In re Bank of New England Corp., Civ. A. No. 92-10657-Y.

Decision Date30 June 1992
Docket NumberCiv. A. No. 92-10657-Y.
Citation142 BR 584
PartiesIn re BANK OF NEW ENGLAND CORPORATION, Debtor. Appeal of COOPERS & LYBRAND.
CourtU.S. District Court — District of Massachusetts

Andrew Zane Schwartz, David Dodds VanSpeybroeck, Stanley B. Bernstein, Foley, Hoag & Eliot, Boston, Mass., for appellant.

Deborah Seltzer Griffin, Peabody & Arnold, Terry L. Gibson, U.S. Dept. of Justice, Boston, Mass., for appellees.

MEMORANDUM AND ORDER

YOUNG, District Judge.

This is an appeal from a judgment of the United States Bankruptcy Court for the Eastern District of Massachusetts. This Court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158(a) (1988). The appellant, Coopers & Lybrand ("Coopers"), argues that the bankruptcy court erred by reducing Coopers' $550,000 request for professional fees by 42% and awarding only $319,000.1 Coopers also argues that the bankruptcy court erred by denying the Motion of Coopers and Lybrand for Reconsideration of the Order and Opinion Granting Interim Compensation ("Motion for Reconsideration"). No opposition has been filed to the instant appeal.2 After consideration of the Record on Appeal ("R.") and an oral hearing held on June 9, 1992, this Court affirms the judgment of the bankruptcy court. The standard of review on appeal from a bankruptcy judge's order allowing or disallowing professional fees is whether the bankruptcy judge "abused his discretion, — i.e., failed to apply proper procedures or legal standards, or made factual findings that were clearly erroneous." Matter of Cena's Fine Furniture, Inc., 109 B.R. 575, 580 (Bankr.E.D.N.Y.1990) (quoting In re Ferkauf, Inc., 56 B.R. 774, 775 Bankr.S.D.N.Y.1985; see Federal Rule of Bankruptcy Procedure 8013 1988).3

I. DETERMINING A REASONABLE FEE

Coopers argues that the bankruptcy court made factual findings that were clearly erroneous. In support of this argument, Coopers alleges that the bankruptcy court inappropriately based its 42% reduction in fees upon a review of less than 2% of the time entries contained in Coopers' fee application. This argument is misplaced. The bankruptcy court examined the entire fee application and offered examples of nine specific time entries that it felt were overstated because they did not correspond with the time entries on other applications submitted to the court. See In re Bank of New England Corp., 134 B.R. 450, 467-68 (Bankr.D.Mass.1991). The court stated that "there were a number of other entries which the Court could not balance against the reports of other participants. . . . that have all been ignored for purposes of this discussion." Id. at 468. The court also noted the existence of numerous entries that merely state that a meeting occurred, without explaining the necessity for that meeting. Id. The court cited other non-descriptive entries such as "tax analysis," "FDIC issues," and "leveraged leases." Id. The court noted entries for typing, photocopying, filing, and other administrative support that it determined should properly be categorized as overhead and not separately compensable. Id. In short, the court examined the entire application, determined it was deficient, and cited some examples of its deficiency. It did not merely review 2% of the fee request, nor find deficiencies amounting to merely 2%.

This Court agrees with the bankruptcy court that courts should not "spend nonexistent Court resources to track down every entry, correlate them against other fee applications, and . . . delete those entries insufficiently substantiated. . . ." Id.; see In re Cascade Oil Co., Inc., 126 B.R. 99, 108 n. 8 (D.Kan.1991) ("The bankruptcy court need not delineate each disallowance and reason for it") (citing In re Metro Transp. Co., 107 B.R. 50, 54 E.D.Pa. 1989). The bankruptcy court did not abuse its discretion in determining that 42% of the fee application was overstated.

Coopers also argues that the bankruptcy court erred by failing to apply the appropriate legal standard for determining a reasonable fee. In the First Circuit, and others, the prevailing approach to awarding professional fees is the "lodestar" method. See, e.g., In re Spillane, 884 F.2d 642, 647 (1st Cir.1989); In re Casco Bay Lines, Inc., 25 B.R. 747, 755-56 (Bankr. App. 1st Cir.1982). Under this method,

the fee-setting court first establishes a "threshold point of reference" or the "lodestar," which is the number of hours reasonably spent by each professional multiplied by his reasonable hourly rate. . . . This lodestar can then be adjusted up or down to reflect a variety of factors, such as delay in payment, quality of representation, and the results obtained, if they have not already been taken into account in computing the lodestar.

