Court Opinion

ID: 9373899
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:22.363645+00
Date Added: 2024-06-11T17:16:49.704255
License: Public Domain

FILED
                                                                                 DEC 29 2022
                          NOT FOR PUBLICATION
                                                                             SUSAN M. SPRAUL, CLERK
                                                                               U.S. BKCY. APP. PANEL
                                                                               OF THE NINTH CIRCUIT
          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

 In re:                                             BAP No. CC-22-1090-FTL
 CPESAZ LIQUIDATING, INC., fka
 Community Provider of Enrichment                   Bk. No. 9:20-bk-10554-DS
 Services, Inc.; NDS LIQUIDATING,                   Jointly Administered With:
 INC., fka Novelles Developmental                   Bk. No. 9:20-bk-10553-DS
 Services, Inc.; CPESCA LIQUIDATING,                Bk. No. 9:20-bk-10994-DS
 INC., fka CPES California, Inc.,
                   Debtors.

 ROBERT BENNETTI; LINDA
 MARIANO; LINKI PEDDY; CHARLES
 FOUST, JR.,
               Appellants,                          MEMORANDUM*
 v.
 OXFORD RESTRUCTURING
 ADVISORS LLC; FAEGRE DRINKER
 BIDDLE & REATH LLP; UST- UNITED
 STATES TRUSTEE, SANTA BARBARA,
               Appellees.

               Appeal from the United States Bankruptcy Court
                     for the Central District of California
               Deborah J. Saltzman, Bankruptcy Judge, Presiding

Before: FARIS, TAYLOR, and LAFFERTY, Bankruptcy Judges.

      *
        This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
                                INTRODUCTION

      Appellants Robert Bennetti, Linda Mariano, Linki Peddy, and

Charles Foust, Jr. (the “ESOP Participants”)1 are participants in an

employee stock ownership plan set up by their former employers, chapter

112 debtors CPESAZ Liquidating, Inc., NDS Liquidating, Inc., and CPESCA

Liquidating, Inc. (the “Debtors”). They appeal the bankruptcy court’s

award of over $2 million in fees and costs to the Debtors’ law firm, Faegre

Drinker Biddle & Reath LLP (“Faegre”). They assert that Faegre failed to

disclose a disqualifying conflict of interest and sought to recover for

excessive, vague, or impermissible work.

      The ESOP Participants rely on the wrong standard of review: they

ask us to review the billing records de novo and overturn the bankruptcy

court’s findings. Rather, the abuse of discretion standard applies and does

not permit us to replace the bankruptcy court’s views of the facts or its

discretionary decision with our own. The bankruptcy court identified the

correct legal standard and made factual findings that are logical, plausible,

and supported by the record. Its decision was well within the bounds of its

      1
        The ESOP Participants purport to include the individual named parties as well
as “ninety-two other participants in the Community Provider of Enrichment Services,
Inc. Employee Stock Ownership Plan and Trust.” Neither the notice of appeal nor the
ESOP Participants’ briefs identify these ninety-two individuals. We express no opinion
on the question whether one may prosecute an appeal on behalf of unnamed appellants.
      2
        Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.

                                           2
discretion. We AFFIRM.

                                      FACTS

A.    The chapter 11 case

      The Debtors 3 provided behavioral health services in California and

Arizona. Their outstanding shares were held in the employee stock

ownership plan (“ESOP”) maintained by Community Providers of

Enrichment Services, Inc. (“CPES”) for the benefit of their employees.

      Faegre advised the Debtors prepetition regarding potential sale and

restructuring options. Around this time, the Debtors were looking for a

replacement trustee of the CPES ESOP. The Faegre partner in charge of the

engagement suggested Miguel Paredes of Prudent Fiduciary Services and

facilitated an interview. Faegre had a lengthy preexisting relationship with

Mr. Paredes and had represented him in dozens of other unrelated ESOP

cases. Shortly before the petition date, the Debtors’ board appointed

Mr. Paredes to serve as trustee for the CPES ESOP.

