Court Opinion

ID: 2974706
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:22:07.343163+00
Date Added: 2024-06-11T13:15:23.329751
License: Public Domain

ELECTRONIC CITATION: 2007 FED App. 0001P (6th Cir.)
                            File Name: 07b0001p.06

           BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

In re: DALE EUGENE WILLIAMS AND
       TRACY RENEE WILLIAMS,                     )
                                                 )
                  Debtors.                       )       No. 06-8027
_____________________________________            )
                                                 )
                                                 )
WILLIAM P. BRINGMAN,                             )
                                                 )
                    Appellant.                   )
                                                 )
                                                 )

                     Appeal from the United States Bankruptcy Court
                    for the Northern District of Ohio, Eastern Division.
                                      No. 05-68109.

                                 Submitted: November 8, 2006

                           Decided and Filed: January 9, 2007

          Before: AUG, GREGG, and SCOTT, Bankruptcy Appellate Panel Judges.

                                   ____________________

                                         COUNSEL

ON BRIEF: William Paul Bringman, Fredericktown, Ohio, for Appellant.
                                           ____________________

                                                 OPINION
                                           ____________________

         JAMES D. GREGG, Bankruptcy Appellate Panel Judge.                              William P. Bringman
(“Appellant”), counsel for the chapter 7 debtors, appeals the bankruptcy court’s order denying his
motion for reconsideration of his fee application, and reducing his requested attorney’s fees to the
presumptive, or “no look,” fee for chapter 7 cases filed in the Northern District of Ohio prior to
October 17, 2005.1 For the reasons that follow, the bankruptcy court’s order is REVERSED and
REMANDED.
                                          I.    ISSUE ON APPEAL

         Whether the bankruptcy court abused its discretion by failing to conduct a lodestar analysis
when reviewing the Appellant’s fee application.

                       II. JURISDICTION AND STANDARD OF REVIEW

         The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal.
The United States District Court for the Northern District of Ohio has authorized appeals to the
Panel. A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C.
§ 158(a)(1). For purposes of appeal, a final order “ends the litigation on the merits and leaves
nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States,
489 U.S. 794, 798, 109 S. Ct. 1494, 1497 (1989) (citations omitted). The bankruptcy court’s order
regarding attorney compensation is a final order. See Boddy v. United States Bankruptcy Court (In
re Boddy), 950 F.2d 334, 336 (6th Cir. 1991). A bankruptcy court’s award of fees will not be
reversed unless there has been an abuse of discretion. Id.

         “An abuse of discretion is defined as a ‘definite and firm conviction that the [court below]
committed a clear error of judgment.’ The question is not how the reviewing court would have

         1
         Because the Debtor’s bankruptcy case was filed before the effective date of the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005 (“BAPCPA”), all references to the Bankruptcy Code in this opinion are to the pre-
BAPCPA version. See Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8,
§ 1501(b)(1), 119 Stat. 23, 216 (stating that, unless otherwise provided, the amendments do not apply to cases
commenced under title 11 before the effective date of BAPCPA).

                                                         -2-
ruled, but rather whether a reasonable person could agree with the bankruptcy court’s decision; if
reasonable persons could differ as to the issue, then there is no abuse of discretion.” Mayor & City
Council v. W. Va. (In re Eagle-Picher Indus., Inc.), 285 F.3d 522, 529 (6th Cir. 2002). The
bankruptcy court’s decision, under this standard, will only be disturbed if it “relied upon clearly
erroneous findings of fact, improperly applied the governing law, or used an erroneous legal
standard.” Gary’s Elec. Serv. Co., 340 F.3d at 378 (citing Blue Cross & Blue Shield Mut. v. Blue
Cross & Blue Shield Ass’n, 110 F.3d 318, 322 (6th Cir. 1997)).

