Opinion ID: 166589
Heading Depth: 2
Heading Rank: 1

Heading: The Bankruptcy Court Used Hours to Evaluate the Reasonableness of Houlihan's Requested Fee

Text: 25 We use an adjusted lodestar analysis to determine the reasonableness of a requested professional fee within the context of § 330. See In re Miniscribe Corp., 309 F.3d at 1243-44 (applying lodestar analysis to trustee's fees under § 330); In re Lederman Enters., Inc., 997 F.2d at 1323 (attorney's fees). The lodestar analysis takes into account each of the factors specifically mentioned in § 330(a)(3) plus additional relevant factors. As articulated in Johnson v. Georgia Highway Express, Inc., these additional factors include the novelty and difficulty of the task, the requisite skill level, whether the case precluded other employment, the contingent nature of the fee, time limitations, the amount of money involved and results obtained, and the experience, reputation, and ability of the trustee. 488 F.2d 714, 717-19 (5th Cir.1974). The burden is on the party requesting fees to prove its request is reasonable. 26 Houlihan argues its rates are reasonable because measuring time on a monthly basis is common marketplace practice. Houlihan's market-based argument confuses acceptable billing methods with whether the rate used under such methods is reasonable. While it may be true that other firms involved in bankruptcy cases bill on a monthly rate, that does not inform the reasonableness inquiry. To answer that question, a bankruptcy court must ask, among other things, how much time a professional firm spent on a case to earn the fee. Without some method of comparison between monthly fees billed in various cases, such as time spent on a project, a bankruptcy court will be consigned to approving any monthly fee plucked out of the marketplace. Houlihan provided no basis for comparison, 6 so the bankruptcy court had to create its own based on hours worked. To merely copy monthly billing rates from competitors in unrelated proceedings invites a finding of reasonableness simply because their monthly billing system is common, even though those firms might actually have committed a substantially divergent amount of resources to the case. We decline to allow billing at a monthly rate to be an automatic insulator from the reasonableness inquiry. Nor is Houlihan's mantra of the the marketplace sufficient to preclude a bankruptcy court from using a constructive hourly rate to compare divergent fees in multiple unrelated proceedings. 27 Based on the statutory language alone, under 11 U.S.C. § 330(a)(3), a bankruptcy court is directed to consider at least five factors, among which four either explicitly or implicitly direct a bankruptcy court to examine the amount of time spent on a project. The statute does not specify the unit of time to be used, but hours appear to be a useful measure for comparison with other professionals' services, for determining a rate, and especially for evaluating whether the actual amount of time spent was reasonable. Houlihan concedes that during some months it spent very little time on the case but still billed at the monthly rate. Thus, using a monthly time frame as the only basis for determining fees obscures the actual amount of effort devoted to the case. The lack of any case law requiring a bankruptcy court to evaluate professional fees on an hourly basis does not foreclose the court's discretionary ability to do so. Houlihan's repeated statements that the purpose of the statute was to create flexibility in fee determinations only supports the bankruptcy court's actions rather than proscribing them. 28 It is important to make two additional observations. First, the record clearly demonstrates Houlihan knew and acknowledged its proposed monthly fee contract was only a proposal and was subject to the fee procedures articulated by the bankruptcy court. This included the bankruptcy court's orders requiring Houlihan to record the number of hours it worked. Moreover, the bankruptcy court specifically reserved its final determination of the reasonableness of requested fees. In fact, at the hearing on March 9, 1999, held to address the other parties' objections to Houlihan's fee arrangement, Mr. Kramer testified he understood Houlihan's fees were subject to the approval of the Court. . . as to the relative fairness or whatever the exact standard is. (Appellant's App. at 0289.) Thus, Houlihan's claims that the bankruptcy court impermissibly changed the terms of its compensation and violated all notions of fundamental fairness by imposing an hourly compensation standard after Houlihan had completed its work are without merit. (Appellant's Br. at 25.) Similarly, its assertions that no party objected to its proposed rates during the pendency of the bankruptcy proceedings ignore the repeated statements of the UCL Trust that the reasonableness of the proposed fee would be determined by the court when the appropriate time came. 29 Second, even though Houlihan frames the issues as legal questions throughout its brief, it continually invites this Court to evaluate the discretionary determination of whether its proposed fees were in fact reasonable. Houlihan frequently references the undisputed evidence about the high quality of its complicated and unique work which adheres more to the question of reasonableness than to whether the bankruptcy court was authorized under the statute to consider a constructive hourly rate. (Appellant's Br. at 38, 43-46.) We decline Houlihan's implicit invitation. The bankruptcy court did not overstep its powers under § 330(a) by requiring Houlihan to keep track of its hours. 30