      In April 2020, with the assistance of Faegre, CPESAZ Liquidating,

Inc. and NDS Liquidating, Inc. filed chapter 11 petitions; CPESCA

Liquidating, Inc. filed its own petition a few months later.

      The bankruptcy court approved the Debtors’ application to employ

      3
       When they filed their chapter 11 petitions, CPESAZ Liquidating, Inc. was
known as Community Providers of Enrichment Services, Inc.; NDS Liquidating, Inc.
was known as Novelles Developmental Services, Inc.; and CPESCA Liquidating, Inc.
was known as CPES California, Inc. We will refer to the Debtors by their new names
throughout this memorandum.

                                          3
Faegre as general bankruptcy counsel. Faegre did not disclose in its

application its relationship with Mr. Paredes or that it had represented him

in unrelated ESOP matters.

      Faegre later had Mr. Paredes and the Debtors’ CEO sign a conflicts

waiver pursuant to firm policy. The Debtors did not seek bankruptcy court

approval for the post-petition waiver, and Faegre did not disclose the

conflicts waiver to the bankruptcy court until much later.

      In November 2020, the bankruptcy court approved the sale of

substantially all of the Debtors’ assets.

      The Debtors proposed a joint chapter 11 plan of liquidation and

disclosure statement. The plan proposed to liquidate the Debtors, which

would result in a 100% payout to unsecured creditors and a surplus for

stockholders, including the ESOP. Mr. Paredes, as trustee of the CPES

ESOP, approved the plan. The bankruptcy court confirmed the plan over

the ESOP Participants’ objection.

      The ESOP Participants appealed the confirmation order and raised

many of the same arguments presented in this appeal. We affirmed,

rejecting their argument that the plan was “tainted by conflict” and holding

that they “did not produce evidence sufficient to support a finding of

mismanagement, conflict, or any other ground for relief.” The Panel denied

the ESOP Participants’ motion for reconsideration. The ESOP Participants

appealed the Panel’s ruling to the Ninth Circuit.

                                        4
B.     The first fee application

       Meanwhile, Faegre filed an interim fee application (“First Fee

Application”) seeking $1,376,120 in fees and $8,606.93 in costs. The U.S.

Trustee identified objectionable billing entries. Ultimately, Faegre agreed to

reduce its fees by $30,461.70.

       After a hearing, the bankruptcy court approved the First Fee

Application (including the voluntary reduction) over the ESOP

Participants’ objection but imposed a twenty-percent holdback. In other

words, the court allowed $1,076,526.64 in fees, held back $269,131.66

subject to a final fee application, and awarded $8,606.93 in costs.

C.     The second fee application

       After the court confirmed the plan, Faegre filed its second and final

fee application (“Final Fee Application”). It sought an additional $1,381,828

in fees and $9,861.82 in costs, plus the amount held back from the First Fee

Application.

       The ESOP Participants again objected, arguing that: (1) Faegre did

not exercise billing judgment; (2) time entries were block-billed;4 (3) time

entries used impermissible “attention to,” “attend,” and “work on”;

(4) time entries reflected clerical or ministerial work; (5) time spent

researching local rules was impermissible; (6) travel and wait times were

       4“Block billing” is “the time-keeping method by which each lawyer and legal
assistant enters the total daily time spent working on a case, rather than itemizing the
time expended on specific tasks.” Welch v. Metro. Life Ins. Co., 480 F.3d 942, 945 n.2 (9th
Cir. 2007) (citation omitted).
                                             5
impermissible; (7) time spent answering the ESOP Participants’ questions

was impermissible; and (8) time spent on unsuccessful or incomplete tasks

was impermissible. They urged the bankruptcy court not to release the

holdback from the First Fee Application because Faegre had done nothing

to correct the problems in its time entries.

