ORDER ON APPEAL

Re: Dkt. No. 1

William H. Orrick, United States District Judge.

Appellant Warren Havens ("Havens") filed an involuntary bankruptcy petition against the Leong Partnership on August 24, 2016. Appellee Dr. Arnold Leong ("Leong") moved to dismiss that petition and eventually secured summary judgment arguing, in part, that the "Leong Partnership" is a non-existent entity. The Bankruptcy Court granted Leong's motion for attorneys' fees and costs under 11 U.S.C. § 303(i). Havens appeals the order granting fees and costs, asserting that the Bankruptcy Court erred in granting the award because § 303(i) only allows fees and costs to be granted to a "debtor" and Leong was not the named debtor, and arguing in any event that the amount of fees and costs awarded was unreasonable. I conclude that the Bankruptcy Court was within its powers to determine that Leong was the debtor for purposes of the petition and that, in light of the 20% reduction in fees imposed on two of Leong's three law firms, the amount of attorney's fees awarded was not an abuse of discretion. The Bankruptcy Court's Order Granting Fees and Costs Under Bankruptcy Code § 303(i) is AFFIRMED.

BACKGROUND

In 1998, Havens and Leong began a business relationship involving purchase of radio spectrum licenses from the Federal Communications Commission ("FCC"). Bankruptcy Court Order Granting Summary Judgment ("MSJ Order") at 3 [Dkt. No. 4-121]. A disagreement arose about the existence of an oral agreement regarding the percentage of ownership interest each had in the business relationship. Id. That disagreement has resulted in more than fifteen years of litigation, culminating most recently with a Receiver being appointed by the Alameda County Superior Court to preserve the value of the FCC licenses on a request by Leong. Appellee's Supplemental Appendix at 12 [Dkt. No. 7-1].

Following the appointment of the Receiver, Havens filed two Chapter 11 cases. MSJ Order at 3-4. This appeal arises from the second Chapter 11 case, where Havens filed an involuntary Chapter 11 petition ("Petition") against the "Leong Partnership." The existence of the "Leong Partnership" was heavily disputed in the Bankruptcy Court proceedings. Leong, in his individual capacity, moved to dismiss the Petition because the named debtor, the Leong Partnership, did not exist and Bankruptcy Code § 303(a)(B) requires at least three creditors to file an Involuntary Petition, but Havens' Petition was filed only by two. Mot. to Dismiss at 2 [Dkt. No. 4-62]. Havens opposed, arguing that § 303(a)(B) was satisfied because at the time of the filing of the Petition, there were three petitioning creditors and that the Leong Partnership did exist. Oppo. to Mot. to Dismiss at 4, 8 [Dkt. No. 4-75]. At the hearing on the Motion to Dismiss, on September 22, 2016, U. S. Bankruptcy Judge Charles Novack denied the Motion to Dismiss, but suggested that Leong "answer the Petition" and file a motion for summary judgment to raise the argument that the Leong partnership does not exist. Tr. Sept. 22, 2016 at 12 [Dkt. No. 4-87].

After Leong filed an Answer to the Petition, Answer [Dkt. No. 4-85], Havens argued in a Status Conference that Leong, as an individual, was not authorized to respond or make filings on behalf of the Leong Partnership because Leong denied there ever was a Leong Partnership (and, therefore, could not be a general partner who could represent the Partnership). Tr. Oct. 31, 2016 at 4 [Dkt. No. 4-92]. Havens asked the Bankruptcy Court to enter an order for relief because the Petition was not timely responded to. Id. at 3. Judge Novack rejected that argument and allowed Leong to file on behalf of the alleged debtor, reasoning that while Bankruptcy Rule 1011 provides that only "the debtor" named in the petition may contest the petition, there was a question whether the debtor exists and "Leong is as close to being the debtor as anyone or anything." Id. at 4-5. Judge Novack concluded "that for purposes of this case, Dr. Leong's motion to dismiss and his answer were filed on behalf of this alleged debtor. And if I need any authority other than common sense, I think I can look to Section 105 of the Code to ensure that there's no abuse of process here or potential abuse of process." Id. at 5.1

