Opinion ID: 515110
Heading Depth: 2
Heading Rank: 3

Heading: Bankruptcy Court Disapproval of the Contingent Fee Agreement

Text: 40 The bankruptcy court initially approved the contingent fee agreement. On July 22, 1987, the bankruptcy court reversed itself and awarded Sonn a fee for the services he performed for the estate which were not required for the representation of U.P. We review a bankruptcy court's award of attorney's fees for an abuse of discretion. In re Nucorp Energy, Inc., 764 F.2d 655, 657 (9th Cir.1985). 41 The bankruptcy court made no findings of fact. In announcing its ruling, the bankruptcy judge stated: I don't think I need any Findings of Law and Conclusions in the case. It is such a complicated matter that I don't know that they add a lot. I think I will just enter the order.... 42 In Kerr v. Screen Extras Guild, Inc., 526 F.2d 67 (9th Cir.1975), cert. denied, 425 U.S. 951 (1976), we held that a trial court should consider twelve factors in determining the amount of attorney's fees to be paid. Id. at 70. The failure to consider such factors is an abuse of discretion. Id. The bankruptcy court failed to apply the Kerr factors. 43 Instead of following the law of this circuit, the bankruptcy judge stated: I think sometimes we have to improvise to reach a result that isn't totally unfair to anybody. Kerr does not authorize improvisation by trial courts to avoid application of pertinent, dispositive decisions of this court. The district court did not err in setting aside the bankruptcy court's fee award. 44 D. The District Court's Award to Sonn of One-Third of the Amount of the State Court Judgment 45 The evidence concerning Sonn's successful prosecution of the Wolfs' claim, which resulted in a $270,000 settlement, is undisputed. It is also uncontroverted that no other attorney, including the Wolfs' counsel, was willing to pursue their claim against Voth, because the estate was totally devoid of funds. Thus, at the time Sonn was employed by the trustee, a contingent fee agreement was the only means available to assure that the claim against Voth would be prosecuted. 46 Section 328(a) permits the court to allow compensation different from that originally specified in the terms and conditions of the agreement between the trustee and his attorney if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions. 11 U.S.C. Sec. 328(a) (1984). No showing has been made that the contingent fee agreement was improvident in light of later developments not anticipated at the time Sonn was employed. 47 The bankruptcy court and the district court found that in representing the estate before the state court, Sonn performed duties beyond those required for the presentation of U.P.'s claim. The evidence in the record supports this finding. 48 It was anticipated at the time Sonn was employed that he would receive no compensation for his services if the state court failed to enter a money judgment in favor of the Wolfs. This risk dissuaded all other attorneys from accepting the trustee's offer of employment to represent the estate in the state court action against Voth. It was also expressly anticipated that if Sonn was successful he would receive one-third of any award granted to the Wolfs. Thus, there are no facts that were unanticipated at the time the trustee employed Sonn, except the success of the state court action and the amount of the recovery. 49 The bankruptcy court noted that its rejection of the contingent fee agreement was a windfall to the estate, and as it develops, perhaps even a windfall to the debtor.... The fact that the estate and the Wolfs received a windfall as a result of Sonn's efforts demonstrates that the contingent fee agreement was quite provident. The district court did not err in awarding Sonn one-third of the amount awarded to the Wolfs in settlement of their state court claim against Voth.