      In addition, the ESOP Participants argued that Faegre’s failure to

disclose that it represented Mr. Paredes in other ESOP matters violated

Rule 2014 and Local Bankruptcy Rule 2014-1, and its representation of the

Debtors was a conflict of interest. They said that Mr. Paredes owed them a

fiduciary duty and duty of loyalty, but he breached those duties by acting

for the benefit of Faegre and the Debtors. They urged the court to modify

the terms of Faegre’s compensation.

      Faegre responded that its billed time was reasonable and

compensable and addressed the alleged problems with the billing records.

Additionally, it represented that it had reached a settlement agreement

with the U.S. Trustee and the liquidating trustee for the CPES ESOP to

reduce its request by $120,000 to settle issues relating to the failure to

disclose.

D.    The ESOP Participants’ motion to disqualify Faegre

      While the Final Fee Application was pending, the ESOP Participants

filed a motion to disqualify Faegre from representing the Debtors (“Motion

to Disqualify”), largely repeating the same concerns about Faegre’s

representation of Mr. Paredes. They urged the bankruptcy court to
                                        6
disqualify Faegre from representing the Debtors and disgorge all fees.

      Faegre responded by arguing that it had no duty to disclose its

representation of Mr. Paredes, because it only represented him in his

capacity as an ESOP trustee, not in his individual capacity. It insisted that

there was no conflict of interest, but it stated that it had obtained a signed

conflicts waiver from Mr. Paredes and the Debtors’ CEO. Nevertheless, it

acknowledged that it did not run a firm-wide conflict check on

Mr. Paredes’ name or his firm’s name.

      The bankruptcy court requested that the U.S. Trustee investigate the

allegations in the Final Fee Application and Motion to Disqualify. In

response to the court’s request, the U.S. Trustee asserted that Faegre should

have disclosed its representation of Mr. Paredes as an ESOP trustee in the

unrelated ESOP cases. He concluded that such failure did not warrant

disqualification but stated that Faegre should supplement its Rule 2014

disclosure so that he could determine if Faegre was disinterested.

      Neither Faegre nor the ESOP Participants were happy with the U.S.

Trustee’s view. Faegre maintained that it was not required to disclose its

representation of Mr. Paredes in other cases. The ESOP Participants argued

that the U.S. Trustee’s analysis was flawed and unsupported.

      The bankruptcy court granted the U.S. Trustee more time to

investigate allegations raised by both parties in their responses. The U.S.

Trustee filed a lengthy analysis concluding that Faegre was disinterested

and did not represent interests adverse to the Debtors’ estates. He did not

                                       7
support disqualification of Faegre. Rather, he reported that Faegre was

agreeable to a $120,000 sanction for its noncompliance with Rule 2014.

E.    The bankruptcy court’s rulings

      After a hearing, the bankruptcy court rendered an oral ruling on the

Final Fee Application and the Motion to Disqualify. As to the Motion to

Disqualify, the bankruptcy court held that Faegre did not properly conduct

a conflict check and violated Rule 2014 by failing to disclose its

representation of Mr. Paredes. It agreed with the U.S. Trustee that a

$120,000 reduction in fees was appropriate as a sanction for violation of

Rule 2014.

      Despite the rule violation, the bankruptcy court held that Faegre’s

representation of Mr. Paredes was not a conflict of interest, was not

adverse to the Debtors’ estates’ interests, and did not suggest a lack of

disinterestedness. It said that the ESOP Participants raised a “lot of

speculation” and read too much into “practices that are fairly common.” It

also found “no evidence of a conspiracy of any improper behavior among

any of the professionals who were working in this case. . . . [T]here were . . .

counsel who performed their professional obligations appropriately and

counsel who met the requirements . . . under the Bankruptcy Code.”

Accordingly, it considered the range of appropriate remedies and held that

disqualification was not warranted.

      The bankruptcy court turned to the Final Fee Application. First, it

disagreed with the ESOP Participants’ analysis that certain types of work

                                       8
could be discounted as a whole.

