Opinion ID: 419205
Heading Depth: 2
Heading Rank: 4

Heading: Compensation of Attorney Jacobowitz

Text: 27 Jacobowitz, unlike Rau, documented the time he and another member of his firm spent in the bankruptcy proceedings. As attorney for Rau as receiver, Jacobowitz worked 37 hours and received $5,000; as attorney for Rau as trustee, he received $51,000 for 340 hours of work. The $56,000 award for 377 hours averages approximately $148 per hour. The bankruptcy court, in finding the award reasonable and proper, was impressed with the success of the bankruptcy proceedings, in that there was a total return to the creditors and a distribution to the shareholders. The district court concluded that although Jacobowitz's hourly wages were high, they were not excessive in light of the bankruptcy court's discretion. 28 The bankruptcy court did not determine the amount Jacobowitz would have charged private clients during the time he worked in connection with the Southwest Media bankruptcy. Nor was there any evidence concerning prevailing rates for comparable work in the private sector in the Phoenix area. Jacobowitz, however, testified that his usual hourly rate was about $100 in 1978 and rose to the range between $125 and $150 in 1981. 12 Thus, according to Jacobowitz's own testimony, the rate of $148 per hour that he requested and received for work between 1979 and 1981 significantly exceeded the rate he would have charged private clients for the same work. The SWM Group maintains that the bankruptcy court abused its discretion by awarding such a fee. 29 The primary method used to determine a reasonable attorney fee in a bankruptcy case is to multiply the number of hours expended by an hourly rate. See, e.g., In re THC Financial Corp., 659 F.2d 951, 954-56 (9th Cir.1981); In re Beverly Crest Convalescent Hospital, Inc., 548 F.2d 817, 820-21 (9th Cir.1976). Under the Bankruptcy Act, we have held that the proper hourly rate should be calculated with a strict rule of economy. 13 See THC Financial Corp., 659 F.2d at 955 n. 2. In that decision, we observed thattwo propositions emerge clearly from our cases and dispose of this appeal: (1) An award [of fees under the Bankruptcy Act] must be compensatory. It may not be simply a token of thanks or reward for good services. (2) The ceiling on any permissible award lies below that which is charged for equivalent services in the private market. 30 Id. at 954. 31 Judged by this standard, the hourly rate of $148 accorded Jacobowitz appears to have been excessive, since it was considerably higher than his comparable private rate. Jacobowitz, however, takes the position that the fee was reasonable when viewed in light of the size of the estate, the nature and extent of the undertaking, the opposition encountered, and the results achieved. He particularly stresses the successful outcome of the bankruptcy as a justification for an enhanced fee, citing Rose Pass Mines, Inc. v. Howard, 615 F.2d 1088, 1092 (5th Cir.1980), where the court allowed recovery at a rate above the attorney's regular private rate because the bankruptcy was successful. 32 We considered and rejected a similar argument by the attorney in THC Financial Corp. See 659 F.2d at 955 n. 2. 14 We there stated that bonuses cannot properly be awarded to attorneys in successful bankruptcy cases. Id. at 955. In this case, we must reiterate our holding that [e]xcellent work is ... not a basis for an enhanced award in excess of normal charges. Id. at 954. 15 Jacobowitz's award, which concededly consisted partly of a bonus element, was improper and excessive. 33 We accordingly reverse the award of fees to Jacobowitz, and remand for a determination of the proper fee by the bankruptcy court. In calculating a reasonable hourly rate, that court should consider (1) the rate normally charged by Jacobowitz in comparable private cases during the period in question, (2) the prevailing hourly rate for comparable bankruptcy work in the Phoenix area, and (3) the number of the hours of work claimed by Jacobowitz, if any, that were actually performed by others whose services are generally billed at a lower rate. 16 See id. at 956. On remand, the court should take further testimony, if necessary, and make an award in accordance with the principles set forth in this opinion and in THC Financial Corp. 34 AFFIRMED in part, REVERSED in part, and REMANDED.