Leong then moved for summary judgment, arguing that the Petition must be rejected because the Leong Partnership did not exist and that there was, at least, a "legitimate dispute" over whether anything was owed to the petitioning creditors, rending the Petition impermissible. In opposition, Havens asserted that the Leong Partnership is an existing partnership comprised of Leong, Mark Griffith, and Channing Jones. MSJ Order at 8. In a series of declarations, Havens proffered the reasons why he believed the Leong Partnership exists. Havens Decl. for Oppo. ¶ 2a [Dkt. No. 4-107]. However, both Leong and Griffith filed declarations stating that the Leong Partnership never existed. Id. at 9. Ultimately, the Bankruptcy Court concluded that a bona fide dispute existed regarding the existence of the "Leong Partnership," which made the pursuit of the Involuntary Petition impermissible and led to the grant of Leong's motion for summary judgment. Id. at 11.2

Leong then filed a motion for attorneys' fees and costs under Bankruptcy Code § 303(i) as the prevailing party to the Involuntary Bankruptcy Petition. Mot. for Fees at 1 [Dkt. No. 4-123]. Havens objected, arguing that as a "non-debtor" Leong had no right to fees under Section 303(i) because fees can only be awarded to a "debtor." Oppo. for Fees at 1 [Dkt. No. 4-131].

In its order, the Bankruptcy Court acknowledged that "serious questions of fact exist regarding the very existence of the Leong Partnership." Bankruptcy Court Order Granting Fees and Costs ("Fee Order") [Dkt. No. 1-3] at 3. The court determined, based on the evidence filed in the Involuntary Petition proceedings, that Havens "had filed the Petition to interfere with the receiver's efforts to sell the radio spectrum licenses" and that "only Dr. Leong was affected by the involuntary petition, and he was its target. Dr. Leong was therefore caught in a `Catch 22': acknowledge the existence of the Leong Partnership and his role as a general partner in order to respond to the involuntary petition and obtain fees and costs under § 303(i), or deny the above and respond (somehow) to the involuntary to preserve the Alameda County Superior court receivership." Id. at 4.

The Bankruptcy Court determined that under Bankruptcy Code § 101(13),3 Leong was "the debtor" and that Bankruptcy Rule 90014 authorized Leong to respond to the Petition. It concluded that "given the serious questions regarding the existence of the Leong Partnership and the identity of the true target of the involuntary petition, Dr. Leong is the debtor herein under Bankruptcy Code § 101(13)." Fee Order at 4.

Havens also objected to the amount and reasonableness of the attorneys' fees and costs sought by Leong, who sought recovery for time incurred by three separate law firms (when only one had made an actual appearance in the bankruptcy proceedings). Havens contended a 60% reduction of fees was warranted because: (1) the time spent on tasks was excessive and the result of duplication of efforts; (2) there were multiple, unnecessary attorneys at hearings, meetings, and conferences; (3) non-bankruptcy attorneys billed time researching basic bankruptcy issues; (4) firms used block billing time; and (5) the firms billed for travel time. Oppo. for Fees at 9-10. The Bankruptcy Court held that the firm representing Leong in the bankruptcy proceedings (the Pachulski firm) could recoup all fees in full, but the two litigation firms who had not made an appearance (Bertrand and Shopoff firms)5 would have their fees reduced by 20% bringing the total attorneys' fees award down to $262,070.50. Fee Order at 6-7. As for costs, the Bankruptcy Court awarded only the costs incurred by the Pachulski firm that were recoverable under 28 U.S.C. § 1920, totaling $562.60. Id. at 8.

