Menu    1 ABR 61 

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA
605 West 4th Avenue, Anchorage, AK 99501-2296




_______________________________x 
In re

NORTHERN MARINE SERVICES, INC.,
ein: 92-01000083

 
 Case No. A88-00229
Chapter 7

Debtor(s).MEMORANDUM REGARDING FEE
APPLICATIONS
_______________________________x 

      A hearing was held in the related cases, A88-00199, In re Pickworth and A88-00229, In re Northern Marine Services, Inc., concerning the fee applications of debtors' attorneys, Copeland Landye Bennett & Wolf, which was challenged by the trustee, First National Bank of Anchorage, and the Small Business Administration. The debtor challenged the trustee's fees and the fees of the trustee's attorneys, Cabot Christianson & Associates.

      1. FEES OF THE TRUSTEE AND CABOT CHRISTIANSON - The court approved the fee applications of the trustee and Cabot Christianson, Esq., in both cases. No creditor objected to the fees, and the court found them reasonable. The trustee, with the full concurrence of the SBA and First National Bank of Anchorage disposed of collateral and took advantage of the Exxon Valdez oil spill. While there may have been a slight distortion by not TOP    1 ABR 62  analyzing the fees under § 506(c), it is not significant enough to require recalculation in the context of this case where the secured creditors benefitted are also the largest unsecured creditors also.

      2. COPELAND LANDYE BENNETT & WOLF FEE APPLICATION -

      There was no objection to the costs applied for and these will be allowed. On the other hand, the objection of the SBA, First National and the trustee to Copeland Landye's fees were among the most forceful I have observed in three and a half years on the bench.

      Copeland Landye asked for:

PICKWORTH CASEFEES COSTSTOTAL
Chapter 11 $26,339.00$1,781.23$28,120.23
Chapter 7$20,954.00$790.12$21,744.12
TOTAL $47,293.00$2,571.35$49,864.35

NMSI CASEFEESCOSTSTOTAL
Chapter 11$37,955.00$1,977.40$39,932.40
Chapter 7$7,352.00$319.95$7,671.95
TOTAL$45,307.00$2,297.35$47,604.35

      11 U.S.C. § 330(a) governs the award of attorneys fees in bankruptcy cases. It provides:

      (a) After notice to any parties in interest and to the United States trustee and a hearing, and subject to sections 326, 328, and 329 of this title, the court may award to a trustee, to an examiner, to a professional person employed under section 327 or 1103 of this title, or to the debtor's attorney- (1) reasonable compensation for actual, necessary services rendered by such trustee, examiner, professional person, or attorney, as the case may be, and by any paraprofessional persons employed by such trustee, TOP    1 ABR 63  professional person, or attorney, as the case may be, based on the nature, the extent, and the value of such services, the time spent on such services and the cost of comparable services other than in a case under this title; and (2) reimbursement for actual, necessary expenses.

      Under the prior bankruptcy law, attorney fees were restricted by a principle of "economy of administration" under which attorneys in a bankruptcy case might be paid less generously for comparable bankruptcy work than in another field of law. In re Beverly Crest Convalescent Hospital, Inc., 548 F.2d 817 (9th Cir. 1977). Beverly Crest was specifically disavowed in the legislative history of the Bankruptcy Reform Act of 1978. H.R. No. 95-595, 95th Cong., 1st Sess. 329-30 (1977). The Code seeks to compensate bankruptcy attorneys from the estate on a scale commensurate to what attorneys would be able to command in other areas of the law. The purpose is to foster competent legal representation of trustees and debtors in bankruptcy. See In re Manoa Finance Co., Inc., 853 F.2d 687, 689 (9th Cir. 1988) and Remarks of the Honorable Don Edwards, 124 Cong.Rec. H11, 091-2 (Sept. 28, 1978); S17, 408 (Oct. 1978).

      The reduction in fees made in this case are done with this legislative history in mind. The cuts are not to effect an "economy of administration," but because the court finds the number of hours claimed for the work done is excessive.

      The calculation of attorney fee awards in bankruptcy is discuss in In re Yermakov, 718 F.2d 1465 (9th Cir. 1983). The TOP    1 ABR 64  court said that the lodestar method was the primary guide to calculating the allowance of fees in bankruptcy cases, id at 1471:

      The primary method used to determine a reasonable attorney fee in a bankruptcy case is to multiply the number of hours expended by an hourly rate. Southwestern Media, Inc. v. Rau, 708 F.2d 419, 427 (9th Cir.1983). Under the present Bankruptcy Code, the hourly rate must be based on the rate that would be charged for comparable services in a non-bankruptcy case. 11 U.S.C. § 330(a)(1); see H.R.Rep. No. 595, 95th Cong., 1st Sess. 330-31 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6286. Factors appropriate to the determination of a comparable rate in this case would include (1) the rate normally charged by Fitzsimmons and Weldon in comparable non-bankruptcy cases where an hourly fee basis is used; (2) the prevailing rate for such work in the area during the period in question; and (3) the number of hours of work claimed, if any, that were actually performed by persons whose services are generally billed at a lower rate. Southwestern Media, 708 F.2d at 428; see Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974) (listing numerous factors to be considered in awarding attorneys' fees).

