Matter of Pothoven
| Decision Date | 29 March 1988 |
| Docket Number | Bankruptcy No. 86-2039-C,87-198-C,87-95-C,87-376-D,86-3347-D and 87-1430-D.,87-485-C,87-827-D,87-1241-D |
| Parties | In the Matter of Paul POTHOVEN, Gretchen Pothoven, Debtors. In the Matter of Lynn T. FISHER, Sue A. Fisher, Debtors. In the Matter of Brett J. FERGUSON, Debtor. In the Matter of Donald D. HERR, Ruth A. Herr, Debtors. In the Matter of Kenneth EGEL, Carolyn Egel, Debtors. In the Matter of Clarence B. HOLTKAMP, Marion R. Holtkamp, Debtors. In the Matter of Douglas Leroy CLING, Joan Kristen Cling, Debtors. In the Matter of TRIPLE K CORPORATION, Debtor. In the Matter of Herbert D. LAMAACK, Twyla R. Lamaack, Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of Iowa |
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Dumbaugh and Childers, P.C., Cedar Rapids, Iowa, for debtors.
The attorneys for the above-named debtors filed motions to reconsider and motions to alter or amend the orders entered by this court allowing attorney fees and expenses. Since the same issue is presented in each motion, the court will consider the motions together in this opinion and order.
In each of the above cases the attorneys for the debtors presented an application for allowance of attorney fees and expenses. Each application was noticed to all creditors and a bar date for objections was established. No objections were made to the applications and an order was presented to the court. After independent review of the applications the court granted each application but made reductions in the fees requested and noted the basis for the reduction on the order.
Each motion to alter or amend and reconsider states the following as support:
For the reasons set forth below the motions to alter and amend judgment and to reconsider ruling are denied except where otherwise noted.
Motions for reconsideration and to amend or alter judgment serve a limited function—to correct manifest error of law or fact or to present newly discovered evidence. In re Pettibone Corp., 74 B.R. 293, 298 (Bankr.N.D.Ill.1987). The debtors' counsel assert that the court acted improperly in sua sponte reducing the fees requested without allowing the opportunity for the presentation of evidence regarding the reasonableness of the fees requested. Counsel contend that this action violates due process of law.
Under the Bankruptcy Code compensation of professional persons is governed by 11 U.S.C. section 330 which provides:
(Emphasis added.) The phrase "after notice and a hearing" is subject to rules of construction contained in section 102 of the Bankruptcy Code. Section 102 provides:
Accordingly, a hearing will not be necessary in every instance. In this district, applications for fees and expenses are noticed to all creditors and a bar date for objections is set. The notice states that if objections are filed a separate hearing will be set. However, if no objections are filed the notice states that an appropriate order will be entered. Thus, the debtors' counsel in all of the cases were aware that no hearing would be held if no objection was received. Moreover, given the statutes, rules and case law governing the court's role in considering fee applications, the debtors' counsel should have been aware that the court is authorized to scrutinize fee applications without giving counsel notice and opportunity for hearing.
Bankruptcy Rule 2016 requires that all the necessary information be in a fee application itself. The practical aspect of this requirement has been discussed by the bankruptcy court for the Northern District of Illinois:
Applicants cannot rely on the fee petition hearing to `explain\' the fee petition. Life is too short and the daily court call is too crowded to allow valuable court time for such verbal explanations and testimony thereon. Applicants must put the explanations in writing and may submit an accompanying affidavit containing further explanation or details if necessary.
In re Pettibone Corp., 74 B.R. 293, 300 (Bankr.N.D.Ill.1987); In re Wildman, 72 B.R. 700, 712 (Bankr.N.D.Ill.1987).
Indeed, given the heavy flow of work through the bankruptcy courts and the many hundreds of fee petitions passed on by each bankruptcy judge each year . . . counsel must be held to the ordinary standards for reconsideration. Otherwise, many fee applications would be heard twice since attorneys would take a second bite at the apple after the fees they seek are reduced. There is no reason why this court should be subjected to the burden of double fee hearings or being obliged to take evidence on matters that can be set forth in the application or affidavits, or to hear testimony on matters that counsel did not even see fit to present in writing.
In re Pettibone Corp., 74 B.R. at 300-31.
It is well established that a bankruptcy court has the independent authority and responsibility to determine the reasonableness of all fee requests, regardless of whether objections are filed. Id. at 299-300; In re Ochoa, 74 B.R. 191, 194 (Bankr. N.D.N.Y.1987); In re NRG Resources, Inc., 64 B.R. 643, 650 (W.D.La.1986); In re Esar Ventures, 62 B.R. 204, 205 (Bankr.D. Haw.1986); In re Jensen-Farley Pictures, Inc., 47 B.R. 557, 585 (Bankr.D.Utah 1985). Judges are justified in relying upon their own knowledge of customary rates and experience concerning reasonable and proper fees, without the need for independent evidence. In re Farwell, 77 B.R. 198, 201 (N.D.Ill.1987); Brown v. Culpepper, 561 F.2d 1177 (5th Cir.1977) "The bankruptcy judge can and must apply his own expertise sua sponte, if necessary, in order to be fair to both counsel and creditors because, in the final analysis, either excess generosity or extreme miserliness in allowing fees will reflect in the public perception of the system". Lavien, Fees As Seen From The Bankruptcy Bench, 89 Com.L.J. 136, 138 (March 1984).
For each of the fee applications submitted, this court engaged in essentially a line-by-line review of the services and expenses reported. That evaluation necessarily entailed reflection upon the court's own experience with the case and knowledge of the case law governing the standard for review of attorney fee applications. A brief explanation for the reductions made was included on each order allowing fees. In order to provide counsel with a better understanding of the court's orders and to provide guidance for future attorney fee applicants, the standards utilized by both bankruptcy judges in this district will be set forth below. Thereafter, the court shall restate the rationale for each fee order.
The primary objective of any fee application is to reveal sufficient data to enable the court to determine whether the services rendered were reasonable, actual and necessary. In re Jensen-Farley Pictures, Inc., 47 B.R. 557, 582 (Bankr.D.Utah 1985). Bankruptcy Rule 2016 requires that:
A person seeking interim or final compensation for services, or reimbursement of necessary expenses, from the estate shall file with the court an application setting forth a detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the amounts requested. (Emphasis added.)
Several recent bankruptcy court decisions have exhaustively examined the subject of attorneys' fees. See In re First Software, Corp., 79 B.R. 108 (Bankr.D.Mass.1987); In re Pettibone Corp., 74 B.R. 293 (Bankr. N.D.Ill.1987); In re S.T.N. Enterprises, 70 B.R. 823 (Bankr.D.Vt.1987); In re Amatex Corp., 70 B.R. 624 (Bankr.E.D.Pa.1985). This decision shall draw upon the analyses in those opinions and the cases cited therein to provide a framework for the evaluation of fee applications in this district.
At a minimum, every application for attorney fees must include a specific analysis of each task for which compensation is sought. The application should list and describe the activity, the date it was performed, the attorney or other professional who performed the work, the...
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