FILED
2/6/2014
1
SUSAN M. SPRAUL, CLERK
2 U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. AZ-12-1499-PaKuD
)
6 JON MICHAEL DRISCOLL and ) Bk. No. 09-08577-RTB
CHRISTINE QUIGLEY DRISCOLL, )
7 )
Debtors. )
8 ______________________________)
)
9 ELLETT LAW OFFICES, PC; )
RONALD J. ELLETT, )
10 )
Appellants. ) M E M O R A N D U M1
11 ______________________________)
12
Argued and Submitted on January 23, 2014
13 at Tempe, Arizona
14 Filed - February 6, 2014
15 Appeal from the United States Bankruptcy Court
for the District of Arizona
16
Honorable Redfield T. Baum, Sr., Bankruptcy Judge, Presiding2
17
18 Appearances: Ronald J. Ellett appeared for himself and for
appellant Ellett Law Offices, P.C.
19
20 Before: PAPPAS, KURTZ and DUNN, Bankruptcy Judges.
21
22
23
1
24 This disposition is not appropriate for publication.
Although it may be cited for whatever persuasive value it may
25 have (see Fed. R. App. P. 32.1), it has no precedential value.
See 9th Cir. BAP Rule 8013-1.
26
2
27 Judge Baum entered the order we review on appeal. Due to
his retirement from full-time service, the Honorable Eddward
28 Ballinger Jr. is now the presiding judge in the bankruptcy case.
1 Appellants Ellett Law Offices, P.C., and attorney Ronald J.
2 Ellett (collectively, “Ellett”), appeal the order of the
3 bankruptcy court granting Ellett’s Amended First Application for
4 Attorney’s Fees in the reduced amount of $1,750.00, rather than
5 the $5,000 requested. We VACATE the bankruptcy court’s order and
6 REMAND this matter for further proceedings.
7 FACTS
8 Debtors Jon and Christine Driscoll filed a petition for
9 relief under chapter 133 on April 27, 2009; they were represented
10 by Ellett. Debtors’ Schedule D listed four secured claims
11 totaling $639,882.78, and their Schedule F listed thirty-one
12 unsecured claims totaling $328,669.22. Jon Driscoll is a
13 mortgage broker, and Christine Driscoll is a crisis counselor.
14 Debtors timely filed a chapter 13 plan on May 8, 2009. In
15 paragraph 1, addressing administrative expenses, the plan
16 recites:
17 Attorney Fees: Debtors’ attorney was paid $1274.00
prepetition. Further, Debtors’ attorney shall be paid
18 an additional $3,726.00 as a minimum fee for this
pending case prior to commencement of payments on any
19 claim listed hereafter. The services rendered for this
minimum fee include up to the first 7.6 hours of all
20 consultations, telephone conversations and
correspondences with debtors necessary to confirm
21 debtors’ initial Chapter 13 Plan, appearances necessary
for confirmation of Debtors’ initial Chapter 13 Plan,
22 mailing and costs thereof of all necessary notices to
confirm Debtors’ initial Chapter 13 Plan and
23 preparation and lodging of the order to confirm
Debtors’ initial Chapter 13 Plan. Additional fees may
24
25
3
Unless otherwise indicated, all chapter and section
26 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27 "Rule" references are to the Federal Rules of Bankruptcy
Procedure. All “Civil Rule” references are to the Federal Rules
28 of Civil Procedure.
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1 be charged by hourly fee pursuant to an executed
bankruptcy fee agreement.
2
3 Chapter 13 Plan and Application for Payment of Administrative
4 Expenses at 1-2 (emphasis added).
5 A stipulated order confirming Debtors’ plan, submitted by
6 Debtors, the chapter 13 trustee, and the principal secured
7 creditor, modified this attorney fee provision, which order was
8 entered by the bankruptcy court on January 14, 2010:
9 Attorney’s Fees: Debtor’s attorney was paid $1274.00
prepetition. Further, Debtor’s attorney shall be paid
10 an additional $3,726.00 as a fee prior to the
commencement of any payments on any claim listed
11 hereinafter. This award is for the first 8.1 hours of
counsel’s time in this case. This award is without
12 prejudice to a future award based upon time in excess
of 8.1 hours and a proper application for an additional
13 award of fees.
