In re Hirsch
| Decision Date | 13 May 2016 |
| Docket Number | Case No. GL 12–03851–jtg |
| Citation | 550 B.R. 126 |
| Parties | In re: Adam Howell Hirsch, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Michigan |
Michael Brown, Esq., Dietrich Law Firm, Lansing, Michigan.
Barbara P. Foley, Esq., Chapter 13 Trustee, Kalamazoo, Michigan.
John T. Gregg
This matter comes before the court in connection with the Second Application for Award of Attorney Fees [Dkt. No. 120] (the “Application”) filed by the Dietrich Law Firm (the “Applicant”), counsel for the debtor (the “Debtor”) in the above-captioned, and now dismissed, Chapter 13 case. In the Application, the Applicant requests that the court award it compensation for the services it provided to the Debtor both before and after the Debtor voluntarily dismissed his case. The Applicant also requests that any compensation awarded to it be paid as an administrative expense from funds currently held by Barbara P. Foley, the Chapter 13 trustee (the “Trustee”).
The Trustee filed an objection [Dkt. No. 123] (the “Objection”) in which she contends, among other things, that the compensation sought by the Applicant for post-dismissal services was neither necessary nor beneficial to the Debtor. The Trustee also asserts that the Applicant's request for an award of compensation was untimely. Finally and somewhat similarly, the Trustee argues that the Applicant's request for an administrative expense was untimely.
In this case, the court is called upon to consider the following issues:
For the following reasons, the court shall award the Applicant compensation for pre and post-dismissal services, all of which may be paid as an administrative expense. However, at this time, the Trustee may not distribute funds currently in her possession in order to satisfy the Applicant's administrative expense. Nor may the Applicant seek payment directly from the Debtor absent further order of the court.2
The court has jurisdiction pursuant to 28 U.S.C. § 1334(b)
. Notwithstanding the dismissal of this case, the court retains jurisdiction to adjudicate issues related to compensation of professionals. Dery v. Cumberland Cas. Sur. Co. (In re 5900 Assocs. Inc.), 468 F.3d 326, 330–31 (6th Cir.2006). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A)-(B).
The facts in this case are relatively straightforward and are not in dispute. Prior to his bankruptcy, the Debtor was unable to remain current on his obligations to the holder of a mortgage on his residence. In April 2012 and with the assistance of the Applicant, the Debtor filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. Later that year, the court confirmed the Debtor's plan of reorganization, as amended [Dkt. Nos. 27, 37, 41, 45].
As is common practice in the Western District of Michigan, the plan provided that the Applicant would be paid an initial “no-look” fee for the services of the Applicant through confirmation.3 The plan further stated that the no-look fee constituted an allowed administrative expense entitled to priority. The plan and a separately filed statement under Rule 2016(b) [Dkt. No. 25] (the “Statement”) similarly provided that any additional compensation awarded to the Applicant was to be paid through the plan as an administrative expense entitled to priority, subject to allowance by the court.
The Debtor struggled to perform in his bankruptcy. At least two creditors moved for and were granted relief from the automatic stay [Dkt. Nos. 43–44, 49–50], and the Trustee filed several motions to dismiss [Dkt. Nos. 54, 74, 106]. In June 2014, the Applicant filed its first application for allowance of fees and expenses [Dkt. No. 77]. The first fee application requested significant fees as a result of the services performed by the Applicant to, in large part, stave off dismissal. Approximately one month later, the court approved the compensation in full and granted the Applicant an administrative expense [Dkt. No. 79].
