Geraci, Matter of

• Citation: 138 F.3d 314
• Decision Date: 09 March 1998
• Docket Number: No. 97-2393,97-2393
• Parties: 39 Collier Bankr.Cas.2d 764 In the Matter of: Peter Francis GERACI, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 314

138 F.3d 314

39 Collier Bankr.Cas.2d 764

In the Matter of: Peter Francis GERACI, Appellant.

No. 97-2393.

United States Court of Appeals Seventh Circuit.

Argued Oct. 27, 1997.

Decided March 9, 1998.

Peter F. Geraci, Chicago, IL, pro se.

Sabrina M. Petesch,Office of the United States Trustee, Peoria, IL, for Edward B. Hopper, II, Trustee.

John E. Maloney, Chapter 7 Trustee, Urbana, IL, pro se.

Before CUMMINGS, EASTERBROOK, and ROVNER, Circuit Judges.

ROVNER, Circuit Judge.

Peter Francis Geraci appeals an order entered by Bankruptcy Judge Gerald D. Fines in twelve consumer bankruptcy cases where Geraci's law firm served as debtor's counsel. Judge Fines consolidated the cases for the purpose of considering whether Geraci's fees exceeded the "reasonable value" of his firm's services under 11 U.S.C. § 329(b). After conducting a hearing and determining that Geraci's fees in fact were excessive, Judge Fines ordered Geraci to return to his clients that portion of his fee that exceeded $800. Judge Fines further ordered Geraci to submit a detailed fee itemization in all pending and future no-asset consumer cases in which he receives a fee exceeding that amount. In re Chellino, 209 B.R. 106, 124-25 (Bankr.C.D.Ill.1996). Under Judge Fines' order, then, a fee of $800 or less will be considered presumptively reasonable in a no-asset consumer bankruptcy, but in order to receive a higher fee, Geraci will be required to establish its reasonableness by documenting the legal services provided. Upset at being ordered to disgorge a portion of fees that he says were fairly negotiated in the marketplace, Geraci appealed the bankruptcy court's decision to the district court, but that court agreed with Judge Fines and thus affirmed his order. Geraci v. Hopper, 208 B.R. 907 (C.D.Ill.1997). Geraci now takes a further appeal, invoking this court's jurisdiction under 28 U.S.C. § 158(d). We likewise affirm.

I.

Each of the twelve cases presently before us is a consumer bankruptcy filed by the Geraci firm under Chapter 7 of the Bankruptcy Code. Judge Fines characterized the cases as "relatively simple, no-asset" matters requiring minimal attorney time. Chellino, 209 B.R. at 121. ¹ The record reveals that Geraci originally charged the debtors in the twelve cases a flat fee of between $1,095 and $1,900. ² The Chapter 7 trustee in one of the cases asked the bankruptcy court to review Geraci's $1,095 fee under section 329, and that led the United States Trustee to begin investigating the fees Geraci had charged in other Chapter 7 cases. Believing that those fees were unreasonably high in light of the uncomplicated nature of the cases at issue, the United States Trustee invoked Bankruptcy Rule 2017 to challenge the fees charged in the eleven additional cases before us. See also 11 U.S.C. § 307 (authorizing the United States Trustee to appear in such cases). The bankruptcy court conducted an initial hearing on the fee dispute and then ordered Geraci to submit a detailed itemization of the services provided by his firm for each of the twelve debtors. Geraci's initial response to the court's order did not detail those services at all, but instead included a diatribe directed against the Trustee and bankruptcy practitioners in the Central District of Illinois. Geraci concluded his response with a request that the Trustee be held in contempt for attempting to fix prices in consumer bankruptcy cases. Eventually, however, Geraci complied with the court's order by filing the fee itemizations, and the bankruptcy court then conducted a further hearing.

On December 27, 1996, the bankruptcy court issued a detailed opinion addressed to the fee issue. The court began by criticizing Geraci's fee itemizations because they failed to sufficiently describe the particular services performed and because they included a $75 per hour charge for "clerk time," which the court deemed to be noncompensable office overhead. Chellino, 209 B.R. at 114 & 123-24. Despite that, Judge Fines was able to glean the following from Geraci's fee itemizations:

From its review of the twelve cases at bar, the Court concludes that, while these cases involve different debtors, different creditors, and other subtle differences, these cases are essentially the same type of case. These cases are all simple, no-asset Chapter 7 cases that involved very little time in Court. Only one of the cases had a priority creditor, and all of the cases had relatively few total creditors. No motions to avoid liens were filed in any of these cases, and there were only two cases in which there were motions filed relating to anything other than the issue at hand. Some reaffirmations were filed in these cases, but the number filed in each case was relatively normal. In all but one case, the number of reaffirmations actually filed was less than the number that Debtors stated they intended to file. In all but one of the cases, the only other Court appearance by Debtor's Counsel, besides the § 341 hearing, was on the fee matters at bar.

