In re Rose

561 B.R. 70

In re: Ervin E. Rose, Debtor.

Case No. GG 14–04308–jtg

United States Bankruptcy Court, W.D. Michigan.

Signed November 29, 2016

Roger G. Cotner, Esq. for COTNER LAW OFFICES, Grand Haven, Michigan; Matthew W. Cheney, Esq. for the UNITED STATES TRUSTEE, Grand Rapids, Michigan; Elizabeth T. Clark, Esq. for BRETT N. RODGERS, Chapter 13 Trustee, Grand Rapids, Michigan

MEMORANDUM DECISION REGARDING FEE APPLICATION

John T. Gregg, United States Bankruptcy Judge

This matter comes before the court on the Second Application for Allowance and Payment of Debtor's Attorneys' Fees and Expenses [Dkt. No. 90] (the "Application") filed by the Cotner Law Offices, counsel to the debtor in this Chapter 13 case (the "Applicant"). In the Application, the Applicant seeks an interim award of compensation and reimbursement of expenses in the aggregate amount of $1,240.56. Brett N. Rodgers, the Chapter 13 trustee (the "Trustee"), and Daniel M. McDermott, the United States Trustee for Region 9 (the "UST"), filed separate, albeit similar, objections [Dkt. Nos. 95, 96]. The Trustee and the UST contend that a significant portion of the fees and expenses sought by the Applicant violate Baker Botts L.L.P. v. ASARCO LLC , ––– U.S. ––––, 135 S.Ct. 2158, 192 L.Ed.2d 208 (2015) and are otherwise non-compensable. The Trustee also objects to the award of any additional compensation because of the routine nature of the case to date. For the following reasons, the court shall approve the Applicant's fees and expenses in a reduced amount.

JURISDICTION

The court has jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A)—(B).

BACKGROUND

On June 24, 2014, Ervin Rose (the "Debtor") filed a petition for relief under Chapter 13 with the assistance of the Applicant. As part of the order confirming the Debtor's plan [Dkt. No. 65], the Applicant was awarded compensation in the amount of $3,200.00.

The Applicant subsequently filed a first post-confirmation fee application [Dkt. No. 73] (the "First Application") which drew an objection from the Trustee because the fees requested were allegedly unreasonable. The court eventually sustained several of the Trustee's objections and entered an order awarding additional compensation and reimbursement of expenses in the aggregate amount of $3,344.28 [Dkt. No. 86].

On June 10, 2016, the Applicant filed the Application. The objections of the Trustee and the UST were filed shortly thereafter. As an initial matter, the Trustee argues that the court should not approve any of the fees and expenses requested in the Application. The Trustee maintains that the fees and expenses are unreasonable in light of the compensation previously awarded and the routine nature of this case.

The Trustee and the UST further argue that the following fees should not be approved because they relate to the defense of the First Application:

 Date Description Time Value ($)
8/3/2015     Review/analyze trustee's objection to fee application         0.30        72.00
8/8/2015     Analyze trustee's objection to fee application; calculate     0.20        48.00
             possible settlement scenarios; and draft email to
             trustee's attorney re same
8/17/2015    Research 704(a)(5) for "purpose served" cases.                0.10        24.00
8/19/2015    Letter to client re hearing on Cotner's fee application       0.30        72.00
9/1/2015     Prepare for and attend telephonic hearing for bench           0.80       120.00
             opinion on application for additional attorney fees
9/3/2015     Analysis of disallowances and write up additional notes       0.40        96.00
             from court's 9/1/15 bench opinion on application for
             additional attorney fees

The Trustee and the UST also object to expenses for parking, mileage, postage and copying in the aggregate amount of $46.56 because they, too, relate to defense of the First Application.

The Trustee and the UST further contend that the following time entries are not compensable and, even if compensable under some circumstances, are nonetheless unreasonable in this case¹ :

 Date Description Time Value ($)
6/27/2015     Review attorney time log for accuracy, lumping, etc.     0.40       96.00
7/7/2015      Review, revise fee application and supporting            0.30       72.00
              documents

The court held a hearing regarding the Application on July 14, 2016. During the hearing, the Applicant asserted, among other things, that the fees in the Application that relate to defense of the First Application should be approved because it has already "waived" nearly $5,000.00 in fees and expenses. The Applicant also argued that ASARCO is distinguishable because it involved fees and expenses in Chapter 11, not Chapter 13. Finally, the Applicant contended that confirmation of the Debtor's plan was res judicata as to its retention agreement, which expressly entitles the Applicant to seek fees and expenses from the Debtor for defending any fee application.

