Wayne G. Nelson v. J.J. Mickelson ( 1997 )

United States Bankruptcy Appellate Panel
FOR THE EIGHTH CIRCUIT
No. 97-6085MN
In re: *
*
Mark William Pfleghaar, *
*
Debtor *
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Wayne G. Nelson, *
*
Movant - Appellant, * Appeal from the United
* States Bankruptcy Court
v. * for the District of Minnesota
*
J. J. Mickelson, *
*
Trustee - Appellee *
Submitted: December 16, 1997
Filed: December 19, 1997
Before KOGER, WILLIAM A. HILL, and SCOTT, Bankruptcy Judges
KOGER, Chief Bankruptcy Judge
Appellant Wayne G. Nelson, the debtor’s attorney, appeals the
Order of the bankruptcy court denying his second Application for
Compensation. We have jurisdiction to hear this appeal pursuant to
28 U.S.C. § 158(b) and (c).
FACTS
Nelson filed a Chapter 13 Petition, Schedules and Plan on
behalf of the debtor on April 14, 1997. On May 27, 1997, Nelson
filed an Application for Compensation, under Minnesota Local Rule
2016-1,1 requesting approval of fees and expenses in the flat
amount of $850.00, pursuant to an agreement he had entered with the
debtor. On July 10, 1997, the bankruptcy court allowed the
Application for Compensation in the amount of $850.00 to Nelson.
On August 21, 1997, Nelson filed a second Application for
Compensation, asserting he was entitled additional fees for
performing additional work which had not been included in the
original flat fee agreement.
Specifically, the second Application stated that on March 17,
1997, prior to filing the bankruptcy case, the debtor and Nelson
had entered into an attorney retainer agreement whereby the debtor
agreed to pay the flat fee of $850.00 as attorneys fees in the case
and paying a retainer of $360.00 ($200.00 plus the $160.00 filing
fee). On June 6, 1997, prior to the court’s approval of the first
application for fees, the debtor signed an additional retainer
agreement which provided that Nelson would charge $350.00 for
additional work, specifically, “Responding to Motion for relief
from stay and objection to confirmation and notifying additional
creditors.” On July 10, apparently unaware of the second agreement
between the debtor and Nelson, the bankruptcy court approved the
first Application. Then on August 21, Nelson filed his second
Application for Compensation seeking the additional $350.00
pursuant to the June 6 agreement with the debtor. Nelson attached
an itemization of his time and charges which showed he had expended
1
Minn. Local Rule 2016-1(d) allows an attorney for a debtor in a Chapter 13 case to file a
simplified application allowing payment of compensation without hearing if the fee does not exceed
$850.00.
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a total of 15 hours in the case and alleging his usual fee was
$150.00 per hour.
The bankruptcy court denied the second Application by Order
entered September 10, without holding a hearing on the application.
The court found that the bankruptcy case was not a complicated case
and that the additional services for which Nelson sought additional
fees, (dealing
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with an objection to confirmation, a motion for relief from stay,
and notifying creditors) were all services which were included in
the original contract.
Nelson appeals the order denying his second Application for
Compensation, asserting the bankruptcy court’s sua sponte denial of
the attorney’s fee application without a hearing was clearly
erroneous and that the order should be reversed and his fees
granted.
STANDARD OF REVIEW
An appellate court reviews the bankruptcy court’s findings of
fact, whether based upon oral or documentary evidence, for clear
error, and reviews legal conclusions de novo. Fed. R. Bankr. P.
8013; First Nat’l Bank of Olathe v. Pontow, 111 F.3d 604, 609 (8th
Cir. 1997). We review the bankruptcy court’s decisions regarding
an award of fees under an abuse of discretion standard. Grunewaldt
v. Mutual Life Ins. Co. (In re Coones Ranch, Inc.), 7 F.3d 740, 744
(8th Cir. 1993). An abuse of discretion occurs in this context “if
the bankruptcy judge fails to apply the proper legal standard or to
follow proper procedures in making the determination, or bases an
award upon findings of fact that are clearly erroneous.” Agate
Holdings, Inc. v. Ceresota Mill L.P. (In re Ceresota Mill L.P.),
211 B.R. 315 (B.A.P. 8th Cir. 1997). To be clearly erroneous,
after reviewing the record, we must be left with the definite and
firm impression that a mistake has been committed. In re Waugh, 95
F.3d 706, 711 (8th Cir. 1996). Furthermore, review is limited in
deference to the bankruptcy judge’s familiarity with the work
performed by the professional. In re Grady, 618 F.2d 19, 20 (8th
Cir. 1980).
