MARKELL, Bankruptcy Judge.
R. Sam Hopkins ("Hopkins") sought $1,315.41 in fees for his service as a chapter 7
Andy N. Salgado-Nava ("Salgado-Nava") commenced his voluntary chapter 7 bankruptcy case by filing his bankruptcy petition on October 22, 2009. Hopkins was then appointed to serve as trustee for Salgado-Nava's chapter 7 bankruptcy estate.
Hopkins initially determined that there were no non-exempt assets to distribute to creditors. He thus categorized Salgado-Nava's case, in line with most chapter 7 cases, as a no-asset case.
But Hopkins had also sent routine notices to various taxing authorities, including the State of Idaho. These notices told of Salgado-Nava's bankruptcy filing. They also requested that the recipients advise Hopkins of any tax refunds owed to Salgado-Nava, as Hopkins claimed that such refunds were property of the bankruptcy estate under § 541.
These notices brought results. As it turned out, Salgado-Nava had overpaid his state taxes for 2009 and 2010 by approximately $10,000. In compliance with the notices, Idaho sent Hopkins Salgado-Nava's tax refunds. Hopkins then withdrew his no-asset report. He also issued a new notice advising creditors that there might be a distribution of assets and directing them to file proofs of claim in order to share in that distribution. Seven creditors, appellees here, did so.
After Hopkins received the tax refunds, Salgado-Nava amended his bankruptcy schedules to list the tax refunds as assets and to claim $4,160 of his 2009 refund as exempt. No one contested Salgado-Nava's exemption claim. As a consequence, the exemption was deemed allowed pursuant to § 522(l) and Rule 4003(b). Part of his 2010 refund also was excluded from the estate.
Before hearing the matter, the bankruptcy court requested Hopkins provide additional information. Specifically, the court requested Hopkins file:
Order to Trustee to File Supplementation of Record (April 12, 2011) at p. 1.
In response, Hopkins filed a one-page document entitled "Supplement to Trustee Fee Application," which provided a brief narrative summary of the services that Hopkins had provided in the bankruptcy case. It also summarized the results of those services: Hopkins had cash on hand which he estimated would be sufficient, after the payment of his requested trustee's fees, to pay $4,292 to unsecured creditors who had filed proofs of claim. This would result in a 39% dividend to creditors.
The Trustee also filed time records detailing the amount of time and services he and his staff had performed in the bankruptcy case. According to Hopkins, he and his staff spent approximately 14 hours on the case: Hopkins personally spent 3 hours, his bankruptcy administrator spent 6 hours, his office clerk spent 1 hour, and his paralegals accounted for the final 4 hours.
After the hearing, the bankruptcy court issued a memorandum decision awarding Hopkins only $750 of the $1,315.41 in fees requested. Relying on In re B & B Autotransfusion Servs., Inc., 443 B.R. 543 (Bankr.D.Idaho 2011), and on the other cases cited in B & B, the court held that $750 was a reasonable fee for Hopkins's services. According to the court, based on its consideration of the extent and difficulty of the services Hopkins and his paralegals had provided, the requested fees were unreasonable. In making this determination, the court reasoned:
Mem. Dec. (June 23, 2011) at pp. 3-4 (footnote omitted).
In addition, the bankruptcy court rejected Hopkins's argument that, under § 330(a)(7), he should receive $1,315.41 in fees as a commission based on the compensation rates set forth in § 326(a). As the court put it, § 326(a) in essence "caps" trustee compensation but does not alter or limit the court's duty and authority to determine a reasonable fee.
On June 30, 2011, the bankruptcy court entered its order approving Hopkins's Final Report and awarding Hopkins $750 in fees and $46.10 in expenses. The Trustee timely filed a notice of appeal on July 13, 2011, which gave us jurisdiction under 28 U.S.C. § 158(b).
Although this Panel reviews a bankruptcy court's fee award pursuant to § 330(a) for abuse of discretion, Ferrette & Slater v. U.S. Trustee (In re Garcia), 335 B.R. 717, 723 (9th Cir. BAP 2005), we still must "determine de novo whether the [bankruptcy] court identified the correct legal rule to apply to the relief requested." United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir.2009) (en banc). And that is the issue here: what is the "correct legal rule" set forth in § 330(a)(7)?
We start with the paragraph's provenance. Congress added § 330(a)(7) when it adopted § 407 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, § 407, 119 Stat. 23, 106 (2005) ("BAPCPA"). To determine what this new paragraph means and what it added, we begin with the text of the statute itself. Ransom v. FIA Card Servs., N.A., ___ U.S. ___, 131 S.Ct. 716, 723-24, 178 L.Ed.2d 603 (2011) (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)).
