In re Kern

In Re: Charles Eric Kern, Debtor

No. 20-18381-ABA

United States Bankruptcy Court, D. New Jersey

August 9, 2021

Chapter 12

OPINION

Andrew B. Altenburg, Jr. United States Bankruptcy Judge

Before the court is consideration of the Interim Fee Application ("Fee App") filed by debtor's counsel Kasen & Kasen ("Kasen"). Parke Bank ("Parke") objects to the Fee App and the chapter 12 trustee ("Trustee") joined Parke's objection. For the reasons set forth below, the court determines that the Fee App must be reduced and awards Kasen fees of $125 520 and $7, 546 in expenses to be offset by any prepetition retainer or funds paid.

JURISDICTION AND VENUE

This matter before the court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B) and (O), and the court has jurisdiction pursuant to 28 U.S.C. § 1334, 28 U.S.C § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984, as amended on September 18, 2012 referring all bankruptcy cases to the bankruptcy court. The following constitutes this court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052.

PROCEDURAL HISTORY

Kasen filed its Fee App on April 19, 2021. Doc. No. 238. Parke filed its objection, Doc. No. 243, stating that the Fee App is excessive in light of representations made in the confirmed plan, the fact that the estate will likely end up administratively insolvent as a result, and the fact that certain work performed was either clerical yet charged at $500/hour, or repetitious, unreasonable, or unnecessary. The Trustee joined Parke's objection, Doc. No. 246, emphasizing that the amount sought is much greater than that estimated in the confirmed plan, harming the debtor's fresh start.

The court conducted a hearing on the Fee App, at which time all parties appeared and made arguments. At that hearing, the court questioned the parties about their positions. The court also admonished Kasen for disregarding this court's previous direct written rulings to Kasen that administrative tasks that are routine, ministerial, secretarial, or paralegal in nature are NOT compensated at an attorney's highest hourly rate. See In re Redington, 16-18407-ABA, 2018 WL 6444387, at *7 (Bankr. D.N.J. Dec. 6, 2018); In re Larosa Greehouse, LLP, Bankr. Case No. 15-30672-ABA, Doc. No. 179 (Bankr. D.N.J. May 1, 2017) (unpublished); and In re DeMarco, BR 14-28245-ABA, 2016 WL 899915, at *5 (Bankr. D.N.J. Feb. 9, 2016). The court instructed Kasen to respond to its questions as to why the Fee App should not be reduced.

The parties were afforded additional time to supplement their arguments and address the court's concerns, and the matter was taken under advisement. All submissions have been made and the matter is now ripe for disposition.

DISCUSSION

Preliminary Items

The court incorporates the time entries submitted by Kasen in the Fee App. No one has disputed the accuracy of the time entries but only argues that the fees are excessive, unreasonable, or unnecessary, and may harm the debtor's fresh start.

Kasen seeks allowance of $156, 900 in fees and $7, 546 in expenses for a total award of $164, 446, less a credit for a $20, 000 prepetition retainer.

Kasen's highest hourly rate $500 is assessed for the overwhelming majority of the time set forth in the Fee App.

The debtor himself, Christopher Kern, filed a Certification with this court explaining that he reviewed the objections of Parke and the Trustee, acknowledging that the payment of the Kasen fees will hamper his ability to pay non-dischargeable debt provided for under the plan, and stating that he fully supports payment in full of the Fee App. See Doc No. 253-2.

As Parke pointed out and Kasen did not dispute, while in the Third Modified Plan, Kasen estimated $60, 000 in counsel fees as of November 23, 2020, see Doc. No. 163, p. 19, in reality, it already had accrued $106, 000 in fees as of that date. Doc. No. 243, p. 2.

Section 1222(a)(2) provides that "The plan shall-. . . (2) provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507, unless the holder of a particular claim agrees to a different treatment of that claim[.]" and both the IRS and the New Jersey Division of Taxation, the only priority creditors in this case, agreed to different treatment in stipulations filed with the court. Doc. Nos. 192 and 194. In effect, those creditors have agreed to accept a shortfall in payments of their priority claims under the Chapter 12 Plan and that shortfall will be a nondischargeable debt owed by, and collectible from, the debtor. Accordingly, the impact of the Fee App on these claims really has no place for consideration here as the debtor understands that impact, agreed to nondischargeability of the claims and knowingly and fully supports payment in full of the Fee App.

