Holland & Hart, LLP v. Oversight Comm. Under Confirmed Plan of Liquidation (In re Hopkins Nw. Fund LLC)

• Decision Date: 16 February 2017
• Docket Number: Bk. Case No. 13–02275–JDP,Case Nos. 1:16–cv–00214–EJL (Lead Case),1:16–cv–00230–EJL (Member Case)
• Court: U.S. District Court — District of Idaho
• Parties: IN RE: HOPKINS NORTHWEST FUND LLC, Debtor. Holland & Hart, LLP, Appellant, v. Oversight Committee Under Confirmed Plan of Liquidation, Appellee.

567 B.R. 590

IN RE: HOPKINS NORTHWEST FUND LLC, Debtor.Holland & Hart, LLP, Appellant,

v.Oversight Committee Under Confirmed Plan of Liquidation, Appellee.

Bk. Case No. 13–02275–JDP

Case Nos. 1:16–cv–00214–EJL (Lead Case)

1:16–cv–00230–EJL (Member Case)

United States District Court, D. Idaho.

Signed February 16, 2017

Kirk S. Cheney, Robert A. Faucher, Holland & Hart LLP, Mark D. Perison, Mark D. Perison, P.A., Boise, ID, for Appellant.

Joseph M. Meier, Cosho Humphrey, LLP, Matthew T. Christensen, Angstman, Johnson and Associates, PLLC, Trevor L. Hart, Mark B. Perry, Perry Law PC, Jed W. Manwaring, Evans Keane, Boise, ID, Shane K. Warner, Warner Law Offices PLLC, Eagle, ID, for Appellee.

MEMORANDUM DECISION AND ORDER

Edward J. Lodge, United States District Judge

Before the Court is Holland and Hart, LLP's (Law Firm) appeal regarding the attorney fees awarded by the Bankruptcy Court for the representation of debtors Hopkins Growth Fund, L.L.C. (Growth Fund) and Hopkins Northwest Fund, L.L.C. (Northwest Fund) chapter 11 bankruptcy cases. Two separate appeals were timely filed and the appeals were consolidated since the same attorney fees issue was raised in each appeal. The appeal is fully briefed and ripe for the Court's review.

Having fully reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this Court without oral argument.

FACTUAL BACKGROUND

This appeal is a challenge to the hourly attorney and paralegal fees awarded by the Bankruptcy Court in the two chapter 11 bankruptcy cases. It is undisputed that the hours for services were not reduced by the Bankruptcy Court (except for an agreed upon 6.5 hours requested in error). Rather, the appeal focuses on the reduction of the applicable hourly rates for services. The Bankruptcy Court held a hearing on the issue of fees and determined that experienced partners would receive $280 per hour, associate attorneys $220 per hour and paralegals $100 per hour. This was a reduction of approximately 27% in the hourly rates requested. The partners were requesting $385 to $435 per hour, associates were requesting $260 to $280 per hour, paralegals were requesting $160 to $195 per hour. Total fees were reduced by $167,564 in the two cases.

Judge Pappas determined the applicable market for determining reasonable hourly fees was the District of Idaho, not just the Boise market area.¹ Judge Pappas determined the applicable range of hourly rates for attorneys within the District for bankruptcy cases was between $200 and $450. In considering the factors set forth in 11 U.S.C. § 330(a)(3), Judge Pappas acknowledged that the court should consider the customary compensation charged by comparably skilled practitioners in cases other than cases under title 11.

The Law Firm argues the Bankruptcy Court errored in awarding fees under the principle of "economy of administration," not giving adequate consideration to hourly rates approved in the District of Idaho for non-bankruptcy cases, and erroneously applying the law regarding "reasonable billing judgment."

The Appellee Oversight Committee Under Confirmed Plan of Liquidation ("Oversight Committee") for the Growth Fund responded to the appeal by the Law Firm. The oversight committee for the Northwest Fund did not file a brief in the appeal. However, the Court finds the arguments of the Oversight Committee for the Growth Fund apply equally to the Northwest Fund. The Oversight Committee argues the Bankruptcy Court properly exercised its discretion in applying the factors of § 330(a)(3) in determining the appropriate attorney and paralegal fees to be awarded.

JURISDICTION

The District Court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158(a)(1).