Section 330 (a)(7) provides:
Somewhat surprisingly, the published decisions construing this paragraph conclude that it added little to the law of trustee compensation. These decisions rest primarily on the view that trustee compensation is always subject to a review for reasonableness. See, e.g., In re B & B Autotransfusion Servs., Inc., 443 B.R. 543, 550 (Bankr.D.Idaho 2011); In re Healy, 440 B.R. 834, 835-36 (Bankr.D.Idaho 2010); In re Ward, 418 B.R. 667, 675-78 (W.D.Pa.2009); In re Coyote Ranch Contractors, LLC, 400 B.R. 84, 94-95 (Bankr.N.D.Tex.2009); In re McKinney, 383 B.R. 490, 493-94 (Bankr. N.D.Cal.2008); In re Phillips, 392 B.R. 378, 389-90 (Bankr.N.D.Ill.2008) In re Mack Props., Inc., 381 B.R. 793, 799
There is, however, an alternate view of § 330(a)(7). This view, adopted by the Office of the United States Trustee,
It is against this background of published cases, administrative commentary, and academic opinion that we interpret § 330(a)(7). On its face, § 330(a)(7) is made up of an introductory dependent clause — "In determining the amount of reasonable compensation to be awarded to a trustee" — followed by an independent clause — "the court shall treat such compensation as a commission, based on section 326." In reading this statutory directive, we think the most natural reading of this provision is that the independent clause states a mandatory rule, while the dependent clause states when that rule applies.
If this reading is accepted, it means that we should start with the independent clause — which we will call the commission clause. On its face, this clause requires bankruptcy courts to treat a trustee's fee request as if the trustee were requesting payment of a commission — a fixed amount — based on the rates set forth in § 326. If correct, this reading would change our prior view that § 326 simply "capped" trustee compensation by setting forth maximum compensation rates. See Arnold v. Gill (In re Arnold), 252 B.R. 778, 788 n. 12 (9th Cir. BAP 2000).
This change is warranted. Congress's addition of the commission clause changed both the function of § 326 and its relationship with § 330(a). The amendment fixed a statutory commission for chapter 7 trustees tied to — or, in the language of the last provision of the commission clause, "based on" — § 326's compensation scheme.
No other reading of the phrase "based on section 326" seems plausible, especially given the use of the word "commission." If Congress did not want to link a trustee's commission to the rates set forth in § 326, it could have ended the commission clause
But Congress chose to use different words to refer to § 326 in § 330(a)(1) and (a)(7). The use of different words presumably means that Congress intended that the different words had different meanings and effects. See Sosa v. Alvarez-Machain, 542 U.S. 692, 711 n. 9, 124 S.Ct. 2739, 159 L.Ed.2d 718 (2004). Put another way, standard canons of statutory interpretation require us to give "based on section 326" a different interpretation from one we would give if the phrase read, as its cognate phrase in § 330(a)(1) does, "subject to section 326." In short, we follow established precedent by giving each word and provision of the commission clause meaning. See Corley v. United States, 556 U.S. 303, 314, 129 S.Ct. 1558, 173 L.Ed.2d 443 (2009) ("[a] statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant..." (internal quotation marks omitted)); see also Meyer v. Renteria (In re Renteria), 470 B.R. 838, 843 (9th Cir. BAP 2012) (interpreting § 1322(b)(1) so as to give effect to all of the words and phrases in the statute).
That said, we need to examine the remainder of the commission clause, including the relationship the phrase "based on" has to the word "commission" and, in turn, the meaning of the word "commission." One key indicator of the substantive relationship among these terms and phrases is indicated by the spatial relationship of each in the statute's text. The words "based on" follow the main portion of the commission clause, a placement and ordering which generally means that the former limits, qualifies or refines the meaning of the latter. See In re Renteria, 470 B.R. at 842 (citing 2A NORMAN J. SINGER, SUTHERLAND ON STATUTORY CONSTRUCTION § 47.33 (7th ed. 2011) (explaining the rule of the last antecedent)). In short, the use of "commission" before the words "based on" indicates that the normal meaning of commission starts the analysis of the main text, with the addition of "based on section 326" indicating a refinement or limitation of that accepted meaning.
Turning to the accepted meaning of "commission" in normal parlance, a "commission" is a form of compensation set as a fixed percentage of what is sold or transferred. See BLACK'S LAW DICTIONARY 306 (9th ed. 2009) (defining commission as "[a] fee paid to an agent or employee for a particular transaction, usu[ally] as a percentage of the money received from the transaction <a real-estate agent's commission>."); OXFORD ENGLISH DICTIONARY (2d ed. 1989), available at http://www.oed.com/view/Entry/37135 (last visited July 20, 2012) (defining commission as "[a] remuneration for services or work done as agent, in the form of a percentage on the amount involved in the transactions; a pro rata remuneration to an agent or factor.").