Finally, the court is very mindful of, and in fact commented several times on the record over the course of this case, that Parke took a very aggressive and litigious position throughout the course of these proceedings. This in turn required Kasen to expend additional time addressing matters that might have been, in the court's experience, otherwise resolved without the need for repeated pleadings and hearings.

The Standard

Under section 330(a), the court may award "reasonable compensation for actual, necessary services rendered" by the attorney and by other professionals "based on (i) the nature of the services, (ii) the extent of the services, (iii) the value of the services, (iv) the time spent on the services, and (v) the cost of comparable services in non-bankruptcy cases." In re Busy Beaver Building Centers, Inc., 19 F.3d 833, 840 (3d Cir. 1994). "[T]he court should not allow compensation for (i) unnecessary duplication of services; or (ii) services that were not (I) reasonably likely to benefit the debtor's estate; or (II) necessary to the administration of the case." 11 U.S.C. § 330(a)(4)(A). The applicant bears the burden of proving that the fees and expenses sought are reasonable and necessary. Zolfo, Cooper & Co. v. Sunbeam-Oster Co., Inc., 50 F.3d 253, 261 (3d Cir. 1995).

The court must conduct an objective inquiry based upon what services a reasonable lawyer or legal firm would have performed in the same circumstances. In re Fleming Companies, Inc., 304 B.R. 85, 89-90 (Bankr. D. Del. 2003). A "judge's experience with fee petitions and his or her expert judgment pertaining to appropriate billing practices, founded on an understanding of the legal profession, will be the starting point for any analysis." Id. (citing Busy Beaver, 19 F.3d at 854). The court should then consider any evidence submitted with the application or at a hearing. Id. When making its consideration, the court is not required to make a line-by-line analysis of the fee application, and a sampling will suffice. In re Maruko Inc., 160 B.R. 633, 642 645 (Bankr. S.D. Cal. 1993) (citing In re Bank of New England Corp., 142 B.R. 584, 586 (D. Mass. 1992)) and Lindy Bros. Builders of Philadelphia v. Am. Radiator & Standard Sanitary Corp., 540 F.2d 102 (3d Cir. 1976). "Because its time is precious, the reviewing court need only correct reasonably discernible abuses, not pin down to the nearest dollar the precise fee to which the professional is ideally entitled." Busy Beaver, 19 F.3d 833 at 844-45.

Finally, a fee applicant's failure to exercise billing judgment will result in reduction of fees where, in the sound discretion of bankruptcy court, such fees are unreasonable. In re Maxine's, Inc., 304 B.R. 245 (Bankr. D. Md. 2003). The exercise of billing judgment is the voluntary reduction of a fee by counsel to a private client for services that either conferred a negligible benefit or were excessive. Id. at 249. Such billing judgment is an absolute requirement of fee applications in bankruptcy. Id.

Administrative and Routine Tasks at the Highest Hourly Rate are Excessive

The court is truly at a loss as to why it has to again admonish Kasen for submitting a Fee App that once again provides for the charging of the highest possible hourly rate - $500 - for preparation of routine form pleadings, simple letters to parties and the court, and general administrative/clerical tasks. While section 330(a) does bar compensation for administrative/clerical services, Busy Beaver 19 F.3d at 848-49, as Kasen acknowledges in its response, Doc No. 272, such routine ministerial, secretarial, or paralegal-in-nature tasks generally should not be compensated at an attorney's hourly rates, let alone the highest possible rate. To be sure, Kasen's response provides no basis or challenge against a reduction of fees. Alleged complexity of a case has no weight when considering simple administrative or routine tasks. That Kasen chooses not to utilize staff or a lesser hourly rate for these tasks is of Kasen's own choice. Kasen cannot expect this court to allow an hourly rate of $500 for simple administrative or routine tasks. The fact that the court has to continually admonish Kasen for this is trying and intolerable.

As Kasen is fully aware, see e.g., In re Redington, 16-18407-ABA, 2018 WL 6444387, at *7 (Bankr D.N.J. Dec. 6, 2018); In re Larosa Greehouse, LLP, Bankr. Case No. 15-30672-ABA, Doc. No. 179 (Bankr. D.N.J. May 1, 2017) (unpublished); and In re DeMarco, BR 14-28245-ABA, 2016 WL 899915, at *5 (Bankr. D.N.J. Feb. 9, 2016), the court "always looks to reasonableness and operates by the guidelines that normal secretarial, paralegal, or junior attorney services should be compensated accordingly-for example, simple correspondence, including filing letters, scheduling of meetings, etc., preparation of basic documents...