In re Davis
| Decision Date | 23 September 1988 |
| Docket Number | Adv. No. 82-6005-THOM.,Bankruptcy No. 81-60100-THOM |
| Citation | 91 BR 627 |
| Parties | In re David Larry DAVIS, Debtor. Charles A. GOWER, Trustee, Plaintiff, v. FARMERS HOME ADMINISTRATION, Defendant. |
| Court | U.S. Bankruptcy Court — Middle District of Georgia |
COPYRIGHT MATERIAL OMITTED
T. Jefferson Loftiss, II, Thomasville, Ga., Charles A. Gower, Columbus, Ga., J. Patrick Ward, Cairo, Ga., for plaintiff.
Lillian H. Lockary, Asst. U.S. Atty., Macon, Ga., for defendant.
CORRECTED MEMORANDUM OPINION
FINDINGS OF FACT AND CONCLUSIONS OF LAW
On November 13, 1984 this Court entered an Opinion and Judgment in favor of the Trustee in this case, Charles A. Gower, ordering Farmers Home Administration (hereinafter "FMHA") to return to the Debtor's estate $282,847.39 plus interest and directing the Trustee to turn over to the estate an additional $52,327.07 plus interest held in escrow pending the outcome of the litigation. The Court found the money to be in part an illegal preference payment to FMHA under 11 U.S.C. § 547(b) and (c)(5), and found FMHA's total claim to be subject to equitable subordination under 11 U.S.C. § 510 because of FMHA's misconduct in obtaining the money. Those findings were affirmed by the District Court in an order dated November 5, 1986, and its decision was affirmed by the Court of Appeals for the Eleventh Circuit on September 23, 1987. Because the facts and conclusions on the merits of this Adversary Proceeding are stated in full in the Opinion of November 13, 1984, this Opinion will include only those facts necessary to the resolution of the instant request for attorney fees under 28 U.S.C. § 2412.
The Debtor in 1981 borrowed $985,000.00 from FMHA to finance his 1981 crop. FMHA prepared a "Farm and Home Plan" covering the Debtor's proposed disbursements for expenses and anticipated receipts from crops. It also directed the debtor to set up a supervised bank account which would require the signature of both an FMHA official and the Debtor to disburse funds. However, FMHA did not insist upon strict performance of the terms of the Farm and Home Plan. FMHA allowed payment from the supervised bank account in accordance with the debtor's bills as he brought them in. In some instances checks were simply endorsed by FMHA and delivered to the Debtor. FMHA took a crop lien on the Debtor's 1981 crops and filed security agreements and UCC-1 financing statements. The Debtor later expanded his 1981 operation with rented farmland and obtained loans from other creditors, giving them crop liens. FMHA was aware that the Debtor had planted crops on other land than that on which FMHA held crop liens.
During the summer of 1981, FMHA reverted to strict compliance with the Farm and Home Plan. It began to retain part of the proceeds from the Debtor's crops. FMHA received crop proceeds as to which it was neither secured nor perfected from the rented properties. FMHA knew that it had no lien on these crops, but it notified all buyers of the Debtor's crops to make their checks out jointly, whether the crops came from properties with FMHA liens or not. FMHA made misleading statements to the Debtor's other creditors, leading them to believe that if they advanced services and supplies to allow the Debtor to harvest his crops, they would be paid from the crop proceeds. FMHA then retained the proceeds and did not pay the other creditors.
On November 16, 1981, the Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code. On February 12, 1982, the Trustee brought this Adversary Proceeding against FMHA to recover payments made to FMHA within 90 days prior to the Bankruptcy under 11 U.S.C. § 547(b) and 11 U.S.C. § 547(c)(5), for equitable subordination under 11 U.S.C. § 510 of other sums paid to FMHA within 90 days of the bankruptcy, and to subordinate FMHA's claim to the claims of the unsecured creditors. FMHA asserted that it was exempt from those actions of the Trustee under the doctrine of sovereign immunity and it moved to dismiss the case. This Court held that FMHA had waived sovereign immunity by asserting a claim in the case. In re Davis, 20 B.R. 519 (Bankr.M.D.Ga.1982). FMHA appealed that decision to the District Court, which upheld the decision of the Bankruptcy Court in an order dated October 22, 1982. FMHA then moved the District Court to certify the case for interlocutory appeal, and its motion was denied on February 28, 1983.