Id. at 114. The bankruptcy court then looked to the criteria delineated in 11 U.S.C. § 330 for the compensation of professionals and addressed those criteria in the context of carefully considering each of the twelve factors set out in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974), for assessing the reasonableness of an attorney's fee. With respect to the fifth Johnson factor--the customary fee in similar cases--the bankruptcy court found from evidence presented by the Trustee and from his own review of court records that the average fee charged in the locale for a no-asset consumer bankruptcy was $550. Chellino, 209 B.R. at 120-21. The court then found that neither the experience, reputation, and ability of the attorneys from the Geraci firm, nor the results they had been able to obtain for their clients, justified the significantly higher fees they had charged. Judge Fines noted that although Peter Francis Geraci described himself to the court as the "foremost consumer bankruptcy practitioner in the country,"

the attorneys whose names appear most on the fee itemizations in question and the attorneys who have appeared before this Court are relatively inexperienced. Neither the fee itemizations or the experience of this Court indicate that Mr. Geraci himself has spent any significant amount of time on the cases at hand. The work product of Debtors' Counsel is not extraordinary. It is not outstanding. It is not up to a level that this Court sees from the majority of practitioners who regularly appear before it.

Id. at 122 (footnote omitted). Judge Fines further found that the results the Geraci firm had been able to obtain for its clients in the twelve cases were nothing out of the ordinary:

Mr. Geraci argues that his firm provides top-notch service. However, as the Court has noted, the fee itemizations and the Addendum to those fee itemizations do not support a finding that superior, expert service was provided to the Debtors in the cases presently before the Court. No outstanding results were achieved in these cases, and the Court finds no extraordinary benefits for either the Debtors or their creditors. The cases presently before the Court would have seen the same result had the services been performed by any competent counsel in a competent manner.

Id. at 121. Based upon these findings, the bankruptcy court concluded that the reasonable value of the Geraci firm's services in each of the twelve cases was $800. The court noted that the $800 figure was $250 more than the $550 average charged for similar services in the relevant locale. The court therefore ordered Geraci to return to each debtor that portion of his fee that exceeded $800. The court made its order applicable to all present and future cases filed in that court by the Geraci firm, meaning that Geraci either could accept a presumptively reasonable fee of $800 in no-asset consumer bankruptcy cases under Chapter 7, or file a detailed fee itemization in support of a higher fee. Id. at 124. When Geraci then appealed to the district court pursuant to 28 U.S.C. § 158(a), that court affirmed Judge Fines' order in its entirety. ³

II.

In ordering Geraci to return a portion of his fee to each of the twelve clients here, the bankruptcy court acted pursuant to 11 U.S.C. § 329(b) and Bankruptcy Rule 2017. Section 329(b) authorizes the court to assess the reasonable value of the services counsel provided to the debtor and to compare that value with the amount the debtor paid or agreed to pay for the attorney's services. If the court determines that the fee charged by the attorney is excessive--i.e., that it exceeds the reasonable value of the services provided--then it may cancel any compensation agreement between the attorney and his client, or it may order the return of the excessive portion of the fee to the debtor's estate or to the entity making the payment. 11 U.S.C. § 329(b); see In re Wiredyne, Inc., 3 F.3d 1125, 1127 (7th Cir.1993); see also In re Mahendra, 131 F.3d 750, 758 (8th Cir.1997); In re Hargis, 895 F.2d 1025, 1025 (5th Cir.1990). In making the "reasonable value" determination, the bankruptcy court is to be guided by section 330 of the Bankruptcy Code, which sets forth a number of factors that Congress deemed relevant to an assessment of the value of professional services. See Wiredyne, 3 F.3d at 1128; In re Basham, 208 B.R. 926, 931 (9th Cir. BAP 1997); Lawrence P. King, Collier on Bankruptcy para. 329.04[c], at 329-19 (15th ed.1996).

Once a question has been raised about the reasonableness of the attorney's fee under section 329, it is the attorney himself who bears the burden of establishing that the fee is reasonable. Mahendra, 131 F.3d at 757; Basham, 208 B.R. at 931-32; Collier on Bankruptcy para. 329.05, at 329-28; see also In re Kenneth Leventhal & Co., 19 F.3d 1174, 1177 (7th Cir.1994) (accounting firm had burden of proving its entitlement to fees and...