JAMES EDWARD BACHMAN MOVANT - APPELLANT
v.
JOEL PELOFSKY U.S. TRUSTEE - APPELLEE
| [1] | United States Bankruptcy Appellate Panel FOR THE EIGHTH
CIRCUIT |
| [2] | No. 00-6006NE |
| [3] | |
| [4] | August 7, 2000 |
| [5] | IN RE: CRAIG PETERSON DEBTOR JAMES EDWARD BACHMAN MOVANT - APPELLANT v. JOEL PELOFSKY U.S. TRUSTEE - APPELLEE |
| [6] | Before Koger, Chief Judge, Dreher and William A. Hill Bankruptcy
Judges. |
| [7] | The opinion of the court was delivered by: Koger, Chief Judge. |
| [8] | Appeal from the United States Bankruptcy Court for the
District of Nebraska |
| [9] | Submitted: July 13, 2000 |
| [10] | James Edward Bachman, counsel for the debtor, appeals the Order of the
Bankruptcy Court *fn1
which granted Bachman's request for attorney fees in a reduced amount.
For the reasons that follow, we affirm. |
| [11] | Factual Background |
| [12] | Craig Peterson originally hired Bachman to represent him regarding
certain sales tax deficiencies that had been assessed against him for
the period of 1991 to 1997 by the Nebraska Department of Revenue.
Shortly after Peterson retained Bachman to represent him in the matter
with the Nebraska Department of Revenue, the Madison County Attorney
criminally charged Peterson with offenses relating to the tax
deficiencies. Peterson's business records were seized by the Nebraska
State Patrol at the time of Peterson's arrest for the criminal tax
charges. |
| [13] | Because Peterson had not timely appealed some of the assessments, they
had become final under Nebraska law and could only be appealed after he
paid them. Consequently, on July 16, 1997, Bachman filed a Chapter 13 bankruptcy
petition on Peterson's behalf for the express purpose of challenging the
tax assessments by the Nebraska Department of Revenue. In November 1997,
while his bankruptcy case was pending, Peterson pled
guilty to one count relating to his failure to pay and file the sales
tax returns and he was sentenced in the spring of 1998. Due to some
delay caused by the State Patrol's misplacement of Peterson's business
records, the records were not released by the State Patrol until
September 1998. |
| [14] | In addition, Bachman was injured in August 1998 and was unable to
effectively perform as Peterson's attorney until November 1998.
Bachman's wife was able, however, to drive Bachman to the office of the
Nebraska Department of Revenue during his period of recovery to deliver
the debtor's records so that the Department could determine whether the
assessments which totaled over $125,000 had been grossly overstated. |
| [15] | In November 1998, the Department convinced Bachman that the
assessments against the debtor were valid. In addition, the Internal
Revenue Service filed a proof of claim in the debtor's bankruptcy
case for priority taxes in the amount of $40,000. Bachman attempted to
informally negotiate reduced claims with both the IRS and the Nebraska
Department of Revenue but was unsuccessful in his negotiations and the
Nebraska Department of Revenue formally declined Bachman's offer in June
1999, refusing to reduce the assessments. Meanwhile, because of these
problems, the debtor was never able to propose a confirmable plan. After
the Nebraska Department refused to reduce the assessments, Bachman
determined that the debtor would not be able to fund a Chapter 13 plan
and in July 1999, he converted the case to Chapter 7. |
| [16] | In the meantime, Bachman filed his first request for fees with the Bankruptcy
Court in December 1997. In that application, he indicated that he had
already been paid $943.75 and requested an additional $1,241.96 in fees
and expenses. He further requested that the fees be paid prior to plan
confirmation. The Chapter 13 Trustee opposed the application, asserting,
among other things, that the circumstances did not warrant payment prior
to plan confirmation. The Bankruptcy Court approved the
fees up to the retainer and denied the balance without prejudice to the
balance of the fees being approved at the time of the final fee
application. |
| [17] | In May 1998, Bachman again filed a Chapter 13 fee application, this
time requesting total fees and expenses in the amount of $3,812.50, less
the $943.75 retainer, for a total of $2,899.07, to be paid under the
plan. In this application, Bachman stated he had expended 30.5 hours and
that he anticipated expending an additional 25 hours on the case due to
the tax problems. The Chapter 13 Trustee filed a comment onthis
application wherein she stated that the application appeared to request
compensation for actual and necessary services. The Court apparently did
not rule on this application. |
| [18] | In December 1998, Bachman again requested fees, this time totaling
$6,737.50, less the retainer. He again asserted that he would require an
additional 25 hours to complete the case. The Chapter 13 Trustee
