In re Fox, Bankruptcy No. 89-40005-PKE.

• Decision Date: 15 May 1992
• Docket Number: Bankruptcy No. 89-40005-PKE.
• Citation: 140 BR 761
• Parties: In re James Robert FOX and Donna Joann Fox, Debtors.
• Court: U.S. Bankruptcy Court — District of South Dakota

140 B.R. 761 (1992)

In re James Robert FOX and Donna Joann Fox, Debtors.

Bankruptcy No. 89-40005-PKE.

United States Bankruptcy Court, D. South Dakota, S.D.

May 15, 1992.

J. Bruce Blake, Sioux Falls, S.D., for debtors.

Bruce J. Gering, Sioux Falls, S.D., for U.S. Trustee.

PEDER K. ECKER, Bankruptcy Judge.

On January 6, 1989, Debtors filed a voluntary Chapter 12 bankruptcy petition, and on December 10, 1991, the case was dismissed by the Court.The order of dismissal states, "The Court retains limited jurisdiction, for the sole and only purpose, of hearing a final application for compensation to be brought by debtors' attorney pursuant to § 330(a)."On January 21, 1992, a "Rule 2016(a) Final Application for Compensation and Reimbursement (Blake)" was filed by Sioux Falls Attorney J. Bruce Blake, attorney for Debtors.The application was filed less than 45 days after the case was dismissed and requested compensation and reimbursement for services that occurred between October 4, 1990, and January 15, 1992.Objection was filed on behalf of the United States Trustee by and through Sioux Falls Attorney Bruce J. Gering.An evidentiary hearing was held May 7, 1992, and the Court took the following issue under advisement: whether Debtors' counsel is entitled to seek court approval of fees for services rendered prior and subsequent to case dismissal via application pursuant to BankruptcyRule 2016(a) which provides for compensation "from the estate" when an objection to the application asserts that no estate exists after dismissal, rendering the application moot, but when the order of dismissal specifically retains court jurisdiction to resolve matters relating to fee compensation.For the following reasons, the Court concludes that Debtors' counsel is entitled to submit a fee application and obtain court approval for compensation and reimbursement relating to services rendered in this previously dismissed Chapter 12 case.

THE COURT'S BROAD AUTHORITY OVER MATTERS OF FEES

There is considerable support for the proposition that jurisdiction may continue even though an underlying bankruptcy case has been dismissed.Beneficial Trust Deeds v. Franklin,802 F.2d 324(9th Cir.1986);Post v. Ewing,119 B.R. 566, 567(S.D.Ohio1989);In re Pocklington,21 B.R. 199(Bankr.S.D.Cal.1982).SeeCooter & Gell v. Hartmarx Corp.,496 U.S. 384, 110 S.Ct. 2447, 2454-57, 110 L.Ed.2d 359(1990);In re Coones Ranch, Inc., Ch. 11Case No. 91-40183-PKE, 1992 WL 111110(Bankr.D.S.D.Mar. 9, 1992)(court has jurisdiction to consider a Rule 11 motion despite case dismissal).In particular, jurisdiction continues to exist to determine the propriety of matters concerning compensation.In re Miranne,861 F.2d 1278(5th Cir.1988);Matter of Samford,125 B.R. 230(E.D.Mo.1991);In re Fricker,131 B.R. 932, 937-38(Bankr.E.D.Pa.1991);In re Lerch,85 B.R. 491, 493(Bankr.N.D.Ill.1988).

"This court\'s duty of oversight of fee matters embraces a broad supervisory power over any fees charged in contemplation of, or in connection with, a bankruptcy case by both attorneys and lay persons, as provided in the Bankruptcy Code and Rules."

In re Fricker,131 B.R. at 938, citingIn re Fleet,95 B.R. 319, 338(E.D.Pa.1989).Bankruptcy Rule 2017 also indicates that a court has control over the payment of attorneys.Therefore, even if the order in this case had not retained jurisdiction over matters involving fees, this Court has jurisdiction over the final application filed by Mr. Blake, notwithstanding case dismissal.Awarding professional fees is as "intrinsically involved" as any other case administration matter.Id.Accordingly, this is a core proceeding as defined by 28 U.S.C. § 157(b)(2).

Counsel may only obtain or retain compensation upon court approval of fee applications which provide detailed information relative to the services provided.8 L. King, Collier on Bankruptcy¶ 2016.03 at 2016-15 (15th ed. 1983);In re Fricker,131 B.R. at 940-41;see alsoIn re Peoples Savings Corp.,114 B.R. 151, 155(Bankr. E.D.Ill.1990);In re Hargis,73 B.R. 622, 626(Bankr.N.D.Tex.1987)(counsel is only entitled to compensation after employment has been approved).Counsel in this case made application pursuant to the requirements set forth in BankruptcyRule 2016(a), which provides:

"An entity seeking ... final compensation for services, or reimbursement of necessary expenses, from the estate shall file with the court an application setting forth a detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the amounts requested."