      Second, it agreed in part with the ESOP Participants that some time

entries contained inadequate descriptions. It said that it could not “make a

real meaningful assessment about what the services were or whether they

were actual, reasonable, beneficial to the estate” and deducted $70,000.

      Third, the bankruptcy court found that Faegre’s billing records

contained instances of block billing. It reduced the award by $56,000.

      Fourth, the court deducted $1,500 for double billing of expenses.

      Thus, in addition to the $120,000 sanction for the Rule 2014 violation,

the court deducted another $126,500.5

      Finally, the bankruptcy court addressed the twenty-percent holdback

from the First Fee Application. It authorized payment of half of the

holdback and explained that “repeated inadequate applications just make

it impossible for [the court] to approve payment of the full amount here.”

      The bankruptcy court entered an order granting in part and denying

in part the Motion to Disqualify. It denied the request to disqualify Faegre

but granted the request for sanctions and deducted $120,000 from the Final

Fee Application.

      The court issued a separate order granting the Final Fee Application.

It noted the $120,000 sanction for violation of Rule 2014, the $125,000

      5  The bankruptcy court made a mistake in its final calculation: although the total
of its deductions was $127,500, it reduced the award by $126,500. However, neither
party has raised this issue on appeal, so we will not adjust the bankruptcy court’s
calculation.
                                            9
reduction for vague descriptions and block billing, the $1,500 reduction for

duplicative expenses, and the $134,565.83 disallowance (half of the twenty-

percent holdback). Thus, Faegre was entitled to an additional $1,271,393.83

in fees and $8,361.82 in costs from the Final Fee Application.

      In sum, Faegre requested fees totaling $2,757,948. The bankruptcy

court did not disqualify Faegre but allowed fees totaling $2,347,920.47. This

is a reduction of $410,027.54, or approximately fifteen percent. The ESOP

Participants timely appealed both orders.

                               JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

                                    ISSUE

      Whether the bankruptcy court abused its discretion in granting the

Final Fee Application and awarding Faegre its fees and costs subject to

stated reductions and sanctions.

                         STANDARD OF REVIEW

      The ESOP Participants correctly state that the standard of review is

abuse of discretion; nevertheless, they urge us to review the bankruptcy

court’s orders de novo and exercise our discretion to reduce the fee award.

Conversely, Faegre and the U.S. Trustee argue that we must apply the

more deferential abuse-of-discretion standard.

      The bankruptcy court has broad discretion in determining an award

of attorneys’ fees. This discretion particularly applies to its evaluation of

                                       10
and factual determinations concerning the reasonableness and

appropriateness of an award. See Fry v. Dinan (In re Dinan), 448 B.R. 775,

788 (9th Cir. BAP 2011) (“We are mindful that the bankruptcy court has

broad discretion in determining whether to award attorney’s fees.”). As

such, “[w]e do not disturb a bankruptcy court’s award of attorneys’ fees,

unless the court abused its discretion or erroneously applied the law.”

Ferrette & Slater v. U.S. Tr. (In re Garcia), 335 B.R. 717, 723 (9th Cir. BAP

2005); see also Fear v. U.S. Tr. (In re Ruiz), 541 B.R. 892, 896 (9th Cir. BAP

2015) (“We review for abuse of discretion the bankruptcy court’s award of

fees under § 330(a).”). 6

      To determine whether the bankruptcy court has abused its discretion,

we conduct a two-step inquiry: (1) we review de novo whether the

bankruptcy court “identified the correct legal rule to apply to the relief

requested” and (2) if it did, we consider whether the bankruptcy court’s

application of the legal standard was illogical, implausible, or without

support in inferences that may be drawn from the facts in the record.

United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).

      6
        We acknowledge that the legal standard “to determine the allowance of fees
involves statutory interpretation and construction of 11 U.S.C. § 330(a) and is therefore
reviewed de novo.” Roberts, Sheridan & Kotel, P.C. v. Bergen Brunswig Drug Co. (In re
Mednet), 251 B.R. 103, 106 (9th Cir. BAP 2000) (footnote omitted). But there is no dispute
about the correct legal standard, so we do not employ de novo review.
                                            11
                                DISCUSSION

A.    The bankruptcy court did not abuse its discretion in evaluating the
      billing entries and awarding Faegre its fees and costs.

