In re Carter

Decision Date08 June 1989
Docket NumberBankruptcy No. 87-40521-PKE,88-50069-PKE.
Citation101 BR 170
PartiesIn re John W. CARTER and Vinnese Carter. In re Dale Leon MARTIN.
CourtU.S. Bankruptcy Court — District of South Dakota

Kay Cee Hodson, Sioux Falls, S.D., for U.S. trustee.

David O. Carter, Carlsen, Carter, Hoy & Eirinberg, P.C., Sioux Falls, S.D., for John W. and Vinnese Carter.

John Harmelink, Harmelink & Fox Law Offices, Yankton, S.D., for Dale Leon Martin.

PEDER K. ECKER, Bankruptcy Judge.

These cases are before the Court on applications for court approval of professional compensation from estate funds. The cases are presented on the United States Trustee's office's objections and the Court's duty to scrutinize fee applications independent of objections.

The United States Trustee's objections are addressed to hourly rates for travel time and inadequately itemized fee applications. The United States Trustee requests the Court to set standards as to the rate professionals may bill for their travel time.

Travel Time

Virtually all the travel time is billed at the applicants' full hourly rate. The United States Trustee's office contends that travel time should be billed at a reduced rate, unless the applicant demonstrates that legal work was performed during the travel time.

The Bankruptcy Code provision dealing with compensation of attorneys is 11 U.S.C. § 330(a)(1). Section 330(a)(1) provides that the bankruptcy court may award reasonable compensation for actual, necessary services rendered by an attorney based on the nature, the extent, and the value of such services, the time spent on such services, and the cost of comparable services other than in a case under this title. See In re Powerine Oil Co., 71 B.R. 767, 770 (9th Cir.1986).

The Eighth Circuit in Mann v. McCombs (In re McCombs), 751 F.2d 286, 288 (1984), stated the following:

Section 330 is meant to encourage high standards of professional legal practice in the bankruptcy courts. Bankruptcy courts are no longer bound by pre-code notions of frugality and economy in fixing fees. Bankruptcy courts must consider whether the fee awards are commensurate with fees for professional services in nonbankruptcy cases, thus providing sufficient economic incentive to practice in the bankruptcy courts.
See In re Atlas Automation, Inc., 27 B.R. 820, 822 (E.D. Mich. 1983); see also In re Hanson, No. 386-00136, Ch. 12, at 2 (Bankr.D.S.D. Mar. 8, 1989). The award of fees is within the discretion of the bankruptcy court. McCombs, 751 F.2d at 287.

The factors utilized for consideration of attorney awards are found in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir.1974), and made applicable in the bankruptcy context by In re First Colonial Corp. of America, 544 F.2d 1291 (5th Cir.1977), cert. denied, 431 U.S. 904, 97 S.Ct. 1696, 52 L.Ed.2d 388 (1977). The twelve factors considered in Johnson are: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal services properly; (4) the preclusion of other employment by the attorney due to the acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the clients or other circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorney; (10) the undesirability of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. Johnson, 488 F.2d at 717-19. The Johnson factors were approved by the Court of Appeals for the Eighth Circuit in Cleverly v. Western Electric Co., 594 F.2d 638, 642 (8th Cir. 1979), and by this district for bankruptcy cases in In re Doyle-Lunstra Sales Corp., 19 B.R. 1003 (D.S.D.1982). Also, while preserving the bankruptcy estate is no longer the primary concern in awarding professional fees, this Court has held that economy should be retained as a relevant factor. Hanson, No. 386-00136 at 2; see In re Henning, 55 B.R. 682 (Bakr.D.S.D.1985) (Henning II). I determined that a balance must be struck between preserving the estate for creditors and "the need to be generous enough to encourage lawyers and others to render the necessary and exacting services that bankruptcy cases often require." Henning II, 55 B.R. at 684, citing In re Yale Express System, Inc., 366 F.Supp. 1376, 1381 (S.D.N.Y.1973); see Hanson, No. 386-00136 at 2.

The burden of persuasion remains at all times with the applicant to show the reasonableness of the compensation or reimbursement sought. In re Tri-County Water Ass'n, Inc., 91 B.R. 547, 548 (Bankr. D.S.D.1988). The burden of production shifts to the objector only after the applicant has presented a prima facie case. In re Ralph Marcantoni & Sons, Inc., 62 B.R. 245, 247 (Bankr.D.Md.1986).

