JIM D. PAPPAS, Bankruptcy Judge.
Plaintiffs, chapter 7
Debtors own a home in Blackfoot, secured by a promissory note ("the Note") currently held by the Bank. Two months after Debtors filed for chapter 7 bankruptcy relief on January 9, 2008, they stopped making payments on the Note. The Bank sought and received relief from the automatic stay in Debtors' bankruptcy case, and, soon thereafter, sent Debtors a Notice of Intent to Accelerate their loan. See Dkt. No. 81-1 at 5. Per that notice, the loan balance was accelerated with full payment required by December 24, 2008. See id. When full payment was not received, the Bank initiated non-judicial foreclosure proceedings against Debtors' home in 2009. See Dkt. No. 81-1 at 7.
In response, Debtors filed a state court law suit against the Bank,
The Bank eventually filed a motion to dismiss Debtors' TILA and ICPA claims on January 11, 2011.
Both Debtors and the Bank then moved for summary judgment. A hearing on the parties' motions was held July 13, 2011, at which the Court denied Debtors' motion, and took the Bank's motion under advisement. After review of the record, the parties' submissions, and applicable law, the Court found that the loan documents provided to Debtors fully complied with TILA, and it granted summary judgment for the Bank.
Throughout this action, the Bank was represented by three attorneys from the Boise office of Holland & Hart, LLP; a paralegal assisted them. This is a summary of the fees billed in this case:
Declaration of Robert Faucher at 3, Dkt. No. 77-1.
The Bank contends it is entitled to recover attorneys' fees and costs pursuant to Idaho Code § 12-120(3), and under the provisions of the Note and the Deed of Trust ("DOT") securing the Bank's loan. Debtors argue that the Bank is not entitled to any fees, though, if the Court finds the Bank is entitled to fees and costs, Debtors contend the requested fees and costs are excessive.
Though litigated in the Bankruptcy Court, whether the Bank may recover attorneys fees and costs in this action is governed by state law. JB Constr., Inc. v. King (In re King), 09.1 I.B.C.R. 32, 32 (Bankr. D. Idaho 2009) (quoting Ford v. Baroff (In re Baroff), 105 F.3d 439, 441 (9th Cir. 1997) ("[A] prevailing party in a bankruptcy proceeding may be entitled to an award of attorney fees in accordance with applicable state law if state law governs the substantive issues raised in the proceedings.")). Consistent with case law governing the award of attorneys' fees in federal court, the Idaho Rules of Civil Procedure provide:
IDAHO R. CIV. P. 54(e)(1); see also Bertola v. N. Wis. Produce Co. (In re Bertola), 317 B.R. 95, 99 (9th Cir. BAP 2004) (indicating that, in federal court, attorneys' fees are only to be awarded if authorized by statute or contract). The Bank asserts Idaho Code § 12-120(3), the Note, and the DOT all authorize its recovery of attorneys' fees in this instance. The Debtors disagree.
Idaho Code § 12-120(3) provides:
Under this statute, then, the Bank may recover attorneys' fees if it was the prevailing party in a civil action, so long as the action was one to recover on a note or negotiable instrument.
For the purposes of attorneys' fees determinations, the definition of "civil action" is found in Idaho Rules of Civil Procedure 3(a). See Smith v. Washington Cnty., 247 P.3d 615, 619-20 (Idaho 2010); Neighbors for Responsible Growth v. Kootenai Cnty., 207 P.3d 149, 153 (Idaho 2009); Sanchez v. State Dept. of Corr., 141 P.3d 1108, 1112 (Idaho 2006). A civil action is one "commenced by the filing of a complaint with the court," and a proceeding that does not involve such a filing is not a civil action for the purposes of awarding attorneys' fees. IDAHO R. CIV. P. 3(a)(1); see Smith, 247 at 619-20 (indicating that a petition for judicial review of an administrative decision is not a civil action); Driver v. SI Corp., 80 P.3d 1024, 1030 (Idaho 2003) (implying that a proceeding to confirm an arbitration award is not a civil action); Allen v. Blaine Cnty., 953 P.2d 578, 582-83 (Idaho 1998) (finding that an appeal from an agency decision is not a civil action); Swanson v. Kraft, Inc., 775 P.2d 629, 636 (indicating that worker's compensation claims proceedings are not civil actions).
The Bank's action to collect its debt from Debtors in this case took the form of a non-judicial foreclosure proceeding. By definition, the filing of a complaint is not required to commence such a proceeding. See Idaho Code § 45-1506. Accordingly, the Bank's non-judicial foreclosure efforts do not render this adversary proceeding a civil action.
On the other hand, Debtors responded to the Bank's non-judicial foreclosure proceeding by filing a state court complaint against the Bank, thereby clearly commencing a civil action for the purposes of § 12-120(3).
There are three provisions, one in the Note and two in the DOT securing the Note, that the Bank asserts authorize it to recover attorneys' fees in this case. Of these, the provision in the Note
In addition, ¶ 9 of the DOT provides:
DOT ¶ 9, Dkt. No. 50-5 at 14.