                                                  III.   FACTS

       On October 13, 2005, the Appellant filed a chapter 7 petition on behalf of the debtors. On
October 29, 2005, the Appellant filed a disclosure of compensation, the “Rule 2016(b) Disclosure,”
which stated that he received $850.00 prior to commencement of the case and that “[i]f additional
services [were] needed after the creditors’ meeting such as dealing with the trustee on additional
information or disposition of assets or with a creditor such as in an adversary proceeding, the service
will be rendered at the rate of $175.00 per hour subject to court approval.” (Appendix at 2.) At the
meeting of creditors, the trustee assigned to the case stated that he was considering referring the
matter to the United States Trustee for possible conversion to a chapter 13 case. As a result, the
chapter 7 trustee requested additional documentation regarding the debtors’ expenses and income.
       On January 10, 2006, the Appellant filed his “Motion on Attorney Fees” seeking an
additional $1,083.32 in fees (in addition to the $850.00 paid prior to commencement of the case) and
$252.72 in expenses. The bankruptcy court reduced the Appellant’s compensation to $850.00 and
ordered that any amount already paid in excess be disgorged. The Appellant then moved for
rehearing and a hearing was held before the bankruptcy court on April 24, 2006. The court denied
the Appellant’s motion for rehearing and allowed the application for fees in the amount of
$1,102.72 - - $850.00 in attorney’s fees and $252.72 in expenses. The Appellant was again ordered
to disgorge any compensation received in excess of $850.00. He then filed this timely appeal.2

       2
           No other party appeared in this appeal. Therefore, there is no Appellee in the caption above.

                                                         -3-
                                         IV.    DISCUSSION

        11 U.S.C. § 330 provides that professionals may be awarded “reasonable compensation for
actual, necessary services rendered . . . .” The Appellant contends that the bankruptcy court erred
by not using the “lodestar” method to evaluate his fee application. In Boddy v. United States
Bankruptcy Court (In re Boddy), 950 F.2d 334 (6th Cir. 1991), the Sixth Circuit Court of Appeals
mandated that the lodestar method be used to calculate fees in bankruptcy cases. Boddy controls the
result of this appeal.

        In Boddy, the chapter 13 debtors’ attorneys sought interim compensation of $1,156.00.
Relying on its practice that a maximum attorney’s fee of $650.00 for legal services is “normal and
customary” for a chapter 13 case, the bankruptcy court only awarded the law firm $300.00 in interim
compensation. On appeal, the Sixth Circuit held that the bankruptcy court abused its discretion
because it applied an improper legal standard, the “normal and customary” standard, rather than
calculating the lodestar amount. Boddy, 950 F.2d at 337.

        The lodestar amount is calculated by multiplying the attorney’s reasonable hourly rate by the
number of hours reasonably expended. Boddy, 960 F.2d at 337. The bankruptcy court also may, in
its discretion, consider other factors such as the novelty and difficulty of the issues, special skills of
counsel, and the typical compensation, “as long as it expressly discusses these factors in light of the
reasonable hours actually worked and a reasonable hourly rate.” Id. at 338. However, such factors
may be duplicative if the court first determines the lodestar amount “because the lodestar presumably
subsumes all of these factors in its analysis of the reasonable hourly rate and the reasonable hours
worked.” Id. (emphasis in original) (citing Blum v. Stenson, 465 U.S. 886, 898-900, 104 S. Ct. 1541,
1549 (1984)).

        The starting point in the lodestar analysis is to determine a reasonable hourly rate. A
reasonable hourly rate is the prevailing market rate in the relevant legal community for similar
services by lawyers of reasonably comparable skills, experience, and reputation. Blum v. Stenson,
465 U.S. 886, 895-96 n.11, 104 S. Ct. 1541, 1547 n.11 (1984). The next step in the analysis is to
determine the lawyer’s reasonable hours. Norman v. Housing Authority, 836 F.2d 1292, 1301 (11th
Cir. 1988). If the court disallows hours, it must explain which hours are disallowed and show why
an award of these hours would be improper. Id. at 1304. “While the burden is on the applicant to

                                                   -4-
justify a fee request, the bankruptcy court must expressly discuss the amounts that are not supported
by the application and provide a reasoning to support the court’s decision.” Sadin v. United States
Trustee (In re Blain), No. 94-CV-74718, 1995 WL 871180, at *3 (E.D. Mich. July 31, 1995).

