In re Combs

1

In re: GLEN D. COMBS, JR., Debtor.

No. 22-30644

United States Bankruptcy Court, S.D. Ohio, Western Division

January 25, 2023

Chapter 13

ORDER GRANTING IN PART AND DENYING IN PART ATTORNEY FEE OF DEBTOR COUNSEL (DOC. 1)

GUY R HUMPHREY UNITED STATES BANKRUPTCY JUDGE

This order concerns the reasonableness and necessity of the requested attorney fee of Andrew Zeigler, counsel to the Chapter 13 debtor Glen D. Combs, Jr., of $4,350. See Disclosure of Compensation of Attorney for Debtor and Application for Allowance of Fees in Chapter 13 Case (doc. 1). The requested $4,350 fee is the current maximum "no-look fee" provided by the United States Bankruptcy Court for the Southern District of Ohio. Local Bankruptcy Rule ("LBR") 2016-1(b)(2)(A), as amended by General Order 50-1 (effective for cases filed on or after February 24, 2021).^[1]

As stated in this court's scheduling orders (docs. 23, 28):

This case appears to primarily address a secured vehicle claim and generally lacks other typical Chapter 13 issues including, but not limited to, mortgage loan claims land contracts, significant tax issues, secured claim arrearages, small business income, or unusual special plan provisions. For this reason, the requested maximum no-look fee appears excessive or unreasonable in light of the comparatively limited issues and complexity presented by the circumstances in this case. See In re Spurlock, [642 B.R. 269 (Bankr. S.D. Ohio 2022)].

The court set this matter for an evidentiary hearing, which was held on December 8, 2022 (Doc. 28). See also Transcript (doc 36). Mr. Zeigler represented himself in defending his attorney fee and was the only witness who testified. The court admitted Exhibits A, B, C, E and H at the hearing and took under advisement whether Exhibits D, F, and G could be admitted. The court has concluded that these remaining exhibits may also be admitted.^[2] The court also considered the legal arguments of Mr. Zeigler, both in his pre-hearing memorandum (Doc. 31) and at the hearing. The Chapter 13 Trustee, John Jansing, and his counsel attended the hearing but did not take a position with respect to the matter.

The burden of proof lies with counsel to show his fees are reasonable, but the court is required to calculate the appropriate lodestar amount. In re Boddy, 950 F.2d 334, 338 (6th Cir. 1991). The court considered all relevant factors, including those enumerated in 11 U.S.C. § 330(a)(3).

The Chapter 13 Plan (the "Plan") in this case proposed a payment of $350 each month to the Chapter 13 Trustee (the "Trustee"). The Plan did not provide a dividend to non-priority unsecured creditors. The monthly payment, aside from the Trustee's administrative fee, would go to two "910" car creditors,^[3] with the balance left each month to be paid to Mr. Zeigler as "Class 2" out of the remaining funds after the car payments and the Trustee's administrative fee, all of which are Class 1 payments. Mr. Zeigler received $150 in pre-petition fee payments from the Debtor, and the balance of the requested attorney fee would take 4 to 5 years to pay in full. One distinguishing factor in this case is that Mr. Zeigler filed a motion to extend the automatic stay, a service which is not covered by the no-look fee requirements. He seeks an additional hour in fees at his present hourly rate of $350 per hour for those services.

Mr. Zeigler testified that similar cases are often dismissed before the plan is completed, and counsel do not receive their full attorney fees in such instances. But the court cannot set the fee for a particular debtor because some debtors do not complete their cases. It also does not adjust the no-look fee when counsel is fully paid in a case that does not complete and thus performs fewer hours of post-confirmation work.

With one exception, Mr. Zeigler did not argue that this case included legal issues or work distinguishable from Spurlock, which the court, after considering an itemization of counsel, used the lodestar analysis to calculate a fee of $3,660 for very similar services.^[4] The court previously noted that Mr. Zeigler performed work on motion to extend the automatic stay pursuant to 11 U.S.C. § 362(c)(3). As Mr. Zeigler has indicated that he will not be separately billing for this work, and it is not included in the list of required work under LBR 2016-1(b)(2)(A), the court awards one additional hour at Mr. Zeigler's current rate of $350 for those services.

