James E. Bachman v. Kathleen Laughlin ( 1999 )

United States Bankruptcy Appellate Panel
FOR THE EIGHTH CIRCUIT
No. 99-6029 NE
In re: *
*
William E. McKeeman, *
Lynn N. McKeeman, *
*
Debtors. *
*
James Edward Bachman, * Appeal from the United States
* Bankruptcy Court for the
Appellant, * District of Nebraska
*
v. *
*
Kathleen Laughlin, Trustee, *
*
Appellee. *
Submitted: June 24, 1999
Filed: August 3, 1999
Before WILLIAM A. HILL, SCHERMER, DREHER, Bankruptcy Judges.
SCHERMER, Bankruptcy Judge.
Debtors’ Chapter 13 counsel appeals the bankruptcy court’s1 order reducing his
attorney fee request on the grounds that the court abused its discretion by considering the
1
The Honorable John C. Minahan, Jr., United States Bankruptcy Judge for the District of
Nebraska.
hourly rate and number of hours typically charged in a Nebraska Chapter 13 case and by
refusing to award compensation at counsel’s full hourly rate for travel time. Because the
court made a lodestar calculation in determining reasonable compensation, the court did not
abuse its discretion and we affirm.
FACTS
Appellant, James Edward Bachman, filed a Chapter 13 petition for Mr. and Mr.
McKeeman on January 15, 1998. The court confirmed debtors’ second amended Chapter 13
plan on January 6, 1999. During the case, counsel filed three fee applications seeking
approval of fees in the total amount of $3,595.00 for legal services rendered and $205.30 for
reimbursement of expenses.2 In the first fee application, counsel requested fees of $2,260.00
for 17 hours of attorney time billed at $125.000 per hour, and three hours of legal assistant
time billed at $45.00 per hour. This application covered the time period from January 13,
1998 through June 11, 1998. The second application, covering the period of January 1, 1998
through November 11, 1998, sought additional fees of $1,123.00. The court approved
counsel’s second fee application but did not enter an order with respect to the first
application.3
2
Although the order on appeal recites that counsel sought approval of fees in the total
amount of $3,575.00 and cost reimbursement of $205.30, Mr. Bachman’s third fee application
requested fees in the amount of $3,595.00 and no amount for reimbursable costs and expenses.
In fact, although the court can glean that counsel incurred expenses of $205.30 from counsel’s
billing records attached to the second and third fee applications, none of the attorney fee
applications actually requested expense reimbursements.
3
The order approving the second fee application does not state the dollar amount of fees
allowed. Rather, that order simply recites that the motion is granted. In the journal entry that is
the subject of this appeal, however, the court stated that it awarded Mr. Bachman fees in the
amount of $1,107.00 under the second fee application. The amount of $1,107.00 is reflected on
the second application as the balance of fees remaining after deducting amounts received to date.
This balance ($1,107.00), however, appears to be the result of an error in counsel’s calculation.
Total fees requested were $1,123.00, while counsel’s receipts to date were listed as $160.00.
The balance of additional fees, therefore, should have been only $963.00 ($1,123 - $160) rather
than $1,107.00 ($1,123 - $16). Further, the additional fees requested ($1,123.00), plus the
amount previously sought in the first application ($2,260.00) exceed the total amount of
$3,260.00 listed as charges for professional services on the billing statement attached to the
second application. Based upon these errors and inconsistencies, even though this court affirms
2
Mr. Bachman filed a third application in January 1999, covering the entire time period
from filing through confirmation. In that application, he sought to have total fees of $3,595
paid through the plan. The Chapter 13 Trustee objected to the third fee application on the
grounds that total fees were in excess of customary fees of $1,100.00 allowed in Chapter 13
cases, and that although the case may have involved unusual tax issues, the full amount
requested appeared unreasonable. The trustee further objected that travel time was billed at
counsel’s full hourly rate of $125.00 and urged that various inconsistencies in counsel’s
applications made it difficult to ascertain the precise amount of fees requested.4
The bankruptcy court conducted a hearing on the third fee application on March 10,
1999. Mr. Bachman supported this fee request with an affidavit that explained the nature of
the tax matters involved, and at the hearing, he asserted that his efforts related to the debtors’
tax liabilities, as well as, his own health problems caused delays which increased fees in this
case. The court took the issue of fees under advisement, and by its journal entry of April 2,
1999, allowed fees in the reduced amount of $1,300.00 inclusive of amounts previously
allowed. In making its fee determination, the court performed a lodestar analysis, finding the
reasonable hourly rate for these legal services to be $110.00 per hour, and finding $45.00 per
hour to be the reasonable rate for counsel’s legal assistant. The court further found that while
in a typical Chapter 13 case, ten hours of attorney time at $110.00 is reasonable, in this case,
eleven hours of attorney time and two hours of legal assistant time were reasonable, resulting
in a total fee award of $1,300.00 [(11 x $110) + (2 x $45)]. Although the court found all of
counsel’s travel time was necessary, the court also held that it was unreasonable to charge
$110.00 per hour for travel time.
