Opinion
Case No. 96-36765-T, Chapter 13
April 14, 1998
Bruce W. White, Esquire, Richmond, Virginia, Counsel for Debtors.
Robert E. Hyman, Esquire, Chapter 13 Trustee, Richmond, Virginia, Office of the United States Trustee, Richmond, Virginia.
MEMORANDUM OPINION
In this chapter 13 case the court must consider the amount of fee to be awarded counsel for his representation of the debtors in the case.
Bruce W. White, attorney for the chapter 13 debtors filed on February 23, 1998, an application for attorney fees for services in this case in the amount of $2,975.00 plus costs of $123.30. (The fee request includes a prior original application for a fee of $925.00.) An objection to the attorney's application was filed by Willie C. Rigsby, an unsecured creditor. Hearing on the application and objection was held on March 11, 1998, after which the court took the matter under advisement.
The basis for Rigsby's objection to the fee is set out in his Objection To Application For Allowance filed on March 19, 1998. His principal objection is that the attorney should be held to the fixed fee charged at the beginning of the case and not allowed to charge additional sums for time expended dealing with subsequent problems that arose in the case. In addition, some of Rigsby's opposition to the fee is similar to arguments he had earlier presented in objecting to confirmation of the debtors' chapter 13 plan. Those objections to confirmation were effectively rejected by the court's confirmation order of April 17, 1997.
Although most of the points in opposition to the attorney's fee reflect Mr. Rigsby's inexperience in bankruptcy matters and are without merit, his fundamental objection to the higher than usual amount for the attorney's charges in a chapter 13 case does merit the court's attention. Of course, the court has a duty to review professional compensation awards for reasonableness, and the burden of proof for reasonableness is on the applicant. In re Great Sweats, Inc., 113 B.R. 240, 242 (Bankr.E.D.Va. 1990); 11 U.S.C. § 330(a)(3) and (a)(4)(B).
It is customary in this district for attorneys to charge a flat fee for representation of a debtor in a chapter 13 case. Ordinarily this charge should cover interviews with the client, contacting creditors when necessary and verifying other information for the statements and schedules, preparation of petition, schedules and a confirmable plan, attendance at the § 341 meeting of creditors, and, finally, attendance to other routine matters encountered in the case.
Often, however, additional nonroutine attorney services are required for which attorneys request additional compensation. There are various reasons for this, usually related to the client's ongoing financial difficulties. The most frequent problems experienced in these cases are objections to plan confirmation and motions for relief from stay. In many instances, these problems can be anticipated and should be considered in the flat fee charge.
Under local rule 2016-1(c) a debtor's attorney fee request in a chapter 13 case does not require notice to all creditors in the case unless it exceeds $1,250.00. Although the rule allows the court to approve a chapter 13 fee in any amount with or without a hearing, the practical result of the local rule is that the judges in this district do not ordinarily require a hearing on fee applications of $1,250.00 or less. However, depending on the judge and on the amount sought, attorneys may anticipate a court hearing for a fee in excess of $1,250.00.
Even though the attorney initially charges a flat fee for services leading to the filing of a chapter 13 petition, all attorneys in this district are expected to maintain time records of all services if they ever anticipate requesting the court to approve additional charges. When additional fees are sought, the judges expect attorneys to demonstrate that the total fee in a case is reasonable in light of all circumstances. Thus, the total fee still must pass muster under the standards for determination of reasonable compensation.
Turning to the instant case, the file reveals the following summary history:
(1) December 2, 1996. Debtors' petition with all schedules and plan filed. Plan proposes payments by debtor over 36 months with a 25% dividend to 20 unsecured creditors.
(2) December 2, 1996. Attorney White files initial application requesting approval of a fee of $925.00 ($325.00 paid in advance).
(3) January 1997. Objections to confirmation filed by chapter 13 trustee, by Willie C. Rigsby, and by Virginia Department of Taxation. Rigsby asserts that he and other unsecured creditors have not received copy of plan. Trustee objects to amount proposed to be paid to plan because no provision is made to increase payments after debtors pay off an auto loan.
(4) February 10, 1997. Schedules amended and modified chapter 13 plan filed. New plan cures the trustee's objection by increasing plan payments. Proposed dividend to creditors increased to 52%; payment period increased to 38 months.
(5) February 11, 1997. The holder of a lien on debtors' automobile files motion for relief from stay. Settled by consent order entered March 18, 1998.
(6) March 11, 1997. Rigsby files objection to confirmation of modified plan. At hearing, April, 9, 1997, court finds that debtors' modified plan has cured the trustee's objection to confirmation and overrules all other objections by Rigsby. Plan confirmed April 14, 1997.