14 Stipulated Order, at 2 (emphasis added). Ellett admits that he
15 has received $5,000, in his words, “under the [bankruptcy
16 court’s] no look procedure.” Amended First Application for
17 Attorney’s Fees at ¶ 10 (the “Fee Application”).
18 Significant Events in the Bankruptcy Case
19 There were no adversary proceedings or contested hearings
20 conducted in the bankruptcy case. In addition to generally
21 assisting them in filing their bankruptcy case, and obtaining
22 confirmation of Debtors’ plan, Ellett’s activities focused on
23 three matters: valuing and stripping the lien of the second
24 mortgage holder on Debtors’ home; defending a motion for relief
25 from stay from the first mortgage holder; and a post-confirmation
26 modification of the plan.
27 In particular, through Ellett, Debtors filed a motion for
28 “Determination of Value of Claim Secured by Lien and Debtors’
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1 Objection to Proof of Claim” of Wells Fargo Bank’s second
2 mortgage on their residence on October 7, 2009. Debtors argued
3 that the value of Wells Fargo’s secured claim was zero, insofar
4 as the value of the first lien of U.S. Bank was greater than the
5 value of the property. Wells Fargo did not contest the motion,
6 and the bankruptcy court granted the motion on January 1, 2010.
7 U.S. Bank filed a motion for relief from the automatic stay
8 to foreclose the lien on its first position Deed of Trust on
9 June 28, 2010. Debtors did not contest the relief from stay
10 motion. The bankruptcy court granted stay relief to the lender
11 on July 22, 2010.
12 In light of the grant of stay relief, Debtors then filed a
13 motion to modify the confirmed chapter 13 plan because of their
14 decision to surrender their residence. In a one-page motion,
15 Debtors proposed to reduce the number of monthly payments from
16 sixty to thirty-six, and to reduce the amount of the monthly
17 payments to the chapter 13 trustee, because they no longer needed
18 to service the mortgage. No party objected to the motion and the
19 bankruptcy court approved the plan modification on December 6,
20 2011.
21 The Fee Application
22 On February 27, 2012, Ellett filed the Fee Application.
23 Ellett provided an hourly billing record in the Fee Application
24 indicating he had provided services with a value of $16,467.00.
25 Two paragraphs of the Fee Application are noteworthy:
26 9. The confirmation order approved $3,750 under the
“no-look fee” procedure but also provided that the
27 initial fee award was without prejudice to an
additional fee award based on a detailed fee
28 application showing additional work performed in the
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1 case.
2 10. The amount of the total attorney’s fees incurred
in connection with this case is $16,467.00 (of this
3 amount, $5,000 was previously approved and paid under
the no-look procedure). This leaves a balance of
4 $11,457.00. There are insufficient funds to pay these
fees. Counsel is voluntarily writing his fees down by
5 $6,467.00. The balance to be paid is therefore
$5,000.00.
6
7 Although there were no objections to the Fee Application,
8 the bankruptcy court contacted Ellett and instructed him to
9 schedule it for a hearing. Ellett filed a notice setting the
10 hearing for August 7, 2012. He also filed a supplement in
11 support of the Fee Application which contained argument and
12 affidavits supporting his requested hourly rate of compensation,
13 $495.
14 A transcript for the short hearing on the Fee Application is
15 included in the record. The substance of that hearing consisted
16 of an extremely brief colloquy among the bankruptcy court, Ellett
17 and Trustee’s counsel:
18 MR. ELLETT: I filed -- I was surprised [the Fee
Application] was set for hearing. I'm not certain why,
19 but I filed a supplement that points out. I'm going to
be awarded less than [$]325 an hour because I'm writing
20 off $6,000 in that case because there's not enough
money to pay me. My clients can't afford to pay me, so
21 to the extent the hearing is about my hourly rate, I
don't think that applies in this case because I'm
22 already writing off $6,000 -- over 6,000 in fees.
23 THE COURT: So, what will your total fee be in that
case?
24
MR. ELLETT: A total fee would be [$]10,000 out of 16,
25 over [$]16,000 that was billed. Five has been approved
already. I’m asking for additional five.
