In re National Magazine Pub. Co., Bankruptcy No. 94-10859.
| Decision Date | 01 August 1994 |
| Docket Number | Bankruptcy No. 94-10859. |
| Citation | 170 BR 329 |
| Parties | In re NATIONAL MAGAZINE PUBLISHING CO. fka Mall Network Publication, Inc., Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
M. Colette Gibbons, Cleveland, OH, for debtor.
In this Chapter 7 case the U.S. Trustee seeks to have the Court review compensation paid to the law firm of Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A. (KKYA) which serves as counsel for National Magazine Publishing Company (the Debtor).
The Debtor filed for voluntary relief under Chapter 7 on March 1, 1994. Pursuant to the requirements of § 329 of the Code and Rule 2016(b), KKYA disclosed the amount of compensation received from the Debtor totalling $15,000.00 as a prepetition retainer. A letter dated March 1, 1994 from KKYA to the Debtor attached to the petition reflects that the $15,000.00 retainer covers attendance and representation of the Debtor at the first meeting of creditors, working with the trustee to facilitate the liquidation of all assets, and attendance at required court hearings. On this basis, the U.S. Trustee asserts that the amount received by KKYA was excessive, and the present motion ensued.
By definition, a "retainer" means:
The act of withholding what one has in one\'s own hands by virtue of some right. Act of the client in employing his attorney or counsel, and also denotes the fee which the client pays when he retains the attorney to act for him, and thereby prevents the attorney from acting for his adversary. Term can mean a fee not only for the rendition of professional services when requested, but also for the attorney taking the case, making himself available to handle it, and refusing employment by plaintiff\'s adversary; or it can mean solely the compensation for services to be performed in a specific case. (Black\'s Law Dict., 1979 ed.).
The engagement situation in which the retainer is paid to the attorney prepetition for simply accepting the case and refusing to accept employment offered by his client's adversary is often referred to as a "classic" retainer. That is, the retainer is fully earned upon receipt. In re Mondie Forge Co., 154 B.R. 232 (Bankr.N.D.Ohio 1993). In such a case, the retainer is not estate property and is subject to the reasonable standard of review under § 329. Id. If the retainer was paid postpetition, or was not fully earned upon receipt, such as an advance against hourly charges or a security retainer, then the retainer is property of the estate and is subject to the more stringent standard of review of § 330. Id. That is, the services charged must be reasonable, necessary and beneficial to the estate. Id.
Contending that the $15,000.00 prepetition retainer is excessive in view of the tasks usually required of a Chapter 7 debtor's counsel, the U.S. Trustee seeks an order directing KKYA to disgorge any fee amount deemed excessive. The U.S. Trustee argues that the Court, in reviewing the retainer, should use the standard of review found under § 330; that services and charges therefore be reasonable, necessary and beneficial to the estate. See In re Mondie Forge Co., supra.
In opposition to the U.S. Trustee's motion, KKYA argues that the retainer was fully earned prepetition, is not estate property, and, as such, the less stringent standard of review under § 329 is applicable. Id. In support of the reasonableness of its retainer charged, KKYA...
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