Court Opinion

ID: 180353
Source: CourtListenerOpinion
Date Created: 2010-12-03 18:30:22+00
Date Added: 2024-06-11T17:25:51.584237
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              DEC 02 2010

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

STATE OF MONTANA DEPARTMENT                      No. 09-36062
OF REVENUE,
                                                 D.C. No. 9:09-cv-00094-DWM
              Appellant,

  v.                                             MEMORANDUM *

GREGORY B. DUNCAN; LAURIE L.
DUNCAN,

              Debtors-in-Possession -
Appellees,

DARCY M. CRUM,

              Trustee - Appellee.

                    Appeal from the United States District Court
                            for the District of Montana
                    Donald W. Molloy, District Judge, Presiding

                     Argued and Submitted November 4, 2010
                                Portland, Oregon

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before:        W. FLETCHER and FISHER, Circuit Judges, and JONES,
               District Judge.**

      The Montana Department of Revenue (MDOR) appeals the district court’s

order affirming the bankruptcy court’s denial of MDOR’s application for

$13,447.50 in attorneys’ fees. The fees were sought by Lynn Butler, a private

attorney hired by MDOR. We will not “disturb a bankruptcy court’s award of

attorneys’ fees unless the bankruptcy court abused its discretion or erroneously

applied the law.” In re Kord Enterprises II, 139 F.3d 684, 686 (9th Cir. 1998).

We affirm.

      MDOR’s primary argument is that the bankruptcy court erroneously applied

the law by creating a per se rule that oversecured creditors with unchallenged

claims are never entitled to attorneys’ fees under 11 U.S.C. § 506(b) because such

fees are inherently unreasonable. We, like the district court, do not read the

bankruptcy court’s decision to create such a per se rule. Although the bankruptcy

court relied in part on the fact that MDOR’s claims were unsecured and

unchallenged, it also relied on the facts that MDOR had three salaried attorneys

working on the case, including a bankruptcy specialist, and that Butler’s work did

not change the outcome of the case.

          **
            The Honorable James P. Jones, United States District Judge for the
Western District of Virginia, sitting by designation.

                                          2
      Although the bankruptcy court did describe Butler’s fees as “inherently

unreasonable,” the bankruptcy court’s reference to Hungerford for the “inherently

unreasonable” language implies that its conclusion was that Butler’s fees were

inherently unreasonable because MDOR had three attorneys already working on

the case and there was thus little prospect that any additional benefit would result

from Butler’s work, not that all attorneys’ fees accrued in collecting an

oversecured and unchallenged claim are inherently unreasonable. See In re

Hungerford, 19 Mont. B.R. 103, 136-138 (Bankr. Mont. 2001) (“it is inherently

unreasonable to ask a debtor to reimburse attorneys’ fees incurred by a creditor that

are not cost-justified” (quoting In re Huhn, 145 B.R. 872, 876 (Bankr. W.D. Mich.

1992) (quoting In re Nicfur-Cruz Realty Corp., 50 B.R. 162, 169 (Bankr. S.D.N.Y.

1985)))). We therefore conclude that the bankruptcy court conducted a

reasonableness analysis based on the facts of this case.

      In conducting its reasonableness analysis and denying MDOR’s application

for Butler’s attorneys’ fees, the bankruptcy court did not abuse its discretion. The

burden is on MDOR to establish the reasonableness of its requested attorneys’ fees.

MDOR failed to carry that burden. MDOR had three attorneys working on this

case, including a bankruptcy specialist. Butler never appeared at a hearing without

one of these attorneys present. MDOR never explained why Butler’s work was

                                           3
necessary, or what value it added to the litigation. The bankruptcy court thus did

not abuse its discretion in denying MDOR’s fee application.

      AFFIRMED.

                                          4