Opinion
NOT FOR PUBLICATION
ORDER ON FEE APPLICATION
PETER W. BOWIE, Chief Judge United States Bankruptcy Court
Counsel for this Chapter 13 debtor have applied for $4,000 in attorneys fees for their work, ($200 of which has been paid by the debtor) and submit it as a "final" application. In support of their application they submit "Exhibit A", which is a checklist, or template of possible services in a case filed post-BAPCPA, with a column for time entries. Both Mr. Doan and Mr. Larkin filed brief supporting declarations asserting under penalty of perjury that the time entries in Exhibit A were accurate, including the total time spent by each on the case.
The Chapter 13 Trustee filed a "Response", objecting to the fees sought as excessive or unsupported, and asking that the fees allowed be capped at the maximum presumptive or no-look fee for a consumer Chapter 13 case in this district, which was $2,800 at the time of the bankruptcy filing.
After a hearing, the Court invited supplemental information from counsel, which was provided in the form of supplemental declarations from Mr. Doan and Mr. Larkin. Thereafter, the matter was taken under submission.
The Court has subject matter jurisdiction over the proceeding pursuant to 28 U.S.C. § 1334 and General Order No. 312-D of the United States District Court for the Southern District of California. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B).
Discussion
This application for fees was filed at a time when this district's judges were gathering information and considering revisions to the presumptive fees allowed to chapter 13 debtors' attorneys without the necessity of a formal fee application. The desirability of such a procedure has long been recognized, In re Geraci, 138 F.3d 314 (7th Cir. 1998), and more recently approved in In re Eliapo. 468 F.3d 592 (9th Cir. 2006) . A significant goal of the instant application was to use it to advance the Doan firm's views on the subject. The Application argues that the presumptive fees are "wholly inadequate to provide reasonable compensation to this Firm" at the rates then set, and they even argued they could have "forum-shopped" by filing in Los Angeles where the presumptive fee is $4,000 for a consumer case. They recognize that in jurisdictions that do utilize a presumptive fee approach, the presumptive fee is the usual maximum allowed unless the applicant can show that the services provided were "extraordinary or unusual". The Doan firm also attached to its application a copy of a commercial matrix purporting to show the average hourly rates charged by attorneys based on their years of practice, and a copy of the results of a KPMG study ranking large cities in terms of the cost of doing business.
Outside of the Bankruptcy arena, lawyers and clients are relatively unfettered in the agreements they may make for representation, subject to unconscionability. In the bankruptcy context, and especially in Chapter 13 cases, however, it is different. The concept of Chapter 13 is that a debtor's earnings over time will be used to repay creditors. In Chapter 13, a debtor's post-petition earnings are property of the bankruptcy estate (11 U.S.C. § 1306), and all available projected disposable income (11 U.S.C. § 1322(a)(4)) is to be paid to the Chapter 13 trustee to distribute to the debtor's creditors over the life of the plan proposed by the debtor and confirmed by the court.
It is both interesting and appropriate to note that in the calculation of "current monthly income" (defined at 11 U.S.C. § 101(10A)) using Form B22C, and projected disposable income, including Schedule J of a debtor's expenses, (see In re Pak, 378 B.R. 257 (9th Cir. BAP 2007) no provision is made for attorneys' fees, in any amount. So, in the large number of cases where a debtor proposes to pay less than all debt, the debtor must promise to pay all projected disposable income over the required applicable commitment period of the plan. Theoretically, at least, that leaves no income over the life of the plan to pay-attorneys' fees, whether up through confirmation or for post-confirmation events such as defending against relief from stay motions, motions to dismiss, pressing claims objections, or prosecuting adversary proceedings. It can become even more confusing because 11 U.S.C. § 1322(a)(2) requires that any plan provide for payment in full of all priority claims under 11 U.S.C. § 507. Section 507(a)(2) provides for priority status for administrative expenses allowed under § 503(b), which includes attorneys' fees awarded under § 330(a). Section 330(a)(4) provides in full:
(4)(A) Except as provided in subparagraph (B) the court shall not allow compensation for -
(I) unnecessary duplication of service; or
(ii) services that were not -
(I) reasonably likely to benefit the debtor's estate; or
(II) necessary to the administration of the case.
(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.
This Court favors the policy embodied in § 330(a)(4) because case administration is well served by competent representation of Chapter 13 debtors, as routinely provided by the Doan firm. The process is, however, in a sense hydraulic, where siphoning off funds to pay attorneys which would otherwise be distributed to creditors means that payments to creditors are delayed, plan life is extended, the funds have to be replaced from some source not identified at plan confirmation, or the debtor's ability to successfully perform the plan is compromised. And, with attorneys' fees accorded priority status, they are paid earlier in the process than most creditors unless the attorney agrees to some other treatment. All of the foregoing reflects the tension between payment of creditors and drawing off funds to pay attorneys' fees and costs, and in Chapter 13 cases firms are not operating in a free market environment unfettered by restraints such as "necessity", "benefit", and reasonableness. Against that backdrop, presumptive or no-look fees are an important process and result in substantial economies in Chapter 13 cases in part because the time and expense of formal fee applications are avoided in the routine cases.
As noted, the Doan firm filed an "Exhibit A", which was a stock description of possible events (plus some argument about Code requirements) in the form of a template which could be used in any Chapter 13 case, and the only variable might be the amount of time expended on a particular box for a particular debtor. By way of example, one box is captioned "New Notice Requirements to Creditors". The task description recites:
Under 342(f), creditors can request that all notices to be sent to such creditor nationwide will be sent to a specific address. 342(g)(2) states we can get NO monetary penalty for stay violations unless proper notice address is used. Stay violation time increases, particularly among small businesses (small auto dealers, for example), because we have a harder time getting sanctions. We documented proper addresses per pulling a credit report and recent billing statements so that notice was sent to the proper address.
