In re Lopez

• Decision Date: 07 May 2009
• Docket Number: Bankruptcy No. 01-04801-GAC.,Adversary No. 03-0093-GAC.,BAP No. PR 08-068.
• Citation: 405 B.R. 24
• Parties: Ana Torres LOPEZ, Debtor. Ana Torres Lopez, Plaintiff-Appellant, v. Consejo de Titulares del Condominio Carolina Court Apartments, Defendant-Appellee.
• Court: U.S. Bankruptcy Appellate Panel, First Circuit

Page 24

405 B.R. 24

Ana Torres LOPEZ, Debtor Ana Torres Lopez, Plaintiff-Appellant, v. Consejo de Titulares del Condominio Carolina Court Apartments, Defendant-Appellee.

BAP No. PR 08-068.

Bankruptcy No. 01-04801-GAC.

Adversary No. 03-0093-GAC.

United States Bankruptcy Appellate Panel for the First Circuit.

May 7, 2009.

COPYRIGHT MATERIAL OMITTED

Victor C. Thomas Santiago, Esq., on brief for Appellant.

Pablo H. Montaner Cordero, Esq., on brief for Appellee.

Before HAINES, VOTOLATO, and FEENEY, United States Bankruptcy Appellate Panel Judges.

FEENEY, Bankruptcy Judge.

Ana Torres Lopez (the "Debtor") appeals from a bankruptcy court order (the "Order") determining the amount of her attorney's fees and costs awarded in connection with her successful litigation against Consejo de Titulares del Condominio Carolina Court Apartments ("Consejo") for violation of the automatic stay. The bankruptcy court awarded Debtor's counsel approximately one-third of the fees he requested. The only justification advanced by the bankruptcy court for reducing the attorney's fees was the minimal amount of damages awarded to the Debtor for emotional distress caused by Consejo's stay violation.¹

The Panel concludes that the bankruptcy court erred as a matter of law in failing to apply the lodestar approach in determining the award of attorney's fees and in failing to address the factors set forth in 11 U.S.C. § 330(a)(3).² Thus, it abused its discretion in reducing Debtor's counsel's fees based solely on the amount of damages obtained by her counsel in the adversary proceeding against Consejo.

BACKGROUND

The Debtor filed a chapter 13 petition on April 25, 2001. Approximately two years later, on June 25, 2003, she filed a complaint against Consejo in which she alleged that it and others willfully violated the automatic stay by attempting to collect maintenance fees that were due pre-petition.³ Through her complaint, the Debtor sought $80,000.00 in actual damages and $100,000.00 in punitive damages, plus costs and attorney's fees.

The bankruptcy court conducted an evidentiary hearing on October 27, 2006, following which it issued a 26-page Decision and Order. The bankruptcy court found that Consejo or its agents violated the automatic stay "by sending [the Debtor] invoices with pending amounts, by sending a coercive letter advising her that the electricity and water would be cut if they did not receive the payments, and by posting a communal notice with the notation `Chapter 13.'" Torres Lopez v. Consejo De Titulares Del Condominio Carolina Court Apartments, Adv. P. No. 03-00093, Slip op. at 21 (Bankr.D.P.R. Sept. 6, 2007). The bankruptcy court awarded the Debtor damages for emotional suffering in the amount of $2,500.00, but refused to award punitive damages.⁴ In order to assess costs and attorney's fees, it ordered Debtor's counsel to file a fee application.

In accordance with the bankruptcy court's order, Debtor's counsel filed an "Application for Compensation for Attorneys Fees Pursuant to F.R.B.P.2016 and Motion in Compliance with Order," in which he sought compensation in the amount of $26,680.00 for attorney's fees and $1,245.97 in expenses for a total of $27,925.97. In the application, Debtor's counsel represented that "the amount is a reasonable value for the necessary and actual services and costs provided to the [Debtor]," and that "[t]he attorney fees requested for the services performed complies with the guidelines set for compensation and reimbursement of expenses under section 330 of the Bankruptcy Code and, Bankruptcy Rule 2016(a)." Debtor's counsel attached to the application an itemization of his services, referencing the date the services were performed and providing a detailed description of the services, as well as the number of hours expended for those services computed in 1/10 hour intervals. The number of hours expended totaled 133.4. Debtor's counsel computed his fees for services as follows: "LOADSTAR [sic] FEE CHARGES $200.00 PER HOUR X 133 HOURS = 26,680." He also provided detailed descriptions of costs incurred in the litigation.