The Debtor's case remained relatively dormant for a little less than a year until Green Tree Servicing, LLC n/k/a Ditech Financial LLC (“Ditech”), the mortgagee's servicer, filed a one page motion in June 2015 requesting that the court approve a loan modification agreement between the Debtor and Ditech that had been executed in October 2013 [Dkt. No. 101]. The Trustee and the Debtor both filed objections to the motion [Dkt. Nos. 102–103]. After the United States Trustee also objected [Dkt. No. 111], Ditech, the United States Trustee, the Debtor and the Trustee filed a stipulation which resolved the majority of the issues related to the loan modification motion, including overpayments made by the Trustee to Ditech [Dkt. No. 115]. The stipulation required Ditech to refund the amount of $7,656.03 to the Trustee, who was then required to “disburse the refunded Total Overpayment Amount pursuant to the Debtor's confirmed Chapter 13 Plan, excepting only payments to Ditech.” The court entered an order approving the stipulation on September 10, 2015 [Dkt. No. 116].4
Four days after the court approved the loan modification stipulation, the Debtor voluntarily dismissed his case. The motion to dismiss filed by the Debtor was silent as to whether any funds in the possession of the Trustee would revest in the Debtor or would be distributed by the Trustee pursuant to the plan [Dkt. No. 117]. The court entered a dismissal order stating that all provisions of section 349 of the Bankruptcy Code
were in effect [Dkt. No. 118]. The order also required the Trustee to promptly file a final accounting. No accounting was forthcoming though. Instead, the Trustee decided to delay filing the accounting pending receipt of the overpayment refund from Ditech.
The dismissal of the Debtor's case appears to have resulted in some confusion. Ditech initially balked at providing the overpayment refund. On October 30, 2015, the Applicant sent an email to counsel for Ditech and the Trustee inquiring as to the status of the overpayment refund. Counsel for Ditech responded by stating only that “[t]his case has been dismissed.” Thereafter, the Trustee advised Ditech that she believed the overpayment refund should be distributed pursuant to the plan. The Applicant sought assistance from the United States Trustee by sending his counsel a fairly detailed email on November 2, 2015. It is unclear how or if the United States Trustee responded, but it is clear that two days after the Applicant's email to the United States Trustee, Ditech informed the parties that it had reconsidered its position and that the Trustee should expect to receive the overpayment refund soon. The Trustee received the overpayment refund from Ditech on November 23, 2015.
Approximately two months after the dismissal order was entered and around the time Ditech confirmed it would provide the overpayment refund, the Applicant filed the Application. The Application requests two forms of relief. First, the Application requests that the court award the Applicant compensation in the amount of $5,433.96 for services performed by the Applicant both before and after the case was dismissed. Second, the Application requests that any compensation awarded to it be paid as an administrative expense. The Application, like the motion to dismiss, is silent regarding the revesting of property of the estate upon dismissal.
The Trustee filed her Objection on December 7, 2015. In her Objection, the Trustee contends that the court should not award the Applicant compensation for the services it provided after dismissal because the services were untimely, as was the request for compensation. The Trustee also asserts that any compensation awarded to the Applicant should not be paid as an administrative expense. Finally, the Trustee argues that even if the Applicant is not seeking an administrative expense for post-dismissal services and instead seeks to be paid directly by the Debtor, the post-dismissal fees are, in large part, excessive under section 329 of the Bankruptcy Code
.5
Shortly before the initial hearing on the Application, the Applicant filed a lengthy reply brief [Dkt. No. 127] asserting that all actions taken were necessary and beneficial to the Debtor because the Debtor requested that the Applicant continue to monitor the status of the overpayment refund, apparently even after the case was dismissed. The Applicant also reiterated that it was seeking an administrative expense to be paid from the overpayment refund through the plan.
During an initial hearing, both parties requested an opportunity to file supplemental briefs.6 After the parties filed their supplemental briefs [Dkt. Nos. 131–132, 137] and a stipulation of facts [Dkt. No. 135] in lieu of any testimony or other proofs, the court held a final hearing on February 2, 2016.7 At the conclusion of the hearing, the court took the matter under advisement.
Upon consideration of the legal arguments and limited evidence presented, the court shall award the Applicant compensation in the aggregate amount of $4,539.50 to be paid, to the extent possible, as an administrative expense, defer ruling on whether the Trustee may satisfy the administrative expense by distributing the overpayment refund, and order that no compensation be paid to the...
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