objected this time, primarily on the ground that if payment were
approved prior to plan confirmation, Bachman would receive all of the
funds held in the Chapter 13 estate at the time. The Trustee also
objected on the ground that some of the creditors had not received
notice of the fee request. However, the Chapter 13 Trustee conceded that
it had been a difficult case and that it had been necessary for Bachman
to expend more than the usual amount of time required on a Chapter 13
case. After Bachman corrected the notice problems, the Chapter 13
Trustee then filed an additional comment indicating she believed that
due to the complexities involved in the case, the case justified
allowance of fees greater than the usual fees requested in Chapter 13
cases. Nevertheless, the Bankruptcy Court denied the fee
request at that time because an amended plan had not been filed as
ordered. The Court indicated it would reconsider the fee application
upon confirmation. |
| [19] | On August 5, 1999, after the case had been converted to Chapter 7,
Bachman filed a request for his fees as an administrative expense. He
attached a statement of account to this motion which showed he had
expended a total of 66.6 hours at $125.00 per hour for a total of
$8,325.00 in fees. After making certain adjustments to that figure,
Bachman's total request was $7,419.15. *fn2 |
| [20] | The U.S. Trustee filed an objection to this request. The U.S. Trustee
conceded that the case had been more complicated than a typical Chapter
13 case, but contended that the total amount was excessive or
unreasonable in light of the Bankruptcy Appellate Panel's
recent decision in In re McKeeman, 236 B.R. 667 (B.A.P. 8 th Cir. 1999). |
| [21] | The Bankruptcy Court conducted a hearing and after
taking the matter under advisement, entered a Journal Entry allowing
reduced fees in the amount of $1,980.00, plus expenses in the amount of
$217.90. The Court issued specific findings wherein it found that after
considering each of Bachman's fee applications and reviewing the bankruptcy
file, the fees requested were excessive. The Court conducted a lodestar
analysis, determining that reasonable compensation for a debtor's
attorney in a Nebraska consumer Chapter 13 case was typically $110.00
per hour for ten hours, resulting in a lodestar amount of $1,100.00. The
Court concluded that although Bachman asserted that the case was unique
in that it involved primarily debt for taxes, Bachman had not identified
any substantial tax related legal services provided to the estate. The
Court found that the fee applications did not indicate that the case was
anything more than a routine Chapter 13 case with few complexities. The
Court further noted that there were only seven creditors and there had
been no disputes with any of them, other than with the two taxing
authorities, and that those disputes involved only minimal litigation
and resulted in the objections to those claims either being withdrawn or
overruled. Moreover, the Court specifically found that although some
extra time had been expended by counsel in drafting the plans and
dealing with the taxing authorities, there was no indication that the
case had involved any novel or difficult legal questions. According to
the Bankruptcy Court, "In reviewing Mr. Bachman's fee
applications, the services provided for in the applications are not
unnecessary or duplicative in themselves for a Chapter 13 case, but the
time expended for those services is excessive." |
| [22] | In addition, the Court also found that the fee application itself was
not detailed as to the services that were provided, noting that entries
for multiple services were grouped and that excessive time was billed
for individual tasks, giving specific examples of such instances. The
Court also concluded that the over twelve hours of travel time billed to
the client at the normal hourly rate of $125.00 was excessive. The Court
further found that some of the claimed services had provided no benefit
to the estate under § 330(a)(4)(B). Finally, after noting that the
typical Chapter 13 case would require ten hours, the Court concluded
that the reasonable amount of time expended in this case was eighteen
hours at $110.00 per hour for a lodestar amount of $1,980.00. |
| [23] | Bachmanfiled a motion for new trial or to amend or alter the judgment
and accordingly, the Court conducted a second hearing. Bachman submitted
an affidavit explaining the time he had spent on the debtor's case, as
well as a more detailed billing statement, and he presented oral
argument regarding his requested fees at the second hearing. |
| [24] | The Bankruptcy Court entered a second Journal Entry
wherein the Court noted that despite the fact that all of the
"new" evidence Bachman had submitted at the second hearing had
been available at the first hearing, the Court would consider it anyway.
