form also notes that in the event of novel or complex motions or oppositions, the attorney may bill at hourly rates by filing a fee application. No specific hourly rate was set out.
Three weeks after the petition was filed, Andres Schonviesner dba Affirmative Judgment Services filed both a motion to dismiss the bankruptcy, and for relief from stay. He asserted debtor did not have sufficient liquidity to make the payments called for. Moreover, he claimed the AAMCO judgment had been recorded prepetition, so was a secured debt, and the amount of the debt was $103,056.39. The relief from stay motion sought to be able to foreclose on debtor's real properties as necessary to satisfy the judgment.
Mr. Feldman filed an opposition to the stay relief motion, mainly arguing that Mr. Schonviesner was not an attorney and could not appear in court representing any interest AAMCO might continue to hold in the judgment. Mr. Feldman asked the Court to require Mr. Schonviesner to establish his authority to press the AAMCO judgment. Subsequently, Mr. Feldman acknowledged that Mr. Schonviesner had filed a proof of claim and had standing on that basis. This Court denied the stay relief motion for the reasons stated on the record. Meanwhile, the Chapter 13 trustee objected to confirmation of debtor's proposed plan. Subsequently, so did Mr. Schonviesner.
The hearing on the motion to dismiss was continued to allow production of documents concerning the assignment of the judgment. Debtor filed a formal objection to Mr. Schonviesner representing any interest of AAMCO in the judgment. The Court sustained that objection, and Mr. Schonviesner arranged for counsel.
In April, 2012 Mr. Feldman objected to the claim Mr. Schoviesner filed on the grounds he had no authority to file it on behalf of AAMCO's interest, and therefore it should be declared invalid. Mr. Schonviesner's counsel renewed the motion to dismiss, which debtor opposed through counsel.
In late May, 2012 debtor filed a modified plan, with significant step-ups in payments. The trustee objected on multiple grounds. Debtor filed a declaration in support of the modified plan, and explained how she intended to generate sufficient revenue to support the plan. After the modified plan drew objections, in August, 2012 debtor filed a further modified plan, making clear that the debt to Mr. Schonviesner was secured and would be paid in full. A few days later, debtor filed an amended objection to Mr. Schonviesner's claim, asserting AAMCO still held rights to 7 0% of any recovery and therefore AAMCO had to file its own proof of claim. A few weeks later, counsel for AAMCO filed a ratification of the claim filed by Mr. Schonviesner. The Court overruled the debtor's objection to the claim for the reasons stated on the record.
After hearing the objections of both the trustee and Mr. Schonviesner to the second modified plan, the Court gave debtor yet another chance to submit a confirmable plan, with a deadline and the sword of dismissal looming. The deadline was met, and the trustee withdrew his objection. Mr. Schonviesner filed his own objection, which the Court found to be untimely, and overruled.
All of which leads to the present dispute. On March 1, 2013 Mr. Feldman filed a final fee application seeking $12,850.50 in attorney fees after crediting a 40% discount to hourly fees cumulated to $21,417.50 at $325 per hour. Mr. Feldman set out 6 categories for fees:
| 1. | Objection to the Proof of Claim 13.7 hours | 4,452.50 |
| 2. | Opposition to Relief from Stay 9.2 hours | 2,990.00 |
| 3. | Opposition to Motion to Dismiss 28.7 hours | 9,327.50 |
| 4. | Objection to Schonviesner's Representation of AAMCO 10.4 hours | 3,380.00 |
| 5. | Litigation: Production of Documents 3 hours | 975 |
| 6. | Litigation: Rule 2004 Exam .9 hours | 292.50 |
After receiving a copy of Mr. Feldman's fee application debtor filed a written objection with the Court. Based on that objection, the Court set the matter for evidentiary hearing. Upon conclusion of the hearing, the matter was taken under submission.
The debtor made a central point at the hearing. She testified that Mr. Feldman knew throughout how little monthly income she generated, which directly limited how much she could pay the trustee each month. Her declaration filed with the Court on June 11, 2012 reiterated that point. She could not afford to add thousands of dollars to the debts she intended to pay through her plan.