      The ESOP Participants argue that the bankruptcy court erred in its

evaluation of Faegre’s billing entries and should have deducted much more

from its fee award. We hold that the bankruptcy court properly exercised

its discretion in approving fees for Faegre’s work.

      Section 327 permits the trustee (or debtor-in-possession) to employ

professionals such as attorneys. After notice and a hearing, the bankruptcy

court may award those professionals “reasonable compensation for actual,

necessary services rendered by the . . . attorney . . . and . . . reimbursement

for actual, necessary expenses.” § 330(a)(1). Section 330(a)(3) provides

guidance for the court’s evaluation:

      In determining the amount of reasonable compensation to be
      awarded . . . , the court shall consider the nature, the extent,
      and the value of such services, taking into account all relevant
      factors, including—

            (A) the time spent on such services;

            (B) the rates charged for such services;

            (C) whether the services were necessary to the
            administration of, or beneficial at the time at which the
            service was rendered toward the completion of, a case
            under this title;

            (D) whether the services were performed within a
            reasonable amount of time commensurate with the

                                       12
                complexity, importance, and nature of the problem, issue,
                or task addressed;

                (E) with respect to a professional person, whether the
                person is board certified or otherwise has demonstrated
                skill and experience in the bankruptcy field; and

                (F) whether the compensation is reasonable based on the
                customary compensation charged by comparably skilled
                practitioners in cases other than cases under this title.

       The bankruptcy court may “award compensation that is less than the

amount of compensation that is requested.” § 330(a)(2). Additionally, the

court cannot award compensation for “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.”

§ 330(a)(4)(A). 7

       An inquiry into the reasonableness of compensation should consider

the “circumstances and the manner in which services are performed and

the results achieved . . . .” In re Mednet, 251 B.R. at 108.

                Such examination, in general, should include the

       7   We have summarized these statutes as follows:
              Section 330(a)(1) authorizes “reasonable compensation for actual,
       necessary services rendered” by a professional. Section 330(a)(2)
       authorizes a court to award compensation that is less than the amount of
       compensation requested. Section 330(a)(3)(A) outlines factors a court
       should consider when determining what is reasonable compensation for
       services rendered. In addition, § 330(a)(4)(A) outlines when compensation
       should not be allowed.
In re Mednet, 251 B.R. at 106 (footnotes omitted).
                                            13
      following questions: First, were the services authorized?
      Second, were the services necessary or beneficial to the
      administration of the estate at the time they were rendered?
      Third, are the services adequately documented? Fourth, are the
      fees requested reasonable, taking into consideration the factors
      set forth in § 330(a)(3)? Finally, in making this determination,
      the court must take into consideration whether the professional
      exercised reasonable billing judgment. [W]hen a cost benefit
      analysis indicates that the only parties who will likely benefit
      from [a service] are the trustee and his professionals, the service
      is unwarranted and a court does not abuse its discretion in
      denying fees for those services.

Id. at 108-09 (cleaned up).

      1.    Reasonableness of the award

      The ESOP Participants raise arguments that have little to do with the

Faegre fees. For example, they argue that it was suspicious that the Debtors

filed their petitions in California, rather than Arizona, and that there

should have been a creditors’ committee to “counter-balance” the Debtors

and Faegre. The ESOP Participants do not explain how these contentions

would justify denial or reduction of Faegre’s fees after the court had

already confirmed a plan and decided (at least implicitly) that the Debtors

conducted their cases properly. Further, we already rejected these

arguments in the ESOP Participants’ prior appeal.