The Court found that contrary to one of the findings in the first
Journal Entry, this was a Chapter 13 business case rather than an
individual consumer case. The Court awarded Bachman an additional six
hours at $110.00, for a total of $660.00, which the Court concluded was
a reasonable lodestar calculation for the services Bachman had performed
in obtaining a new sales tax license for the debtor's business. The
Court concluded that this additional amount properly and reasonably
compensated Bachman in light of the fact that this was a business case
and that he had to obtain a new sales tax license. Bachman appeals this
Order. |
| [25] | Discussion |
| [26] | The Bankruptcy Appellate Panel of this Circuit recently
issued an opinion involving nearly identical issues and parties. See In
re McKeeman, 236 B.R. 667 (B.A.P. 8 th Cir. 1999). *fn3
Here, Bachman is, in effect, rehashing the very same arguments that he
argued in McKeeman. Not only do we think the decision in McKeeman was
correct under the Code and applicable Eighth Circuit precedent, we are
bound by our previous decisions in any event. See Nelson v. Mickelson
(In re Pfleghaar), 215 B.R. 394, 396 (B.A.P. 8 th Cir. 1997). |
| [27] | In McKeeman we said: |
| [28] | The Bankruptcy Appellate Panel of this Circuit has twice
previously addressed appeals fromdenial of attorneys' fees and has well
stated the applicable standard of review, as well as, the analysis
required from a bankruptcy court when considering
professional fees under 11 U.S.C. § 330.See Nelsonv. Mickelson (In re
Pfleghaar), 215 B.R. 394 (8th Cir. BAP 1997); Chamberlain v. Kula (In re
Kula), 213 B.R. 729 (8th Cir. BAP 1997). On appeal, we review the bankruptcy
court's findings of fact, whether based upon oral or documentary
evidence, for clear error, and its legal conclusions are reviewed de
novo. Fed.R.Bankr.P. 8013; First Nat'l Bank of Olathe v. Pontow, 111
F.3d 604, 609 (8th Cir.1997). Decisions regarding an award of fees are
subject to the abuse of discretion standard. Grunewaldt v. Mutual Life
Ins. Co. (In re Coones Ranch, Inc.), 7 F.3d 740, 744 (8th Cir.1993). An
abuse of discretion occurs in this context "if the bankruptcy
judge fails to apply the proper legal standard, fails to follow proper
procedures in making the determination, or bases an award upon findings
of fact that are clearly erroneous." Agate Holdings, Inc. v.
Ceresota Mill L.P. (In re Ceresota Mill L.P.), 211 B.R. 315, 317 (8th
Cir. BAP 1997). To be clearly erroneous, after reviewing the record, we
must be left with the definite and firmimpression that a mistake has
been committed. In re Waugh, 95 F.3d 706, 711 (8th Cir.1996). Finally,
our review is limited in deference to the bankruptcy
judge'sfamiliarity with the work performed by the professional. Inre
Grady, 618 F.2d 19, 20 (8th Cir.1980). See Kula, at 735. In re McKeeman,
236 B.R. at 670. |
| [29] | Section 330 governs the allowance of attorneys' fees and permits the
court, on its own motion or on the motion of a trustee or other party in
interest, to award compensation that is less than the amount requested.
Id. We have consistently held that the lodestar method, calculated by
multiplying the reasonable hourly rate by the reasonable number of hours
required to represent the debtor in the case, is the appropriate
approach for determining reasonable compensation under § 330. Id. at
671; Pfleghaar, 215 B.R. at 396; Chamberlain, 213 B.R. at 736. To
determine the reasonable rates and hours, § 330(a)(3)(A) directs courts
to consider factors including: |
| [30] | - the time spent; |
| [31] | - the rates charged; |
| [32] | - the necessity of the services for administration of the case; |
| [33] | - the reasonableness of the amount of time spent in light of the
complexity, importance and nature of the problem, issue or task
addressed; and |
| [34] | - the reasonableness of the requested compensation compared to the
customary compensation charged by comparably skilled practitioners in
non-bankruptcy cases. McKeeman, 236 B.R. at 671. |
| [35] | We have held that courts may also apply the similar criteria set forth
in Johnsonv. Georgia Highway Express, Inc., 488 F.2d 714 (5 th Cir.