26
THE COURT: All right. Anything from the Trustee?
27
[TRUSTEE’S COUNSEL]: No, Your Honor.
28
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1 THE COURT: All right. I'll take them both under
advisement.
2
MR. ELLETT: Thank you.
3
(Proceedings Concluded)
4
5 Hr’g Tr. 1:15-21, August 7, 2012.
6 On September 12, 2012, the bankruptcy court entered a Minute
7 Entry/Order (the “Fee Order”). After a short discussion of the
8 amount sought by Ellett for fees and a review of Ellett’s
9 services, the order provided that “the court has carefully
10 reviewed the time records and entire record and concludes that
11 Ellett’s billings are excessive for the work performed.” In
12 arriving at this conclusion, the court focused on three items:
13 (1) the lien strip of the second deed of trust; (2) the stay
14 relief motion; and (3) the modified plan.
15 The bankruptcy court indicated that its website procedures
16 page informed attorneys and parties that the court ordinarily
17 allows $500 for uncontested proceedings to avoid a junior
18 mortgage lien, and that this “$500 fee is based on the premise
19 that an uncontested lien avoidance is legally simple and often
20 done with form pleading with no required hearing.” The court
21 reviewed the Fee Application, and noted that Ellett had billed
22 $3,811.50 for services in connection with the motion to strip the
23 mortgage lien. The court concluded “that such amount for a
24 simple lien avoidance is grossly inflated and well out of the
25 range ($500-1500) of what is typically charged by bankruptcy
26 practitioners in this district for similar work.” The court
27 allowed $750.00.
28 As to Ellett’s time spent reviewing the stay relief motion,
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1 the bankruptcy court determined that such services were
2 ordinarily assumed to be included in the no look fee. The court
3 noted that Ellett’s work on the modified plan was also minimal
4 because it was uncontested, and the motion to modify the plan was
5 a single page which addressed no difficult legal issues.
6 Ellett’s hourly billing for the stay relief and modified plan was
7 $1,485.00. The bankruptcy court concluded that reasonable
8 compensation for all these services was $1,000, which together
9 with the $750 allowed for the mortgage lien avoidance, amounted
10 to a total of $1,750 in compensation, in addition to the $5,000
11 no look fee, for a grand total of $6,750. Instead of the $10,000
12 Ellett had requested, this reduced amount of compensation was
13 approved.
14 Without seeking reconsideration, Ellett filed a timely
15 appeal of the Fee Order on September 26, 2012.
16 JURISDICTION
17 The bankruptcy court had jurisdiction under 28 U.S.C.
18 §§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C.
19 § 158.
20 ISSUE
21 Whether the bankruptcy abused its discretion in granting
22 Ellett’s fee application in a reduced amount.
23 STANDARD OF REVIEW
24 The bankruptcy court’s award of attorney’s fees is reviewed
25 for abuse of discretion. Smith v. Hale (In re Smith),
317 F.3d
26 918, 923 (9th Cir. 2002); Label & Opera v. U.S. Tr. (In re Auto
27 Parts Club),
211 B.R. 29, 32 (9th Cir. BAP 1997). We review the
28 legal premises a bankruptcy court employs in determining the
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1 reasonableness of attorney’s fees de novo. Ferrand v. Conrad
2 Credit Corp.,
244 F.3d 1145, 1147 (9th Cir. 2001).
3 A bankruptcy court abuses its discretion if it applies an
4 incorrect legal standard, or misapplies the correct legal
5 standard, or if its factual findings are illogical, implausible
6 or without support from evidence in the record. United States v.
7 Hinkson,
585 F.3d 1247, 1262 (9th Cir. 2009)(en banc).
8 DISCUSSION
9 Section 330(a)(4)(B) provides that:
10 In a chapter 12 or 13 case in which the debtor is an
individual, the court may allow reasonable compensation
11 to the debtor’s attorney for representing the interests
of the debtor in connection with the bankruptcy case
12 based on a consideration of the benefit and necessity
of such services to the debtor and the other factors in
13 this section.