             Many districts have established standardized attorney’s fees for routine bankruptcy cases.
These standardized fees are commonly referred to as presumptive, “fixed,” “flat,” or “no look” fees.
These standard fees allow attorney’s fees without requiring a detailed fee application in the absence
of an objection.3 See Keith M. Lundin, Chapter 13 Bankruptcy § 294.1 (3d ed. 2002 and Supp.
2004). In the Northern District of Ohio, the presumptive fee for a chapter 7 case filed prior to
October 17, 2005 was $850.00. (Appendix at 10). This presumptive fee included “normal, ordinary,
and fundamental services of the chapter 7 process that is provided to a typical debtor.” (Appendix
at 10.) “Such services usually include . . . pre-bankruptcy consultation, schedule preparation,
representation of debtor at the meeting of creditors, reaffirmation agreement review, and other
similar tasks.” (Appendix at 10.)

         On Appellant’s original motion for attorney’s fees, the bankruptcy court found:

                  [Appellant] cannot establish the reasonableness of the $1,933.32 fee.
                  Simply because an attorney expends a certain amount of time on an
                  issue does not mean that the time spent is reasonable. If the facts and
                  circumstances of the case do not merit the time expended, the fee is
                  not reasonable. In this case, the fee requested is not reasonable in
                  light of the uncomplicated nature of Debtor’s case. This is a simple
                  case involving two secured creditors, four unsecured creditors . . . .
                  [Appellant]’s billing detail describes activities that are all normal,
                  fundamental chapter 7 services . . . .

         3
           A growing number of bankruptcy courts have adopted and implemented “no look” or presumptive fees, most
commonly in chapter 13 cases, but also in chapter 7 cases. See Hon. David S. Kennedy et al., Attorney Compensation
in Chapter 13 Cases and Related Matters, 13 J. Bankr. L. & Prac. 6 Art. 1 (2004); In re Geraci, 138 F.3d 314 (7th Cir.
1998) (establishing presumptive fees in chapter 7 cases permissible); In re Murray, 330 B.R. 732 (Bankr. E.D. W is.
2005) (discussing district’s flat fee of $700 to $800 for routine chapter 7 cases). The Panel recognizes that this type of
standardization, or uniform fee guideline, promotes efficiency by relieving the courts of the administrative burden of
reviewing numerous attorney’s fee applications; encourages predictability and efficiency for all involved in a chapter
7 or 13 case; and saves time for the court, trustees and the attorneys who represent debtors. The Panel also believes that
“no look” fees are permissible and should be encouraged in appropriate circumstances. See Boddy, 950 F.2d at 338
(“[W ]e do not hold that the bankruptcy court can never consider the ‘normal and customary’ services rendered . . . .”);
see also, Boone v. Derham-Burk (In re Eliapo), 2006 W L 3262497 (9th Cir. 2006) (approving issuance of and reliance
upon presumptive guideline fees for routine services in chapter 13 cases); In re Cahill, 428 F.3d 536, 541 (5th Cir. 2005)
(approving the use of a “precalculated lodestar” as a basis for awarding attorney’s fees in “typical” chapter 13 cases);
In re Kindhart, 160 F.3d 1176 (7th Cir. 1998) (approving use of presumptive fees in routine cases).

                                                           -5-
               It appears to the court that the compensation paid or agreed to be paid
               to [Appellant] exceeds the reasonable value because only normal and
               fundamental services were necessary in this case.
       (Appendix at 10.) (citation omitted.)

     In denying Appellant’s motion for reconsideration, the bankruptcy court stated:

               While the detail given in the motion and at hearing illuminated the
               specifics of, and the reasons for, the work, it did not change the
               underlying fact: the services were in the range of a routine Chapter 7
               case. Counsel responded to the trustee’s request for an explanation
               of Debtors’ present and anticipated income and expenses. The
               request was not novel or unforeseeable, nor did it require legal
               research or result in hearing before the Court.

               As discussed in the previous order, the Court imposes a presumptive
               fee in routine Chapter 7 cases. The Court declines to allow the
               presumptive fee to exclude responding to requests from the trustee,
               particularly when the request is within the spectrum of what can be
               expected.
       (Appendix at 16.) (Emphasis supplied.)