This case came on for trial on the merits on October 15, 1984. This Court held for the Trustee and found that FMHA had received preferential transfers and had engaged in misconduct requiring the equitable subordination of its claim. The Court also held that the Trustee does not simply stand in the shoes of the Debtor in an action to avoid preferential transfers. FMHA appealed the decision, and the District Court found that the Debtor had defrauded FMHA in obtaining the loan. It entered a summary judgment on July 10, 1985 dismissing the Trustee's claim under 28 U.S.C. § 2514 as forfeited because of the Debtor's fraud. This time the Trustee appealed, and the Eleventh Circuit Court of Appeals held that the Trustee's claims were for the benefit of the creditors and were not forfeited by the fraud of the Debtor. The case was remanded to the District Court for a ruling on the preference and equitable subordination findings. In re Davis, 785 F.2d 926 (11th Cir.1986). On November 5, 1986, the District Court affirmed the Findings of Fact and Conclusions of Law of the Bankruptcy Court. This decision was affirmed by the Eleventh Circuit Court of Appeals in an unpublished decision on September 23, 1987.
The attorneys for the Trustee in this case filed an application for attorney fees under the Equal Access to Justice Act (hereinafter "EAJA") on December 12, 1984. A hearing was originally set on the application for March 12, 1985, but was continued after the appeal of the Bankruptcy Court decision. After the final judgment in the matter, the Trustee again applied for attorney fees under EAJA on January 4, 1988. The Government objected. A hearing was held on February 25, 1988, and briefs were filed. There was an interim award of fees from the estate in this case on March 24, 1986 in the amount of $60,000.00 to Charles A. Gower, $30,000.00 to J. Patrick Ward, and $23,000.00 to T. Jefferson Loftiss, II. The Trustee agrees that any award of fees under EAJA would first be used to reimburse the estate for the previous fee award.
The Trustee's application requests attorney fees under EAJA at $150.00 per hour, with affidavits attached showing 812.35 hours for Mr. Gower, 747.73 hours for Mr. Ward, and 539.9 hours for Mr. Loftiss. He contends that special factors such as the limited availability of qualified attorneys and the length of the litigation warrant a higher rate than $75.00 per hour, and that bankruptcy is an "identifiable practice specialty" which was required in the case.
The United States objects to the fee application on several grounds. It contends that the Trustee is not eligible to recover under EAJA, since he has other means of compensation, that the Trustee has not shown a qualified net worth under EAJA, that the Trustee is not a prevailing party on some issues, that the Government was substantially justified in all of its agency actions and litigation positions, that there are special circumstances making an award unjust, that the Trustee unduly prolonged the litigation, and that the fee application is inadequate.
The attorneys for the Trustee were employed as authorized under 11 U.S.C. § 327. The attorneys for the Trustee are seeking an award of attorney fees from the Government under 28 U.S.C. § 2412(d), known as the Equal Access to Justice Act. Section 2412(d)(1)(A) provides as follows:
Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.
Section 2412(d)(1)(B) requires that an application for fees:
show that the party is a prevailing party and is eligible to receive an award under this subsection, and the amount sought, including an itemized statement from any attorney or expert witness representing or appearing in behalf of the party stating the actual time expended and the rate at which fees and other expenses are computed. The party shall also allege that the position of the United States was not substantially justified. Whether or not the position of the United States was substantially justified shall be determined on the basis of the record (including the record with respect to the action or failure to act by the agency upon which the civil action is based) which is made in the civil action for which fees and other expenses are sought.
Section 2412(d)(2)(A) is on the amount of fees that will be allowed under EAJA: "The amount of fees awarded under this subsection shall be based upon prevailing market rates for the kind and quality of the services furnished, except that . . . attorney fees shall not be awarded in excess of $75.00 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee."
Section 2412(d)(2)(B) covers who may receive an award of fees under EAJA: "Party means (i) an individual whose net worth did not exceed $2,000,000.00 at the time the civil action was filed, or (ii) any owner of an unincorporated business, or any...
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