1974), to determine the reasonableness of attorneys' fees. Id.;
Chamberlain, 213 B.R. at 738. Finally, § 330(a)(4)(B) provides that in
a Chapter 13 case in which the debtor is an individual, "the court
may award reasonable compensation to the debtor's attorney for
representing the interests of the debtor in connection with the bankruptcy
case based on a consideration of the benefit and necessity of such
services to the debtor and the other factors set forth in this
section." Pfleghaar, 215 B.R. at 396. |
| [36] | The Bankruptcy Court in this case conducted a thorough
analysis under these tests and plainly applied the correct legal
standard. Thus, the question before us is whether the Court clearly
erred in its factual findings under this analysis. |
| [37] | The evidence presented at the first hearing consisted of Bachman's
billing statement which he had submitted with the Application; Bachman's
own affidavit wherein he outlined his background and experience, his
overhead costs, the circumstances surrounding the tax problems and his
injury, and his own knowledge that bankruptcy attorneys in
Nebraska with his experience who represent creditors charge between
$150.00 and $175.00 per hour; and the affidavit of James G. Egley, a
Nebraska attorney who had referred the debtor to Bachman regarding his
tax problems, which stated, among other things, that his firm routinely
charges their clients for all travel time. At the second hearing,
Bachman submitted another affidavit explaining some of his charges about
which the Bankruptcy Court had expressed some concern in
the first Journal Entry; a more detailed billing statement; and an
affidavit by attorney Joseph M. Smith, the County Attorney for Madison
County, pertaining to the tax evasion and sales tax permit problems. |
| [38] | Bachman argued at the hearings that because of the tax complications,
the case necessitated a significant number of hours over what the
typical Chapter 13 case requires. He contends that the Trustee offered
no evidence to the contrary and that it was error for the Bankruptcy
Court to apply its own independent judgment to conclude that both the
hourly rate and the number of hours claimed were unreasonable, asserting
that if decisions regarding the reasonable rates and number of hours are
left to the absolute discretion of the court, "by its very nature
you have an arbitrarily imposed fee." |
| [39] | As we have said, we addressed these very same arguments in McKeeman.
We expressly held therein that the Bankruptcy Court did
not arbitrarily impose a flat fee when it reduced the requested number
of hours based on the nature of the case and reduced Bachman's hourly
rate from the $125.00 he requested to the $110.00 allowed. Rather, we
held that the Court in that case considered the reasonable rates and
hours charged in Chapter 13 cases in its district and then applied those
rates to that particular case. Id. at 671-72. We held that "[w]hen
a bankruptcy court determines that a case presents routine
Chapter 13 matters, the court may review the fees requested in light of
fees typically charged, and may reduce the requested fees
accordingly." Id. at 672. We concluded in McKeeman that it was not
error for the court to reduce the hourly rate and the number of hours
based on its determination of what was reasonable in light of the nature
of the bankruptcy case. Id. |
| [40] | This is precisely what the Bankruptcy Court did in this
case. The Court started with a lodestar calculationbased on the typical
routine Chapter 13 case in that district. The Court concluded that the
case was, in fact, a fairly routine Chapter 13 case with few
complexities. The Court explained this finding by commenting on the
nature of the tax issues as well as the fact that there were only a few
creditors and that there were no disputes with any creditors other than
the taxing authorities. Moreover, the Court specifically noted that the
tax issues did not result in any sort of protracted litigation and
indicated that the negotiations with those authorities should not have
required the significant number of hours Bachman claimed they did.
Finally, the Court found that these efforts resulted in no benefit to
the debtor under § 330(a)(4)(B), other than to cause delay in payment.
