In re Quiroz, Case No.: 6:17-bk-10255-WJ

CHAPTER 13

MEMORANDUM OF DECISION REGARDING CHAPTER 13 SUPPLEMENTAL FEE APPLICATION

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The Travis Law Firm ("Firm"), counsel for the chapter 13 debtors, Carlos and Angeles Quiroz ("Debtors"), has filed an application for supplemental fees entitled "Application for Supplemental Fees" [docket number 73] ("Application"). The billing records of the Firm in the Application seek fees for two categories of services in this chapter 13 case: (1) $920 for opposing a motion for relief from the automatic stay¹ and (2) $3,700 for preparing a declaration of the Debtors, for attending a status conference, for submitting a brief prior to the status conference and for preparing the fee application.² The total of these figures is $4,620.³

The chapter 13 trustee, Rod Danielson ("Trustee"), has filed opposition to the Application [docket #75] and contends that the Court should allow $2,025 consisting of (1) $600 for opposing the motion for relief from the automatic stay, (2) $1,350 for preparing a declaration of the Debtors, attending a status conference and submitting a brief prior to the status conference, and (3) $75 for preparing the fee application.

For the reasons set forth below, the Court allows total fees and costs of $2,325.

Section 329(b) of the Bankruptcy Code limits attorneys for debtors to "reasonable" attorney's fees. See 11 U.S.C. § 329. Under the statute, a fee charged by counsel for a debtor that "exceeds the reasonable value of any such services" is not permissible. According to the legislative history for the statute, Congress believed that fees charged by counsel for debtors "should be subject to careful scrutiny."⁴ Thus, the Code requires bankruptcy courts to evaluate

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the fees charged by counsel for debtors.

The leading case in the Ninth Circuit regarding awarding attorney's fees in chapter 13 cases is Law Offices of David A. Boone v. Derham-Burk (In re Eliapo), 468 F.3d 592 (9^th Cir. 2006). As described at length in that case, when considering a fee application in a chapter 13 case, courts tend to not rely upon the lodestar method when awarding fees for routine tasks regularly performed in large numbers of chapter 13 cases and, instead, look to the "normal and customary" fees charged by other chapter 13 attorneys in the legal community. Id. at 599-600. On this subject, the Ninth Circuit cited the following cases for the "normal and customary" standard: Chamberlain v. Kula (In re Kula), 213 B.R. 729, 737 n.5 (8th Cir. BAP 1997) ("Because the majority of work in most Chapter 13 cases is normal and customary, and because of the sheer volume of such cases in most districts, the lodestar calculation may not necessarily be the best method for determining appropriate fees in those cases.") and In re Szymczak, 246 B.R. 774, 781 (Bankr. D.N.J. 2000) ("Because use of the lodestar method for calculating legal fees does not achieve fair and reasonable results for debtor's counsel in chapter 13 cases, bankruptcy courts should divide services into two categories: work that is standard or normal and customary in a chapter 13 case and work that falls outside of this standard.") as well as In re Watkins, 189 B.R. 823, 828 (Bankr. N.D. Ala. 1995) (approving use of a "normal and customary" standard for routine services in Chapter 13 cases, and use of the lodestar method for work that "falls outside of that standard").

In reflecting on the Eliapo decision ten years later, the Ninth Circuit stated that "nothing required the bankruptcy court to apply the lodestar method, Unsecured Creditors' Comm. v. Puget Sound Plywood, Inc., 924 F.2d 955, 960 (9^th Cir. 1991), which, as we have previously noted, is problematic in Chapter 13 cases, see In re Eliapo, 468 F.3d 598-99 (describing the problems with applying the lodestar method in Chapter 13 cases and approving the use of presumptive fees in such cases)." Bayer Wishman & Leotta (In re Walker), 652 Fed. Appx. 539 (9^th Cir. 2016).

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Finally, under applicable law, attorneys who submit a fee application bear the burden of proving an entitlement to fees. A chapter 13 fee application must include evidence that the amount of fees requested is "usual and customary" in comparison to the fees charged for the same tasks performed by other chapter 13 attorneys in other cases. The applications must include sufficient evidence that the requested fees are reasonable. Bayer at **2 ("[Chapter 13 debtors' counsel] did not carry its burden of proving its entitlement to the fees requested because it failed to produce sufficient evidence that the fee request was reasonable. See 11 U.S.C. §§ 330(a)(2), (a)(3); Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 980 (9th Cir. 2008) ("[T]he burden is on the fee applicant to produce satisfactory evidence—in addition to the attorney's own affidavits—that the requested [fees are reasonable.]" (quoting Blum v. Stenson, 465 U.S. 886, 895 n.11, 104 S. Ct. 1541, 79 L. Ed. 2d 891 (1984)).").

