Opinion
Case No. 07-58999-R.
February 27, 2009
Opinion Regarding Application for Compensation
I.
On September 24, 2007, the Zions filed for chapter 7 relief. On December 21, 2007, the United States Trustee filed a motion to dismiss the case pursuant to 11 U.S.C. § 707(b). The Court conducted a hearing on the motion and then set the matter for an evidentiary hearing. Before that hearing, however, on April 14, 2008, the parties entered into a stipulation whereby the debtors agreed to convert their case to chapter 13.
On May 9, 2008, the debtors filed their chapter 13 plan. The amended order confirming plan, entered October 21, 2008, provides for a 100% dividend to Class 8 general unsecured creditors. On October 30, 2008, the debtors' counsel, Gold, Lange Majoros, P.C., filed its First Application for Compensation. The application requests fees of $8,167 and expenses of $398.26 for the period July 4, 2007 through October 1, 2008.
The chapter 13 trustee filed an objection to the fee application, challenging the request for compensation for services rendered during the pendency of the chapter 7 case, from July 4, 2007 through April 8, 2008.
On December 17, 2008, the Court conducted a hearing on the fee application. The Court approved all fees related to the chapter 13 case. However, the Court instructed the parties to file briefs with respect to the fees incurred in the chapter 7 case and took the matter under advisement.
II.
Compensation for an attorney representing a chapter 13 debtor is authorized under 11 U.S.C. § 330(a)(4)(B), which states:
In a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor's attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section.
Compensation for an attorney representing a chapter 7 debtor is permitted from the estate only if the attorney is employed under § 327. Lamie v. U.S. Trustee, 124 S. Ct. 1023 (2004).
[W]e hold that § 330(a)(1) does not authorize compensation awards to debtors' attorneys from estate funds, unless they are employed as authorized by § 327. If the attorney is to be paid from estate funds under § 330(a)(1) in a chapter 7 case, he must be employed by the trustee and approved by the court.
Id. at 1032.
In In re MacKay, 323 B.R. 903 (Bankr. M.D. Pa. 2005), the debtor filed for chapter 7 relief on March 15, 2002. On December 17, 2002, the debtor converted the case to chapter 13. On December 15, 2003, the debtor converted the case back to chapter 7. The debtor's attorney filed a first fee application for the period ranging from one month prior to the filing of the first chapter 7 case through one month after the case was converted to chapter 13. The attorney's second fee application was for the period the case was in chapter 13. A creditor objected to the first fee application, relying on the Supreme Court's decision in Lamie. The court held that the fees incurred in the chapter 7 case could not be paid from the estate, stating:
The attorney's fees incurred during the initial Chapter 7 do not fall under the provisions of § 330 because Applicant was not employed by the Trustee and, under § 330(a)(4)(B), the Applicant is obviously not asking for compensation for services provided to the Debtor in either a Chapter 12 or 13 case.
Id. at 907.
Likewise, in In re Carey, 2006 WL 288226 (Bankr. D.N.H. February 1, 2006), the debtor initially filed for chapter 7 relief and later converted to chapter 13. The debtor's attorney sought compensation from the estate for services rendered during the pendency of the chapter 7 case. Relying on Lamie, the court held that the debtor's counsel was not entitled to such compensation. See also In re Holbrook, 2008 WL 2437735 (Bankr. E.D. Tenn. June 13, 2008) (Attorney's request for fees and expenses attributable to services rendered in conjunction with the debtors' chapter 7 case prior to conversion to chapter 13 cannot be allowed.).
The Zions' attorney relies on In re Bottone, 226 B.R. 290 (Bankr. D. Mass. 1998), in support of his position. In that case, the court held that after conversion of a case from chapter 7 to chapter 13, the debtor's attorney is entitled to payment for fees incurred in the chapter 7 case pursuant to § 330(a)(4)(B). The court stated:
At first blush, the applicability of § 330(a)(4)(B) to a claim arising under Chapter 7 is easy to overlook. However, a close reading of that subsection reveals that its coverage does include the Legal Fee sought by the Claimant. Nothing in § 330(a)(4)(B) excludes from its scope a claim for legal services rendered in the Chapter 7 case from which the Chapter 13 case was converted. And, nothing in § 330(a)(4)(B) conditions the allowance of such a claim by whether it would have been allowable in the prior Chapter 7 case. Section 330(a)(4)(B) in no way distinguishes in terms of where the claim arose, but only limits the context in which the claim is asserted. The debtor's counsel's claim must be asserted in a Chapter 13 case. That condition is satisfied here, and no other relevant condition applies.
Id. at 297.
This Court disagrees. Section 330(a)(4)(B) does limit the debtor's attorney to compensation for services rendered "in connection with" the chapter 13 case. Here, the services for which the debtors' attorney seeks compensation were rendered in connection with the chapter 7 case, not the chapter 13 case. In any event, the Bottone case was decided prior to the Lamie case and has effectively been overruled.
The debtors' attorney also relies on a decision by Judge Shapero in In re La Vallee, Case No. 07-41756, July 28, 2008. There, the debtors filed for chapter 7 relief. After a successful § 707(b) motion, the debtors converted their case to chapter 13. The debtors' attorney filed a fee application which included approximately $9,000 in fees incurred in the chapter 7 case. The chapter 13 trustee did not object to the payment of fees through the debtors' plan, but only objected to the reasonableness of the fees. Judge Shapero concluded that the fees were reasonable. It is clear enough that in La Vallee, the trustee did not assert that the fees incurred in the chapter 7 case cannot be paid from the estate. Accordingly, the LaVallee case does not support the attorney's position here.
Based on the Supreme Court's decision in Lamie, the Court concludes that the applicant's request for payment from the estate of attorney fees incurred during the chapter 7 case must be denied. Accordingly, the trustee's objection is sustained.