Outside of bankruptcy, commissions generally are not subject to a review for reasonableness unless an agreed-upon commission rate is not duly fixed before the commission is earned. As stated in the Restatement (Third) of Agency:
RESTATEMENT (THIRD) OF AGENCY § 8.13, Comment d (2006).
Much the same analysis applies in bankruptcy when, for example, a court pre-approves a professional's percentage-based fee or a contingency fee arrangement before the work is performed. See § 328. If the fee arrangement is properly authorized under § 328, the bankruptcy court does not conduct a standard § 330(a) reasonableness review of contingency fees or percentage-based fees it has pre-approved under § 328. See Friedman Enters, v. B.U.M. Int'l, Inc. (In re B.U.M. Int'l, Inc.), 229 F.3d 824, 829 (9th Cir.2000) (citing Pitrat v. Reimers (In re Reimers), 972 F.2d 1127, 1128 (9th Cir.1992)); see also In re Confections by Sandra, Inc., 83 B.R. 729, 731-32 (9th Cir. BAP 1987). Indeed, a bankruptcy court only can disturb such pre-approved fees when it finds that the pre-approval of such fees turned out to be "improvident in light of developments not capable of being anticipated at the time" the court fixed the fees. § 328(a); see also In re Reimers, 972 F.2d at 1128.
As a result of this analysis, the plain language of the commission clause leads us to conclude that § 330(a)(7) sets commissions for bankruptcy trustees based on the rates set forth in § 326. Given this, if the commission clause stood alone, independent of the rest of § 330, we could immediately hold that trustee fees should not be disturbed absent circumstances like those required in order to disturb fees pre-approved under § 328, or like the circumstances that might justify reformation or rescission of a commission agreement outside of bankruptcy.
But the commission clause does not stand alone. We still must construe the remainder of § 330(a)(7), because ascertaining the plain meaning of statutory text requires a contextual reading. State Comp. Ins. Fund v. Zamora (In re Silverman), 616 F.3d 1001, 1006 (9th Cir.2010) ("To determine plain language we consider the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." (internal quotation marks omitted)); Carpenters Health & Welfare Trust Funds for Cal. v. Robertson (In re Rufener Constr., Inc.), 53 F.3d 1064, 1067 (9th Cir.1995) ("When we look to the plain language of a statute in order to interpret its meaning, we do more than view words or sub-sections in isolation. We derive meaning from context, and this requires reading the relevant statutory provisions as a whole.")
This requires us to look at the dependent clause that immediately precedes the commission clause. Its wording and placement suggests that bankruptcy courts still must consider the reasonableness of trustee fees because it specifies that bankruptcy courts must apply the commission clause "in determining the amount of reasonable compensation to be awarded to a trustee...." We should not ignore the
The starting place for a reasonableness analysis component of trustee compensation might be § 330(a)(3). Before BAPCPA's enactment in 2005, § 330(a)(3) required bankruptcy courts, when considering the reasonableness of all trustee fees under all relevant chapters, including chapters 7, 11, 12, and 13, to consider:
BAPCPA changed this. It amended § 330(a)(3) so that the only types of trustees that come within its ambit are chapter 11 trustees; chapter 7 trustees no longer are subject to its terms. BAPCPA, Pub. L. 109-8, § 407, 119 Stat. 23, 106 (2005). As a consequence, the factors of reasonableness specified in paragraph (3) no longer directly apply to chapter 7 trustees such as Hopkins when reviewing their fee requests.
Section 330(a)(7), however, applies to all trustees under all chapters. This indicates a shift in treatment and analysis of chapter 7 trustee fees from paragraph (3) and its catalogue of factors, to paragraph (7) and its explicit incorporation of commission rates.
But the shift was not complete. Notwithstanding the applicability of paragraph (7) to chapter 11 trustees, they are still specifically included in paragraph (3) with its litany of reasonableness factors. As a result, we cannot construe paragraph (7) to require a fixed commission in all cases regardless of chapter. Otherwise, we would create an absurd situation in which § 330(a)(3) requires what § 330(a)(7) prohibits.
This requires us to search for an interpretation of the § 330(a)(7) that harmonizes the various provisions. See, e.g., Nat'l Ass'n of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 661-66, 127 S.Ct. 2518, 168 L.Ed.2d 467 (2007); Mountain States Tel. & Tel. Co. v. Pueblo of Santa Ana, 472 U.S. 237, 249, 105 S.Ct. 2587, 86 L.Ed.2d 168 (1985). In this endeavor, it is not our role to pick and choose between statutory provisions and only give effect to some of them. See Nigg v. U.S. Postal Serv., 555 F.3d 781, 785-86 (9th Cir.2009) (citing Morton v. Mancari, 417 U.S. 535, 551, 94 S.Ct. 2474, 41 L.Ed.2d 290 (1974)).