Nevertheless, the Court then made two upward adjustments to the lodestar
calculation for routine Chapter 13 cases by allowing an additional
number of hours which the Court determined were necessary to deal with
the tax issues and plan confirmation problems and also to compensate
Bachman for the services required in obtaining the sales tax license,
specifically recognizing in its second Journal Entry that this was a
business case rather than a consumer case. |
| [41] | Bachman takes strong issue with the Bankruptcy Court's
finding that the case was a routine Chapter 13 case with few
complexities and, as he did in the McKeeman case, Bachman contests the Bankruptcy
Court's finding that he should not be compensated at his full hourly
rate for travel time. However, we believe the Court supported its
conclusions with specific findings pertaining to the nature of the case
and we find no clear error in the Court's findings. "If the bankruptcy
court's account of the evidence is plausible in light of the entire
record viewed, it must be upheld even though we may have weighed the
evidence differently had we beensitting as the trier of fact."
Forbes v. Forbes (In re Forbes), 215 B.R. 183, 187 (B.A.P. 8 th Cir.
1997) (citing Anderson, 470 U.S. at 573-74, 105 S.Ct. at 1511).
Furthermore, despite Bachman's assertion that the Bankruptcy
Court should not impose its own judgment regarding what constitutes a
reasonable fee in a given case, several courts have held that "[j]udges
are justified in relying upon their own knowledge of customary rates and
experience concerning reasonable and proper fees, without the need for
independent evidence." In re Pothoven, 84 B.R. 579, 583 (Bankr.
S.D. Iowa 1988); see also In re U.S. Golf Corp., 639 F.2d 1197, 1206 (5
th Cir. 1981) (trial courts are experts as to the reasonableness of
attorneys' fees); Brown v. Culpepper, 561 F.2d 1177, 1177-78 (5 th Cir.
1977) (same). As a result, we find no clear error in the Bankruptcy
Court's conclusions regarding the reasonable hourly rate and number of
hours required in this case. Furthermore, as we found in McKeeman, the
decision to deny Bachman's request for his full hourly rate for travel
time was within the Bankruptcy Court's discretion and we
find no abuse of that discretion. Id. at 672-73. *fn4 |
| [42] | Finally, Bachman asserts that his due process rights were violated
because neither the Trustee's objection nor the Bankruptcy
Court informed him prior to the first hearing as to specific objections
to his fee application. He asserts that although he became aware of the
Court's specific objections following the Court's first Journal Entry,
it was inherently unfair to require him to respond to those objections
after the Court had already made its decision. |
| [43] | Specifically, the Trustee's objection to the Application stated,
"While the United States Trustee acknowledges that many of the
services performed by the applicant may have been necessary for the
administration of this case at the time they were performed, it appears
that the total amount of fees is excessive or unreasonable [pursuant to
the BAP's opinion in McKeeman]." The Trustee also suggested that
although the case was more complicated than a typical Chapter 13 case,
the allowance of an administrative expense in the requested amount would
substantially reduce or eliminate the distribution of any funds to
creditors. The Trustee requested a hearing for the Court to review the
lodestar factors and make a determination of allowable fees. The Court's
notice of hearing on the objection noted no particular objections or
concerns with the fee application. |
| [44] | Bachmanrelies primarily on In re Busy Beaver Bldg. Centers, Inc., 19
F.3d 833 (3 rd Cir. 1994), for the proposition that he did not receive
due process on his fee application. In Busy Beaver, the Bankruptcy
Court, sua sponte and without notice or hearing, disallowed fees
requested for the firm's paraprofessionals' services. In reversing the Bankruptcy
Court's decision, the Third Circuit held: |
| [45] | [I]f the court does disallow fees of a "good-faith
applicant," the Code, see §§ 329(b), 330(a); see also Rule
2017(b) -- and perhaps even the dictates of due process, see U.S.
CONST., amend. V -- mandates that the court allow the fee applicant an
opportunity, should it be requested, to present evidence or argument
that the fee application meets the prerequisites for compensation;
canons of fairness militate against forfeiture of the requested fees
simply because the court's audit of the application uncovers some
ambiguity or objection. By good-faith applicant we mean to refer to a
fee applicant who reasonably and in good faith attempts to comply with
the applicable rules governing the format and substance of fee
applications. |
| [46] | To make the hearing meaningful, the court should first apprise the
applicant of the particular questions and objections it harbors, a role
which the adversary in a statutory fee case would typically play. . . .