      2.    Reasonableness and necessity of time expended

      The ESOP Participants argue that the billed fees and expenses were

not reasonable or necessary. But they merely offer questions and conjecture

                                      14
about Faegre’s motives and self-interestedness without any citation to

supporting evidence in the record. They also fail to provide us with a

proposed reduction that they consider reasonable, instead asking us to

review the time records ourselves and award something less than the

bankruptcy court did.

      The ESOP Participants misconceive the Panel’s role. An appeal

governed by the abuse of discretion standard is not a “do-over.” Rather,

our job is to determine whether the bankruptcy court’s findings regarding

the reasonableness and necessity of Faegre’s work were illogical,

implausible, or without support in the record.8 We hold that the

bankruptcy court’s findings easily meet that standard.

      3.     Specific findings

      The ESOP Participants complain that the bankruptcy court “failed to

provide . . . sufficient basis on which to ascertain the specific reasons” for

its decision and offered only “a mere generalization.” The ESOP

Participants are wrong.

      “When the [bankruptcy] court makes its award [of attorneys’ fees], it

must explain how it came up with the amount. The explanation need not

be elaborate, but it must be comprehensible. . . . [T]he explanation must be

      8
         At oral argument, counsel for the ESOP Participants asked the Panel to spend
five or ten minutes reviewing the billing statements. While we are not reviewing the
bankruptcy court’s findings de novo, we can assure counsel that we spent much more
than five or ten minutes reviewing those statements.

                                          15
‘concise but clear.’” Moreno v. City of Sacramento, 534 F.3d 1106, 1111 (9th

Cir. 2008) (citation omitted).

       Here, the bankruptcy court did just that: it carefully reviewed the

billing records and offered an understandable and comprehensive

explanation of its various reductions. In particular, it stated that it was

unable to evaluate the work performed due to vague or inadequate

descriptions or block billing that was valued at $126,000; identified

duplicative expenses totaling $1,500; and highlighted other problems that

Faegre had not remedied and deducted an additional $134,565.83. Contrary

to the ESOP Participants’ argument, the bankruptcy court did not need to

“show its work” or go line-by-line down Faegre’s billing records. 9 Its

explanation was concise and sufficiently clear.

       4.     Billing entries

       The ESOP Participants offer no fewer than eleven alleged problems

with Faegre’s billing records that they say warrant full or partial reduction

in fees. None of these points suggest reversible error.

              a.     Billing judgment

       The ESOP Participants argue that Faegre did not exercise any billing

judgment. “Billing judgment” requires that an attorney must “consider the

       9
        At oral argument, the ESOP Participants took the position that Local
Bankruptcy Rule 2016-1 requires that the bankruptcy court provide a “detailed
explanation” and address each “line item.” But the rule is applicable to litigants’ fee
applications and does not impose any such requirement on the bankruptcy court’s
findings.

                                            16
potential for recovery and balance the effort required against the results

that might be achieved.” Unsecured Creditors’ Comm. v. Puget Sound

Plywood, Inc., 924 F.2d 955, 961 (9th Cir. 1991). 10

       The ESOP Participants fail to show that Faegre did not exercise

billing judgment. Other than complaining about the number of attorneys

and professional staff working on the case, the hourly billing rates, and

Faegre’s apparent failure to reduce their bills, the ESOP Participants do not

point to any particular lapse in judgment that would warrant further

reduction or disgorgement. We also note that these bankruptcy cases were

unusually successful: few chapter 11 cases result in full payment of all

creditors and a surplus for stockholders. The bankruptcy court – which

was undoubtedly more familiar than this Panel with the demands of the

case – was satisfied with Faegre’s billing judgment, and we will not

second-guess its finding.