A. No Evidence Of Reasonableness Of The Fees.

When submitting a fee application, the law requires applicants to provide evidence that their fees are reasonable in comparison to similar services rendered by other attorneys. It is not enough to simply provide the billing records of the applicants showing the work performed in one case. Instead, the applicants must also provide evidence that the fees are reasonable in comparison to fees of other attorneys. Requested fees must be "usual and customary" in amount. This requires some evidence of the custom and practice in the legal community for the task at hand.

In this case, the Firm did not provide any such evidence in support of its Application. Rather, the Firm simply provided its own billing records with no evidence that the amounts sought are "usual and customary" in comparison to other attorneys. That hampers the ability of the Court to evaluate the Application.

However, as discussed in greater detail below, the Court faced this same situation in the case of In re Kevin Walker, 6:09-bk-28706-WJ in which a chapter 13 attorney filed a fee application with billing entries but provided no evidence of reasonableness. In that situation, the

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Court reviewed 125 similar fee applications filed by chapter 13 attorneys performing the same task. Given that the Court reviews and processes hundreds of supplemental fee applications every year, the Court sees quite a bit of evidence regarding the amount of fees charged by chapter 13 debtors' attorneys.

On appeal, both the District Court and the Court of Appeals affirmed this approach. See Bayer Wishman & Leotta (In re Walker), 2014 U.S. Dist. LEXIS 117644 (C.D. Cal. 2014), affirmed, 652 Fed. Appx. 539 (9^th Cir. 2016). In particular, the District Court noted that in the Walker case (like this one) the "supplemental fee application did not contain any information to demonstrate the reasonableness of the fees for the particular task at issue." 2014 U.S. Dist. LEXIS 117644 at *8. In this context, the District Court stated that "[i]n the absence of such evidence, the Court conducted its own independent study to determine a reasonable fee in which it compiled information concerning 125 cases where fee applications were filed in the Riverside Division seeking compensation for the same task . . . This Court finds that the Bankruptcy Court did not err or abuse its discretion, but instead followed a reasonable approach and reached a reasonable conclusion as to the value of the services at issue based on the information available." Id. at *8-*10. The Court of Appeals affirmed, stating that the "fee study relied upon by the bankruptcy court . . . consisting of 125 supplemental fee requests filed in the Riverside Division for preparation of a Chapter 13 status report . . . provided concrete evidence of the comparative unreasonableness of BWL's fee request." 652 Fed. Appx. at 540.

As in the Walker case, the Firm has not provided evidence of reasonableness of its fees. Therefore, as in the Walker case, the Court has spent considerable time reviewing hundreds of other fee applications for services similar to the services set forth in the Application by the Firm. The data found by the Court is listed on the attached exhibits and discussed below.

B. The Aggregate Results From 168 Fee Applications.

In considering and analyzing the Application, the Court has reviewed 168 fee applications filed in other chapter 13 cases which this Court has considered and approved in the past. A list of those 168 applications is attached as Exhibit 1. The 168 fee applications are listed in

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chronological order.

Over the years, the Court has considered thousands of supplemental fee applications filed by attorneys for chapter 13 debtors. The fee applications pertain to dozens of different kinds of services rendered during a chapter 13 case. The Court has considered 168 fee applications that pertain to motions for relief from stay.

The 168 fee applications listed on Exhibit 1 involve chapter 13 cases in which a creditor filed a motion for relief from the automatic stay and counsel for the debtors assisted the debtors in dealing with the motion.⁵ As set forth on the last page of Exhibit 1, attorneys for chapter 13 debtors have requested on average $507.47 in fees and costs for addressing a motion for relief from stay and they have agreed to accept an average of $442.58 in allowed fees and costs. The difference, of course, is based on objections by the chapter 13 trustee.

In 123 of the 168 cases, counsel for the chapter 13 debtors requested an amount of fees and costs and the trustee agreed with that request. The trustee did not object to 123 of the fee applications. Thus, in 73% of the cases,⁶ the trustee...