(7) May 14, 1997. NationsBank, the holder of debtors' residential mortgage, files motion for relief from stay due to debtors' postpetition default in payments. Settled by consent order entered August 19, 1997.
(8) January 29, 1998. NationsBank files affidavit of debtors' breach of consent order of August 19, 1997. Amended affidavit for same filed February 13, 1998.
(9) Attorney White files application for attorney fees of $2,975.00 and costs of $123.30. This request includes earlier application for fee of $925. Rigsby files objection to application.
(10) March 11, 1998. Hearing on fee application and objection.
Attached to Mr. White's fee application is a schedule of his time charges in this case. This shows 23.35 total hours billed at various hourly rates to calculate the total fee requested of $2,975.00. Of the billed time, 4.7 hours or $282.00 was charged by a legal assistant at an hourly rate of $45.00. The attorney's hourly rate for the balance of 18.65 hours was $145.00 until May 23, 1997, when it was increased to $160.00.
From the court's summary of the case, it can be seen that over a period in excess of one year from the filing date, debtors' attorney had to deal with several plan objections and one modification, two motions for relief from stay and two affidavits of breach with respect to a relief from stay consent payment (drop dead) order. The case thus presents circumstances that in general might justify an award of additional attorney compensation.
In the Fourth Circuit, attorney's fees are to be evaluated by the lodestar method, under which various factors are applied to determine the attorney's reasonable rate and the reasonable number of hours. Equal Employment Opportunity Comm. v. Service News Co., 898 F.2d 958, 965 (4th Cir. 1990). After application of these factors, the product of reasonable hours and a reasonable rate constitutes the lodestar figure. See In re Great Sweats, Inc., 113 B.R. 240, 241-42 (Bankr.E.D.Va. 1990).
The 12 factors to be considered in evaluating the reasonableness of attorney's fees include:
1) the time and labor expended;
2) the novelty and difficulty of the question raised;
3) the skill required to properly perform the legal services rendered;
4) the attorney's opportunity costs in pressing the instant litigation;
5) the customary fee for like work;
6) the attorney's expectations at the outset of the litigation;
7) the time limitations imposed by the client or circumstances;
8) the amount in controversy and the results obtained; request includes earlier application for fee of $925.00. Rigsby files objection to application.
9) the experience, reputation and ability of the attorney;
10) the undesirability of the case within the legal community in which the suit arose;
11) the nature and length of the professional relationship between attorney and client; and
12) attorney's fees awards in similar cases.
Barber v. Kimbrell's, Inc., 577 F.2d 216, 226 n. 28 (4th Cir. 1978), cert. denied, 439 U.S. 934 (1978). In Great Sweats, Judge Shelley stated that the Fourth Circuit approach uses a "hybrid of the lodestar and 12-factor tests." 113 B.R. at 241.
At the outset, the court notes that the fee request here seems to be on the high side notwithstanding the additional services the attorney was required to perform. Looking to specifics, I find two areas which warrant reduction of the claimed charges. (1) The attorney's time records reflect that his charges in the case from initial meeting with the debtors through the meeting of creditors were $727.75. Since the initial fee charge was $925.00 it is apparent within this charge that there was an approximate $200.00 cushion for the attorney's performance of additional services after the meeting of creditors. (2) Also, the reasonableness of the attorney's additional time charges for preparing a modified chapter 13 plan can be questioned. In the chapter 13 trustee's objection to confirmation of the initial plan the trustee had pointed out that the plan payments were too low because they failed to take into account that debtors would have additional disposable income for unsecured creditors after full payment of an automobile loan. Debtor's attorney apparently agreed to the trustee's objection and filed a modified plan which significantly increased the plan payments; the dividend to unsecured creditors was increased from 25% to 52%. The attorney's application shows that his total charges for preparing the modified plan as it related to the trustee's objection was $433.00. The court finds that this was a plan modification that might reasonably have been anticipated, and therefore some adjustment of the charge is warranted.
These charges are as follows:
February 7, 1997 $ 27.00
February 7, 1997 $145.00
February 7, 1997 $159.50
February 7, 1997 $ 43.50
February 12, 1997 $ 58.00 ________
TOTAL $ 433.00
Some of these charges may also have related to schedule amendments.
Based upon the court's examination of the debtors' attorney's time records for the case and the application of the 12 factors to the attorney's representation, I find that the attorney's reasonable hours are 15. The reasonable rate based upon the attorney's average hourly rate is $152.50. Thus the court finds that the attorney is entitled to his charges of $2,287.50 plus $282.00 for the legal assistant's charges. A total of $2,569.50 plus costs of $123.30 will be allowed for the attorney's representation of the debtors in this case.
A separate order will be entered.