Debtors' action to prevent the Bank from foreclosing on their house based upon alleged TILA and ICPA violations is "a legal proceeding that might significantly affect [the Bank's] interest in [Debtors' home]." Therefore, pursuant to ¶ 9 of the DOT, the Bank was authorized to appear in court and to incur reasonable attorneys' fees to protect its interest and rights in the Debtors' home and under the DOT. Rather than receiving an outright award of fees, however, any fees recovered under this provision are to be added to the debt secured by the DOT.
Debtors' objection to the Bank's motion for attorneys' fees is essentially that, because the Bank incurred the fees in defense of Debtors' action, and not in direct efforts to "enforce" the Note, the attorneys' fees are not authorized. Paragraph 9 of the DOT, however, authorizes recovery of fees incurred by the Bank in taking any reasonable or appropriate action to protect its rights and interests in Debtors' home and the DOT. In addition, even under enforcement-type language, like that included in the other contract provisions, courts have found that a lender defending against actions intended to halt foreclosure proceedings is enforcing its contract rights. See, e.g., Gilbert v. World Sav. Bank, FSB, 2011 995966 at *2 (N.D. Cal. Mar. 21, 2011) (finding that, under California case law, "attorneys' fees incurred in the enforcement of a contract includes attorneys's fees incurred in defending against a challenge to the underlying validity of the obligation") (quoting Siligo v. Castellucci, 26 Cal.Rptr.2d 439, 442 (Cal. 6th Dist. Ct. App. 1994) (internal quotation marks and citations omitted)). While this precise issue has not arisen in the context of contractually authorized attorneys' fees in Idaho, the Idaho Court of Appeals has held that attorneys' fees incurred in defending against actions intended to halt foreclosure proceedings are compensable from non-judicial foreclosure sale proceeds under Idaho Code § 45-1507. Wilhelm v. Johnston, 30 P.3d 300, 305-06 (Idaho Ct. App. 2001). It is likely that Idaho courts would also find those fees to be authorized in enforcement-related provisions.
Regardless, because ¶ 9 of the DOT does not require "enforcement" of the Note as a prerequisite to recovering fees, the Bank may recover its reasonable attorneys' fees in connection with defending against Debtors' state court action even if Idaho courts were to find differently.
Of course, that the Bank is authorized by the DOT to recover attorneys' fees does not necessarily mean that the Bank is authorized to recover the total amount it has requested. The DOT limits the Banks' recovery to "reasonable" attorneys fees. Moreover, underlying all state court attorneys' fees awards is the requirement that the amount be reasonable. See IDAHO R. CIV. P. 54(e)(1).
The Idaho Rules provide a list of factors that a court is to consider in determining the reasonableness of an attorneys' fees award.
The first noteworthy factor in fixing the amount to award the Bank for attorneys' fees in this case involves the amounts in controversy. The Court is not inclined, on these facts, to award the Bank over $132,000 in attorneys fees in an action defending the Bank's DOT on a house worth less than $200,000. While not ultimately determinative, the disproportionate nature of the requested fees when compared to the amount of its monetary interest at stake if the Bank were prevented from foreclosing, factors into the Court's reasonableness calculations.
The second important factor influencing the Court's decision in this case involves the amount of time spent by the Bank's attorneys in defending this action. The Bank's request is based upon services provided by three different attorneys working on this adversary proceeding, and, combined, they billed a total of 566.8 hours. In addition, the Bank's lawyers were assisted by a paralegal, who billed 37.8 hours for her services. In comparison, Debtors' attorneys spent 166.5 hours to both prosecute this adversary proceeding and represent Debtors in their chapter 7 bankruptcy.
While the Court has high regard for the Bank's attorneys' law firm, and the attorneys in that firm, the Court must conclude that the high number of hours billed by the Bank's attorneys appears to have been excessive. It must be recalled that the issues in this adversary proceeding were resolved at the summary judgment stage, without a trial or even extensive discovery. Within the eight months or so that the action was actively litigated, the Bank filed 15 different motions, objections to motions, or replies in support of motions, along with accompanying memoranda, affidavits, and declarations.
The Bank also argues that the complex nature of TILA and the novelty and difficulty of the questions in this case justify the large number of hours billed. In doing so, however, the Bank's attorneys undercut any argument that they have specialized knowledge or experience "in the particular field of law" required for resolution of this case, a factor that may justify higher fees. See IDAHO R. CIV. P. 53(e)(1). At the same time, most of the Bank's lawyers' time accountings show that most hours were billed for purposes other than researching TILA-related issues.
While it is not a scientific endeavor, in exercising its discretion in this matter, the Court concludes that the amount of time for which reasonable fees may be awarded is likely somewhere between the time spent by Debtors' counsel prosecuting the action, and the Bank's attorneys in defending. Considering the factors identified above, recognizing that the Bank prevailed on only two of its three motion to dismiss contentions,
Third, not only is the time for which the Bank's attorneys billed unreasonable, it appears to the court that their billing rates are also excessive in this context. To justify the rates of its attorneys, the Bank primarily relies on District of Idaho cases discussing reasonable fees in the Boise legal market, as well as the affidavits of two Boise practitioners. In one of the decisions upon which it relies, the Bank notes the district court found that an attorney with experience comparable to Faucher's could "reasonably bill as much as $350 per hour in the Boise Market." Reply in Support of the Bank's Motion for Attorney Fees and Costs at 11, Dkt. No. 81.