       10
            The Ninth Circuit has stated that a professional should consider:
             (a) Is the burden of the probable cost of legal services
       disproportionately large in relation to the size of the estate and maximum
       probable recovery?
             (b) To what extent will the estate suffer if the services are not
       rendered?
             (c) To what extent may the estate benefit if the services are
       rendered and what is the likelihood of the disputed issues being resolved
       successfully?
Puget Sound Plywood, Inc., 924 F.2d at 959.
                                              17
            b.    Block billing and vague entries

      The ESOP Participants contend that there were many instances of

impermissible block billing totaling over $280,000. We have stated that

“lumping prevents the bankruptcy court from determining whether

individual tasks were expeditiously performed within a reasonable amount

of time.” In re Stewart, BAP No. CC-07-1328-MoDMk, 2008 WL 8462960, at

*6 (9th BAP Cir. Mar. 14, 2008), aff’d, 334 F. App’x 854 (9th Cir. 2009).

“When fee applications are submitted with a portion or all of the requested

fees based on lumped entries, courts may reduce, rather than disallow,

compensation.” Thomas v. Namba (In re Thomas), BAP No. CC-08-1307-

HMoPa, 2009 WL 7751299, at *6 (9th Cir. BAP July 6, 2009), aff’d, 474 F.

App’x 500 (9th Cir. 2012).

      The ESOP Participants also argue that the billing entries contained

vague descriptions involving “attention to,” “attend,” and “work on,” all of

which accounted for nearly $350,000 of fees. As a general rule, “[b]illing

entries must provide the Court sufficient detail to evaluate what work was

performed.” Godwin v. World Healing Ctr. Church, Inc., Case No. 8:21-cv-

00555-JLS-DFM, 2021 WL 6618801, at *4 (C.D. Cal. Oct. 20, 2021).

      The bankruptcy court closely reviewed the billing entries and spent a

considerable amount of time examining the issues and evidence. It flagged

the block-billing issue in connection with both the First Fee Application

and the Final Fee Application, found that block-billed entries prevented it

from being able to evaluate work totaling $56,000, and deducted that

                                       18
amount. It also determined that vague entries and inadequate descriptions

justified a $70,000 reduction. The bankruptcy court carefully considered in

the first instance the billing entries and work done in this case, and its

findings are not illogical, implausible, or unsupported by the record.

      Moreover, in addition to the specific amounts flagged by the court for

block billing and vague descriptions, the court exercised its discretion and

further reduced fees by $134,565.83 for Faegre’s “shortcomings” and

sloppy billing practices. Thus, it is clear that the bankruptcy court did not

ignore or minimize these issues; in fact, the court imposed a significant

reduction in fees. It did not abuse its broad discretion.

            c.    Impermissible tasks

      The ESOP Participants highlight types of billed tasks that the court

should have disallowed: clerical, ministerial, or administrative tasks;

research regarding local rules; travel and wait time; work done in response

to the ESOP Participants’ inquiries; work correcting Faegre’s own mistakes;

“failures” concerning state agencies; and work on matters never finished or

filed. The premise underlying the ESOP Participants’ arguments is that

Faegre should not have done these tasks. We defer to the bankruptcy

court’s factual findings that this work was actually performed and

necessary. See In re Garcia, 335 B.R. at 724 (In Mednet, “[w]e rejected a

standard that services are only compensable if they result in a material

benefit to the estate because this does not comport with the clear meaning

of the statute. Instead, a professional need demonstrate only that the

                                       19
services were reasonably likely to benefit the estate at the time rendered.”

(citation omitted)); id. at 728 (“The fact that documents are not complex is

not dispositive as to whether their drafting is properly within the sphere of

legal services. Settled California law establishes that preparing legal

documents that secure legal rights is normally considered practicing law.”);

Rodriguez v. Cnty. of L.A., 96 F. Supp. 3d 1012, 1025 (C.D. Cal. 2014)

(“Reasonable travel time by the attorney is compensable, at full rates, if that

is the practice in the community. . . . In Los Angeles, the practice is to

compensate at full rates for travel time . . . .”), aff’d, 891 F.3d 776 (9th Cir.

2018). The bankruptcy court carefully reviewed the time entries and

determined that the work was actually performed and necessary; it did not

abuse its discretion.

