In re Bob's Supermarket's, Inc.

Decision Date06 January 1992
Docket NumberBankruptcy No. 90-10814-011.
Citation146 BR 20
PartiesIn re BOB'S SUPERMARKET'S, INC., f/d/b/a Bob's County Market, Bob's Super Value, Bob's State Avenue IGA, Debtor.
CourtU.S. Bankruptcy Court — District of Montana

Harry D. Dixon, Jr., Jeffrey T. Wegner, Dixon & Dixon, P.C., Omaha, Neb., for debtor.


JOHN L. PETERSON, Bankruptcy Judge.

Counsel (Applicant) for the Debtor-in-Possession (DIP) filed, on November 8, 1991, a Final Application by Counsel for Bob's Supermarkets, Inc., for Compensation and Reimbursement of Expenses in the sum of $50,696.00 for fees and $11,967.87 for expenses, totaling $62,663.87.

Applicant requests an Order authorizing compensation and priority status pursuant to 11 U.S.C. §§ 330, 503, and 507 and to apply the $36,031.38 plus interest from a retainer paid to the applicant for payment of this allowed claim for compensation and expenses. Applicant previously filed, on July 25, 1991, an Interim Application which sought in excess of $50,000 in fees and expenses. This Court entered an Order on October 1, 1991, ("earlier Order") denying the application with leave to amend for several reasons. That earlier Order is hereby incorporated by reference into this Order.

The Final Application includes few if any of the reductions which this Court's earlier Order mandated, specifically with regard to attorney fees for research and interoffice conferences, and also does not address this Court's earlier concern of the lack of information proving the necessity and actual costs of the expenses charged. Because of Applicant's failure to address this Court's concerns, this Court has had to completely re-analyze the fee application in its entirety.

In addition, the Applicant's answer to this Court's earlier concern about Applicant's failure to disclose its retainer agreement with the DIP fails to satisfy this Court. As a result, this Court has, for the following reasons, gone back through the entire fee application, made reductions where the Applicant failed its burden of proving the necessity or actual costs of various fees and expenses, and penalized Applicant for failure of its duty of disclosure under the Bankruptcy Code and Rules.

This Court's earlier Order cites the applicable law from In re WRB-West Associates, 9 Mont.B.R. 17, 18-20 (Bankr.Mont. 1990), the most important of which is:

Pursuant to 11 U.S.C. §§ 327-330 and Bankruptcy Rules 2016 and 2017, this Court has an independent judicial responsibility to evaluate fees requested from the estate. In re S.T.N. Enterprises, Inc., 70 B.R. 823, 831 (Bankr.Vt.1987); In re Seneca Oil Co., 65 B.R. 902 (Bankr.W.D.Okla.1986); In re Frontier Airlines, Inc., 74 B.R. 973 (Bankr.Colo. 1987). The burden of proof to show entitlement to all fees requested from the estate is on the applicant. In re Lindberg Products, Inc., 50 B.R. 220, 221 (Bankr.N.D.Ill.1985). This burden is not to be taken lightly, especially given the fact that every dollar expended on fees results in a dollar less for distribution to creditors of the estate. In re Yankton College, 101 B.R. 151, 158 (Bankr.S.D. 1989); In re Pettibone Corp., 74 B.R. 293, 305 (Bankr.N.D.Ill.1987). All expenses and fees must be shown as both actual and necessary under § 330(a)(2) of the Code. S.T.N., supra at 834; Yankton College, supra at 158; Seneca Oil, supra at 912.

Under the preceding law, if an Applicant fails to satisfy its burden of proof by failing to include sufficient information to allow this Court to determine necessity or actual cost, then Applicant alone must bear the burden of its own failure by seeing its claimed fee or expense disallowed.

The Final Application, despite this Court's earlier Order requiring their deletion, shows numerous entries for research and interoffice conferences between Applicant's attorneys and staff. Such entries must be intricately scrutinized. S.T.N., supra; Seneca Oil, supra. In this case, forty-two (42) hours of time is claimed for interoffice conferences between attorneys and staff, several of which lasted only .1 hours. Mr. Wegner explains in his supporting affidavit that the conferences were necessary in this case because of the complexity of the case, the need to utilize nonbankruptcy or less experienced attorneys for cost savings, and the need for one attorney who is the manager to have a "view of the case as a whole." Mr. Wegner states that he has already removed 161.0 hours and $9,033 in such interoffice conference fees from the application.