Before me is Havens's appeal of the Bankruptcy Court's Fees and Costs Order. He argues that the Bankruptcy Court erred by allowing Leong, as a non-debtor, to recover attorneys' fees and costs under § 303(i) and that the fees and costs awarded were unreasonable. Appellant Br. at 2.6

LEGAL STANDARD

District courts have jurisdiction to hear appeals from the final judgments, orders, and decrees of bankruptcy courts. 28 U.S.C. § 158(a)(1). Findings of fact are reviewed for clear error. Fed. R. Bankr. P. 8013; In re Acequia, Inc., 787 F.2d 1352, 1357 (9th Cir. 1986). Legal conclusions and mixed questions of law and fact are reviewed de novo. In re Lee, 179 B.R. 149, 155 (9th Cir. B.A.P. 1995).

DISCUSSION

I. THE BANKRUPTCY COURT DID NOT ERR IN AWARDING ATTORNEYS' FEES AND COSTS

Havens contends that Leong cannot seek costs and fees under Bankruptcy Code § 303(i) as that section only allows "the debtor" to recover costs and fees. Appellant Br. at 17. He asserts that even though the Bankruptcy Court allowed (and even encouraged) Leong to answer to the Involuntary Petition and move for summary judgment on the Petition, those actions do not make Leong the debtor for purposes of § 303(i). Id. at 8. He also notes that while the Bankruptcy Court discussed the evidence regarding the Leong Partnership's existence, the court never made a finding whether the named debtor, the Leong Partnership, existed. Id. at 14.

Bankruptcy Code § 303(i) provides:

11 U.S.C.A. § 303. Havens contends that under the plain language of the statute, only "the debtor" is entitled to attorney's fees and costs. Appellant Br. at 18.

Relying on Law v. Siegel, 571 U.S. 415, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014), Havens argues that a bankruptcy court cannot contradict an express provision of the Bankruptcy Code to attempt to reach an equitable result under § 105(a). Appellant Br. at 9-10; Law, 134 S.Ct. at 1191. In Law, the Supreme Court held that the bankruptcy court exceeded its authority by using § 105(a) to override another section of the Bankruptcy Code. Law, 134 S.Ct. at 1198.7 Here, Havens notes that the Bankruptcy Court below relied on § 105 to conclude Leong had standing to answer the Petition and to conclude that Leong — who constantly maintained he was not "the debtor" — was able to recover fees under § 303(i). However, given § 303(i)'s express limitation of those who can seek fees (only "the debtor"), the Bankruptcy Court could not rely on its equitable powers under § 105 in contravention of the express limits of § 303(i). Appellant Br. at 22.

Havens also relies on In re Miles, 430 F.3d 1083, 1093 (9th Cir. 2005) to argue that the Ninth Circuit has affirmed that under § 303(i) only the actual debtors named in involuntary petitions, and not third parties, can be awarded damages. In re Miles., In Miles, involuntary bankruptcy petitions were brought, separately, against Rodney and Ann Miles. In re Miles, 430 F.3d at 1086. The Bankruptcy Court dismissed the bankruptcy proceedings, finding the petitions were filed in bad faith. Id. Thereafter, Ann and her daughters brought cases in state court seeking damages on behalf of the daughters as a result of the petitions filed against their parents, and on behalf of Ann as a result of the petitions filed against her husband. Id. The state court cases were removed to Bankruptcy Court and the Bankruptcy Court dismissed the cases on the basis that Bankruptcy Code § 303(i) does not allow third parties to seek damages caused by the filing of involuntary petitions. Id. at 1087. The Ninth Circuit reviewed the language in § 303(i) and noted that an argument could be made that while (i)(1) expressly limits to fees and costs "to debtors," subsection (i)(2) (addressing petitions brought in bad faith) did not expressly mention "debtors" and therefore it was not similarly limited. Id. at 1093. However, after reviewing the legislative history — confirming that Congress intended only "debtors" to recover damages related to involuntary petitions and expressing concerns that allowing third-parties to recover could invite abuse of the involuntary petition process — the Ninth Circuit confirmed that only "debtors" had standing to seek damages under both subsections of § 303(i). Id. at 1093-94.

