In re Bond

Citations: 271 B.R. 590; 2000 Bankr. LEXIS 1852; 2000 WL 33673850Docket: Nos. 97-74395, 98-70007, 95-72240, 98-73553

Court: United States Bankruptcy Court, C.D. Illinois; April 27, 2000; Us Bankruptcy; United States Bankruptcy Court

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On remand from the United States District Court, Bankruptcy Judge Larry L. Lessen provided a detailed rationale for partially denying Vicki A. Dempsey's Motions for Additional Attorney’s Fees in five bankruptcy cases. Dempsey filed an unverified motion on February 16, 1999, seeking additional fees calculated by multiplying her hours worked by an hourly rate of $110. A hearing was held on March 31, 1999, but Dempsey did not appear, and her co-movant, Marcia L. Moellring, presented no evidence, choosing instead to stand on the motions as filed. 

On May 7, 1999, the Court allowed fees up to $1,000 in each of the four cases, while denying the remainder of the requests, which totaled amounts exceeding $1,000 in each case. Dempsey appealed this decision, leading to the District Court's remand for further explanation. The Court reiterated that the burden of proof lies with the applicant to demonstrate entitlement to the requested fees. Dempsey declined the opportunity to present evidence or testimony regarding her fee requests. 

The Court's rationale for denying fees beyond $1,000 was based on the principle that the reasonable time billed does not equate to all time expended. It noted that factors such as attorney experience, case preparation, and delegation of tasks significantly affect the time required to complete a Chapter 13 case. The Court emphasized that time spent by an attorney is not a reliable indicator of a reasonable fee, highlighting that inefficiencies often lead to inflated billable hours.

Duties not requiring an attorney's expertise should be performed by non-attorneys to avoid unreasonable billing. Attorneys should not charge their standard hourly rates for tasks that can be handled by support staff, such as preparing bankruptcy schedules. If an attorney performs such tasks, their fees should align with those of a paralegal or secretary. A typical Chapter 13 case should require only three to four hours of attorney time, in addition to staff time, leading to an effective hourly rate exceeding $200 given the $1,000 fee cap. 

The Court did not determine whether Ms. Dempsey's claimed hourly rate of $110 was reasonable, noting that other experienced attorneys in the area charge between $90 and $100 per hour. Ms. Dempsey failed to provide evidence to support her rate, leading the Court to conclude it was not reasonable. The Court referenced a recent policy change from the United States District Court for the Central District of Illinois, which raised the review level for Chapter 13 attorney fees to $1,000. 

Applying factors from Johnson v. Georgia Highway Express, Inc., the Court found the cases in question were simple, straightforward, and free of novel legal issues or complications. Further, there was no indication that Ms. Dempsey or her colleague faced any constraints that would justify higher fees. The Court emphasized that the $1,000 threshold for routine Chapter 13 cases is presumptively reasonable, allowing attorneys to seek higher fees only by demonstrating specific justification for exceeding that amount. The policy aims to streamline the handling of straightforward cases in the Bankruptcy Court.

The Court, its staff, the standing Trustee, and the U.S. Trustee can assume that attorney fees in Chapter 13 cases are reasonable without requiring a review of every fee petition. This approach aims to protect unsecured creditors, as attorney fees impact their dividends from the Chapter 13 plan. Attorneys benefit from not needing to file hiring applications or maintain time records, which can lead to varying profitability across cases. While attorneys can request additional fees in rare instances of undercompensation, a threshold fee structure often results in the minimum fee being charged.

Debtors surrender their financial interest in funds exceeding reasonable expenses, which are then allocated to the Chapter 13 plan. The trustee's fee, based on the amount paid into the plan, remains unaffected by attorney fees, creating no incentive to limit those fees. Consequently, higher attorney fees primarily impact unsecured creditors, who typically do not contest fee applications due to modest dividends. 

In 1999, the Springfield division saw 253 Chapter 13 filings, with five attorneys managing 108 cases expressing satisfaction with fee awards. Ms. Dempsey, who filed 16 cases, is notably concerned about undercompensation, but the Court attributes her issues to inefficiency. To prove fee reasonableness, an attorney must substantiate the time and hourly rate, and unverified requests for additional fees lack merit. The Court determined the reasonableness of fees in four specific cases after thorough review of case files and hearings, considering the necessary contributions of debtor's counsel.

The Court emphasizes its commitment to not deny fees to professionals when justified. However, professionals must demonstrate their entitlement to extraordinary fees in typical cases; the Court cannot assume entitlement without evidence of reasonableness. Rulings are based on the Kindhart mandate and established case law, which places the burden of proof on the applicant. In this instance, Ms. Dempsey did not attend the hearing on her Motions for Additional Attorney’s Fees and was represented by Ms. Moellring, who did not present any evidence. Contrary to Ms. Dempsey's claim, a transcript of the March 31, 1999, hearing was available and confirmed her absence. The Court was unable to question the applicant regarding the reasonableness of the fees due to the lack of evidence presented. Ms. Dempsey's counsel suggested that Kindhart indicates she should receive fees without scrutiny, but the Court disagrees, interpreting Kindhart differently. The District Court had previously set a standard fee for Chapter 13 cases at $1,000, subject to review. The Court recommended allowing Ms. Dempsey's fees based on the extensive judicial history of the Kindhart case, hoping this resolution would prevent further fee requests for appeals. Ultimately, the matter was concluded.

No evidence supports the reasonableness of Ms. Dempsey’s $110 hourly rate in the Kindhart cases. She has not provided any proof of what constitutes a reasonable hourly rate for her services, nor has she presented testimony from other attorneys regarding standard rates in the Quincy area. Ms. Dempsey failed to file a required application for employment by the estate under Section 330 of the Bankruptcy Code, submitting only a statement of fees as mandated by Bankruptcy Rule 2016. Additionally, she did not seek court authority to represent the estate after confirmation, which means she is not entitled to compensation for services rendered post-confirmation.

Ms. Dempsey did not attend the March 31, 1999, hearing and relied solely on the Kindhart decision to support her fee motions. The court found no justification for deviating from a standard $1,000 fee, as the cases handled were routine Chapter 13 matters, with no extraordinary services provided by Ms. Dempsey. The Kindhart ruling established $1,000 as the threshold fee but did not provide criteria for evaluating fee applications. The court has adhered to the precedent set forth in Kindhart while considering the motions for additional attorney's fees. Although Ms. Dempsey filed the motion for additional fees, the services in question were performed by her partner, Marcia L. Moellring. In one case, Ms. Dempsey's requested fees did not exceed $1,000, and that motion was granted without appeal.