Continental Illinois Nat. Bank & Trust v. Wooten
| Decision Date | 18 August 1988 |
| Docket Number | No. 88-0052-LC. Bankruptcy No. 483-00016.,88-0052-LC. Bankruptcy No. 483-00016. |
| Citation | 90 BR 226 |
| Parties | CONTINENTAL ILLINOIS NATIONAL BANK & TRUST COMPANY OF CHICAGO v. Charles N. WOOTEN, Sr., et al. |
| Court | U.S. District Court — Western District of Louisiana |
Philip K. Jones, Liskow & Lewis, New Orleans, La., for appellant.
Charles N. Wooten, Hamilton J. Chauvin, Charles N. Wooten, Ltd., Lafayette, La., for Charles N. Wooten, Ltd. and Charles N. Wooten, Sr.
Jacque B. Pucheu, Pucheu & Pucheu, Eunice, La., for H. Kent Aguillard.
Continental Illinois National Bank & Trust Company of Chicago, as the administrator for the Federal Deposit Insurance Corporation (FDIC), appeals an award of fees in a bankruptcy matter to the trustee, Charles N. Wooten, and the attorneys of the trustee, Charles N. Wooten, Ltd. Wooten filed a cross appeal, contesting the standards used by the bankruptcy judge in reaching his determination, and also objecting to the denial of an award on his final fee applications. This matter was referred to the Magistrate for a report and recommendation.
The Magistrate issued a report and recommendation which provided that the award to the trustee and the attorney for the trustee be reduced substantially.
Counsel for the trustee and for the attorney for the trustee (hereinafter referred to as Wooten) have objected to the report and recommendation on several grounds.
The first objection raised by Wooten ask that the report and recommendation be stricken. They contend that the law is now clear in this circuit that bankruptcy appeals may not be assigned or referred to a Magistrate and may only be heard by the District Judge as expressly provided in 28 U.S.C. 158. They cite the cases of Minerex Erdoel, Inc. v. Sina, Inc., 838 F.2d 781 (5th Cir.1988) and In The Matter of Elcona Homes Corp., 810 F.2d 136 (7th Cir.1987).
The court finds the argument of Wooten persuasive and finds that the order referring this appeal to the Magistrate for report and recommendation is invalid and is hereby recalled. The court will now decide this appeal as an appeal of first impression.
Evangeline Refining Co., Inc. instituted a Chapter 11 bankruptcy proceeding on January 6, 1983. On March 14, 1983, Charles N. Wooten was appointed trustee and his law firm, Charles N. Wooten, Ltd., was appointed as attorney for the trustee. Wooten served in these positions until this matter was converted into a proceeding under Chapter 7 on January 8, 1987.
During Wooten's administration, he filed three interim fee applications and one fourth and final fee application both as trustee and as attorney for the trustee. The interim applications were filed during the administration of Judge Rodney Bernard, Jr. Wooten's first interim application for the period of March 14, 1983 through July 31, 1983 sought fees in the amount of $52,575.43 for the trustee, $14,452.71 as expenses for the trustee, and $74,706.25 for the attorneys for the trustee (Appendix A, Trustee Exhibits 1, 2, 3). On these first applications, Judge Bernard awarded the trustee $25,000, the attorneys for the trustee $53,361.25, and reimbursement of expenses in the amount of $3,262.50 (Appendix B, Trustee No. 10).
Wooten's second applications for interim allowance for the period of August 1, 1983 through November 30, 1983 requested fees for the trustee in the amount of $50,000, reimbursement of expenses in the amount of $7,926.43, and fees for the attorneys for the trustee in the amount of $58,477.50 (Trustee 4, 5, 6). On these second applications, Judge Bernard awarded fees in the amounts of $50,000 to the trustee, $11,661.42 in expenses, and $51,202.50 to the attorneys for the trustee (Trustee No. 11).
The third interim applications for the period of December 1, 1983 through December 31, 1984 requested fees in the amounts of $50,000 for the trustee, $58,192.50 for the attorneys for the trustee, and expenses in the amount of $22,861.42 (Trustee No. 7, 8, 9). On March 15, 1985, Judge Bernard awarded trustee's fees in the amount of $25,000, reimbursement of expenses in the amount of $7,926.43, and attorneys' fees in the amount of $53,073.75 (Trustee 11).