STANDARD OF REVIEW

This Court reviews the Bankruptcy Court's fee determination for erroneous application of the law or abuse of discretion. Ford v. Baroff (In re Ford ), 105 F.3d 439, 441 (9th Cir. 1997). "[A]n inaccurate view of the law" can lead to an erroneous application of the law. Trevino v. Gates , 99 F.3d 911, 924 (9th Cir. 1996). "An abuse of discretion occurs if a trial court makes a clearly erroneous finding of fact." Escobar v. Bowen , 857 F.2d 644, 645, n.1 (9th Cir. 1988).

ANALYSIS

The Bankruptcy Court has a duty to review debtor's requested attorney fees in a chapter 11 bankruptcy and to determine reasonable compensation. The Bankruptcy Court may award compensation that is less than the amount of compensation requested. 11 U.S.C. § 330(a)(2). Compensation awarded under § 330(a) is an administrative expense which is paid out of the assets of the bankruptcy estate before the claims of most unsecured creditors. 11 U.S.C. §§ 503(b), 507(a). Therefore, the award of attorney fees undeniably reduces the assets in the estate available to be paid to creditors. This is not to say that such professional fees are not justified nor entitled to a priority of payment. Instead, the incurrence of reasonable professional fees is critical to presenting a plan for confirmation. It simply highlights the competing interests that exist in a bankruptcy case that do not exist in other types of litigation.

In this case, Judge Pappas found all of the hours requested were reasonable based on the services provided. Judge Pappas did note that these two cases were not extremely complex in nature and were essentially liquidation cases from the outset versus chapter 11 cases involving reorganization and restructuring. The cases did involve significant professional hours for the numerous legal issues presented, but the nature of these two chapter 11 cases was primarily focused on the distribution of monies after liquidation and the legal issues were not considered complex by the Bankruptcy Court.

The applicable law for determining the amount of reasonable compensation is set forth in § 330(a)(3) which provides the court shall consider the nature, the extent and the value of such services, taking into account all relevant factors, including—

(A) the time spent on such services;

(B) the rates charged for such services;

(C) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title;

(D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue or task addressed;

(E) with respect to a professional person, whether the person is board certified or otherwise has demonstrated skill and experience in the bankruptcy field; and

(F) whether the compensation is reasonable based on the customary compensation charged by comparatively skilled practitioners in cases other than cases under this title.

Judge Pappas acknowledged on the record that in certain bankruptcy cases, attorneys had been awarded up to $450 per hour. Judge Pappas also noted that he was aware of attorneys being awarded at higher hourly rates in civil cases in the District of Idaho and had considered the rates of comparatively skilled practitioners in cases other than bankruptcy cases.

On appeal, it is not this Court's job to determine if it would have awarded the same hourly rates as the Bankruptcy Court. Instead, this Court is charged with determining if the Bankruptcy Court erred in applying the law when exercising its discretion in determining the amount of reasonable compensation to be awarded in these bankruptcy cases. The Court finds the Bankruptcy Court did not erroneously apply the law and did not abuse its discretion in determining the applicable hourly rates in this case.

First, the Bankruptcy Court did not apply an "economy of administration" analysis in determining the hourly rate. The Bankruptcy Court did consider the nature, extent and value of services under the particular facts and found it to be different than a restructuring chapter 11 or a chapter 11 case wherein the size of the bankruptcy estate presented more complexities than in the case at bar. The Bankruptcy Court did not find the hourly rates should be reduced merely because of the size of the bankruptcy estates at issue, but instead analyzed the nature of the legal issues presented in these two specific chapter 11 cases. The Court found the requested services and time were necessary, but the legal issues were not necessarily complex. The analysis was not an "economy of administration" analysis, but an analysis of the overall nature and complexity of the particular chapter 11 cases. The nature of the case and the extent of the services is a judgment call by the Court and such a finding does not appear to be an error in applying the law or an abuse of the Court's discretion.

Second, the Law Firm argues the Bankruptcy Court errored in not considering the rates charged in comparative non-bankruptcy cases under § 330(a)(3)(F). The Court respectfully disagrees with this conclusion based on a review of the transcript from the hearing. While arguably, the Bankruptcy Court did not place as much weight as the Law Firm would like on this factor, the Bankruptcy Court considered hourly rates outside bankruptcy cases in determining a reasonable hourly rate in the chapter 11 cases. The statute does not require that this factor be given any more or less weight than the other factors listed in the statute or the consideration of the "nature, extent and value of services" provided.

Attorney fee awards are made on a case by case basis. Section 330(a)(3)(B) sets forth the "rates charged" are a factor to be considered. Reasonableness of the overall hours and time spent on specific issues are other factors. Another factor to be considered is the customary compensation charged by comparatively skilled practitioners in non-bankruptcy cas...