Contrary to a typical adversarial proceeding, when the bankruptcycourt
clothed in its administrative robe fulfills its duty to review a fee
application without the applicant being present the applicant cannot
possibly know what evidence or legal theories the court is contemplating
when it decides to disallow certain fees. Unless the applicant is
afforded an opportunity to rebut or contest the court's conclusions, the
applicant would unfairly and undesirably be deprived of the chance to
respond to and assuage the court's questions and concerns. Besides, the bankruptcy
bar might well react to a regime offering the applicant no chance to
respond to the court's concerns by spending an inordinate amount of time
preparing overly detailed fee applications, which time might be billable
to the estate, in an effort to anticipate all the idiosyncracies and
inconsistencies of review the divers bankruptcy judges
might exhibit. Id. at 846-47 (citations and footnotes omitted). |
| [47] | We agree with theBusyBeaver Court that fee applicants are entitled to
a meaningful hearing regarding the reasonableness of their requested
fees. See Pfleghaar, 215 B.R. at 397; Chamberlain, 213 B.R. at 742-43.
However, we believe Bachman was afforded a meaningful hearing in this
case. Contrary to the situation in BusyBeaver, Bachman was afforded two
full evidentiary hearings and oral argument following an objection made
by the Trustee. |
| [48] | In addition, as the Trustee asserts, Bachman is an experienced bankruptcy
practitioner in the District of Nebraska and following the Bankruptcy
Court's detailed decision in In re Malewicki, 142 B.R. 353 (Bankr. D.
Neb. 1992), and the decisions in McKeeman, Bachman's assertion that he
could not anticipate the Bankruptcy Court's concerns with
his fee application is somewhat spurious. |
| [49] | Moreover, even assuming Bachman did not have adequate notice of the
Court's concerns pertaining to the fee application prior to the first
Journal Entry disallowing some of the fees, he certainly had notice
after it was entered and we reject Bachman's argument that he was denied
due process because he was required to change the Court's mind after the
fact. The record clearly indicates that the Court permitted Bachman
significant leeway to present any new evidence at the second hearing,
despite the fact that the evidence had been available at the time of the
first hearing. The record also clearly shows that the Court considered
the additional evidence and in fact did change part of its decision
following the second hearing: it specifically held that it had
erroneously found that the case had been a consumer case rather than a
business case and awarded additional fees accordingly. As a result, we
find that Bachman received due process in this case. |
| [50] | Conclusion |
| [51] | In sum, we conclude that the Bankruptcy Court's decision
was within the permissible range of choice and was not influenced by any
mistake of law. See Kern v. TXO Production Corp., 738 F.2d 967, 970 (8
th Cir. 1984). In other words, we cannot say that we are left with a
"definite and firm impression that a mistake has been
committed" by the Bankruptcy Court in this case,
Chamberlain, 213 B.R. at 735; In re Waugh, 95 F.3d 706, 711 (8 th Cir.
1996), and as a result, the Bankruptcy Court's award of
fees did not constitute an abuse of discretion. The judgment, therefore,
is affirmed. |
| [52] | A true copy. |
| [53] | Attest: |
| [54] | CLERK, U.S. BANKRUPTCY APPELLATE PANEL, EIGHTH CIRCUIT |
|
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| Opinion Footnotes | |
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|
| [55] | *fn1 The Honorable John C. Minahan,
United States Bankruptcy Judge for the District of
Nebraska. |
| [56] | *fn2 Bachman filed an Amended
Request for An Administrative Expense Advance in which Bachman indicated
that the original request had contained an error and overstated the
amount due by $112.50. As a result, Bachman's request for payment of
fees totaled $7,306.65. |
| [57] | *fn3 In re McKeeman involved the
same attorney, Bachman, and the same bankruptcy judge as
this case does. It also involved a Chapter 13 case which had a tax
problem. |
| [58] | *fn4 Since we expressly addressed
Bachman's other legal and policy arguments regarding the
compensabilityof travel time inMcKeeman, repeating that discussion here
will serve no beneficial purpose. |