In the instant case, the Doan firm claimed 30 minutes of time was spent on that "activity".
Another example: The task description is:
Attorney certification now places higher duty of care on attorney certifying the petition and also certifying that [sic] has no knowledge after inquiry that schedules are incorrect. In this regard, Mr. Doan was held to a higher standard of care and had to provide further review and supervision to the case being filed. Mr. Doan provided final review prior to filing the case.
The time claimed for the "activity" was 60 minutes, and presumably was performed by Mr. Doan as the description indicates.
The Chapter 13 trustee objected to the utility of "Exhibit A" on multiple grounds, central to which was that a person reviewing it could not tell what specific task was performed in this case, when it was performed, or by whom it was performed.
In addition to the trustee's concerns, which the Court shares, the Court has difficulty with the time claimed by the firm as attorney time for certain events. An example is "Attorney Review with Debtor Prior to Filing" which states:
This includes time spent reviewing the petition with the debtor to ensure accuracy, answering questions, making corrections to draft petition, explanation of the schedules and statement of financial affairs, chapter 13 calculations and for filing the case and uploading 3-docs to the trustee.
Two full hours of attorney time are claimed for that "activity".
The total time claimed for Doan firm attorneys on "Exhibit A" in support of this "final" application was 60 minutes for Mr. Doan and 955 minutes for Mr. Larkin (the latter included 2 hours for preparing the fee application and 2 more hours for the hearing to be held on it).
Prior to the hearing on the application, the Chapter 13 trustee filed a supplemental objection, and a supporting declaration. The trustee argued that the Court should consider factors utilized by other courts, such as the novelty and difficulty of any legal question, fees charged in the community for similar work, the degree of risk taken by the firm, and time and labor actually required. The supporting declaration of Mr. Murdock was a compilation of confirmation orders in 63 8 cases all filed after BAPCPA and all assigned to the Chapter 13 trustee in this case. The fees approved in those cases upon confirmation averaged $2,591.47. Here, the Doan firm seeks $4,000.
As noted, the Court asked for more specific information after the hearing on the fee application. Both Mr. Doan and Mr. Larkin filed supplemental declarations in which they stated they had "further reviewed" their "time in the aforementioned case and converted the same from our files and Bestcase Software to our new 'Bankruptcy Pro/Doing Time' Software." They discovered that the time asserted in "Exhibit A" was misallocated between them, and that Mr. Doan had put 4.45 hours in on the case and Mr. Larkin's were reduced to 12.45 from 15.9 hours. They both then added time for events subsequent to the time period covered by "Exhibit A", which are not part of the instant, noticed, fee application.
After detailed review of both the original application and the Doan firm's supplemental information (insofar as it related to the time frame covered by the fee application), the Court finds that the fees sought are unreasonably high and do not reflect the sound billing judgment required in bankruptcy cases. The supplemental declarations have attorneys doing work that is sometimes ministerial and should be relegated to lower billing staff or paralegals. Mr. Doan's claimed hourly rate of $450 is not appropriate in a routine consumer Chapter 13 case which, to this point, this is. The Court is aware there are adversary proceedings involving the IRS, but they are not part of this fee application time period and are not considered in this application. Whether such a billing rate is appropriate in that context is for another day.
As the firm recognized, it has the burden of showing that this case is "extraordinary or unusual" in some meaningful way in order to depart from the presumptive fee and to add to the cost of the debtor's estate both in fees generally and fees for filing and defending a fee application. The firm has made no effort whatsoever to show that this case is outside the ordinary-consumer Chapter 13 case. To the extent the firm's goal was to provide additional information to the court in support of increases to the presumptive fees in this district, the firm has been successful. The firm's arguments were shared, and considered in the increases the court as a whole adopted subsequent to the hearing and supplemental briefing in this case. However, the firm was afforded opportunities to do that directly, as was the rest of the Chapter 13 bar, and the associated costs should not be borne by the creditors of this bankruptcy estate.
Conclusion
For all the foregoing reasons, the Court finds and concludes that through confirmation in this case this is a routine consumer Chapter 13 case and the presumptive or no-look fee of $2,800 is the appropriate fee. The Court further finds and concludes that the template proffered by the firm as "Exhibit A" is of little utility to the court in the context of a fee application because it does not reveal what was done, when it was done, or by whom. Because the firm has already received $2 00 directly from the debtor, the balance due to the Doan firm from the debtor's payments to the trustee is $2,600.
IT IS SO ORDERED.
CERTIFICATE OF MAILING
Barbara J. Kelly Judicial Assistant
The undersigned, a regularly appointed and qualified clerk in the office of the United States Bankruptcy Court for the Southern District of California, at San Diego, hereby certifies that a true copy of the attached document, to wit:
ORDER ON FEE APPLICATION was enclosed in a sealed envelope bearing the lawful frank of the Bankruptcy Judges and mailed to each of the parties at their respective address listed below:
Attorneys for Debtor: Michael G. Doan, Esq., Jeffrey D. Larkin, Esq. Doan, Levinson & Liljegren, San Diego, CA 92101 LLP 2850 Pio Pico Drive, Suite D Carlsbad, CA 92008
Chapter 13 Trustee: Thomas H. Billingslea, Jr. 530 B Street, Suite 1500
Said envelope(s) containing such document were deposited by me in a regular United States mail box in the City of San Diego, in said district on February 6, 2008.