14 A professional seeking compensation under § 330 has the
15 burden of proving that the amount requested is reasonable. Law
16 Offices of David A. Boone v. Derham-Burk (In re Eliapo),
298 B.R.
17 392, 402 (9th Cir. BAP 2003) (“Eliapo I”), rev’d. in part on
18 other grounds,
468 F.3d 592 (9th Cir. 2006) (“Eliapo II”). The
19 bankruptcy court has an independent duty to review fee
20 applications of professionals for reasonableness. Eliapo I,
21 298 B.R. at 404-05; Mayer, Glassman & Gaines v. Washam
22 (In re Hanson),
172 B.R. 67, 74 (9th Cir. BAP 1994). This duty
23 arises even where, as here, there are no objections to the
24 professional’s application by the trustee, debtor or creditors.
25 In re Dorsett,
297 B.R. 620, 624 (Bankr. E.D. Cal. 2003).
26 Although Ellett raises several arguments in his brief to
27 support his position that the bankruptcy court erred in deciding
28 that the amount of compensation he requested in the Fee
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1 Application for the services performed as Debtors’ counsel in
2 this case was excessive, we need not consider those arguments.
3 This is because we agree with Ellett that, under the facts of
4 this case, the bankruptcy court failed to afford Ellett a
5 meaningful opportunity to be heard and defend his fee request
6 and, therefore, the bankruptcy court’s order awarding reduced
7 fees must be vacated. As in many other districts, Arizona rules
8 provide that a chapter 13 debtor’s attorney may receive a
9 presumptively reasonable fee of up to $5,000 for his or her
10 services without the submission of a detailed fee application – a
11 so-called “no look” fee. Bankr. D. Ariz. Local R. 2083-11(a) &
12 (b)(2009, later modified). But counsel requesting approval for
13 compensation in addition to the no look fee must justify the
14 reasonableness of the amount requested in such an application.
15 See In re Allen, 2012 Bankr. LEXIS 314, at *2 (Bankr. D. Ariz.
16 January 25, 2012) (awarding a no look fee of $4,500 plus $500 for
17 “reasonable and fair” services in an adversary proceeding not
18 included in the no look fee rules).
19 Although the bankruptcy court is required under the Code to
20 limit a chapter 13 debtor’s attorney’s compensation to only such
21 amounts as are “reasonable” as provided in § 330(a)(4)(B), where
22 the bankruptcy court may have objections to a fee application
23 that might result in a reduction in the amount awarded, in
24 Eliapo II the Ninth Circuit has instructed courts to provide a
25 procedure whereby the applicant has a meaningful opportunity to
26 respond to the court’s concerns. Eliapo
II, 468 F.3d at 603. In
27 Eliapo II, the Ninth Circuit examined implications of no look
28 fees and additional services in chapter 13 cases. An attorney
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1 submitted a one-page fee application under the no look guidelines
2 in effect in the Northern District of California. The bankruptcy
3 court approved the first application without a hearing. The
4 attorney then submitted a second, supplementary application that
5 included both fees allowed under the no look guidelines and
6 additional fees. The bankruptcy court first scheduled a hearing
7 on the second application, but then took the fee request under
8 submission without a hearing when no objection was filed. The
9 court ruled on the second application without a hearing, allowing
10 some fees that were approved under the no look guidelines, but
11 disallowing other fees because the court felt that “extraordinary
12 circumstances” were required before the court would allow an
13 attorney to exceed the guidelines.
Id. at 595.
14 On appeal, the Ninth Circuit held in Eliapo II that a
15 debtor’s attorney is entitled to “notice and a hearing,” as that
16 term is defined in § 102(1),4 before the bankruptcy court may
17 award counsel a reduced
fee. 468 F.3d at 601. Specifically, the
18 Ninth Circuit concluded that:
19 The essential point is that the court should give
counsel a meaningful opportunity to be heard. [citing
20 to Busy Beaver Bldg. Ctrs., Inc.,
19 F.3d 833, 856 (3d
Cir. 1994)]. The bankruptcy court should "apprise the
21 [fee] applicant of the particular questions and
objections it harbors" and should give the applicant
22 "an opportunity to rebut or contest the court's
conclusions."
