Opinion ID: 3011280
Heading Depth: 1
Heading Rank: 4

Heading: the reasonably likely to benefit test

Text: The Bankruptcy Court applied a benefits analysis test when evaluating Hellring Lindeman's fee application. See In re Xebec, 147 B.R. 518 (Bankr. 9th Cir. 1990). According to that test, the attorney's services had to be identifiable, tangible, and of material benefit to the estate in order to be compensable. (Dec. 3, 1998 Tr. at 23). On appeal to the District Court, Hellring Lindeman directed the Court to S 330(a)(4)(A) which prohibits compensation for the unnecessary duplication of services; or . . . services that were not- . . . reasonably likely to benefit the debtor's estate; or . . . necessary to the administration of the case. 11 U.S.C. S 330(a)(4)(A) (emphasis added). The District Court affirmed the Bankruptcy Court's determination that a debtor's attorney seeking allowances for services provided after appointment of a Chapter 11 Trustee must show an actual benefit to the estatelest the state be taxed twice for services that only the Trustee should have rendered. We do not agree. Section 330(a)(4)(A) already protects the estate from the unnecessary duplication of services. We will, therefore, adopt the test proposed by Hellring Lindeman that its application be evaluated pursuant to the standards set 14 forth in S 330(a)(4)(A) and not by some heightened standard or by hindsight. Accordingly, the debtor's attorney must show that the representation was reasonably likely to benefit the debtor's estate. Do Hellring Lindeman's services for the debtors during the attempted reorganization meet the reasonably likely to benefit the debtor's estate standard set forth in S 330(a)(4)(A)? The Bankruptcy Court held that it could find no service that was not either A) . . . rendered solely to the debtor out of possession and thereby by definition of no benefit to the estate or B) . . . that was not duplicative of a Trustee or Trustee's counsel duty. Therefore, I disallow any fees to Hellring [Lindeman] in the Chapter 11 context. JA at A-23. The District Court concurred but noted further that even if the reasonableness test adopted were applied, Hellring Lindeman still would not be eligible for an award of fees and expenses from the estate. Our review of the record convinces us that Hellring Lindeman's services do not meet the reasonableness test. It is primarily the duty of the Chapter 11 Trustee to help the parties reach an acceptable reorganization plan. The debtor's attorneys must bring something unique to the negotiations in order to receive compensation from the estate. Hellring Lindeman's fee application states, inter alia, that its services to the debtors included: (1) meeting with the debtor's principals to learn the history of the cases, (2) reviewing the exhaustive pleadings of the case, (3) meeting with the debtor's prior counsel to learn about the complex background of the case, (4) preparing numerous pleadings, (5) attending various court hearings, (6) conducting numerous telephone conversations and meetings with representatives of the debtors concerning diverse matters, and (7) researching various legal issues. After a search of the record, we are unable to ascertain any particular action by the debtor's attorney that could not have been done by the Trustee and his staff. Moreover, the Bankruptcy Court found that it was the debtors who were inflexible and insistent that Walder Sondak not be fairly compensated. Given that finding, which is not clearly erroneous, along with the nature of the services performed, it is difficult to see how Hellring Lindeman's services could have been 15 considered reasonably likely to benefit the estate. Cf. In re Pro-Snax, 157 F.3d at 426 n.17 (commenting that even under a reasonableness test the law firm should have concluded that its services would be futile). Hellring Lindeman also argues that the mere fact that it was appointed by the Bankruptcy Court demonstrates that its representation was reasonably likely to benefit the estate. No such per se rule exists. It is the burden of the debtor's attorneys to demonstrate that their representation was reasonably likely to benefit the estate. Hellring Lindeman did not do so.