Cripps v. Foley (In re Cripps)

566 B.R. 172

IN RE: Lon W. CRIPPS and Deborah E. Cripps, Debtors.

Lon W. Cripps, Deborah E. Cripps and Dietrich Law Firm, Appellants,

v.Barbara P. Foley, Chapter 13 Trustee, Appellee.

Case No. 1:16–cv–744

United States District Court, W.D. Michigan, Southern Division.

Signed March 31, 2017

Robert W. Dietrich, Dietrich Law Firm, Lansing, MI, for Appellants.

Barbara Pietila Foley, Kalamazoo, MI, pro se.

Courtney Kendra Roberts, Kalamazoo, MI, for Appellee.

JANET T. NEFF, United States District Judge

OPINION

Appellant Dietrich Law Firm ("Dietrich Law") appeals from an order of the Bankruptcy Court approving in part and denying in part Dietrich Law's application for attorney fees in connection with its representation of the Debtors in their Chapter 13 bankruptcy. Having considered the parties' appellate briefs and the record, the Court finds oral argument unnecessary. "[T]he facts and legal arguments are adequately presented in the briefs and record, and the decisional process would not be significantly aided by oral argument." FED. R. BANKR. P. 8019. The Court affirms the decision of the Bankruptcy Court.

I. Facts

On June 22, 2010, the Debtors, Lon W. Cripps and Deborah E. Cripps (the "Cripps" or "Debtors") filed a Voluntary Petition for relief under Chapter 13 of the Bankruptcy Code. Appellant Dietrich Law represented the Cripps in their bankruptcy case.

The Debtors' Chapter 13 plan provided for the full payment of general secured creditors over a period of sixty months. In re Cripps , 549 B.R. 836, 842 (Bankr. W.D. Mich. 2016). On November 6, 2015, the Trustee issued her notice/letter to the Debtors concerning completion of the Chapter 13 plan, and on the same date issued a notice of final cure of mortgage payments. Id. at 842–43. The payroll orders, by which Debtors had made the required payments to their Chapter 13 case by payroll deductions, were terminated by the Bankruptcy Court on November 9, 2015. Id. at 843, n.6.

On December 7, 2015, the Trustee filed a report of plan completion, and the Debtors filed their certificate regarding domestic support obligations. Two days later, on December 9, 2015, Dietrich Law filed its final fee application,¹ seeking an additional $686.60 in fees and expenses, which was later limited to $642.60 by agreement of the parties. Id. at 843–44, n.8.

The Trustee filed an objection to the fee application on December 16, 2015, contending that the court should not award Dietrich Law compensation to be paid as an administrative expense because the application was untimely in light of the letter to the Cripps, the report of plan completion, and the imminent entry of the discharge. Id. at 843. Further, Dietrich Law's delay in filing the application would prejudice the Cripps by impairing their fresh start and/or precluding the entry of their discharge. Id. at 843–44.

On January 13, 2016, during the pendency of the instant fee matter, the Bankruptcy Court entered a Discharge in the Cripps' case. Id. at 843.

Following oral argument on Dietrich Law's pending application for fees, the Bankruptcy Court took the matter under advisement. Id. at 844. On May 13, 2016, the Bankruptcy Court issued an Opinion and Order approving in part and denying in part the fee application. The court awarded compensation in the amount of $642.60 pursuant to 11 U.S.C. § 330(a), but determined that the compensation awarded shall not be paid as an administrative expense under 11 U.S.C. § 503, and was discharged pursuant to 11 U.S.C. §§ 524(a) and 1328(a) (Dkt 11–2 at PageID.118).² The Order also stated that "nothing contained herein shall preclude the Debtors from voluntarily satisfying the compensation awarded herein pursuant to 11 U.S.C. § 524(f)."

Dietrich Law now appeals the Bankruptcy Court's decision on its fee request.

II. Legal Standard

"The bankruptcy court has broad discretion in determining the amount of attorneys' fees, and the award may be reversed only on a showing that the bankruptcy judge abused its discretion." Solomon v. Wein (In re Huhn) , 145 B.R. 872, 874–875 (W.D. Mich. 1992). "An abuse of discretion occurs only when the bankruptcy court fails to apply the proper legal standard and procedure in making the fee determination or bases the award on clearly erroneous findings." Id.

The bankruptcy court's conclusions of law are reviewed de novo . Rowell v. Chase Manhattan Auto. Fin. Corp. (In re Rowell) , 359 F.Supp.2d 645, 647 (W.D. Mich. 2004). Issues of statutory interpretation are questions of law, and are thus subject to review de novo . Mitan v. Duval (In re Mitan) , 573 F.3d 237, 241 (6th Cir. 2009) ; ITT Indus. v. BorgWarner, Inc. , 506 F.3d 452, 457 (6th Cir. 2007). "Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination." Menninger v. Accredited Home Lenders (In re Morgeson) , 371 B.R. 798, 800 (6th Cir. B.A.P. 2007).