Mr. Zeigler did not provide an itemization of his work for the court to consider in determining the appropriateness of the $4,350 as a fee for this case. Instead, he raises a series of discrete arguments regarding why the full no-look fee of $4,350 is appropriate, despite this court's lodestar calculation in Spurlock and other similar Chapter 13 cases. The court will address each such issue separately.

First, Mr. Zeigler argues that his fee must account for $70.72 in postage and copying costs paid to a third-party service provider. The court finds, as it indicated at the hearing, the presumptive hourly rate and total fee calculated in Spurlock for such cases includes overhead such as postage and copying costs. The court was well-aware of the prior increase of the no-look fee when debtor counsel became responsible for service of debtors' plans. For purposes of the no-look fee, the court finds such overhead is accounted for in the reasonable hourly rate of $300 and total fee of $3,660 outlined in Spurlock. This court does not separately award expenses for copying and service of the plan and other such expenses when it approves no-look fee awards because such expenses are included in this flat fee. In addition, if counsel wants to be reimbursed for such expenses, counsel may opt out of the no-look fee and itemize counsel's fees and expenses pursuant to Local Bankruptcy Rule 2016-1(b)(2)(C) ("The debtor's attorney may opt out of the no-look fee by filing an application for allowance of fees that includes an itemization of all legal services performed, the amount of the total fee requested, the amount and itemization of any expenses for which reimbursement is sought . . . ."). Thus, for these reasons, the court declines to add these expenses to the $3,660 base number determined by the court in Spurlock for such cases.

Second, Mr. Zeigler argues that the court should account for the payment of his attorney fee occurring over almost five years and the time value of the funds he is receiving. Chapter 13 fees are sometimes paid in twelve months or less, and sometimes over a five year plan. The timing of the payment can also be affected by subsequent modifications of the plan. The court is unaware of any court's local rule calculating the no look fee in this manner. LBR 2016-1(b)(2)(A) does not provide for adjustment of the amount of the no-look fee based upon the timing of the payments over the life of the Chapter 13 plan. Therefore, the same amount is approved regardless of whether it is paid over twelve months or sixty months. Of course, requiring such calculus would defeat the primary purpose of the no-look fee of providing administrative convenience to counsel, the debtor, the creditors, and the court. The court declines to re-calculate the lodestar determination in Spurlock absent a distinguishing feature of a particular case or a complete itemization for work completed up to confirmation.

Third, Mr. Zeigler argues that the court ought to account for increases in his hourly rate during the pendency of the Chapter 13 plan for his post-confirmation work. The court is unaware of any other District that considers subsequent potential increases in counsel's hourly rate in determining the presumptive hourly rate for purposes of a no-look fee lodestar calculation. If counsel wants his hourly rate to be accounted for over time, the solution is to itemize his work throughout the case and the court will consider that hourly rate under the lodestar standard mandated by the Sixth Circuit. Again, the District's no-look fee does not contemplate adjustment of the fee based upon anticipated increases in counsel's hourly billing rate over the life of the plan and such calculation would defeat the administrative convenience purpose of the no-look fee.

Fourth, Mr. Zeigler indicated that counsel cannot realistically itemize his fee applications because his firm lacks the resources to do so. The court has two responses. First, similarly small firms have itemized fee applications before this court. The resources needed to prepare an itemization would seem to be more than offset by cases that may justify a higher fee. Itemizing more complex cases in which the fee can be paid in the Chapter 13 plan would be appropriate for such cases and a better solution than having debtors in simpler cases pay the freight for debtors with more complex cases. If counsel never itemizes and always charges the same $4,350, some debtors are effectively subsidizing other debtors' Chapter 13 counsel fees. Although such an arrangement may be advantageous administratively for the court and debtor counsel (and for debtors with more complex cases), it does not fully consider the differences in legal work that Chapter 13 debtors require or for which they should pay.

Fifth and finally, Mr. Zeigler argues that the current no-look fee is similar to the historical amount allowed by this District. The court recognizes that the no-look fee has varied in its present day value at different times. Obviously, the first year the no-look fee is raised by the court, that fee would be more valuable in real dollars than in year two. But, as the court discussed in Spurlock, it considered multiple sources in evaluating the itemization in that case. If anything, those sources of authority demonstrated the...