Miles is significantly different from this case. In Miles there was an actual debtor, yet the debtors' relatives were the ones attempting to claim damages under § 303(i) caused by involuntary petitions as to which they were not parties. Here, there was a significant question regarding the very existence of the named debtor, the Leong Partnership. The Bankruptcy Court appropriately determined that Leong was the only person/entity who could respond to and contest the Involuntary Petition, and allowed him to answer the Petition and move for summary judgment.8 Fee Order at 3; Appellee Br. at 20 [Dkt. No. 7]. As recognized by the Bankruptcy Court, there must be a debtor in bankruptcy cases. Leong was not a third party watching as another debtor participated in the Involuntary Petition; throughout the case Leong was the only respondent as debtor.

Although, as the Bankruptcy Court recognized, "there is little case law addressing situations like this" (Fee Order at 4), there are at least three cases that support the Bankruptcy Court's order. In In re Ed Jansen's Patio, Inc., cited by the Bankruptcy Court and relied on by Leong here, the named debtor was out of business, had no employees, and no longer had assets. In re Ed Jansen's Patio, Inc., 183 B.R. 643, 644 (Bankr. M.D. Fla. 1995). The Circuit Court appointed an Assignee for Benefit of Creditors and, after the Bankruptcy Court dismissed the involuntary petition finding the petitioning creditors were not actually creditors, the court granted attorney's fees and costs. Id. The court held that it was an unusual situation and there must be a remedy for the improper filing of an involuntary petition and, since the estate's assets were reduced by paying for the defense, the costs should be recoverable by the petitioning creditor. Id.

In In re Synergistic Technologies, Inc., a board member of a company, that was no longer in operation, defended against an involuntary petition brought by two other board members. In re Synergistic Technologies, Inc., 2007 WL 2264700 *1 (Bank. N.D. Tex. 2007). That court granted fees and costs under § 303(i) to the board member, holding that when there is a corporate governance deadlock, the shareholder can respond on behalf of the debtor and recover fees. Id. at *5.

And in In re Fox Island Square Partnership, the petitioners filed an involuntary petition against the Fox Island Square Partnership. In re Fox Island Square Partnership, 106 B.R. 962, 965 (Bankr. N.D. Ill. 1989). The petitioners collectively held a 75% interest in the partnership. Id. A general partner of the partnership (Frey) answered and filed a motion to dismiss. Id. The case went to trial and the bankruptcy court denied the involuntary petition and dismissed the case since the partnership was paying its debts and the debt discussed in the involuntary petition was not the partnership's debt. Id. at 966. Frey filed a request for the recovery of attorney's fees and costs pursuant to § 303(i). Id. The bankruptcy court found that for all intents and purposes Frey was attempting to save the partnership by representing the partnership in the case and, therefore, could seek an award under § 303(i). Id. at 967.

Havens argues that these cases predate the Ninth Circuit ruling in Miles and the U.S. Supreme Court decision in Law and asserts that they should not be considered precedent because they are from outside the Ninth Circuit. Appellant Br. at 21. But neither Miles nor Law addressed the situation in these cases, where there was a dispute over the existence of "the debtor" and the movant (here, Leong) was determined to be the closest thing to a debtor and, therefore, entitled to fees under § 303(i). I find the rationale of Jansen, Synergistic, and Fox are not undermined by Miles, which addressed a wholly different factual predicate. Miles had a debtor that participated in the involuntary petition proceedings. In Jansen, Synergistic, and Fox, the Bankruptcy Court allowed a party closely tied to the case, even if not the party named in the involuntary petition, to contest the involuntary proceedings and recover their attorney's fees and costs. Similarly, Leong was as close to the named debtor as possible, was (as found by the Bankruptcy Court) to be the party in interest and was the party whose efforts in the underlying Receivership Havens was attempting to thwart. Leong was not a "third party" as were the spouse and daughters in Miles.