The court has the independent authority and responsibility to determine the reasonableness of all requests for payments of attorneys' fees. See In re Pettibone Corp., 74 B.R. 293, 299-300 (Bankr.N. D.Ill.1987). This responsibility exists whether or not any objections or requests for hearing have been filed with regard to a particular fee application. Id. The court may rely upon its own knowledge of customary rates and its own experience in determining the reasonableness and necessity of fees without the need for independent evidence. In re Golf Consol Services, Inc., 91 B.R. 414, 415 (Bankr.S.D.Tex.1988).

As the United States Trustee's brief points out, the published cases vary widely in the compensation allowed for reasonable and necessary travel time. These various courts have varied from no compensation, Jungkurth v. Eastern Financial Services, Inc., 87 B.R. 333, 337 (E.D.Pa.1988); In re Seneca Oil Co., 65 B.R. 902, 909 (Bankr.W. D.Okla.1986), to one-half the attorney's hourly rate, In re S.T.N. Enterprises, Inc., 70 B.R. 823, 837 (Bankr.D.Vt.1987); In re Pothoven, 84 B.R. 579, 585 (Bankr.S.D. Iowa 1988); In re Taylor, 66 B.R. 390, 397 (Bankr.W.D.Pa.1986), to 75% of the attorney's hourly rate, In re C & J Oil Co., Inc., 81 B.R. 398, 404 (Bankr.W.D.Va.1987), to the attorney's full hourly rate, In re Frontier Airlines, Inc., 74 B.R. 973, 977 (Bankr. D.Colo.1987). At least two courts have recognized the flat hourly rate for travel. In re Sinor, 87 B.R. 620, 624 (Bankr.E.D. Cal.1988) ($50.00 per hour for travel); In re Amatex Corp., 70 B.R. 624, 627 (Bankr.E. D.Pa.1985) ($40.00 per hour for travel). The court in Frontier Airlines, however, stated the following in regard to compensation for travel time:

As to travel time, the question is not whether the time spent traveling was nonproductive, but rather whether the travel time was reasonable and necessary. If the trip was necessary, then the time spent in making the trip was part of the total time necessary for the performance of the professional services which were rendered.

Frontier Airlines, 74 B.R. at 979.

Judge Hoyt, in Hanson, stated the following with regard to compensation for travel time:

In the District of South Dakota, the geographic locations of the court points does sic not always coincide with the attorney\'s residence, and the concession must be made that substantial travel time is often necessary. Also, because a limited number of attorneys in our district practice bankruptcy law, the debtor\'s ability to hire qualified counsel would be unduly chilled if travel was not fully compensable.

Hanson, No. 386-00136 at 3. This Court is in agreement with Judge Hoyt's reasoning in Hanson and, therefore, will find that the applicants should be compensated for their travel time at their full hourly rate if, indeed, their travel time was reasonable and necessary. This Court will also find that the applicants' travel time was both reasonable and necessary.

This result is proper because frugality is no longer the main objective and full compensation is generally available for travel in cases "other than in a case under" title 11. Hanson, No. 386-00136 at 3; see 11 U.S.C. § 330(a); see also McCombs, 751 F.2d at 288. On the other hand, trimming fees in cases where they become too large a percentage of the total fees applied for will help maintain the balance this Court spoke of in Henning II. Henning II, 55 B.R. at 684; see Hanson, No. 386-00136 at 4.

This holding requires that professionals seeking compensation from the estate prorate travel time and expenses between bankruptcy cases on which they are working. See Hanson, No. 386-00136 at 4. Out-of-town counsel appearances must be scheduled for the same date on as many of their files as practical. Id. Also, when traveling, attorneys are encouraged to work on their bankruptcy cases when practical. Id. Legal services need not be rendered on the file on which the attorney is traveling. Id. Work performed on one file when traveling on another file may be prorated between the cases. Id.

It must be borne in mind that travel is not always necessary within the meaning of Section 330. Id. Of course, travel can be unnecessary for many reasons. Id. This Court spoke of one such type of junket when it held that an attorney located far from the "situs of the bankruptcy" could not expect compensation for travel when "adequate local representation" is available. In re Henning, 52 B.R. 350, 352 (Bankr.D.S.D.1985), quoting In re Interstate United Electronics Sales Co., 44 B.R. 784 (Bankr.S.D.Fla.1984); see Hanson, No. 386-00136 at 4. The Hennings hired Chicago counsel. Hanson, No. 386-00136 at 4.

Attorneys should make every attempt to keep travel expenses at a minimum. Id. Such things as encouraging client meetings in their office rather than traveling to an outsite, having documents delivered by paraprofessionals or office staff when personal delivery is necessary, and more use of teleconferencing are just a few examples that come to mind. Id. Also, attorneys should not expect full compensation for a task that requires little or no legal expertise. See Doyle-Lunstr...

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