Because the Applicant introduced arguments for the first time at the hearing, the court provided the parties with an opportunity to file supplemental briefs. All three parties timely filed supplemental briefs [Dkt. Nos. 108, 109, 111] in accordance with the court's scheduling order [Dkt. No. 106]. The court held a final hearing on the Application on October 20, 2016.² After carefully considering the parties' arguments, the court shall sustain a majority of the objections and approve fees and expenses in the aggregate amount of $640.56.

DISCUSSION

The Applicant requests that the court award compensation and reimbursement of expenses under section 330(a). Section 330(a)(4) provides, in pertinent part, that in a Chapter 13 case, "the court may allow reasonable compensation to the debtor's attorney for representing the interests of the debtor in connection with the bankruptcy case based on consideration of the benefit and necessity of such services to the Debtor and the other factors set forth in this section." 11 U.S.C. § 330(a)(4)(B). Section 330(a)(3) sets forth a non-exclusive list of those factors. See , e.g. , In re Hirsch , 550 B.R. 126, 138 (Bankr. W.D. Mich. 2016). The Applicant has requested that any fees and expenses awarded be paid by the Trustee as an administrative expense. 11 U.S.C. § 503.

A professional requesting approval of fees and expenses bears the burden of proof by a preponderance of the evidence. In re Hirsch , 550 B.R. at 138 (citations omitted). "This burden is not to be taken lightly, especially given that every dollar expended on legal fees results in a dollar less that is available for distribution to creditors or use by debtor." In re Ulrich , 517 B.R. 77, 80 (Bankr. E.D. Mich. 2014) (citations omitted).

A. The Fees and Expenses Are Not Unreasonable on the Whole

As an initial matter, the Trustee objects to all fees and expenses sought in the Application. The Trustee emphasizes that over $6,500 in fees and expenses have already been approved to date in what has been a relatively simple case. In other words, the Trustee asserts that the Applicant has already been paid enough.

As support, the Trustee relies on a recent decision from the Bankruptcy Court for the Eastern District of Michigan. See In re Ulrich , 517 B.R. at 77. In evaluating the preconfirmation fees and expenses sought by an attorney for a Chapter 13 debtor, the Ulrich court carefully considered the record before it, placing great emphasis on a worksheet prepared by the attorney that estimated fees and expenses through confirmation. Id . at 84. The court also relied on its own experience reviewing fee applications, the appropriate amount of fees in routine Chapter 13 cases based on such experience, and the impact of the fees and expenses on feasibility—namely, whether the fees and expenses would threaten the viability of the plan. Id . at 84–86. The Ulrich court ultimately concluded that the preconfirmation fees and expenses sought were, on the whole, excessive and should therefore be reduced by approximately one half. Id . at 87–88.

The reasoning in Ulrich may be compelling in certain circumstances. However, those circumstances are not present in this case based on the record. Although the Debtor's case has been fairly routine to date, the fees and expenses requested by the Applicant all arise from post-confirmation services. There is no worksheet or other estimate in the record upon which to rely. And, while the aggregate amount of fees requested by the Applicant to date is certainly on the high side, the court does not believe that the fees are unreasonable on the whole. Based on the limited record before it, the court declines to extend Ul rich to the post-confirmation fees and expenses requested in the Application.

B. ASARCO Applies in Chapter 13 Cases

The Trustee and the UST next contend that a significant portion of the fees and expenses sought by the Applicant violate ASARCO because they relate to the defense of the First Application. In ASARCO , the United States Supreme Court held that section 330(a)(1) does not authorize compensation for defending a fee application. ASARCO , 135 S. Ct. at 2169. In reaching this conclusion, the Court first recognized that absent an explicit statutory directive or a provision in a contract stating otherwise, the American Rule controls. Id . at 2164. As such, each litigant must pay its own attorneys' fees, win or lose. See id . The Court observed that nothing in section 330(a)(1) of the Bankruptcy Code provides for the shifting of fees, like other statutes that displace the American Rule do. Id . at 2164–65. Relatedly, the Court noted that Congress clearly knew how to shift costs of litigation in bankruptcy, as it expressly did in other sections of the Bankruptcy Code. Id . at 2165–66. Finally, the Court rejected arguments that defense of a fee application falls within the ambit of services rendered, or that compensation sought...