Boston & Maine Corp. v. Moore, 776 F.2d 2, 7 (1st Cir.1985).

Coopers asserts that although the bankruptcy court professed an allegiance to the lodestar approach, see In re Bank of New England Corp., 134 B.R. at 453, it failed to apply it. In support of this argument, Coopers cites the following four cases in which a higher court found that a bankruptcy court had abused its discretion in determining an appropriate fee award. Each case, however, is distinguishable from the instant one.

In In re Cascade Oil Co., 126 B.R. at 107, the bankruptcy court cited deficiencies that constituted only 2% of the hours in the fee application, yet the court reduced the award by 25%. The district court found that the bankruptcy judge failed to "articulate the decisions it made, give principled reasons for those decisions, and show its calculation." Id. at 107-08. The district court therefore remanded the case for an explanation, since "in none of its orders or rulings from the bench did the bankruptcy court state that the reductions represent the amount of inadequate entries." Id. at 108. In the instant case, by contrast, the bankruptcy judge stated that the reduction represented the number of inadequate entries. In re Bank of New England, 134 B.R. at 468.

In In re Metro, 107 B.R. at 53, the bankruptcy court automatically cut fees for intra-office conferences by 50%, based on its own general guidelines. The district court found that doing so violated the standard in 11 U.S.C. § 330(a) (1988) which requires the bankruptcy court to weigh the reasonableness of the time or of the specific task. Id. In the instant case, the bankruptcy court based its 42% reduction on its evaluation of the reasonableness of the actual hours spent. It did not apply a mechanical formula unrelated to the case at hand.

Similarly, in Matter of Cena's Fine Furniture, 109 B.R. at 581, the district court found that the bankruptcy court failed to apply the lodestar method when, after finding that the fee application lacked specificity of description, it "completely abandoned the time records supplied by the applicant and `fixed an award for the minimum time necessary to provide the minimum required services, estimated on the basis of the court's own experience in these matters.'" (footnote omitted) (emphasis in original). In the instant case, the bankruptcy court neither abandoned the time records nor substituted its own evaluation. The court merely discounted those entries it felt were not substantiated by the evidence. The estimate was not based on the bankruptcy court's determination of how long such matters should have taken, but rather, on the percentage of entries insufficiently described or inconsistent.

Lastly, in In re Paster, 119 B.R. 468, 470 (E.D.Pa.1990), the district court vacated a decision of the bankruptcy court which reduced a fee from $1,700 to $1,300 and instead awarded the full amount. The district court reasoned that "the record does not reflect why the Bankruptcy Court thought that appellant's $1700 request was unreasonable or, on the other hand, how the court determined that $1300 was reasonable." Id. The bankruptcy court must "provide some basis for the fee reduction in the record. . . . the law, . . . requires more than a visceral reaction to a fee application." Id. Again, in the instant case, the bankruptcy court provided a detailed analysis of its reasons for disallowing the full fee request.

For the above reasons, this Court concludes that the bankruptcy court did not abandon the lodestar approach. Rather, the bankruptcy court announced its intention to use the approach at the beginning of its analysis, In re Bank of New England, 134 B.R. at 453, and then proceeded to determine the reasonable number of hours worked. Using the hourly rate supplied in the original fee application, the bankruptcy court multiplied the reasonable number of hours worked by the reasonable hourly rate in order to compute the fee award. Id. The bankruptcy court did not make an arbitrary judgment as to the amount of the deduction.

II. MOTION FOR RECONSIDERATION

Coopers argues that the bankruptcy court erred by (1) narrowly defining the standard to be applied to a motion for reconsideration and (2) failing to consider the merits of Coopers' motion.

A motion for reconsideration cannot be considered "a vehicle for raising issues or citing authorities a party could or should have presented prior to the court's ruling. It is not a vehicle for rehashing arguments previously made or for refuting the court's prior ruling." In re Grand Builders, Inc., 122 B.R. 673, 675-76 (Bankr.W.D.Pa.1990) (citing Lelsz v. Kavanagh, 112 F.R.D. 367, 371 N.D.Tex.1986). Coopers urges that a motion for reconsideration is appropriate where "the Court . . . has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error . . . of apprehension." Above the Belt, Inc. v. Mel Bohannan Roofing, Inc., 99 F.R.D. 99, 101 (E.D.Va.1983). In the instant case, however, the bankruptcy court stated that ". . . a motion to reconsider a decision disallowing fees may be granted only if there has been newly discovered evidence or a manifest error of law or fact." Memorandum Decision Regarding Motion of Coopers...

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