In re Garcia
| Decision Date | 14 December 2016 |
| Docket Number | Docket Control No. SDN-4,Case No. 12-93049-E-11 |
| Parties | In re MARK ANTHONY GARCIA and ANGELA MARIE GARCIA, Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of California |
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NOT FOR PUBLICATION
This memorandum decision is not approved for publication and may not be cited except when relevant under the doctrine of law of the case or the rules of claim preclusion or issue preclusion.
YP ADVERTISING & PUBLISHING LLC, a Delaware limited liability company, formerly known as YP WESTERN DIRECTORY, LLC, a Delaware limited liability company, formerly known as PACIFIC BELL DIRECTORY, a California corporation ("Creditor YP"), that has been identified as the Chapter 11 Plan Proponent in this case, files this motion ("Motion") for allowance of an administrative expense for the legal fees and expenses incurred in making a substantial contribution to this Chapter 11 case.1 For all relevant periods of time Creditor YP has been represented by Coleman & Horowitt, LLP ("YP Counsel"). The time period for which the fees are requested is October 24, 2014, through July 29, 2016. Creditor YP requests the administrativeexpense for $45,805.00 in fees and costs in the amount of $1,280.39, for a total of $47,085.39.2
In addition to Creditor YP and YP Counsel, the main players in the prosecution of this case relevant to the current Motion are Mark Garcia and Angela Garcia, the two debtors ("Debtor"); Mark Hannon, Esq., who served as counsel for the two debtors when they served as the debtor in possession prior to the appointment of the Chapter 11 Trustee ("Debtor's Counsel"); John Bell, the Chapter 11 Trustee ("Chapter 11 Trustee"); Zayante P. Merrill, the first attorney for the Chapter 11 Trustee; and Estella Pino, the second attorney for the Chapter 11 Trustee (collectively "Trustee Counsel").
The court grants the Motion, allowing $25,375.00 in legal fees and $1,061.19 in costs relating thereto. Requests for amounts in excess thereof are denied.
In considering this Motion and the underlying facts, the court is convinced that YP Counsel, given her good nature and lack of bankruptcy law experience (though not inexperienced as a lawyer), was actively taken advantage of by Debtor and Debtor's Counsel, and at least passively by the Chapter 11 Trustee and Trustee Counsel. Recently, the court was presented with a declaration under penalty of perjury signed by debtor Mark Garcia, the Plan Administrator under the confirmed Chapter 11 Plan. Mr. Garcia was testifying under penalty of perjury as to facts in support of amotion to sell property under the plan to an "unrelated" third-party. The declaration that was prepared by Debtor's Counsel, who is now serving as the attorney for the Debtor serving in the capacity of Plan Administrator, contained false information (inaccurately stating that Debtor had no interest in the "unrelated" third-party purchaser limited liability company, an entity for which debtor Mark Garcia is actually a managing member). The court did not find persuasive debtor Mark Garcia's and Debtor's Counsel's arguments that Mr. Garcia just did not read the declaration before signing it and the court should overlook the false statement. Civil Minutes, Dckt. 896. This misstatement exemplifies the conduct of Debtor in this case, all the while represented by the same Debtor's Counsel.
The amount of attorneys' fees allowed Creditor YP for the work of YP Counsel is greater than stated in the tentative ruling before the court took this matter under submission. Though the court's discussion in the findings of fact regarding YP Counsel are pointed, the real blame for the non-productive legal services rests at the feet of the Debtor, Debtor's Counsel, the Chapter 11 Trustee, and Trustee Counsel. Upon further review of the facts, and conduct of the other parties and attorneys, the court has concluded that a higher amount of reasonable attorneys' fees than stated in the tentative ruling are appropriate for YP Counsel - one attorney in this case who attempted to do her job in this case consistent with her obligations in federal court.
As with any request for an order, the court begins with the Motion itself, which must state with particularity not only the relief requested, but the grounds upon which such relief is based. Fed. R. Bankr. P. 9013, 9014. It is asserted that due to the efforts of Creditor YP's counsel, the case was saved from a conversion to Chapter 7 in which the creditors would have recovered nothing.
The grounds stated with particularity in the Motion are summarized as follows:
The task billing analysis provided in the Motion discloses that the fees are allocated as follows:
YP Counsel who has been appearing in this case for Creditor YP has provided her declaration in support of the Motion for Creditor YP to be allowed an administrative expense. Declaration, Dckt. 845. Her declaration gets off on the wrong foot, conflicting with the Motion and stating under penalty of perjury that it is her law firm that is seeking compensation and reimbursement of expenses, not the allowance of an administrative expense. Declaration ¶ 4, Id. It is this type of lack of basic bankruptcy law experience that has led to YP Counsel being taken advantage of by the bankruptcy-experienced parties and their counsel.
The United States Trustee for Region 17 filed a Response on October 6, 2016. Dckt. 862. The U.S. Trustee states that while Creditor YP did make a substantial contribution to this case by obtaining approval of a Disclosure Statement and confirmation of the Chapter 11 Plan, Creditor YP expressly states in the Disclosure Statement (Dckt. 739), purportedly prepared by Creditor YP that, "[Creditor YP] estimates filing a claim for fees in the sum of $15,000." This Disclosure Statement appears to be a cleaned-up version of the original Disclosure Statement filed on December 3, 2015. Dckt. 704. The U.S. Trustee states that a fee reduction may be appropriate to the extent the increased fees detrimentally affect the feasibility of the Plan.
Creditor YP filed a Reply to the Response of the United States Trustee on October 13, 2016. Dckt. 866. Creditor YP states that the amount allocated for attorneys' fees was only $15,000.00because that is all the Debtor could afford to pay based on the income, expense, and other administrative expenses Creditor YP and YP Counsel agreed to be paid to Debtor's Counsel and the Chapter 11 Trustee's two attorneys ahead of Creditor YP. YP Counsel confirms that the $15,000.00 administrative expense amount was not stated because Creditor YP was unaware of the actual fees and costs. It is argued that if the full amount of the projected fees had been listed in the Plan and Disclosure Statement, then the Plan would not have been feasible and confirmation would have been denied. As repeated at the hearing, YP Counsel argues that it agreed to take a substantial discount on its fees (not trying to recover 67% of the amount now asserted "reasonable and necessary") so that Debtor's Counsel and Trustee Counsel (who were incapable of prosecuting this case and getting a plan confirmed as asserted in the present Motion) could be paid in full for their fees.
Creditor YP is requesting that: (1) the administrative expense for attorneys' fees that Debtor's Counsel is not legally allowed to be paid as an administrative expense, and (2) attorneys' fees not requested by or awarded to the Trustee's first attorney stated in the Disclosure Statement and Plan be reallocated to Creditor YP for the benefit of YP Counsel. Creditor YP asserts that reallocating monies for the not-allowed administrative expenses to YP C...
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