DANIEL P. COLLINS, Bankruptcy Judge.
Before this Court are Plaintiff's, Timothy R. Wright's ("Plaintiff") Application for Award of Attorneys' Fees
After reviewing the parties' briefs and hearing oral argument on the issue, this Court finds that Plaintiff is entitled to an award of $124,605.11 for fees and costs incurred in connection with Defendants' bankruptcy.
On November 14, 2017 ("Petition Date"), Defendants filed a Chapter 13 bankruptcy.
After allowing the parties to provide additional briefing on the issue of Chapter 13 eligibility
On July 6, 2018, this Court held an evidentiary hearing on Plaintiff's Objection to Homestead. After the parties were allowed to file additional briefs on the Defendants' homestead issue,
On July 9, 2018, Plaintiff initiated this Adversary Proceeding seeking a denial of discharge under §§ 727(a)(2)(A),
After this Court's Under Advisement Ruling Regarding Debtors' Homestead Exemption, Debtors' counsel withdrew in the administrative case of this bankruptcy proceeding.
On September 11, 2018, Debtors retained new counsel
On October 11, 2018, a second hearing regarding a discovery dispute was held and Defendants failed to appear.
Plaintiff filed an Objection to Defendants' Motion to Dismiss Chapter 11 Case
On August 1, 2019, the Court held a hearing on Plaintiff's Fee Application and determined that Plaintiff would be awarded fees related to specific aspects of Defendants' bankruptcy case based on Defendants' bad faith. The Court ordered Plaintiff to file a categorized statement of the fees and costs sought and gave Defendants until August 22, 2019 to respond. Plaintiff filed his Fee Exhibits
This Court has jurisdiction over the Adversary Proceeding pursuant to 28 U.S.C. § 157(J) and has the "inherent power to sanction vexatious conduct presented before the court."
Section 105 grants the Court broad powers to implement provisions of the Code and to prevent an abuse of the bankruptcy process.
On August 1, 2019, this Court made specific findings and determined that Defendants acted in bad faith with respect to several aspects of their bankruptcy case. The Court categorized the fees sought by Plaintiff into five buckets: (1) fees and costs incurred in connection with Defendants' chapter 13 eligibility; (2) fees and costs incurred in connection with Plaintiff's Adversary Proceedings seeking a denial of discharge; (3) fees and costs incurred in connection with Plaintiff's objection to Defendants' claimed homestead; (4) fees and costs incurred in connection with Defendants' initial refusal to dismiss their case and subsequent objections to conversion; and (5) fees and costs incurred in connection with Plaintiff's efforts to investigate the accuracy of Defendants' disclosures on their schedules and statements and Plaintiff's efforts to discover Defendants' assets.
The Court determined that Defendants did not act in bad faith with respect to the chapter 13 eligibility dispute or in contesting the § 727 denial of discharge adversary proceeding. The Court did determine that Defendants acted in bad faith (1) in claiming and pursuing a homestead exemption in the 11 East Venado Drive, New River, Arizona property; (2) in objecting to Plaintiff's October 2, 2018 attempt to dismiss the case; (3) in failing to disclose multiple sources of income; (4) in pursuing a chapter 13 and chapter 11 plan; and (5) in repeatedly failing to comply with this Court's orders.
Without a doubt, Plaintiff expended significant time and energy contesting Debtors' many twists and turns in this case. This Court determined that Defendants did not dispute that the hourly rates charged by Plaintiff were reasonable. The only issue left to be determined was whether Plaintiff's fees and costs sought were reasonable for the categories in which the Court found the Debtors to have acted in bad faith.
This Court determined that Plaintiff would be awarded (1) fees and costs incurred in connection with Plaintiff's objection to Defendants' claimed homestead; (2) fees and costs incurred in connection with Defendants' initial refusal to dismiss their case and subsequent objections to conversion; and (3) fees and costs incurred in connection with Plaintiff's efforts to investigate the accuracy of Defendants' disclosures on their schedules and statements and Plaintiff's efforts to discover Defendants' assets. Plaintiff now seeks $147,788.32 in fees and costs incurred in connection with these three categories. Although Defendants filed Defendants' Objection, for the most part they failed to follow this Court's directive to specifically identify billing entries to which they objected and instead made a general objection to the fees and costs as being "excessive and improper."