The challenge is, if possible, to give a meaning to both § 330(a)(3) and
While these types of reasonableness reviews vary somewhat, their overarching purpose is consistent and clear: to determine whether there is a rational relationship between the duties to be compensated by the commission rate and the nature and range of services actually provided. When a rational relationship exists, the fee is presumed reasonable. Moreover, in each of these instances, federal courts applied standards that did not require a lodestar analysis to determine the reasonableness of the fees in question.
We acknowledge that these nonbankruptcy commission cases are not directly comparable with § 326's commission rates. Most significantly, Congress has set chapter 7 trustee commission rates rather than the market. But we know of no reason why courts should second-guess Congress's clearly expressed intent to fix trustee commission rates for the vast majority of cases, especially given that Congress has set the duties that trustees such as Hopkins must perform to earn that commission.
Against this background, we must assume that Congress already has approved fees set as commissions in § 326 as reasonable for the duties it has set out for such trustees in § 704 and elsewhere in the Code. In effect, Congress has set both the duties of a trustee and the "market" rate for compensation related to the delivery of those services.
On the other hand, if extraordinary circumstances exist, or if chapter 11 trustee fees are at issue, the bankruptcy court may be called upon in those cases to determine whether there exists a rational relationship between the amount of the commission and the type and level of services rendered. In the case of a chapter 11 trustee, this determination necessarily requires consideration of the § 330(a)(3) factors, and also ordinarily includes a lodestar analysis. As for chapter 7, 12, and 13 trustee fees, when confronted with extraordinary circumstances, the bankruptcy court's examination of the relationship between the commission rate and the services rendered may, but need not necessarily include, the § 330(a)(3) factors and a lodestar analysis. But bankruptcy courts still must keep in mind that tallying trustee time expended in performing services and multiplying that time by a reasonable hourly rate ordinarily is beyond the scope of a reasonableness inquiry involving commissions. Simply put, a bankruptcy court that diminishes a trustee's compensation from the statutorily-set rate errs if the only basis offered for this diminution is a lodestar analysis.
Although the legislative history is silent on the specific meaning and purpose of § 330(a)(7), our construction of § 330(a)(7) generally is consistent with the overall purpose of § 330, pursuant to which Congress sought to balance the general bankruptcy interest of conserving estate assets with the goal of fairly compensating bankruptcy trustees and professionals.
Based on the law set forth above, the bankruptcy court erred in determining Hopkins's fees. The bankruptcy court did not treat Hopkins's compensation as a commission based on § 326(a). Instead, the court compared the fees requested to what it considered a reasonable rate of compensation for the time Hopkins and his paralegals actually spent working on the case. The court offered no other grounds for its decision. In short, the bankruptcy court substituted a different standard for the appropriate method and rate of compensation for Hopkins in place of the method and rate set by Congress.
When the bankruptcy court does not select and apply the correct law, we typically remand so that the bankruptcy court can apply the correct law to the facts of the case. However, an appellate court may decide a case on the facts previously found when the record is sufficiently developed and there is no doubt as to the appropriate outcome. See, e.g., Wharf v. Burlington N. R.R. Co., 60 F.3d 631, 637 (9th Cir.1995); see also Weisgram v. Marley Co., 528 U.S. 440, 456, 120 S.Ct. 1011, 145 L.Ed.2d 958 (2000); Cuddeback v. Florida Bd. of Educ., 381 F.3d 1230, 1236 n. 5 (11th Cir.2004).
In this instance, no further proceedings are necessary to apply the facts to the correct law. The record is complete and establishes that there was nothing unusual, let alone extraordinary, about the bankruptcy case or Hopkins's services.
For the reasons set forth above, we REVERSE the bankruptcy court's fee award and REMAND this matter, with an instruction to enter a new fee award in the full amount requested by Hopkins, $1,315.41.
That no-asset cases are all-too-common is underscored by Rule 2002(e), which allows trustees and clerks generally to tell creditors to dispense with filing proofs of claim unless the creditors are later notified that there will be assets to disburse.
Cf. Trustee Compensation, in the United States Trustee's Frequently Asked Questions about trustee compensation:
FREQUENTLY ASKED QUESTIONS (FAQs) FOR TRUSTEES, available at http://www.justice.gov/ust/eo/bapcpa/trustees_faqs.htm#trust_issue4 (last visited July 20, 2012).