See also, In re Manoa Finance Co., Inc. at 690-692 and R. McCullough, II, Attorneys' Fees in Bankruptcy: Toward Further Reform, 95 Comm.L.J. 133, 154-161 (1990).

      All parties acknowledge that a debtor's attorney is not a guarantor of the debtor's success in a bankruptcy proceeding. The results obtained are, however, a factor to be considered. See In re Temple Retirement Community, Inc., 97 B.R. 333, 338 (Bankr.W.D. Tex. 1989). The result of Copeland Landye's eight months of representation of the debtors during the chapter 11 phases of the two cases was not a success. It was marked by contentiousness and distrust of the SBA and First National Bank of TOP    1 ABR 65  the debtors, and visa versa. The chapter 11 case was ultimately converted. The amount of time claimed for its chapter 7 representation was far in excess of what the estate should bear.

      The objecting parties did not contest the hourly rate claimed of $160.00 per hour, and the court, for the purposes of this opinion, will use that rate in the lodestar formula.

      There was vehement objection to the number of hours reasonably expended. After hearing the testimony of Robert Hume, Kenneth Battley, and Jo Ann Pickworth, and reviewing the files in both cases, I conclude the number of hours charged are excessive given the tasks performed and the course of these cases.

      Attached as Appendix A is the court's analysis of what Copeland Landye sought (taken from the "Response to Objection to Attorney Fees" filed by Copeland Landye filed on July 26, 1990) and what the court considers reasonable for the tasks involved. The amount of hours allowed and the dollar extension appear in the right hand columns and totals 210.55 hours for chapter 11 work in both cases, as opposed to 404.70 hours. For chapter 7 work in both cases, 30.00 hours was allowed as opposed to 176.80 claimed. The total allowed is 240.55 hours or $38,488.00 to be prorated between the two estates.

      Copeland Landye claimed about 58.65 hours for the relief from stay matters, the equivalent of a week-and-a-half for these matters. I have reviewed the files, and allowing for office preparation, I found this excessive. More that three full days, or TOP    1 ABR 66  25 hours, should have been more than adequate to accomplish these matters.

      There was a similar cut in the amount for the cash collateral aspect of the case. Copeland Landye claimed 30.95 hours, whereas 16 hours (two full days) should have been adequate, especially since the issues overlapped with the relief from stay issues.

      When reviewing the general category on services not grouped by a specific project, the debtor claimed 166.38 hours. These were cut to 100.00 in some rough comparison to the cuts in the specific categories, and in light of Mr. Hume's acknowledgment that the Pickworths were extremely "deliberative" and required more than the usual amount of time to counsel. The reduction in this category was a percentage (smaller than the percentage of cuts in the other categories to give Copeland Landye the benefit of a doubt) of the 166.38 hours claimed.

      Copeland Landye claims 66.92 hours for plan and disclosure statement. The plan filed in the Pickworth case was principally to save their residence. Mr. Hume indicated he had begun preparing a disclosure statement in the Northern Marine case, but the case was converted before one was filed. Allowance of 35 hours is reasonable in light of the level of complexity of this case and the unworkable plan produced in the Pickworth case.

      In particular, I reduced the time concerning chapter 11 exemption work from 23.55 hours to 5.00 hours. To be compensable administrative expenses, the work must generally be for the benefit TOP    1 ABR 67  of the estate. 11 U.S.C. § 503(b)(2) allows administrative expenses for fees awarded un 11 U.S.C. §330(a). These include expenses for actual, necessary services performed by debtor's attorney. A debtor may have motives and concerns in conflict with, or differ from, the best interests of the estate. A bankruptcy court may deny fees where the attorney is working for the individual debtor instead of the estate. In re Walter, 83 B.R. 14, 19 (9th Cir.BAP 1988). Mr. Hume of Copeland Landye argues that the court should follow In re Deihl, 80 B.R. 1 (Bankr.D.Me. 1987) which would allow the award of fees where the work is for the debtor's exemption or defending dischargeability. The majority of cases restrict the allowance of fees for representation of a debtor's interest per se for such things as dischargeability or exemption objection hearings. See e.g. In re Reed, 890 F.2d 104 (8th Cir. 1989), In re Alderson, 114 B.R. 672, 681 (Bankr.D.S.D. 1990), In re Grabill Corp., 110 B.R. 356, 359 (Bankr.N.D. Ill. 1990), and In re Osterberg, 109 B.R. 936 (Bankr.E.D.Wisc. 1990).

