In re: ALEJANDRO RIVERA and BRENDA JIMENEZ-CONTERAS,
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- BAP No. AZ-23-1047-LCF (9th Circuit, Dec 19,2023) Not Published
- Tag(s):
-
- Ruling:
- A chapter 7 trustee who is their own attorney has the burden of showing why work performed is legal in nature, rather than work typically performed by a chapter 7 trustee, when applying for attorney's fees. Here, the trustee did not do so, and the bankruptcy court's decision allowing only $870 in fees was not clearly erroneous.
- Procedural context:
- Following the filing of a fee application and an amended fee application, and three hearings by the bankruptcy court, the bankruptcy court disallowed most of the fees requested by a chapter 7 trustee who was acting as his own attorney. The chapter 7 trustee timely appealed.
- Facts:
- A chapter 7 trustee was appointed as counsel for the trustee. He filed a motion seeking to have the debtors account for $5,000 of transfers in the two months before the filing date. The parties settled the dispute with the debtors agreeing to pay the estate $2,500 over time.
Neither the motion for accounting nor the motion to approve the settlement included any substantive discussion regarding the alleged facts or any discussion of why the settlement was appropriate. No objections were filed to the motion to approve the settlement and the court approved the settlement.
The trustee then filed an application to have his fees, in the amount of $3,390, allowed. The time was limited to the following categories: 8.4 hours for “litigation” with the Debtors over the $5,000 alleged to be property of the estate; 0.7 hours for the preparation of the employment application documents; and 1.5 hours for the fee application. The 12.6 hours included an anticipated 2.0 hours for preparing for and attending a hearing on the application should there be objections. The trustee stipulated that he would reduce the amount requested to $2,500 if no objection were filed. The trustee failed to include a declaration to support the application.
The U.S. Trustee objected, pointing out that (1) the trustee lumped time entries, (2) the trustee as lawyer should not be compensated for preparing an application for employment, and (3) under Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121, 131 (2015), the trustee as lawyer cannot be compensated for time spent defending his fee application.
Nearly a year later, the trustee filed an amended fee application. The amended application increased the billing rate from $275 to $300 per hour (without explanation), addressed some of the U.S. Trustee's problems with the lumping of time, removed the 2 hours for attending a hearing on the fee application, and added time for preparing the amended fee application. The U.S. Trustee objected to the amended fee application.
Meanwhile, the clerk of the court filed a preprinted Memorandum to Case Trustee, noting that there had been no activity in the case for more than one year and that “it is unclear as to whether this case is continuing to be administered or whether an appropriate final report should be filed and the case closed.”
Neither the trustee nor the U.S. Trustee responded to the filing of the Memorandum to Case Trustee. Eight months later, the U.S. Trustee requested a status conference on the fee application. At the status conference, the court invited the trustee to file a written response to the U.S. Trustee's objection to the amended fee application. The trustee declined the offer and asked the court to rule on the fee application.
The court directed written responses from the trustee and the U.S. Trustee and noted that it appeared that all but one of the trustee’s time entries were “presumptively non-compensable trustee duties.”
The trustee's response repeated his position that all his billed time was for services “routinely performed” by attorneys employed by chapter 7 trustees.
The court held a second hearing and again directed the trustee and the U.S. Trustee to brief the issue of how to distinguish a trustee’s efforts as trustee from those of trustee’s counsel.
The trustee filed a compendium of 34 opinions purporting to establish that “the Attorney for the Chapter 7 Trustee was compensated (without objection) for services which the U.S. Trustee now claims are services that must be provided by the Chapter 7 Trustee, not an Attorney.” The list contained some details about each case and a “[d]escription of the work” but contained no analysis or statement by Smith establishing a direct relationship between those cases and his case nor showing any relevance to the tasks Smith performed.
The court held a third hearing, at which the trustee was forced to testify. The trustee testified that his efforts amounted to “turnover litigation” which brought $2,500 into the estate. He suggested he was forced into the litigation because the debtors’ counsel was “a particularly difficult lawyer to deal with.”
After the hearing, the court the court disallowed all the line entries for the "litigation" and allowed the entries related to the trustee's employment as counsel to the trustee and the amended fee application. Consequently, the court allowed only $870 in fees.
- Judge(s):
- LAFFERTY, CORBIT, and FARIS, Bankruptcy Judges
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