the bankruptcy court’s award of fees, we doubt whether the amount awarded under the second
application can clearly be known from this record.
4
Some of these inconsistencies were noted in footnotes 2 and 3 above. Other
inconsistencies include Mr. Bachman’s time summary attached to the third fee application which
reflected accumulated fees of $3,710.00, while the application sought $3,595.00. Further, the
third application enumerated “total time and billings for services to date” as 1.00 hour at $125.00
for a total of $450.00. As stated previously, this court finds great difficulty in following the logic
of counsel’s fee applications and in connecting the information in the billing records to amounts
requested on the fee applications.
3
On appeal, Mr. Bachman maintains that the court abused its discretion in considering
rates and hours incurred in a “typical” Chapter 13 case. He argues that the court thereby
employed an arbitrary standard for allowance of fees. Further, Mr. Bachman urges that by
precluding counsel from billing travel time at his full hourly rate, the court interfered with
his attorney client relationship. He asserts that his clients did not object to the reasonableness
of counsel’s fees and that by preventing him, as an outstate attorney, from receiving full
compensation for his travel time, the court has placed him at a competitive disadvantage and
denied his clients the right to select counsel of their choice.
STANDARD OF REVIEW
The Bankruptcy Appellate Panel of this Circuit has twice previously addressed
appeals from denial of attorneys’ fees and has well stated the applicable standard of review,
as well as, the analysis required from a bankruptcy court when considering professional fees
under 11 U.S.C. § 330. See Nelson v. Mickleson (In re Pfleghaar), 215 B.R. 394 (B.A.P. 8th
Cir.1997); Chamberlain v. Kula (In re Kula), 213 B.R. 729 (B.A.P. 8th Cir. 1997). On
appeal, we review the bankruptcy court's findings of fact, whether based upon oral or
documentary evidence, for clear error, and its legal conclusions are reviewed de novo.
Fed.R.Bankr.P. 8013; First Nat'l Bank of Olathe v. Pontow, 111 F.3d 604, 609 (8th
Cir.1997). Decisions regarding an award of fees are subject to the 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, fails 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, 317 (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). Finally, our 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). See Kula, at 735.
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DISCUSSION
Section 330 governs allowance of attorney’s fees and states, 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
(B) reimbursement for actual, necessary expenses.
Subsection (a)(2) permits the court, on its own motion or on the motion of the a trustee
or other party in interest, to award compensation that is less than the amount of compensation
requested. Subsection (a)(3)(A) lists various factors the court shall consider in determining
the amount of reasonable compensation including:
- the time spent;
- the rates charged;
- the necessity of the services for administration of the case;
- the reasonableness of the amount of time spent in light of the complexity,
importance and nature of the problem, issue, or task addressed; and
- the reasonableness of the requested compensation compared to the customary
compensation charged by comparably skilled practitioners in non-bankruptcy cases.
(11 U.S.C. § § 330(a)(3)(A)-(E)).
Section 330(a)(4)(B) separately addresses Chapter 12 and Chapter 13 cases and provides that
the court may allow 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 section
330.
In Kula, we explained that the lodestar method is the appropriate approach for
determining reasonable compensation under § 330. Kula, 213 B.R. at 736 (citing P.A.