Consejo filed an opposition, entitled "Motion in Opposition to Amount Claimed for Attorneys' Fees," asking the court to disallow the fees because the court did not approve the employment of Debtor's counsel or authorize his $200 hourly rate in connection with the adversary proceeding. In the alternative, Consejo requested the court to reduce the fees to a reasonable amount. Consejo argued that it was "highly improbable" that the court would have approved a $200 hourly rate, particularly because the Debtor could not afford it, adding that numerous charges were for clerical work which should not be paid at the attorney's hourly rate. It further argued that at least one-third of the fees were "self-inflicted," relating to the Debtor's decision to move for partial summary judgment. Consejo asked the court to order Debtor's counsel to provide a copy of his contract with the Debtor, and it reserved the right to depose the Debtor and her counsel. Consejo did not object to the costs for which Debtor's counsel sought reimbursement.

Debtor's counsel filed a response to Consejo's opposition, entitled "Unsworn Statement Regarding Attorney Fees and Costs," in which he recited his professional credentials and the hourly rates at which courts have compensated him. Specifically, he represented that he had been awarded $200 per hour by bankruptcy judges in Puerto Rico, and he reiterated his belief that his fees were reasonable. Debtor's counsel also filed a "Motion to Supplement Unsworn Statement Regarding Attorney Fees and Costs." In that pleading, he stated that he was certified as an expert in consumer bankruptcy law by the American Board of Certification.

Prior to the hearing at which the bankruptcy court considered the fee application, Debtor's counsel filed a 20-page "Motion in Reply to Opposition and Brief for Assessment of Compensation for Attorney Fees and Costs" in which he responded to Consejo's opposition and briefed the court on the standard of review for determining the appropriate amount of attorney's fees, referencing 11 U.S.C. § 330. He also cited In re Boddy, 950 F.2d 334 (6th Cir. 1991), a chapter 13 case in which the Sixth Circuit ruled that the bankruptcy court applied an improper legal standard in determining the amount of attorney's fees when it failed to evaluate the actual and necessary services rendered in the case, and the reasonable time necessary to perform those services. Debtor's counsel recited the words of the court in Boddy:

`In determining a reasonable attorney's fee under § 330, many courts have adopted the formula used to calculate fees under various federal fee-shifting statutes.' Under the typical federal fee-shifting statute, the court will arrive at an attorney's fee by first determining the `lodestar' amount, which is calculated by `multiplying the attorney's reasonable hourly rate by the number of hours reasonably expended.'

The Supreme Court has made it clear that the lodestar method of fee calculation is the method by which federal courts should determine reasonable attorney's fees under federal statutes which provide for such fees. Because the Code provides for attorney's fees, and because the plain language of the Code indicates Congress intended no distinction between attorney's fees in bankruptcy cases and those awarded in non-bankruptcy cases, the courts have generally relied upon the lodestar approach when determining attorney's fees in bankruptcy cases.

Id. at 337 (citations omitted).

Debtor's counsel also observed that "[o]pponents of statutory fee petitions frequently attempt to diminish the value of consumer attorney's fees by citing the relatively modest amount of a typical settlement viz-a-viz the attorney fees and costs expended to reach a satisfactory result." He indicated that the remedial nature of § 362(h),⁵ and fee-shifting statutes generally, counsel against the award of fees based only on the amount of damages awarded in the underlying litigation. Debtor's counsel also attached to his brief a fee matrix prepared by the U.S. Attorney's Office for the District of Columbia and the fee matrix approved by the bankruptcy court in an unrelated bankruptcy case to establish the reasonableness of his hourly rate.

On August 6, 2008, the bankruptcy court conducted a non-evidentiary hearing to determine the fee award. At the hearing Consejo's counsel indicated that he did not see the issue in terms of the number of hours Debtor's counsel spent in connection with the adversary proceeding, his hourly rate, or the sufficiency of his work. Rather, Consejo's counsel asserted that the bankruptcy court's approval of Debtor's counsel's services did not extend to prosecution of the adversary proceeding and that his fees should be allowed on a contingent fee basis. Arguing that there was no evidence of an agreement between the Debtor and her counsel, Consejo's counsel asserted that it "makes sense" that the Debtor would have hired her counsel on a contingency basis given her financial condition and the nature of the suit.

In contrast, Debtor's counsel maintained that resolution of the fee dispute involved only a matter of law because there had been no opposition to his application per se. He also noted that Consejo did not take issue with the amount of time he spent in prosecuting the complaint or his hourly rate.

At the conclusion of the hearing, the bankruptcy court recognized that there was a violation of § 362, that there is an important public policy regarding violations of the automatic stay, and that a fee-shifting analysis was required. The bankruptcy court also determined that Consejo had waived arguments about the scope of employment and the lack of contract because Consejo had not appealed from the order in which the bankruptcy court found for the Debtor and indicated that it would award attorney's fees upon proper...