      While some amount may be justified even if it relates to a debtor's self-centered concerns, the exorbitant amount sought to be charged to the estate for matters in which Copeland Landye was primarily looking after the debtors' problems will not be allowed. Therefore, I found the claim of almost three full days (23.55 hours in the chapter 11) for exemption matters to be grossly excessive. Copeland Landye claimed another 13.90 hours in the chapter 7 phase for work related to exemptions.

TOP    1 ABR 68  With respect to the hours claimed for chapter 7 work, the objecting parties and the court found the 176.80 hours claimed as particularly offensive. 30.00 hours is more appropriate. I have determined this should be adequate to compensate Copeland Landye for all tasks such as preparing reports under Bankruptcy Rule 1019, attending the meeting under § 341, and for reasonable advise to the debtors. Copeland Landye claims to be entitled to the equivalent of about four-and-a-half weeks work for the chapter 7 work. The allowance of 30.00 hours is in line with reality. I have not attempted to categorize this, but merely allowed about 15 hours per case.

      From the beginning of this case the court and creditors perceived the debtors as not being straight forward in their dealings with the court and secured creditors. This may not be principally the fault of Copeland Landye, but the situation was exacerbated by Copeland Landye's representation of conflicting interests during the bankruptcy. Cf. In re Lee, 94 B.R. 172 (Bankr. C.D. Cal. 1988). Even without the analysis above, the court would have been justified in cutting the Copeland Landye fees.

      The court wants to foster quality representation of parties in the Bankruptcy Court in Alaska. I do not want the word on the street to be that the Bankruptcy Court in Alaska is niggardly in the allowance of fees. I do, however, have the duty to independently review fee applications, and reduce them where TOP    1 ABR 69  justified. In re Pothoven, 84 B.R. 579, 583 (Bankr. S.D.Iowa 1988). The cuts are justified in these cases.



DATED: August 9, 1990 
  
 __/s/ Herbert A. Ross__
 HERBERT A. ROSS
 Bankruptcy Judge


Serve: 
Cabot Christianson, Esq., for Trustee 
Robert Hume, Esq., for Copeland Landye and Debtors 
John Beard, Esq., for First National Bank of Anchorage 
Jon DeVore, Esq., and Karlee Gaskill, Esq., for SBA 
United States TrusteeH3068




APPENDIX "A"
PICKWORTH/NMSI FEE APPLICATION
OF COPELAND, LANDYE, BENNETT & WOLF
PROJECTHOURS PER
CLB&W
FEES PER
CLB&W
HOURS
ALLOWED
FEES
ALLOWED
CHAPTER 11 CLAIM:
CASH COLLATERAL30.95$4,952.0016.00$2,560.00
PLAN AND DISCL. STMT. 66.92 $10,707.20 35.00 $5,600.00
RELIEF FROM STAY 58.65 $9,384.00 25.00 $4,000.00
BR 2004 9.20 $1,472.00 1.00 $160.00
SETTLEMENT 40.10 $6,416.00 20.00 $3,200.00
EXEMPTIONS 23.55 $3,768.00 5.00 $800.00
D. LONG EVICTION 8.55 $1,368.00 8.55 $1,368.00
DISCHARGEABILITY 0.40 $64.00 0.00 $0.00
GENERAL 166.38 $26,620.80 100.00 $16,000.00
TOTAL CH 11404.70$64,752.00210.55$33,688.00
 
CHAPTER 7 CLAIM:
SBA/FNBA GUARANTY1.80 $288.00 0.00 $0.00
CH 11 SETTLEMENT 0.20 $32.00 0.00 $0.00
TONGASS LEASE 10.40 $1,664.00 0.00 $0.00
D. LONG EVICTION 0.10 $16.00 0.00 $0.00
EXEMPTIONS 13.90 $2,224.00 0.00 $0.00
DISCHARGEABILITY 17.60 $2,816.00 0.00 $0.00
FINAL SETTLEMENT 23.25 $3,720.00 0.00 $0.00
GENERAL 109.55$17,528.0030.00 $4,800.00
TOTAL CH 7176.80$28,288.0030.00$4,800.00
TOTAL CH 11 AND CH 7 581.50 $93,040.00 240.55 $38,488.00
APPENDIX "A"