Upon review of the record, this Court finds that Applicant has failed its burden of proof to entitlement to fees for interoffice conferences. This Chapter 11 case has resulted in the sale of the DIP's business to another grocery store chain. Having observed the progression of this case, this Court notes that much of the complexity involved was of Applicant's own making. No sufficient explanation is given in the Final Application as to how counsel's duplicative efforts in interoffice conferences benefitted the estate. Accordingly, $4,130 must be deducted from this fee application.

The application contains billings for 64.5 hours of legal research by various attorneys, law clerks, and paralegals. Mr. Wegner states in his affidavit that the issues researched in this case were unique and that it is unlikely that such research will be useful in future cases. Regardless of that prediction, this Court finds that such research time benefits Applicant's knowledge base as well as the client. Accordingly, this Court sets the fee spent on legal research at one-half of the customary fee. Therefore, $1,926 worth of research must be deducted from this fee application. The following table shows the hours and fee reductions by person:

                                     INTEROFFICE CONFERENCES          RESEARCH
                                        Hours         Fee       Hours         Fee
                                                    Reduction               Reduction
                Harry Dixon               2.6       $  838.00
                Jeffrey Wegner           12.0        1,440.00      1.0      $   78.00
                Michael Pankow           12.4          930.00      8.1         303.75
                Jill Ross                 8.2          578.00      5.5         198.00
                William Harvey                                     4.0         140.00
                Scott Coziahr              .3           19.50       .3          19.50
                Kathryn Derr               .7           45.50     15.1         490.75
                Janice Warm               4.5          247.50
                Laurie Steiger             .5           22.50
                Michael Mills                                     10.7         240.75
                Jeanne Burke               .2            9.00     12.1         272.25
                Steve Schaal                                       3.9          97.50
                Rick Loftsgard             .2            9.00      3.8          85.50
                Lorrie Dahl                .4           18.00
                                        _____         _______   ______      _________
                Total                    42.0       $4,130.00     64.5      $1,926.00
                Total Fee Reduction: $6,056.00

As stated in this Court's earlier Order, Harry Dixon's fee must be reduced from $175 to $130 per hour, the maximum attorney fee allowed by this Court, absent any testimony as to market rate. Applicant completely ignored that part of this Court's earlier Order in its Final Fee Application, continuing to insist on a $175 fee for Mr. Dixon without any supporting evidence. This Court finds that Applicant has failed its burden of proof that the higher fee is necessary to the estate. Since Applicant chose to ignore this Court's earlier Order, this Court shall make the fee reduction of $499.50 to bring Mr. Dixon's fee in accordance with the local maximum.

A further reduction is necessary for Mr. Dixon's and Mr. Wegner's travel time. This Court allows travel time at half the attorney's usual fee. Therefore, Mr. Dixon's fee must be further reduced by $266.50 for his 4.1 hours of travel time. Mr. Wegner claims 22.5 hours of travel time at $120/hour and 42.1 hours at $110/ hour. Mr. Wegner's fee request is therefore reduced by $3,665.50 for travel time.

Review of the costs requested in Exhibit "B" shows total entries of $942.18 for "LEXIS CHARGES," or computer research. This Court finds that such charges are akin to overhead and to the costs of maintaining a library. As such, any charges for computer research must be deducted from any costs requested. See, In re Bicoastal Corporation, 121 B.R. 653, 656 (Bankr.M.D.Fla.1990). Applicant refused to follow this Court's earlier Order in its final Fee Application, instead claiming an increased amount of computer research expense. Mr. Wegner in his affidavit justified this refusal by claiming that the issues in this case were unique and would not be useful to the firm in future cases. Upon review of the record, this Court finds that Applicant has failed to satisfy its burden of proving that the computer research charges were necessary to the estate, or in any way unique to this case. Since Applicant refuses to make the reduction, this Court disallows the entire $942.18 charge for computer research.

Exhibit "B" also shows total entries for "Telecopy" of $1,217.35, without any explanation of how such charges are necessary or reasonable or even what was telecopied. Applicant charged telecopies initially at $3 for the first page and $1.25 for each additional page. Later Applicant charged $1 for the first page and actual long distance charges for each page thereafter. Nowhere does the Applicant supply the required actual cost of the telecopies.

Applicant initially charged $.20 per page for photocopies, later reducing that to $.12 per page, based on the standard rate for photocopies in Omaha, Nebraska. Applicant requests $756.68 for photocopy expense. Nowhere does the Applicant indicate the actual cost of the copies. Neither does Applicant describe what was photocopied and why it was necessary to the estate. This Court allows charges for copies which are reasonable and necessary to justify such rate and the necessity...

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