DISCUSSION
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11 U.S.C. § 330 provides, in pertinent part:
(a)(1) After notice to the parties in interest and the
United States Trustee and a hearing, and subject to
sections 326, 328, and 329, the court may award to a
trustee, an examiner, a professional person employed
under section 327 or 1103 --
(A) reasonable compensation for actual,
necessary services rendered by the trustee,
examiner, professional person, or attorney and by
any paraprofessional person employed by any such
person; and
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(B) reimbursement for actual, necessary
expenses.
(2) The court may, on its own motion or on the
motion of the United States Trustee, the United States
Trustee for the District or Region, the trustee for the
estate, or any other party in interest, award
compensation that is less than the amount of compensation
that is requested.
Subsection (3) then lists relevant factors which the court is to
consider in determining the amount of reasonable compensation,
including the time spent; the rates charged; whether the services
were necessary to the administration, or beneficial toward the
completion of, the bankruptcy case; whether the services were
performed within a reasonable amount of time commensurate with the
complexity of the task addressed; and whether the compensation is
reasonable based on the customary compensation charged by
comparably skilled practitioners in non-bankruptcy cases. Finally,
subsection (4)(B) provides that in a chapter 13 case in which the
debtor is an individual, the court may award reasonable
compensation to the debtor’s attorney for representing the
interests of the debtor in connection with the bankruptcy case
based on a consideration of the benefit and necessity of such
services to the debtor and the other factors set forth in this
section.
Nelson concedes that it was within the bankruptcy judge’s
discretion to review the application despite the fact that no one
objected to it. However, it is Nelson’s contention that the court
was required to conduct a hearing on the application.
We addressed this issue recently in Chamberlain v. Kula (In
re Kula), 1997 WL 694299 (B.A.P. 8th Cir. 1997). We are bound by
our previous decisions, just as the Court of Appeals for the Eighth
Circuit is bound by its prior decisions. See Foss v. U.S., 865
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F.2d 178, 180 (8th Cir. 1989) (one panel of the Eighth Circuit
Court of Appeals cannot reverse another panel; such action requires
an en banc decision); Brown v. First Nat. Bank in Lenox, 844 F.2d
580, 581 (8th Cir. 1988) (same); Federal Deposit Ins. Corp. v.
Bowles Livestock Comm’n Co., 937 F.2d 1350, 1354 (8th Cir. 1991)
(same); see also Life Ins. Co. of Virginia v. Barakat (In re
Barakat), 173 B.R. 672, 677 (Bankr. C.D. Cal. 1994) (discussing the
doctrine of stare decisis as it relates to Bankruptcy Appellate
Panel, District Court, and Circuit Court opinions).
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Further, although Chamberlain was decided after the bankruptcy
court’s opinion and thus the bankruptcy court did not have the
benefit of that decision when it issued the instant Order,
Chamberlain is controlling. See Gulf Offshore Co. v. Mobil Oil
Corp., 453 U.S. 473, 486 n. 16, 101 S. Ct. 2870, 2879 n. 16, 69
L.Ed.2d 784 (1981) (stating “[a]n appellate court must apply the
law in effect at the time it renders its decision” (citation
omitted)); Ziffrin, Inc. v. United States, 318 U.S. 73, 78 63 S.
Ct. 465, 468, 87 L.Ed. 621 (1943) (noting “[a] change in the law
between a nisi prius and an appellate decision requires the
appellate court to apply the changed law”); Zolfo, Cooper & Co. v.
Sunbeam-Oster Co., 50 F.3d 253, 258-59 (3d Cir. 1995).
In Chamberlain, we held that in making fee awards under § 330,
a bankruptcy court is required to either make a specific lodestar
calculation or indicate why the lodestar method is inappropriate
under the circumstances. We also held, as discussed more fully
below, that § 330 on its face entitles the applicant to a hearing
on his fee application. On the other hand, we specifically
commented that these requirements are frequently inappropriate in
Chapter 13 cases and further noted that many districts have local
rules permitting applications for fees under a certain amount,
typically $850 - 1,000, be granted without an itemized fee
statement and without a hearing. Such instances present an
exception to the requirement for a hearing and a lodestar
calculation.
As mentioned above, the Bankruptcy Court in Minnesota has such
a rule, see Minn. Local Rule 2016-1(d) (permitting a simplified
application without a hearing in the event the compensation sought
does not exceed $850), and in the case at bar, Nelson filed his
initial application for fees under that rule. As such, he was not
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required to file itemized statements or other documentation as to
that Application, nor was he entitled to a hearing at that point.
