The Bankruptcy Law Firm, PC v. Siegel (In re Waksberg M.D., Inc.)

Summarized by Lars Fuller , BakerHostetler
10 years 2 months ago

Citation:

BAP No. CC-15-1109-TaKuKi (BAP 9th Cir. Dec. 22, 2015)

Tag(s):

Ruling:

The BAP for the 9th Circuit affirmed the ruling of the bankruptcy court (C.D. Cal.) allowing fees and costs as an administrative expense, but in a substantially lower amount than desired by claimant. The BAP agreed that the bankruptcy court did not abuse its discretion under 503(b)(1)(A) in reducing claim amount from $202k to $26k for creditor attorney's fees actually incurred by creditor law firm in obtaining beneficial litigation result for estate. BAP agreed that notwithstanding $2.6 million benefit for estate, claimant failed to establish reasonableness of total fees, including $800 hourly rate, despite being former bankruptcy judge and Yale Law School graduate, and bankruptcy judge's reductions to fee claimed were reasonable under either the Lodestar analysis or the "fundamental fairness" analysis of Reading Co. v. Brown. BAP rejected appellant's argument that bankruptcy judge exhibited bias or enmity toward claimant, and found that claimant's contentious tenor at evidentiary hearing on claim, along with failure to present evidence in support of fee claimed, justified reductions. Appropriate measure of claim remained "reasonableness," regardless of whether services were necessary, justified, or resulted in substantial benefit to estate. Blended rate of $400 per hour for both former judge and associate, who performed clerical tasks and research, was not an abuse of discretion. Similarly, bankruptcy court's reductions for time spent on clerical task, items of legal "overhead," or for what the bankruptcy judge determined to be excessive time spent on compensable tasks were also not an abuse of discretion. BAP agreed that the bankruptcy court did not abuse discretion in applying Lodestar analysis to determine reasonable fee for benefit conferred, and that approach also satisfied "Reading" rule of "fundamental fairness."

Procedural context:

Creditor filed a motion for allowance of fees and costs as an administrative expense under 503(b)(1)(A). The bankruptcy court granted the motion, but allowed fees in a significantly reduced amount. Creditor appealed to the BAP for the 9th Circuit.

Facts:

Movant law firm asserted administrative claim in amount of $202k under 503(b)(1)(A) for fees incurred in successfully opposing substantive consolidation of entity debtor and its individual principal. Law firm claimant was two person firm, with principal being a former bankruptcy judge and Yale Law School graduate, and associate who performed clerical tasks. Claimant sought allowance of fees at hourly rate of $800 for herself, and $400 for associate. Law firm, i.e., its principal, incurred fees opposing consolidation before the bankruptcy court, which the bankruptcy court granted, and then successfully appealing to the BAP, which reversed. The successful appeal resulted in the corporate debtor's estate of $2.6 million being undiluted by consolidation with respect to its creditors. The chapter 7 trustee of both estates opposed the motion for allowance of fees. Movant asserted that claim amount could not be reduced, given the benefit conferred to the corporate estate, under both 503(b)(1)(A) and the "Reading Doctrine" of fundamental fairness under Reading Co. v. Brown, 391 US 471 (1968). The trustee asserted that claimant's fees were unreasonable, and grossly inflated. At hearing on claim, law firm principal argued vehemently for the merits of her skills and advocacy, while also advising the bankruptcy court repeatedly of perceived, appealable, incorrect reasoning being utilized by the court. The bankruptcy court awarded fees of $22k, and denied allowance of the remainder of the $202k claim.

Judge(s):

Taylor, Kurtz, Kirscher

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!