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In Re the Colad Group, Inc.
Citations: 336 B.R. 36; 2005 Bankr. LEXIS 2565; 45 Bankr. Ct. Dec. (CRR) 227; 2005 WL 3529613Docket: 1-17-10129
Court: United States Bankruptcy Court, W.D. New York; December 14, 2005; Us Bankruptcy; United States Bankruptcy Court
In the case of *In re The Colad Group, Inc.*, Hodgson Russ LLP, serving as co-counsel for the Official Committee of Unsecured Creditors, filed a "First Application for Interim Allowance of Compensation for Fees and Reimbursement of Expenses." The United States Trustee objected to the request for payment related to "Employment and Fee Applications," arguing that the claimed 104.6 hours and $19,068.00 in fees for this category were excessive, representing 33% of the total time and 25% of total fees requested. The Trustee specifically criticized a paralegal's allocation of 15.5 hours for preparing an application to appoint an accountant, suggesting that the fees exceeded the value of the accountant's services. In response, Hodgson Russ LLP contended that the contested fees should be assessed as a percentage of total time spent by both co-counsel, not just their firm. They provided a supplemental breakdown to demonstrate a more reasonable allocation of time for each professional's appointment. The firm argued that the reasonableness of fees is not strictly defined by their proportion of total services, noting that complex appointments may justifiably require higher preparation costs. The Bankruptcy Court reviewed the fee application and found that while attorney services were reasonable, the paralegal's time was excessive. The paralegal recorded 57.3 hours for the "Employment and Fee Applications" category, including significant hours for routine applications, which the court deemed excessive and warranting further scrutiny. Overall, the court acknowledged the potential for excessive charges while affirming the need for a careful review of itemized services. The court evaluated the compensation request from Hodgson Russ LLP for paralegal services, finding that the time claimed for preparing a preliminary draft was excessive. It emphasized that billing rates for service providers should reflect factors such as education, competence, and risk. Paralegals, lacking formal legal training and professional accountability, should not be billed at rates close to those of attorneys. Hodgson Russ LLP proposed billing its paralegal at $130 per hour, nearly the same as the lowest attorney rate on the case. Although paralegal services can yield savings when billed at lower rates, the court noted that the paralegal's efficiency was inadequate for such a high rate. The firm requested $7,449 for 57.3 hours of paralegal work, but the court determined a reasonable amount to be $5,000, reducing the compensation by $2,449. Overall, the firm's application sought $75,170 for services and $1,558.29 in expenses, which was partially approved. The court allowed reimbursement of expenses in full but reduced the total compensation to $72,721, approving interim payment of 90% of this amount, equating to $65,448.90. The remaining balance of $7,272.10 will be addressed upon case completion.