Novelly v. Palans (In re Apex Oil Co.), 960 F.2d 728, 731 (8th Cir. 1992)). The lodestar
amount is calculated by multiplying the reasonable hourly rate by the reasonable number of
hours required. To determine the reasonableness of rates and hours, 11 U.S.C. §
330(a)(3)(A) directs courts to consider the factors listed above. Many courts, including the
bankruptcy court in this case, also apply similar criteria set forth in Johnson v. Georgia
5
Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974); Kula, at 738, In re Malewicki, 142
B.R. 353, 355 (Bankr. D. Neb. 1992) to determine the reasonableness of attorneys’ fees.
Because the factors enumerated in Johnson have been detailed in our prior decisions and
because they parallel the factors listed in 11 U.S.C. § 330(a)(3)(A), they will not be listed
again here.
In this case, the bankruptcy court conducted a lodestar analysis and specifically
referred to and applied the Johnson criteria in determining the reasonable number of hours
for the services provided and the reasonable hourly rate for such services. The court
reviewed the Chapter 13 plans, bankruptcy schedules, statement of financial affairs,
counsel’s fee applications, the detailed time entries in counsel’s attached billing records,
counsel’s affidavit in support of his third application, as well as, other pleadings, including
several motions to dismiss filed in this case. After reviewing the work performed in
representing the debtors in this Chapter 13 case, the court determined that the case presented
no novel or difficult legal issues, nor required expertise higher than that required in the
typical Chapter 13 case. Consequently, the court found no reason to deviate greatly from the
reasonable rates or hours charged in a typical Chapter 13 case.
Consideration of amounts charged in a “typical” Chapter case is consistent with the
tests set forth above and does not show that the court improperly employed an arbitrary
standard to award fees. The Johnson factors specifically require consideration of customary
fees charged, awards in similar cases, and the novelty of the issues involved. Johnson, 488
F.2d at 717-19. “[A] court can legitimately take into account the typical compensation that
is adequate for attorney’s fees in chapter 13 cases, as long as it expressly discusses these
factors in light of the reasonable hours actually worked and reasonable hourly rate.” Boddy
v. United States, 950 F.2d 334, 338 (6th Cir. 1991). Here, the court explicitly considered the
actual hours worked and determined that, in light of the standard services rendered and the
ordinariness of the case, reasonable time included eleven hours of attorney time and two
hours legal assistant time. Similarly, in light of the routine nature of the proceeding, the
court applied a reasonable rate of $110.00 rather the requested rate of $125.00. In so
holding, the bankruptcy court did not arbitrarily impose a flat fee. Rather, the court
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considered the reasonable rates and hours charged in Chapter 13 cases in its district and then
applied those rates to this case, resulting in a lodestar amount of $1,300.00.
When a bankruptcy court determines that a case presents routine Chapter 13 matters,
the court may review the fees requested in light of fees typically charged, and may reduce the
requested fees accordingly. It is not necessary for the court to find that the time spent on any
given task was excessive before reducing the award. In re Howell, 226 B.R. 279, 280
(Bankr. M.D. Fla. 1998) (an hour-by-hour review in standard Chapter 13 cases would be a
waste of judicial resources because such cases are susceptible to standard rates); In re
Shamburger, 189 B.R. 965, 973 (Bankr. N.D. Ala. 1995)(citing cases holding that hour-by-
hour analysis of fees is not required where application is voluminous). Here, the court found
that while the case involved tax matters, it presented no issues that were novel or required
skill not common to all Chapter 13 cases. For this reason, the court determined that the total
fees requested were unreasonable, and it appropriately reduced fees to an amount --
determined by hours and rate -- to be reasonable. There is no basis to find error in the court’s
conclusion.
Counsel also challenges the court’s holding that it was unreasonable to charge the full
hourly rate for travel time in a routine Chapter 13 case, and counsel asserts that by
disallowing full fees for travel time, the court has impinged on counsel’s ability to serve his
clients and has placed him at a competitive disadvantage. While there is authority to support
an award of compensation at the full hourly rate for attorney travel time, (see In re Zepecki,
224 B.R. 907, 911 (Bankr. E.D. Ark. 1998); In re Braddy, 195 B.R. 365, 368 (Bankr. E.D.
Mich. 1996) (addressing issues of competitive disadvantage if travel time is not reimbursed
at the full rate)), other authorities equally support the conclusion that attorneys should not be
compensated at the full hourly rate while traveling because travel time is not time
productively providing “legal services.” In re Anderson Grain Corp., 222 B.R. 528, 532
(Bankr. N.D. Tex, 1998) (ludicrous to charge full hourly rates for travel time); In re Bennett
Funding Group, Inc., 213 B.R. 234, 251 (Bankr. N.D. N.Y. 1997) (allowing one-half normal
rate unless work performed during the travel); In re Automobile Warranty Corp., 138 B.R.
