In re Chellino

• Decision Date: 27 December 1996
• Docket Number: 96-91439,96-91440,96-91442,96-91203,96-91210,No. 96-90941,and 96-91444.,96-91204,96-91208,96-91443,96-91207,96-91441,96-90941
• Citation: 209 BR 106
• Parties: In re Aleta D. CHELLINO, Debtor. In re Dawn M. WETHERINGTON, Debtor. In re Tracy L. BRADLEY, Debtor. In re LeRoy M. SENESAC and Judith A. Senesac, Debtor. In re Paul G. MATEER and Bonna L. Mateer, Debtor. In re Everett E. HOESMAN and Laura L. Hoesman, Debtor. In re Sandra C. EVANS, Debtor. In re Melinda F. PENNEY, Debtor. In re Robert C. MAILHOT and Dorothy M. Mailhot, Debtor. In re Gerald R. PARKS and Susan A. Parks, Debtor. In re Jerry R. WISNEWSKI and Linda L. Wisnewski, Debtor. In re Pamela A. ALRANDI, Debtor.
• Court: U.S. Bankruptcy Court — Central District of Illinois

209 B.R. 106 (1996)

In re Aleta D. CHELLINO, Debtor In re Dawn M. WETHERINGTON, Debtor In re Tracy L. BRADLEY, Debtor In re LeRoy M. SENESAC and Judith A. Senesac, Debtor In re Paul G. MATEER and Bonna L. Mateer, Debtor. In re Everett E. HOESMAN and Laura L. Hoesman, Debtor. In re Sandra C. EVANS, Debtor. In re Melinda F. PENNEY, Debtor. In re Robert C. MAILHOT and Dorothy M. Mailhot, Debtor. In re Gerald R. PARKS and Susan A. Parks, Debtor. In re Jerry R. WISNEWSKI and Linda L. Wisnewski, Debtor. In re Pamela A. ALRANDI, Debtor.

Nos. 96-90941, 96-91203, 96-91204, 96-91207, 96-91208, 96-91210, 96-91439, 96-91440, 96-91441, 96-91442, 96-91443, and 96-91444.

United States Bankruptcy Court, C.D. Illinois.

December 27, 1996.

COPYRIGHT MATERIAL OMITTED

Peter Frances Geraci, Chicago, Il. for Debtors.

OPINION

GERALD D. FINES, Bankruptcy Judge.

These matters are before the Court on a Motion to Review Compensation of Debtor's Attorney Pursuant to Section 329 filed by the Case Trustee in In re Chellino, Case No. 96-90941, and upon a Motion to Show Cause filed by the U.S. Trustee in the other eleven cases captioned above. For the purpose of this Opinion, these cases have been consolidated in that the issue before the Court is the same in each case as are the interested parties.

The issue before the Court is whether the fees charged by Debtors' Counsel, Peter F. Geraci, in each of the above-captioned cases, exceeds the reasonable value of the services actually performed such that Debtor's Counsel should be required to return a portion of said fees to Debtors or their respective bankruptcy estates.¹

The controversy presently before the Court originated with the filing of a Motion by the Case Trustee in In re Chellino, Case No. 96-90941, on August 20, 1996, wherein the Case Trustee requested this Court to review fees charged by Debtors' Counsel to determine if they were excessive.² The Trustee's Motion in Chellino was set for hearing on September 5, 1996, and, on that date, Case Trustee, John Maloney, appeared on his own behalf and attorney Steven Diamond appeared on behalf of Mr. Geraci's law firm and Sabrina Petesch appeared on behalf of the U.S. Trustee. Arguments of the parties were heard on September 5, 1996, in Chellino, and the Court was advised by the U.S. Trustee's Office that it had just filed eleven Motions to Show Cause raising the same issue before the Court in Chellino in eleven other cases where debtors were also represented by the law firm of Peter F. Geraci. The Court determined that all twelve matters, including Chellino, should be heard together and, therefore, issued an identical Order in all twelve cases, on September 13, 1996, wherein Debtors' Counsel was ordered to:

Submit a detailed, written fee itemization setting forth the services for which counsel requests compensation, and specifically detailing time spent in Court for and on behalf of the Debtor(s).

The September 13, 1996, Order set November 8, 1996, as a deadline for the filing of the fee itemization with a further hearing being scheduled on the matter for November 14, 1996.

I. Applicant's Response

On September 23, 1996, in Chellino, and September 25, 1996, in the other eleven cases, Debtors' Counsel filed identical pleadings entitled "Debtors' Attorneys' Response to Motion of United States Trustee's Motion to Show Cause" and "Affidavit in Support of Response to Trustee's Motion to Show Cause Regarding Fees."³ 3 The main thrust of the Response filed by Debtors' Counsel was that the fees considered reasonable today by Mr. Maloney, the Case Trustee, and the U.S. Trustee may have been reasonable in 1974, but they aren't reasonable now. Debtors' Counsel further stated that:

Completing a time itemization to prove the reasonableness of the fee charged is not indicated or authorized and would have no bearing on the reasonableness requirement.⁴

Debtors' Counsel concluded his Response by praying for an order:

For a Rule to Show Cause why the United States Trustee, M. Scott Michel, and Sabrina Petesch, attorney for the U.S. Trustee should not be held in contempt of Court for attempting to fix prices for consumer bankruptcy, and foster unfair competition, and for Rule 11 sanctions.⁵

Evidently, Debtors' Counsel did not feel fully vindicated by his assertions and allegations filed in his Response, on September 23 and 25, 1996, in light of his additional remarks included in the Affidavit attached to the Response. In an effort to convince the Court that the fees at issue are justified and reasonable, Debtors' Counsel makes nineteen numbered statements, some of which merit a brief discussion here.

