In re Redding
| Decision Date | 09 August 2000 |
| Docket Number | No. 98-30985-1.,98-30985-1. |
| Citation | 251 BR 547 |
| Parties | In re William Henry REDDING and Alice Patricia Redding, Debtors. |
| Court | U.S. Bankruptcy Court — Western District of Missouri |
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David E. Schroeder, Springfield, MO, James B. Fleischaker, Joplin, MO, for debtor.
This matter is before the Court on remand from the Bankruptcy Appellate Panel for the Eighth Circuit.
On December 21, 1999, this Court entered a Memorandum Opinion and Order in which it ordered David E. Schroeder, bankruptcy counsel for the Debtors, William Henry Redding and Alice Patricia Redding ("Debtors"), to disgorge the sum of $10,011.40 in attorney's fee payments which Schroeder had received from the Debtors. On April 28, 2000, the Bankruptcy Appellate Panel for the Eighth Circuit ("BAP") reversed this Court's decision, holding that this Court had improperly reviewed Schroeder's fee application under 11 U.S.C. § 330, and remanded to this Court for consideration of the fees pursuant to 11 U.S.C. § 329 and Rule 2016(b), FED.R.BANKR.P., and for the consideration of sanctions pursuant to this District's Local Rule 2016-1.
This Court has jurisdiction of these matters under 28 U.S.C. §§ 157(a) and (b)(1) and 1334.
The factual background giving rise to this matter is fully set out in In re Redding, 242 B.R. 468 (Bankr.W.D.Mo.1999) ("Redding I"), this Court's December 21, 1999, opinion, and is summarized in In re Redding, 247 B.R. 474 (8th Cir. BAP 2000) ("Redding II"), the BAP's April 28, 2000, opinion. Therefore, it is not necessary to recount the history of the matter in such full detail in this Memorandum Opinion and Order. The pertinent facts can be briefly summarized as follows:
The Debtors filed a "quick file" Chapter 13 petition on November 5, 1998, to forestall a foreclosure sale scheduled that same afternoon on an apartment complex owned by the Debtors. Schroeder filed an initial disclosure of compensation form indicating that he had been paid a prepetition retainer fee of $3,000.00. Shortly thereafter, on January 21, 1999, Schroeder filed, on behalf of the Debtors, an application to convert the Chapter 13 to a Chapter 11 proceeding, and an order effecting that conversion was entered on the following day. Subsequently, confronted with a Motion to Lift Stay filed by their principal creditors, Frank and Dorothy Dell,1 ("Dells") the Debtors consented to a conversion of the case to Chapter 7, under which the case has since continued.
On July 29, 1999, another attorney, James B. Fleischaker, entered his appearance on behalf of the Debtors for the express and limited purpose of representing them in opposing the Proof of Claim that had been filed by the Dells. At a hearing on September 23, 1999, it came to the Court's attention that Fleischaker had not filed an application to be employed as special counsel for the Debtors. Soon thereafter, Fleischaker filed an application for employment, but he did not disclose that he had been paid any retainer or other fees by the Debtors. However, on November 2, 1999, Fleischaker filed a fee application in which he revealed that he had already been paid $4,414.83 by the Debtors and was holding an additional $2,000.00 in his escrow account to be applied to his fees for October.
Prior to this time, the Panel Trustee, Norman E. Rouse, had learned through Rule 2004 examinations that the Debtors had paid a substantial amount of money to Schroeder and Fleischaker post-petition in payment of their legal fees and expenses. Consequently, on November 2, 1999, the same day Fleischaker filed his fee application, the Trustee filed a Motion for Disgorgement of Attorney's Fees, in which he asked that Schroeder and Fleischaker be compelled to disgorge the fees they had received from the Debtors without Court approval. Schroeder filed a response to the Trustee's Motion in which he admitted that he had received $11,011.40 in payments from the Debtors (including the $3,000.00 retainer fee originally disclosed) and admitting that he had violated Rule 1016(b) by not disclosing all of the payments received. Schroeder also stated that he believed that the cash payments that were made to him had not come from any assets of the bankruptcy estate, but if they had, they were "innocently received."
It was not until November 30, 1999, that Schroeder filed an application for approval and payment of his attorney's fee. This fee application, which is the application now before the Court, requested Court approval for $14,715.00 in fees and $1,001.96 in expenses, a total of $15,716.96. On the same day, Schroeder filed what he called a Supplemental Statement of Compensation of Attorney for Debtors in which he enumerated, for the first time, the various payments he had received from the Debtors — the initial $3,000.00 retainer in November 1998; $4,500.00 on May 28, 1999; $761.40 on August 20, 1999; and $2,750.00 on October 6, 1999. All of these payments (with the exception of the retainer), which totaled $11,011.40, were received by Schroeder, in cash, after he sent invoices to the Debtors and without prior approval from the Court.
As previously indicated, this Court on December 21, 1999, entered an Order disapproving the fees awarded Schroeder (and Fleischaker, as well). Schroeder appealed this Court's Order to the BAP, and, as noted above, the BAP reversed and remanded to this Court for further consideration under 11 U.S.C. § 329, Rule 2016(b), and this Court's Rule 2016-1.2
First, the Court considers the reasonableness of Schroeder's requested fees under § 329, which provides:
11 U.S.C. § 329.
Although the Trustee has not objected to the reasonableness of Schroeder's fees, the Court may nevertheless make an independent determination of their reasonableness. Redding II, 247 B.R. at 479. The Court has wide discretion in making a determination of the reasonableness of a debtor's attorney's fees. In re Willow Lake Partners II, L.P., 156 B.R. 638, 644 (Bankr.W.D.Mo.1993).
The Court has reviewed the detailed itemization submitted by Schroeder in tandem with his fee application and does not find the fees requested to be unreasonable. While some issue might be taken with the wisdom of some of the services provided, the Court is not going to second-guess Schroeder's judgment at this point. This has been a somewhat complicated case, made more so by the acrimonious relationship of the Debtors and the Dells. The Debtors apparently believed they had affirmative claims to assert against the Dells, and those required some investigation and led to the employment of Fleischaker as the Debtors' special counsel. At the same time, the Dells had filed a Proof of Claim which the Debtors opposed. Therefore, under all the circumstances, the Court will find the fees to be reasonable, and will not order any disgorgement of fees on the basis that they are unreasonable or excessive.
The second issue to be considered — counsel's noncompliance with the statutes and rules and the sanctions to be imposed, if any — is another matter, however.
In addition to § 329, this issue involves a consideration of Rule 2016(b), FED. R.BANKR.P., and this Court's Local Rule 2016-1. Rule 2016(b) provides:
This Court's Local Rule 2016-1 provides, in pertinent part:
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