Mr. Feldman countered with a copy of the Rights and Responsibilities, and argued that debtor understood her estate would be liable for fees in excess of basic services. He argued that it was understood such fees would accrue at $325 per hour, although the Court has not found any reference to such a rate either in the Rule 2016 statement or the Rights and Responsibilities form. Nor is it in the form agreement of Mr. Feldman's office provided to the debtor on August 31, 2011. Regardless of whether such a rate was mentioned in writing to the debtor, the Court views Chapter 13 fees, initially, through the prism of the Rights and Responsibilities form and In re Eliapo, 468 F.3d 592 (9th Cir. 2006).
Examining the fees sought by category, the first is the objection to the proof of claim, for which the firm seeks $4,452.50. Under the Rights and Responsibilities the presumptive fee for a contested objection is $300 with a hearing. To be sure, unusual or out of the ordinary proceedings may justify more. Here, however, the only grounds for objection were that no copy of the state court judgment was included (although debtor acknowledged there was a judgment both in Schedule F and in her Statement of Financial Affairs), and that Mr. Schonviesner was engaging in the unauthorized practice of law by pressing AAMCO's claim while he is a non-lawyer. There was no attack on the merits of the judgment or the resulting proof of claim. Moreover, at one point the firm included as a ground that no proof of claim had been filed, when in fact it had but counsel looked in the wrong place in the court records for it, and had to withdraw that argument.
Much more troubling to the Court is that no strategy to reduce or eliminate the Schonviesner claim has ever been revealed, other than the standing/ownership arguments. Yet counsel had to recognize that the amount of equity in real estate set out on Schedule A meant debtor would have to pay all codebters in full, including the Schonviesner/AAMCO claim, to the extent it was an allowed claim. So it would seem the issues are how to do that while maintaining assets. Indeed, the first plan proposed on filing was a 100% plan, although at $500 per month for 60 months would not pay even half the originally scheduled debt.
The second category is relief from stay, for defending against counsel wants $2,990, while the presumptive fee was $450 for real property. Here, counsel did not have to do the traditional items of defense, such as valuation, payment history, and the like.
Third, the firm seeks $9,327.50 or opposing Mr. Schonviesner's motions to dismiss. Again, the essence of the firm's opposition was Mr. Schonviesner's standing, as well as arguing it was not the proper way to object to confirmation of a plan.
The fourth category is largely redundant, focusing on Mr. Schonviesner's purported representation of AAMCO, with the same arguments subsumed in the other categories.
The fifth and sixth categories are routine litigation facets of a case, and warrants little additional compensation.
In the Courts's last analysis, it appears to the Court the only thing achieved by the firm's expensive efforts was to buy the debtor some time. The firm did not attempt to challenge the merits of the primary creditor to be paid under any plan. The firm had to have known that all debts would have to be paid in full over the life of a plan because of the significant real property equity.
Based on the Court's memory of the case as it proceeded, coupled with a full review of the file and the evidentiary hearing, the Court finds and concludes that the firm earned the $4,000 originally agreed upon, and allowed in the Order on Confirmation entered April 5, 2013. In addition, the Court authorizes: 1) $300 for a contested claim objection; 2) $450 for opposing relief from stay; 3) $450 opposing the motion to dismiss; 4) $0 for opposing Schonviesner's purported representation of AAMCO; and $0 for categories 5 and 6 as subsumed within the basic $4000 fee (which is over and above the $2100 recognized in the Rights and Responsibilities for the basic legal services).
As noted, the firm received $3,500 prior to filing, and the trustee was authorized to pay $500 more upon confirmation. In addition, the firm is authorized to receive from the trustee $1200 more, as set out herein. No more than that amount shall in any way be recovered by the firm from the estate, the debtor, or property of the debtor.
IT IS SO ORDERED.
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PETER W. BOWIE, Judge
United States Bankruptcy Court