In addition, this Court has found that, for one of the two attorneys upon whose affidavit the Bank relies, the reasonable rate is $250. Crawforth v. Boise Tower Assocs., LLC (In re Charterhouse Boise Downtown Props., LLC), 2010 WL 1049968 at *4 (Bankr. D. Idaho 2010).
In addition, in the Court's opinion, Tollefson's rate of $215 per hour is too high for an associate attorney with approximately eight years of experience. The reasonable rate for associates with three to four years of experience has been found in other decisions to be "somewhere between $100 and $180 per hour," and attorneys with approximately 10 years of experience have been found to charge $190 per hour. Restoration Indus. Ass'n, Inc., 2008 WL 921078 at *1. The Court also considers this range of rates appropriate based upon the many fee awards it routinely makes in its other cases. Therefore, the Court finds that a reasonable rate for Tollefson's work is $180 per hour.
McNulty, who in this action demonstrated considerable skill considering his status as a first-year associate, billed at a rate of $180 per hour. Other decisions have found the reasonable rate for recent law school graduates, or new bar members, to be $100 per hour. See Beach v. JD Lumber, Inc., 2010 WL 3942117 at *2 (D. Idaho 2010); Martin v. Inclusion, Inc., 2007 WL 1412525 at *1 (D. Idaho 2007). As noted, the reasonable rate for attorneys with even three years of experience ranges down to $100 per hour. Restoration Indus. Ass'n, Inc., 2008 WL 921078 at *1. The Court finds a rate for McNulty's services of $125 per hour to be reasonable in this case.
Finally, the rate charged for paralegal services of $145 per hour is, plainly put, shocking to the Court. In other cases, reasonable paralegal rates were fixed at somewhere between $65 and $100 per hour. See Beach, 2010 WL 3942117 at *2 (finding a reasonable paralegal rate to be $75 per hour); Balla v. Idaho State Bd. of Corr., 2010 WL 1338065 at *3 (D. Idaho 2010) (finding a reasonable paralegal rate to be $65 per hour); C & R Forestry, Inc., 2010 WL 231098 at *4 (citing Simplot, No. CV 06-141-S-EJL/CWD, Order at 18, which noted that "paralegals with five or more years of experience" in the Boise market typically charge between $70 and $100 per hour)); In re Charterhouse Boise Downtown Props., LLC, 2010 WL 1049968 at *4 (finding a reasonable paralegal rate to be $65 per hour). Considering this range of values, and the services performed in this case, the Court finds that a rate of $75 per hour is reasonable for Montgomery's paralegal work.
Based on the reduced time and the reduced rates, the Court finds the base calculation for attorneys' fees in this case is, rounded:
The Bank seeks to recover both taxable and what it terms "non-taxable" costs. There is no objection to the Bank's taxable costs, and the Court deems those costs to be allowable. See IDAHO R. CIV. P. 54(d)(1)(C). Debtors object to the Bank's requested non-taxable costs.
The Note and DOT provisions authorizing attorneys' fees also authorize the Bank to "pay for whatever is reasonable or appropriate" to protect its interest and rights in Debtors' home and under the DOT. See DOT ¶ 9, Dkt. No. 50-5 at 14. At the same time, the Idaho Rules of Civil Procedure limit the Court's ability to grant discretionary costs.
The Bank requests non-taxable costs totaling $14,883.36 for travel expenses, meal expenses, lodging expenses, online research, expert witness fees, printing expenses, and "other" expenses.
The Bank has not asserted that the online research, printing, or "other" expenses were exceptional, necessary, or reasonably incurred. Indeed, as the modern-day equivalent of a law firm's library, it is hard to see how routine online legal research should not simply be one component of a firm's hourly rates. Those expenses will, therefore, not be allowed.
While the Bank has asserted that the expert witness's "report evidences the skill, hard work, experience, and insight" of its witness, it has not argued that the fees incurred in hiring that witness were exceptional, necessary, or reasonably incurred. The Court, in reviewing its summary judgment decision also finds that the expert witness fees were not necessary or reasonably incurred, and should not be assessed against Debtors.
Finally, the Bank asserts its various travel and travel-related expenses
The Note and DOT authorize the Bank to recover its attorneys' fees and costs. The Court finds that the Bank's reasonable attorneys' fees equal $69,820. The Bank may also recover $1,740.55 in taxable costs. Pursuant to Idaho law, these fees and costs may be added to the debt secured by the DOT, and, if the Bank pursues foreclosure, may be included in any deficiency action.
A separate order will be entered.
Note ¶ 7(E), Dkt. No. 50-5 at 4.
DOT ¶ 22, Dkt. No. 50-5 at 18.
IDAHO R. CIV. P. 54(d)(1)(D).