Law is inapposite because, by defining Leong as the debtor and granting him fees and costs, the Bankruptcy Court was not using its equitable powers under § 105 to contravene an express limitation in the Bankruptcy Code.9 The Bankruptcy Court recognized Leong as "the debtor" by examining the definitions of the term "debtor" in Bankruptcy Code § 101(13) (the person upon whom the bankruptcy case has been brought) and Federal Rule of Bankruptcy Procedure 9001 (if the named debtor is a partnership the court can designate a person in control of the partnership to perform any act required by the debtor).10 Fee Order at 4. The Bankruptcy Court was within its powers to do so and, subsequently, award fees under § 303(i).11

II. THE FEES AWARDED WERE REASONABLE

Leong's request for fees included time billed by three law firms who worked on contesting the Involuntary Petition. Fee Order at 6. The general bankruptcy counsel (Pachulski) billed $146,558.50 in fees and the two litigation firms which represent Leong in the Alameda County Superior Court proceedings (Bertrand and Shopoff) billed $52,500 and $91,890 respectively. Mot. for Fees at 16, 64, 85. The Bankruptcy Court found that Leong needed that expertise to address the issues, and that a significant amount of time was "necessary to understand the more than decade long litigation between Havens and Dr. Leong, Havens's litigation with the other alleged Leong Partnership partners, and the relationship between the involuntary bankruptcy proceeding and the Alameda County Superior Court receivership." Fee Order at 7. It concluded that Pachulski's fees were reasonable and awarded those fees in full. Fee Order at 6-7.

However, the Bankruptcy Court found multiple issues with the request with respect to the litigation firm fees. Specifically:

As a result, the Bankruptcy Court reduced the litigation firms' fees by 20%. Id. at 7. Fee Order at 7.12

Havens asserts numerous grounds for error: the Bankruptcy Court did not address all of Havens' arguments as to why the fees billed were excessive; the amount of its reduction (20%) is "inconsistent" with the rationale the Court did recognize; excessive duplication and block billing; and, under Gates v. Deukmejian, 987 F.2d 1392 (9th Cir. 1992), the Court was required to but failed to provide a "concise but clear" rationale supporting the blanket 20% reduction. Gates, 987 F.2d at 1400. Havens requests that if I conclude that the Bankruptcy Court committed no error in awarding fees, I should remand the case back to the Bankruptcy Court to reassess the fees and provide a clear and concise explanation of any award. Appellant Br. at 29.

In the Ninth Circuit, a court may "impose a small reduction, no greater than 10 percent — a `haircut' — based on its exercise of discretion and without a more specific explanation." Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008). Here, the Bankruptcy Court went further, imposing a 20% reduction because of the duplication of effort and block billing problems it identified. Reductions of fees between 10-30% for block billing have been approved. See, e.g., Welch v. Metro. Life Ins. Co., 480 F.3d 942, 948 (9th Cir. 2007) (recognizing the block billing may inflate fees by 10-30% and approving a 20% reduction for block-billed time). Considering the Bankruptcy Court's order, as well as the lack of specificity in the arguments made to me,13 I conclude that the Bankruptcy Court appropriately reduced the fees sought by the two litigation firms by 20% to account for the concerns identified (the block billing by the Shopoff firm and by the duplication of effort by both firms).14

As to the arguments Havens believes were unaddressed or inadequately addressed by the Bankruptcy Court, Havens reiterates his objections to the block billing by Shopoff and the duplication of efforts (both of which have been addressed), as well the unnecessary work performed by the litigation firms researching bankruptcy law. Id. at 28-29. However, the "`concise but clear' explanation requirement mandates that the [trial] court explain the reasons for its fees award; it does not demand that the court make findings as to each of defendants' specific objections to plaintiffs' billing judgment." Gates, 987 F.2d at 1400. The Fee Order is sufficient in this regard.

I conclude that the Bankruptcy Court did not abuse its discretion in only reducing the litigation counsel's fees by 20% and that the Court provided a clear, concise, and adequate explanation of its rationale.

CONCLUSION

The Bankruptcy Court had authority to consider Leong "the debtor" given the unusual situation presented in this case and to award fees and costs under § 303(i). The amount awarded was reasonable and adequately explained. As Leong does not contest the reduction in costs, costs of $562.60 are reduced from the overall award. Otherwise, the Bankruptcy Court's Fee Order is AFFIRMED.

IT IS SO ORDERED.