In paragraph No. 1 of the Affidavit, Mr. Geraci states: "My law firm is chosen by more debtors than any other law firm in the world, to represent them in consumer bankruptcy cases." The Court notes that it has no way of knowing whether this representation is based in fact or not, but it is able to conclude that, regardless of the veracity of the statement, it does not serve to support or substantiate the fees requested by Debtors' Counsel.

At paragraph No. 4 of the Affidavit, Mr. Geraci states:

The fee charged in this case is no more than I have routinely charged in thousands of cases in the last 4 years, and is based on a flat fee for services through discharge in the case. The trustee\'s attempt to trivialize this case shows no understanding of consumer bankruptcy law and is contemptuous of the Court.

As for the first sentence of this statement, the Court can only review the quality of the legal work in the cases before it. The comment about the Trustee's lack of understanding of consumer bankruptcy law and that the U.S. Trustee should be held in contempt of Court is without any merit or support. In over nine years, this Court has had the opportunity to view the work of Trustee Maloney and various attorneys from the U.S. Trustee's Office in hundreds of cases, and their work has always been knowledgeable and competent, as it has been in the cases presently before the Court.

In paragraph No. 5 of his Affidavit, Mr. Geraci seeks to justify his fees by comparing them to filing fees, with the conclusion that, had his fees kept pace with the increases in filing fees, he would be charging $2,400 to $4,800 in "simple" cases. The comparison suggested by Mr. Geraci is illogical and wholly irrelevant to the issue at bar. Mr. Geraci attempts a similar comparison in paragraph No. 6 between his fees and trustees' fees, which is no more logical or relevant than a comparison of attorney fees and filing fees.

At paragraph No. 7, Mr. Geraci touts that he is "the unquestioned foremost consumer bankruptcy practitioner in the country." Mr. Geraci further says that:

I do not and have never billed my clients on an hourly basis. I consider hourly billing to be fraudulent in most cases and apparently the Bankruptcy Code as well as 11 U.S.C. § 701 does not recognize "The Lodestar Analysis" as the correct measure in determining reasonableness of fees.⁶

Here again, the Court has been given no basis other than Mr. Geraci's word that he is the "unquestioned foremost consumer bankruptcy practitioner in the country," but that status is not exemplified by the work product of his law firm in the cases now before the Court and on the particular issue at bar. As for Mr. Geraci's statements about hourly billing and the use of the "Lodestar Analysis," the Court would only comment that hourly billing is clearly a widely used and accepted method of billing, and this Court is aware of no decision finding that hourly billing, in and of itself, is in any way inherently fraudulent. The Court would state further that, while it agrees that use of a "Lodestar Analysis" alone is not a proper method to determine reasonableness of fees, it is an appropriate factor to consider together with many others.⁷

At paragraph No. 10 of his Affidavit, Mr. Geraci accuses this Court of artificially maintaining fees for consumer bankruptcy cases "at an unreasonably low level by its $600 benchmark order in Danville, and an $800 order in Peoria." In addressing this statement, the Court must note that there are no such orders. The Courts in the Central District have a policy of reviewing fees in Chapter 7 cases when they exceed $600 to $800 in typical, straight-forward, no asset situations, and to require a written fee itemization for fees in excess of these amounts. There has never been an attempt to place a cap on fees in such Chapter 7 cases in the Central District of Illinois. The policy followed is merely in keeping with the mandate of 11 U.S.C. § 329. If a fee itemization supports the fee requested, this Court allows the fee even where fees exceed $600 to $800.

As he did in paragraph Nos. 5 and 6, Mr. Geraci again seeks to justify his fees by comparison to other costs of services and goods between Central Illinois and Chicago. In paragraph Nos. 11 and 12, Mr. Geraci states:

11. The only price in Central Illinois that is lower than anywhere else in Illinois is the cost of some housing. Cars are sold at the same or higher prices than in Chicago. Utility costs are the same. Long distance services are a dime a minute or higher. Food costs are virtually identical. It would be a shock to the professors at Southern Illinois University at Carbondale, Illinois State University, and the University of Illinois at Champaign to be ordered to cut their salary in half, because of the simple fact that they happen to be located in Central Illinois. The salaries for the excellent judges and their staff in the Bankruptcy Court and the U.S. District Court are identical to those in Chicago, and so is the filing fee, the interim trustees\' compensation, and the salary of the U.S. Trustee and its attorneys and staff. I will charge less than I do in Chicago and Rockford and Northwest Indiana if they will. There is no basis for bankruptcy attorneys to be the only services in the Central District that are 1/3 to ¼ of

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