72, 78 (Bankr. D. Colo. 1991) (collecting cases with varying approaches).
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The Eighth Circuit has addressed compensation for attorney travel time in the context
of civil rights and employment discrimination proceedings with varying results. Because the
lodestar method applies to calculation of reasonable attorney’s fees under such federal
statutes, those cases provide guidance here. Kula, at 736 (citing use of the lodestar method
in determining fees under various federal statutes). In Craik v. Minnesota State University
Board, 738 F.2d 348, 350 (8th Cir. 1984), for example, the Eighth Circuit awarded attorney’s
fees for travel time at counsel’s full hourly rate, finding the charges for travel were
reasonable and were the result of an unusually complex employment discrimination appeal.
Conversely, in McDonald v. Armontrout, 860 F.2d 1456, 1462 (8th Cir. 1988), a civil rights
action, the court affirmed a district court decision which reduced by fifty percent the hourly
rate for attorney travel time, holding that the award was reasonable and within the court’s
discretion. Finally, in Winter v. Cerro Gordo County Conservation Board, 925 F.2d 1069,
1074 (8th Cir. 1991), the appellate court affirmed disallowance of all expenses for travel,
finding the expense determination to be within court’s discretion. In McDonald, the court
rejected the argument that Craik required travel to be compensated at counsel’s full hourly
rate and explained that its previous decisions held only that compensating counsel at the full
rate was not unreasonable, and that no case precedent mandated that fees for travel had to be
paid at the full rate. McDonald, at 1463. In the instant case, based upon its experience in
valuing services in Chapter 13 cases and the customary fees charged, the bankruptcy court
determined that it was unreasonable in its district to charge the full hourly rate for travel time.
This decision was within the court’s discretion and we find no abuse of that discretion.
Finally, counsel maintains that the court’s determination places him at a competitive
disadvantage with counsel who do not travel from outstate areas. He further asserts that the
court’s decision impedes his client’s right to counsel of their choice by making bankruptcy
cases cost prohibitive for outstate attorneys. Some courts have found these arguments
persuasive as a basis for compensating travel time at an attorney’s full hourly rate. See In
re Braddy, at 367-68; In re Raytech Corp., 206 B.R. 646, 651(Bankr. D. Conn. 1997); In re
Spanjer Brothers, Inc., 191 B.R. 738, 755 (Bankr. N.D. Ill. 1996). The analysis of these
cases is not compelling here, however. In Braddy, for example, the court had before it only
the Chapter 13 trustee’s objection to counsel’s travel time, not an objection to the overall
reasonableness of counsel’s fees, and that court’s standards for reasonable compensation far
8
exceeded what is reasonable in Nebraska. There, the court awarded compensation for over
23 hours of legal time at $175.00 per hour. The Braddy court simply was not operating on
the same level of reasonableness regarding Chapter 13 fees as the court in Nebraska so that
its treatment of travel time is not persuasive.
Raytech and Spanjer were both Chapter 11 cases in which policy concerns of
attracting competent counsel to the field of bankruptcy influence whether counsel should be
compensated for travel at counsel’s full rate. Raytech, at 652. Because Chapter 13 case are
more routine and involve standardized procedures, such policy concerns are less applicable,
and we defer to the bankruptcy court for judgments pertaining to the competitiveness and
development of its local legal community. In Chapter 13 cases, the relevant inquiry is the
value of the services to the debtor. 11 U.S.C. § 330(a)(4)(B), and although counsel’s clients
may have been willing to pay his fees, we find no abuse in the court’s decision to reduce
those fees.
Accordingly, for the forgoing reasons, we affirm the decision of the bankruptcy court.
A true copy.
Attest:
CLERK, U.S. BANKRUPTCY APPELLATE PANEL,
EIGHTH CIRCUIT
9