Wooten's application for final compensation for the period of December 31, 1984 through December 31, 1986 were filed subsequent to the appointment of the new trustee in the Chapter 7 proceeding. The final applications sought approval of the prior interim allowances and additional compensation in the amounts of $32,857.54 for the trustee, and $27,032.50 for the attorneys for the trustee. Continental Illinois National Bank, the major creditor of the estate, and Kent Aguillard, the new trustee, objected to Wooten's fee applications.
On June 22, 1987 and November 5 and 6, 1987, a hearing was held before Judge W. Donald Boe, Jr. on Wooten's fourth and final fee applications. Judge Boe read his findings of fact into the record following the hearing. On December 7, 1987, judgment was rendered denying Wooten's fourth and final fee applications, and ordering Wooten to return $20,000 to the estate by reducing the interim awards previously paid to the trustee and the attorney by $10,000 each (Appendix D).
On appeal, Continental argues that Wooten submitted false fee applications, and that his misconduct justifies the denial of all compensation. In the alternative, Continental asserts that the awards were not justified based on the unreliability of the applications. Wooten, on the other hand, contends that the interim awards should not have been reduced, and that the fourth and final fee applications should have been granted.
It is well established that bankruptcy judges have wide discretion in determining attorney's fees in proceedings before them. Matter of U.S. Golf Corp., 639 F.2d 1197 (5th Cir.1981). An abuse of discretion can occur only when the bankruptcy judge fails to apply the proper legal standard or fails to follow the proper procedures in making the determination, or bases an award upon findings of fact that are clearly erroneous. Golf, supra.
The Fifth Circuit has determined that a district court must consider the following twelve factors in awarding attorney's fees:
Matter of First Colonial Corp. of America, 544 F.2d 1291, 1298 (5th Cir.1977). The same factors in determining a reasonable compensation allowance to an attorney for a trustee are relevant in determining the allowance of compensation to a trustee. Matter of Urban America Development Co., 564 F.2d 808 (8th Cir.1977).
In the first two assignments of error in the cross appeal, Wooten asserts that the bankruptcy judge should not have reviewed and/or disturbed the interim awards at the time of the hearing on the final application. The law is clear, however, that interim awards are interlocutory, and as such are always subject to the court's reexamination and adjustment during the course of the case. In re Callister, 673 F.2d 305 (10th Cir.1982); 2 Collier on Bankruptcy, Pg. 331.03 (15th ed. 1981).
Continental contends that the amount of compensation sought in Wooten's interim and final fee application is not supported by the evidence. Wooten's first application for interim allowance as trustee requested compensation based on the maximum amount permitted by 11 U.S.C. § 326(a) of the Bankruptcy Code. No itemization of the services actually performed or the amount of time expended by Wooten was given in the trustee's first application. The second interim application for fees by the trustee listed the daily hours attributable to Wooten, James Exner and Steve Pierce for the months of August through November, 1983, without any description of the activities which were actually performed. Wooten's third and fourth applications for interim allowance as a trustee grouped the tasks performed in one day into a single billing, and broke down the total number of hours expended daily by each employee without delineating the amount of time it took to complete each activity (Trustee No. 7, Exhibit A).
Wooten's three applications for interim compensation as attorneys for the trustee also lumped all the tasks performed in one day into a single billing (Trustee 1, Exhibit A). In the first application for compensation by the attorney for the trustee, the number of hours were not attributed to individual personnel, but instead were grouped according to the generalized listings of senior attorney, senior staff attorney, paralegals, and executive legal secretary. The second, third and fourth applications broke down the number of hours attributed to each employee on a daily basis, however, they did not delineate the time required to complete each task.
The bankruptcy judge concluded that the estimates of time provided in the various interim and final applications had less than full probative value (Tr. 286). Wooten asserts that the bankruptcy court abused its discretion in following the "contemporaneous time records rule" of the D.C. Circuit, despite the rejection of that rule in this circuit. A review of Judge Boe's findings of fact, however, indicates that the judge did not follow this rule in reaching his determination, and further reflects that he specifically analyzed the cases in which the Fifth Circuit rejected the contemporaneous time records rule (Tr. 283, 284).
Bankruptcy rule 2016(a), in pertinent part,...
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