Opinion
ORDER ON CHAPTER 13 TRUSTEE'S OBJECTION TO FEE REQUEST
PETER W. BOWIET Chief Judge United States Bankruptcy Court
This matter has come on for resolution of the objection of the Chapter 13 trustee to the request of debtors' attorneys, the Price Law Group, APC for $3,300 in fees for handling the debtors' Chapter 13 case through confirmation of their plan, which has occurred.
This district utilizes a fee process for routine Chapter 13 cases, sometimes referred to as a presumptive or "no-look" fee. Participation is dependent upon the debtors and their attorney executing a Rights and Responsibilities agreement in which both sides understand their respective obligations and entitlements. The Price Law Group and the debtors executed such an agreement, and the presumptive fee in this district for a routine non- business Chapter 13 is $3,3 00, which is the amount the firm has requested (before applying a credit for the funds the debtors already paid directly).
The essence of the trustee's objection to part of the fee request is that because the Price Law Group is out of the district, they were not realistically in a position to meet face-to-face with the debtors. Rather, all communications were by phone, e-mail, or mail. Because there was no face-to-face, the trustee argues, the firm and the debtors failed to recognize that the debtors' expenses on Schedule J included the amounts due on their second and third trust deeds even though their purpose in filing was to strip those off and not pay them. Because the home mortgage line item was so high, it adversely impacted the bottom line in terms of net income available to pay each month as a plan payment. Another error in the mortgage payment amount was that it did not take into consideration the property tax payments required annually.
At the conclusion of the first meeting of creditors on November 7, 2008 the trustee filed his objection to confirmation and noticed it for hearing. Meanwhile, the Debtors were represented at the first meeting by so-called "appearance counsel", who acknowledged the need to amend Schedules I and J, as well as the plan. Those changes were made, filed and served on December 5. Those changes resolved the trustee's objection and the plan was confirmed, reserving only the objection to fees. At the confirmation hearing, the Court set a briefing schedule on the fee issue which gave Price Law Group until January 12, 2009 to file a brief fee application, after which the trustee could respond. Both sides did so.
Then, on February 9, 2009, the Price Law Group filed an untimely declaration of one of its attorneys, which also attached a declaration of the debtors. The latter declaration sets out not only that the debtors found it more convenient to communicate by phone or e-mail than to go to the firm's San Diego office, but also there were other changes to the Schedule I and J that arose after the first meeting of creditors which were included in the amendments which resulted in the confirmed plan.
The trustee's objection to the presumptive fee sought by the Price Law Group raises serious questions of great concern to the Court. Those questions center around what constitutes adequate performance of each of the obligations an attorney undertakes in executing the Rights and Responsibilities agreement. It is not difficult to envision a hypothetical lawyer or firm looking to streamline operations or make them more cost efficient becoming more like a petition preparation operation with little or no attorney involvement or contact with the actual case.
The Court will not say that to comply with the Rights and Responsibilities Agreement an attorney must always meet face-to-face with a client. While it is certainly preferable that at least one occur, there are too many instances when it is not reasonable to arrange in a timely way. Moreover, in this case, the debtors' belated declaration makes clear it was offered and they preferred otherwise. Moreover, in this case, the trustee's argument has been that a face-to-face might have revealed the inconsistencies in listing the second and third mortgage payments on Schedule J while having no intent to make those payments and might have led to recognition that the property taxes had been omitted. That may well be correct, but the debtors' belated declaration indicates there were changes in income that occurred post-petition which necessitated amendments to the Schedules and modification of their proposed plan.
One other element which mitigates in the firm's favor is that included in the work for which it seeks the presumptive fee of $3,300 is the adversary proceedings which resulted in a judgment that stripped off the second and third trust deeds because they were totally unsecured by any value in the subject property.
As noted, the Court believes the trustee's objection to fees raises serious questions of ongoing concern in the Chapter 13 process. Information which has been tardily provided by the firm has to a large extent allayed those concerns in this case. Two which remain (but do not require a fee reduction in this case) are, first, the use of an appearance attorney at the first meeting of creditors, rather than the attorney who supposedly prepared and filed the petition, is theoretically more knowledgeable, and importantly, has the confidence of the clients in their first hearing on their case in an alien setting. Second, the first entry in the firm's time records, for 9/15/08, says "Attorney of record met with Debtors, discussed ch. 13 Bankruptcy, income and expenses, and possible elimination of the second deed of trust. Completed consultation. ..." That entry is troubling because the debtors testified they did not meet with the attorney, but rather communicated by phone. On other occasions when a phone communication occurred, the time records report "Attorney of record met with Debtors via phone . . .." 9/16, 10/30, 11/24. Those inconsistencies make the first entry at least misleading.
Under all the circumstances set out above, especially the information provided by the debtors and the firm belatedly on February 9, and because the fees the firm seeks includes their compensation for the lien strip adversary proceeding, the Court finds and concludes that the presumptive fee of $3,300 is reasonable in this case and is approved. Debtors have already paid $1,900 of that, plus their filing fee, leaving a net award of $1,4 00 to be paid through plan payments made to the trustee.
IT IS SO ORDERED.