B.    The ESOP Participants’ arguments regarding Faegre’s alleged
      conflict of interest or failure to disclose are unpersuasive.

      The ESOP Participants complain repeatedly that Faegre was not

disinterested. They contend that Faegre’s preexisting relationship with

Mr. Paredes warrants denial of all fees or a larger fee reduction than the

bankruptcy court selected. We again disagree.

      First, the ESOP Participants’ counsel conceded at oral argument that

they are not currently appealing issues concerning the alleged conflict of

interest, including the propriety of the $120,000 sanction or Mr. Paredes’

alleged conflict. This concession is appropriate because we have already

rejected similar arguments in the ESOP Participants’ earlier appeal to the

                                         20
BAP. We held that the ESOP Participants “did not produce evidence

sufficient to support a finding of mismanagement, conflict, or any other

ground for relief.” The ESOP Participants cannot relitigate the same issues

under the guise of an appeal from a fee award.

      Second, the sanction was appropriate to remedy the Rule 2014

violation. We agree with the ESOP Participants and the bankruptcy court

that Faegre violated Rule 2014 when it failed to disclose its connections

with Mr. Paredes. That rule provides that an application to retain a

professional person “shall be accompanied by a verified statement of the

person to be employed setting forth the person’s connections with the

debtor, creditors, any other party in interest, their respective attorneys and

accountants, the United States trustee, or any person employed in the office

of the United States trustee.” The word “connections” must be read

broadly because “attorneys engaged in the conduct of a bankruptcy case

should be free of the slightest personal interest which might be reflected in

their decisions concerning matters of the debtor’s estate or which might

impair the high degree of impartiality and detached judgment expected of

them during the course of administration.” Waldron v. Adams & Reese, L.L.P.

(In re Am. Int'l Refinery, Inc.), 676 F.3d 455, 462 (5th Cir. 2012) (cleaned up).

For disclosure purposes, the question is not whether the attorney faces a

disqualifying conflict of interest or lack of disinterestedness; rather, the

question is what information the attorney must provide so the court and

other parties in interest can decide for themselves whether the attorney

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should be retained.

      Faegre should have disclosed its “connections” with Mr. Paredes. The

existence of a long-standing business relationship is a fact that the court

and the parties would want to consider in evaluating the Debtors’

application to retain Faegre. We are surprised that Faegre thought it was

advisable to request conflicts waiver letters from the Debtors and

Mr. Paredes but did not think that it was necessary to disclose the

relationship, let alone the signed conflicts waivers, to the court and the

other parties.

      The “failure to comply with the disclosure rules [Rules 2014 and

2016] is a sanctionable violation, even if proper disclosure would have

shown that the attorney had not actually violated any Bankruptcy Code

provision or any Bankruptcy Rule.” Neben & Starrett, Inc. v. Chartwell Fin.

Corp. (In re Park-Helena Corp.), 63 F.3d 877, 880 (9th Cir. 1995). “The

disclosure rules are applied literally, even if the results are sometimes

harsh. Negligent or inadvertent omissions do not vitiate the failure to

disclose. Similarly, a disclosure violation may result in sanctions regardless

of actual harm to the estate.” Id. at 881 (cleaned up). The bankruptcy court

has discretion to reduce a fee award for “failure to disclose fully relevant

information” in its Rule 2014 disclosure. Id. at 882.

      The bankruptcy court correctly determined that Faegre had failed to

comply with Rule 2014. As a result, it sanctioned Faegre $120,000 but held

that disqualification was not appropriate. It rejected the ESOP Participants’

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“speculation,” which was rife with conspiracies involving “practices that

are fairly common.” Because the court’s decision was not illogical,

implausible, or unsupported by the record, it was not an abuse of

discretion to deny the Motion to Disqualify and impose a monetary

sanction as punishment for the failure to comply with Rule 2014.

                              CONCLUSION

     The bankruptcy court did not abuse its discretion in its award of fees

and costs to Faegre or its refusal to disqualify Faegre. We AFFIRM.

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