       While the bankruptcy court discussed some of the factors which are subsumed in the lodestar
analysis, such as the novelty and difficulty of the issues, it did not expressly calculate the lodestar
amount by using the Sixth Circuit mandated methodology. This failure is legally erroneous. “At a
minimum . . . the bankruptcy courts must expressly calculate the lodestar amount when determining
reasonable fees.” Boddy, 950 F.2d at 338. The bankruptcy court did not determine the Appellant’s
reasonable hourly rate. Nor did the court explain which hours detailed in the Appellant’s fee
application were disallowed and why. The court focused instead on whether the tasks completed
were above and beyond what it expected to be included in the presumptive fee. By applying this
improper legal standard, the bankruptcy court abused its discretion. Boddy, 950 F.2d at 337. After
the bankruptcy court conducts a lodestar analysis consistent with Boddy, the fee award may be lesser
or greater than the presumptive fee.

       Based upon its review of the Appendix, the Panel believes that there are a host of factual and
legal issues which may first be addressed by the bankruptcy court. For example, the bankruptcy
court may consider whether the Appellant’s “Motion on Attorney’s Fees,” in which the Appellant

                                                  -6-
itemized his time and summarized his services, adequately complies with the content and specificity
requirements imposed by Federal Rule of Bankruptcy 2016, the bankruptcy court’s General Order
No. 93-1 Guidelines for Compensation and Expense Reimbursement of Professionals, and any other
applicable local rules. See e.g. Solomon v. Wein (In re Huhn), 145 B.R. 872, 875 (W.D. Mich.
1992).4 The bankruptcy court should first determine whether noncompliance may result in a denial,
in whole or in part, of the Appellant’s requested fees.

         The bankruptcy court also may consider the proposed source of the additional requested
attorney’s fees. The record before the Panel does not state the proposed source of the fees. The
Appellant failed to respond to question number three, “[t]he source of compensation to be paid to
me is . . . .” (emphasis supplied) on his Disclosure of Compensation of Attorney for Debtor.
(Appendix at 2.) The Appellant may be requesting fees directly from the Debtors, and not the
bankruptcy estate.5 This is unclear. If the Appellant is seeking fees from the estate, this is
impermissible unless his employment was authorized by 11 U.S.C. § 327. Lamie v. United States
Trustee, 540 U.S. 526, 529, 124 S. Ct. 1023, 1027 (2004).6

         If the Appellant is seeking the payment of fees directly from the Debtors, the bankruptcy
court may consider whether some, or all, of the fees are dischargeable. See e.g. Rittenhouse v. Eisen,
404 F.3d 395, 396-97 (6th Cir. 2005) (holding that prepetition legal services are dischargeable in
bankruptcy, but debts for postpetition attorney fees are not); In re Griffin, 313 B.R. 757 (Bankr. N.D.
Ill. 2004) (discussing whether chapter 7 debtor’s counsel can collect fees from debtor postpetition
without postpetition fee agreement).

         4
           The Appellant’s time keeping entries appear highly suspect. The entries are not kept in one-tenth hour
increments as is customary, and as is required by the bankruptcy court’s local guidelines under General Order No. 93-1
¶ 8. Also, certain tasks are “lumped” together which is prohibited by General Order No. 93-1 ¶ 10. Further, the
Appellant has billed for certain secretarial type office tasks in contravention of General Order No. 93-1 ¶ 13. The Panel
leaves these problems to the bankruptcy court to address, that court being more familiar with the actual services
performed. The bankruptcy court has had an opportunity to observe the job performance of the Appellant.
         5
           The trustee advised the Case Manager of the Panel that the creditors of the estate would not be affected by
this appeal. (Appendix at 20.)
         6
             The record in the Appendix is silent whether the Appellant was appointed under § 327.

                                                           -7-
                                         V. CONCLUSION

       For the foregoing reasons, the bankruptcy court’s order is REVERSED and REMANDED
for the lodestar analysis required by Boddy. The court may consider other relevant factors or issues
pertaining to the fee request as well.

                                                -8-