III. Analysis

Appellant Dietrich Law seeks the reversal of the Bankruptcy Court's decision and a remand so that an order may enter allowing the awarded fees to survive discharge. Dietrich Law argues that (1) no statute or court rule establishes a definite deadline to submit a fee application; and (2) allowed attorney fees are not discharged under the Bankruptcy Code. Accordingly, the Bankruptcy Court erred in denying Dietrich Law's fee application and request to be paid as an administrative expense because the application was timely filed and the awarded compensation survives discharge. Upon review of the Bankruptcy Court's reasoning and rulings, the Court finds no error of law that warrants reversal. The Bankruptcy Court's decision was a proper exercise of its discretion based on the circumstances of the case.

A. Timeliness

Dietrich Law emphasizes that no Bankruptcy Code section, Federal Rule of Bankruptcy Procedure, or local court rule establishes a definite deadline to submit a fee application in a Chapter 13 case. See In re Fricker , 131 B.R. 932, 940 (Bankr. E.D. Pa. 1991). Because there is no deadline, the fee application was timely and the awarded compensation should be allowed as an administrative expense. Thus, the Bankruptcy Court erred in determining that the application was untimely.

The Bankruptcy Court thoroughly considered the timeliness of Dietrich Law's administrative fee request in a detailed analysis of the governing legal authority and the specific case circumstances—both the Cripps' bankruptcy case plan provisions and Dietrich Law's actions. In re Cripps , 549 B.R. at 849–60. It is noteworthy that in the same opinion, the Bankruptcy Court conducted a similarly thorough analysis of the same issues concerning Dietrich Law's fee request in a separate Chapter 13 bankruptcy case, In re Mears , No. 11–11505 (Bankr. W.D. Mich.), under different circumstances, reaching a different result. The Bankruptcy Court's analysis in this case was well-reasoned and accords with the law and the facts, which the Bankruptcy Court observed present some "fairly complex issues." In re Cripps , 549 B.R. at 864. As explained subsequently, Dietrich Law's arguments provide no valid challenge to the Bankruptcy Court's conclusion that the administrative fee request was untimely under the circumstances presented.

Dietrich Law argues that since no statute or court rule establishes a definite deadline to submit a fee application and Bankruptcy Rule 2016(a) provides a procedure to obtain court approval of requests for compensation and reimbursement of expenses, the court can approve a fee application filed pursuant to Rule 2016(a) even though the underlying bankruptcy case has been dismissed. In re Fox , 140 B.R. 761, 765 (Bankr. D. S.D. 1992). And it does not matter if a plan has completed, the discharge has entered, and/or if there are no funds on hand for the trustee to disburse.

Dietrich Law cites several case holdings for the proposition that the Bankruptcy Court here still had the "ability" to award the fee application as an administrative claim. See , e.g. , In re Sweports, Ltd. , 777 F.3d 364, 365 (7th Cir. 2015) (the question presented "is the authority of a bankruptcy judge to make an award of fees after dismissal of the bankruptcy proceeding and the consequent revesting of the assets of the debtor's estate in the debtor").³ However, the question is not whether the Bankruptcy Court had the ability or the "power" to award the attorney fees, but whether the award of the fees as an administrative expense was mandated, as Dietrich Law implicitly argues. The cases cited by Dietrich Law offer no support for the latter proposition, particularly given the differing case circumstances.

In analyzing the timeliness issue, the Bankruptcy Court noted it had the "inherent authority to establish a deadline for filing requests for awards of compensation." In re Cripps , 549 B.R. at 849 (citing In re Alda , 464 B.R. 61 (6th Cir. BAP 2010) (table decision) (citations omitted)). The court declined, however to impose a deadline in the context of the cases before it. "[N]o section of the Bankruptcy Code or any applicable rule explicitly establishes a deadline for the filing of requests for administrative expenses." Id. at 850. "[A]bsent any explicit or implicit directive in the Bankruptcy Code or an applicable rule, bankruptcy courts have the inherent authority under section 503(a) and section 105(a) to establish the time by which a request for an administrative expense must be made." Id. And "even where the Bankruptcy Code or an applicable rule provides an explicit or implicit deadline, the court may, ‘for cause,’ allow a tardily filed request for an administrative expense. Id. (citing 11 U.S.C. § 503(a) ).

The Bankruptcy Court concluded that although the "request for compensation" from Dietrich Law was timely, the separate request for an "administrative expense" was not. In re Cripps , 549 B.R. at 851. The court acknowledged Dietrich Law's argument that no deadline exists under the Bankruptcy Code or any applicable rule for a ...