Id. at 846-47; see also In re Spillane,
23
24 4
§ 102. Rules of construction
25 In this title--
(1) "after notice and a hearing", or a similar phrase--
26 (A) means after such notice as is appropriate in the
27 particular circumstances, and such opportunity for a
hearing as is appropriate in the particular
28 circumstances[.]
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1
884 F.2d 642, 646-47 (1st Cir. 1989) (holding that
cross-examination is not required in hearing on fee
2 application). Depending on the circumstances, the
hearing requirement may be satisfied without oral
3 presentation of evidence and without oral argument.
That is, the "hearing" requirement may, in appropriate
4 circumstances, be satisfied by written submission. All
that is required is that the applicant be given "a
5 reasonable opportunity to present legal argument and/or
evidence to clarify or supplement his Application."
6 [Citing Nelson v. Mickelson (In re Pfleghaar),
215 B.R.
394, 397 (8th Cir. BAP 1997)]; see also Busy Beaver,
7 19 F.3d at 846.
8
Id. at 603.
9 In this case, Ellett filed and served the Fee Application,
10 and no objections were filed. After a time, the bankruptcy court
11 requested that Ellett set the Fee Application for a hearing. At
12 the time he filed the notice of the hearing, he also filed a
13 supplement providing information to support his hourly billing
14 rate, and to remind the bankruptcy court that his fee request was
15 a significantly reduced one as compared to the amounts reflected
16 in the hourly billing records in the Fee Application. However,
17 before and during the hearing, the bankruptcy court gave Ellett
18 no insight, indeed no real clue, about the nature of its
19 concerns, other than inquiring with him at the hearing about what
20 the “total” amount of fees requested was to be. At no time did
21 the bankruptcy court indicate that, as opposed to focusing on
22 Ellett’s hourly rate reflected in the billing records, and as
23 discussed in Ellett’s submissions in the supplement, it might be
24 more generally concerned with the reasonableness of the total
25 fees Ellett had requested and, in particular, with the nature and
26 amount of services he provided as compared to those reasonably
27 required to represent Debtors in their case.
28 Eliapo II makes clear that the bankruptcy court enjoys
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1 significant latitude in prescribing the type of proceedings used
2 to consider fee applications like Ellett’s:
3 We emphasize that the notice-and-a-hearing definition
in § 102(1) is flexible and sensitive to context.
4 Chapter 13 fee applications are typically rather
simple, even in cases where fees beyond the presumptive
5 no-look fees are sought. So long as fair notice and
opportunity to be heard are afforded, the bankruptcy
6 court has considerable freedom to fashion procedures
for notice and a hearing that are “appropriate in the
7 particular circumstances.” 11 U.S.C. § 102(1)(A).
8 468 F.3d at 602.
9 In this case, the bankruptcy court had an independent duty
10 to determine whether Ellett’s requested compensation was
11 reasonable. Moreover, the total amount Ellett was requesting for
12 representing Debtors, the time he spent performing services on
13 relatively routine, uncontested tasks, and the apparently
14 artificial $495 per hour rate he used in his application to
15 measure the value of those services in this simple chapter 13
16 case, were all factors which, we believe, justified the
17 bankruptcy court’s decision to scrutinize Ellett’s application
18 closely. However, as instructed by the Ninth Circuit in
19 Eliapo II, Ellett was entitled to advance notice about the
20 bankruptcy court’s concerns with his fee request so that he
21 could, in a meaningful and timely fashion, respond to those
22 concerns and defend that request. The approach taken here by the
23 bankruptcy court did not satisfy that standard and, therefore,
24 the Fee Order must be vacated and this matter remanded for
25 further proceedings in the bankruptcy court.
26 CONCLUSION
27 The bankruptcy court’s Fee Order is VACATED and this matter
28 is REMANDED for further proceedings consistent with this
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1 memorandum.5
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We emphasize that this outcome is dictated solely as a
25 result of our concerns with the procedure employed by the court.
We express no opinion about the bankruptcy court's conclusion
26 that the amount Ellett requested in the Fee Application was
27 excessive in relation to the services he provided to Debtors, a
topic the bankruptcy court is free to again examine after
28 appropriate notice and a hearing on remand.
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