The Court now conducts an independent review of the fees and costs sought by Plaintiff for each of the three permitted categories.
Plaintiff seeks an award of $60,033 for fees incurred in connection with the objection to Defendants' claimed homestead exemption. These fees and costs were incurred between January 12, 2018 and August 10, 2018. Defendants fail to object to any specific billing entries in this category but instead generally object to these fees on the basis that they were incurred before October 2, 2018. For reasons stated above, this objection mischaracterizes the Court's findings at the August 1, 2019 hearing and is an insufficient basis for objection. Nevertheless, the Court determines that several entries in this expense category are either excessive and unreasonable or improperly categorized under the Plaintiff's objection to Defendants' homestead exemption.
The Court finds that two entries related to Plaintiff's objection to Defendants' homestead exemption are excessive and unreasonable. First, the billing entry for January 21, 2018 for $1,112.50 for work done on revising Plaintiff's objection to Defendants' homestead exemption is excessive and unreasonable. Similarly, the billing entry for January 26, 2018 for $1,220 for work done reviewing and revising the Plaintiff's objection to Defendants' homestead exemption is excessive and unreasonable. The Court hereby denies Plaintiff's these fees in the aggregate amount of $2,332.50. Furthermore, several billing entries identified by Plaintiff as falling under the category of objection to Defendants' claimed homestead exemption appear to be related to Plaintiff's motion for stay relief. Although it is conceivable that Plaintiff's objection to Defendants' homestead exemption and Plaintiff's motion for relief from stay related to the same property are indirectly linked for the purposes of work performed on both matters, the Court did not find that Defendants' acted in bad faith with respect to the motion for stay relief. Therefore, the Court is skeptical that any entries related to the latter should be awarded under the Court's inherent authority to sanction vexatious conduct.
The following entries are determined to fall outside the scope of this Court's August 1, 2019 Order: (i) the April 22, 2018 entry for $297 for researching case law regarding when bad faith is considered cause to grant relief from the automatic stay (ii) the April 23, 2018 entry for $1,350 for drafting and revising motion for stay relief; (iii) the April 24, 2018 entry for $623 for revising the motion for stay relief; (iv) the April 25, 2018 entry for $240 related to the motion for stay relief; (v) the April 25, 2018 entry for $89 for reviewing and editing notice of stay relief; (vi) the May 8, 2018 entry for $96 for drafting the notice of preliminary hearing on the motion for stay relief; (vii) the May 8, 2018 entry for $133.50 for reviewing the notice of the preliminary hearing on stay relief; (viii) the May 11, 2018 entry for $216 for reviewing the motion for stay relief and disclosure statement; (ix) the May 14, 2018 entry for $108 for conferring on the reply to the motion for stay relief; (x) the May 16, 2018 entry for $267 for conferring on the case law and applicable standards for stay relief in chapter 11; (xi) the May 16, 2018 entry for $1,107 for researching issues related to the motion for stay relief; (xii) the May 17, 2018 entry for $667.50 for revising the reply in support of the motion for stay relief; (xiii) the May 17, 2018 entry for $675 for on drafting the reply in support of the motion for stay relief; (xiv) the May 17, 2018 entry for $243 for revising a reply in support of the motion for stay relief; (xv) the May 18, 2018 entry for $162 for in preparation of the hearing on the motion for stay relief; (xvi) the May 21, 2018 entry for $594 for preparing and attending the hearing on stay relief; and the August 8, 2018 entry for $216 for drafting an order granting relief from the stay in light of the Court's ruling on debtors' homestead exemption. These stay relief related charges total $7,084.