However, when Nelson filed his second Application, the
simplified rules (and thus the exception to the rules announced in
Chamberlain) no longer applied. Consequently, as to the second
Application, Nelson was required to file sufficient documentation
to allow the bankruptcy court to make a decision as to whether the
requested compensation was reasonable as enunciated in
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Chamberlain. The court was then to make a determination as to the
reasonableness of the fee request and issue findings and
conclusions based on the evidence.
Although Nelson of course asserts he is entitled to the
requested fees and the bankruptcy court erred in denying them, the
focus of Nelson’s appeal is not specifically aimed at the
bankruptcy court’s findings or failure to perform a lodestar
calculation. Rather, he focuses on his entitlement to a hearing.
In its Order denying the second Application, the bankruptcy court
commented that a hearing was not necessary and that it had
determined to decide the matter on the papers. We believe Nelson
is correct that this was error and that he was entitled to a
hearing.2
As stated in Chamberlain, Section 330(a) provides that the
bankruptcy court may award fees to a professional “after notice .
. . and a hearing.” “[I]f the bankruptcy court plans to disallow
certain items of compensation, § 330(a) on its face first
contemplates the applicant’s right to a hearing.” Chamberlain, at
*12 (quoting In re Busy Beaver Bldg. Centers, Inc., 19 F.3d 833,
845 (3d Cir. 1994)); accord In re Spillane, 884 F.2d 642, 646 (1st
Cir. 1989). Thus, there can be no question but that Nelson was
entitled to a hearing before the bankruptcy court denied his second
fee application. As a result, the case must be remanded to the
bankruptcy court for a hearing on the second Application.
On the other hand, we must point out that, as in Chamberlain,
Nelson may not, given the circumstances of the case, be entitled to
a full evidentiary hearing on the Application. Section 102(1)
2
To the extent Nelson requests we simply reverse the bankruptcy court and award his fees,
that request is denied. We do not find he was necessarily entitled to his fees; rather, we merely find
he was entitled to a hearing on the second Application.
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provides that the hearing contemplated by § 330 means “such
opportunity for a hearing as is appropriate in the particular
circumstances.” In Chamberlain, the applicant had been afforded a
hearing but he appealed because, inter alia, he believed he was
entitled to present live witnesses regarding certain issues.
Although we reversed and remanded the case for a lodestar
calculation, we
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held in that case that the applicant was not entitled to a full
evidentiary hearing and that the hearing he had received was
adequate under the circumstances. Id. at *13.
In discussing the type of hearing to which an applicant is
entitled, in Chamberlain we relied on the decision by the Third
Circuit Court of Appeals in In re Busy Beaver Bldg. Centers, Inc.,
which said:
At the hearing, held after notice of the court’s concerns
and/or objections, the court should allow the applicant a
reasonable opportunity to present legal arguments and/or
evidence, as the case may be, to clarify or supplement the
petition and accompanying affidavit. Of course, the
anatomy of the hearing lies within the sound discretion of
the bankruptcy judge, and would not necessarily require the
presentation of oral testimony. For example, the type of
hearing which “is appropriate in the particular
circumstances” might simply be an oral hearing (whether in
court or more informally, as by teleconference) at which
the applicant submits argument based upon the papers. The
essential point is that the court should give counsel a
meaningful opportunity to be heard.
Chamberlain, at *12 (quoting In re Busy Beaver, 19 F.3d at 846). If
after allowing the applicant to respond, the bankruptcy court adheres
to its views and disallows some of the requested compensation, it
should enter sufficient findings of fact and conclusions of law in
the record to facilitate review. Id.In the case at bar, Nelson is certainly aware of the bankruptcy
court’s concerns and objections to his second fee request. At this
point, he is simply entitled to a hearing at which he can be given a
reasonable opportunity to present legal argument and/or evidence to
clarify or supplement his Application. If, after conducting the
hearing, the bankruptcy court is still of the opinion that Nelson is
not entitled to the additional compensation, it should enter findings
and conclusions so that, if appealed again, a reviewing court can
determine the bases for that decision.
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CONCLUSION
For the foregoing reasons, we conclude that Nelson was entitled
to a hearing on his second Application for Compensation under § 330
and that it was therefore error for the bankruptcy court to decide
the matter on the papers. The case is therefore REVERSED and
REMANDED for a hearing which is appropriate under the circumstances.
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A true copy.
Attest:
CLERK, U.S. BANKRUPTCY APPELLATE PANEL FOR THE EIGHTH
CIRCUIT
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