BankruptcyRule 2016(a).In response, the Code provides that after notice and hearing, the court may award compensation for services "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."11 U.S.C. § 330(a)(1).The applicant bears the burden of proof in a request for approval of professional fees.In re Yankton College,101 B.R. 151, 157-58(Bankr.D.S.D.1989).In evaluating whether to approve the fees, several other factors may be considered:

1. the time and labor required

2. the novelty and difficulty of the questions

3. the skill required to perform legal services properly

4. the preclusion of employment due to acceptance of the case

5. the customary fee

6. whether the fee is fixed or contingent

7. time limitations imposed by the client or the circumstances

8. the amount involved and the results obtained

9. the experience, reputation, and ability of the attorneys

10. the undesirability of the case

11. the nature and length of the professional relationship with the client

12. awards in similar cases

In re Grimes,115 B.R. 639(Bankr.D.S.D.1990).In this case, no objection was made to implicate any of these substantive factors, and, as such, the Court could approve this fee application"but for" a technical objection made by the United States Trustee.

FILING FEE APPLICATIONS WHEN THE CASE IS DISMISSED

The United States Trustee challenges counsel's fee application based upon the prepositional phrase, "from the estate," contained in BankruptcyRule 2016(a).The argument is that since this Chapter 12 case was dismissed more than one month before Mr. Blake's fee application was filed, there is no estate from which to be paid; therefore, the application is moot.This argument requires an application to be filed prior to case dismissal and makes "timing" a critical element.Since a motion to dismiss a Chapter 12 case may be made by a debtor as well as any other party in interest, there may be some practical problems with this conclusion, and the Court is reluctant to hold that this phrase is intended to regulate or eliminate fee applications filed after a case is dismissed.

The Code provides that a Chapter 12 bankruptcy case may be dismissed after notice and hearing at the request of a party in interest.11 U.S.C. § 1208.If counsel for debtor receives a notice of hearing on a motion to dismiss, counsel would then have to immediately complete and file an application pursuant to BankruptcyRule 2016(a), even though the case may not be dismissed, or, in the alternative, wait until the motion is heard and decided and risk the consequences of a "moot application" if the case is dismissed.The Code also states that applications for compensation or reimbursement of expenses may not be filed more than once every 120 days.11 U.S.C. § 331.If the motion to dismiss is filed during this period of application prohibition and the applicant is unable to obtain an exception to Section 331 before the case is dismissed, the applicant's request for compensation would be rejected.Another scenario could exist as in In re Travis,1991 WL 331675(Bankr.D.S.D.Apr. 5, 1991), where an application for fees was objected to as being made prematurely since the objecting party believed the debtor could not "conceivably obtain confirmation" of a plan.Id. at 1.The court in Travis deferred approval of the fee application pending a resolution of a motion to convert.Id.A "moot application" objection could arise if there was a deferral pending resolution of a motion to dismiss.The impractical aspects and inequitable results that would arise if the language of the Rule were to control are troubling.If the Rule was meant to regulate or weed out applications filed after case dismissal via this timing element, it seems there would be more emphasis placed on the phrase and that it would be written more precisely, such as "from the currently existing estate," for example.These are some of the practical problems encountered and inconsistencies found between BankruptcyRule 2016(a) and the Code if this phrase is allowed to control.

BankruptcyRule 2016(a) provides the procedural requirements necessary for a complete and proper fee application.The application is a means to obtain court approval of requested fees.The approval process does not provide a source of payment nor a guarantee of payment.The application is a tool for the court and is based upon a set of instructions from the Rule.It is the Bankruptcy Code that provides the applicable law used by the court to make a determination of application approval.There are no sections of the Bankruptcy Code that specifically premise the award of professional fees on the existence of an estate at the time the application is filed.No Code provision moots fee applications filed after a case is dismissed.Timing, as it relates to applications filed after case dismissal, is not one of the Code's elements that controls the approval of professional fees.BankruptcyRule 2016(a)'s phrase, "from the estate," should not be the bright line for disapproving fee requests.In some districts, local rules eliminate BankruptcyRule 2016(a)'s application process when the compensation sought is less than a certain dollar amount.SeeIn re Fricker,131 B.R. at 936, n. 1.Such...