After taking into account the entries identified as excessive or unreasonable ($2,332.50) and the entries related to the Plaintiff's motion for stay relief ($7,084), the Court finds that Plaintiff shall be awarded $50,616.50
Plaintiff seeks an award of $15,306 for fees incurred in connection with Defendants' initial refusal to dismiss their case and subsequent objections to conversion. Defendants fail to object to any specific billing entries in this category and instead generally object to these fees on the basis that they were incurred before October 2, 2018. For reasons stated above, this objection mischaracterizes the Court's findings at the August 1, 2019 hearing and is an insufficient basis to object. This Court finds that the entire $15,306 sought by Plaintiff in connection with Defendants' initial refusal to dismiss their case and subsequent objections to conversion is reasonable.
Plaintiff seeks an award of $57,955 for fees incurred in connection with Plaintiff's efforts to investigate the accuracy of Defendants' disclosures on their schedules and statements and Plaintiff's efforts to discover Defendants' assets. Defendants object to four specific billing entries under this category on the basis that they are clerical or pertain to an administrative matter. Specifically, Defendants point the Court to billing entries for (1) November 29, 2017; (2) November 30, 2017; (3) December 7, 2017; and (4) January 3, 2018. This Court finds that the November 29, 2017 billing entry, the December 7, 2017 billing entry and the January 3, 2018 billing entry all relate to substantive investigations regarding Defendants' assets and income. The November 30, 2017 billing entry, however, is appropriately characterized as clerical or pertaining to an administrative matter. The November 30, 2017 billing entry is described as "Re-lodge and notice order granting motion for 2004 exam and production at Court's request; draft certificate of service regarding order and electronically file same." This billing entry charges $96 for essentially filing and noticing an order previously granted and drafting a certificate of service.
In addition to the November 30, 2017 billing entry for $96, this Court determines that the following billing entries are excessive or unreasonable and therefore will not be awarded: (i) The November 20, 2017 entry for $884.50 for analyzing legal strategies in the Defendants' bankruptcy is excessive; (ii) the January 8, 2018 billing entry for $890 for working on objection to Defendants' chapter 13 plan is excessive considering that five previous billing entries concern the same issue and account for 11.3 hours of billed work; (iii) the January 9, 2018 billing entry for $356 for additional revisions to the objection to Defendants' chapter 13 plan is excessive for the same reason; (iv) the May 17, 2018 billing entry for $667.50 for 0.10
After taking into account the entry identified as clerical or pertaining to administrative matters and the excessive or unreasonable changes noted above, the Court finds that Plaintiff shall be awarded $46,990.50
Plaintiff seeks an award of $14,494.32 for costs incurred in connection with (1) Plaintiff's objection to Defendants' claimed homestead; (2) Defendants' initial refusal to dismiss their case and subsequent objections to conversion; and (3) Plaintiff's efforts to investigate the accuracy of Defendants' disclosures in their schedules and statements and Plaintiff's efforts to discover Defendants' assets. At the August 1, 2019 hearing, the Court expressed concern over costs incurred by MCA Financial. The Court requested that Plaintiff revisit those specific costs and explore the possibility of seeking qualitative billing from MCA Financial. Plaintiff requests an award of all costs incurred by MCA Financial in this matter because those costs were incurred in connection with Defendants' bad faith pursuit of a chapter 11 plan.
The Court declines to award those fees in their entirety because, although they were incurred in connection with Defendants' initial refusal to dismiss their case and subsequent objections to conversion, the Court finds that incurring costs totaling $3,789.71 after September 20, 2018 was necessary.
For these reasons, the Court finds that Plaintiff shall be awarded $11,692.11
For the reasons stated above, this Court awards $124,605.11 to Plaintiff for fees and costs he incurred in connection with Defendants' bad faith related to the homestead, dismissal/conversion and discovery/disclosure issues referenced above. Defendants pursued these aspects of their litigation with Plaintiff in bad faith and, under § 105(a), this Court awards these amounts of fees and costs as a sanction for Defendants' misconduct.
